Netherlands approves stricter caps at Groningen gas field

LONDON (Bloomberg) -- Europe’s largest natural gas field may only produce less than half of what it did four years earlier as the Netherlands seeks to reduce the risk of earthquakes linked to output.

Production at Groningen gas field in the northeast will be capped at 24 Bcm a year (847 Bcf) from Oct. 1 after a majority in parliament Thursday backed Economy Minister Henk Kamp’s five-year output proposal. The government can review output annually, opening the door for further reductions from 53 Bcm in the 2012-2013 gas year, equal to more than 10% of annual EU consumption.

“This annual review is a new development but a prudent and understandable one in the context of the seismic concerns,” Craig Lowrey, a consultant at UX Energy Services in Ipswich, England, said by email. “Seeking stability for five years is likely to be welcome news to the markets given the extent of the declines in output seen over the last two years.”

Production from Groningen, operated by a venture of Royal Dutch Shell Plc and Exxon Mobil Corp., was first limited in 2014 amid warnings small tremors around the site would become worse with further extraction. The Dutch Economy Ministry has ordered several more cuts as some residents push to close the field entirely.