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Dutch Groningen gas output to fall in June-September

07 Jun 2018 18:36 (+01:00 GMT)
Dutch Groningen gas output to fall in June-September

London, 7 June (Argus) — Groningen production for sale will have to fall more over the remainder of the summer than in April-May if output over the full gas year is to meet the lower end of the government's target.

The Dutch government called in February for output to be kept significantly lower than the 21.6bn m³ cap initially set for the 2017-18 gas year, following an earthquake in Zeerijp that was the strongest in the region for six years.

The key principle behind the government's approach is to consistently keep field offtake to the minimum required for security of northwest Europe's low calorie supply, to help reduce seismic activity in the region. Output is to be turned down on days when low-calorie demand is weak, and only ramped up once quality conversion has been maximised.

Cumulative offtake of 19.6bn-21.1bn m³ would be sufficient in October 2017-September 2018 if heating degree days were in line with the seasonal norm over the remainder of the gas year and quality conversion utilisation is around 85-100pc of capacity, the government said in early February based on advice from system operator GTS.

Degree days were well above the long-term average in February-March and forced higher field offtake, which will make it more difficult to meet the target. But this was partially offset by GTS operating its quality conversion facilities more extensively than previously expected — partly because it relied on back-up and reserve nitrogen capacity over the deepest part of the late cold spell.

Producer Nam was able to sharply turn down output for sale — including Norg stock movements — early this summer, as warmer-than-average weather curbed northwest Europe's heating demand.

It fell to 23.2mn m³/d in April-May from 35.9mn m³/d a year earlier, although the year-on-year drop in May was much smaller.

Production for sale would have to be 11.6mn m³/d in June-September if cumulative output over the full gas year is to be limited to 19.6bn m³ — and assuming Norg is completely refilled. This would be less than half the 27.3mn m³/d over the period in 2017.

And it would still need to be 17.7mn m³/d over the period if output is to be kept to 20.35bn m³, the middle of the range set by the government.

It may be possible for output for sale to drop substantially in June-August, when northwest Europe's low-calorie demand is usually lowest. But heating demand typically ramps up in September, and a cool end to the summer could again require require stronger field offtake.

Aggregate domestic output — including the small fields — was just 566GWh on 23 May, compared with 694 GWh/d over the rest of the month. Assuming broadly stable small field output, this suggests Groningen production for sale was much lower than the monthly average on some days.

The scope for summer offtake cuts is partly limited by minimum flow rates required at transfer stations and clusters to keep them operational. And regional fluctuations are to be avoided as much as possible, even as the requirement for flat field-wide production was removed.

Another limiting factor is the need to turn up offtake to meet northwest Europe's low-calorie demand on days when quality conversion is maximised.

Constraints to baseload nitrogen conversion capacity have restricted the amount of Groningen supply that can be substituted with converted gas over the past few months. And GTS has had to use nitrogen from its back-up and reserve facilities consistently since the start of the 4 June gas day because of further unexpected outages. This was despite weak heating demand over the period.

The operator said in February it was difficult to determine the average utilisation rate at which its two baseload Ommen and Wieringermeer nitrogen ballasting facilities can run throughout the year, because of possible technical disruptions and maintenance.

And substantially lowering Groningen supply sent to the Dutch grid could also limit the amount of high-calorie supply that can be added to low-calorie gas for blending.

Blending — which is first in the merit order ahead of quality conversion with nitrogen as it can be done most cheaply — fell in April-May from a year earlier, probably because of weaker low-calorie supply in the grid. Enrichment for domestic use and exports fell to 171 GWh/d in April-May from 263 GWh/d a year earlier, which more than offset more high-calorie supply converted through quality conversion.

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High-calorie gas used for quality conversion GWh/d

Utilisation of Dutch quality conversion sites pc

Dutch domestic output drops on some days GWh/d

Cumulative Dutch heating degree days HDD

Groningen output for sale in recent summers mn m³/d