* Annual output to be cut to 40 bcm by 2016
* Previous outlook was 49 bcm per year until 2020
* Will reduce government revenue by 1 bln euros by 2016
By Sara Webb and Anthony Deutsch
AMSTERDAM, Jan 17 The Netherlands will cut gas
production at Groningen, the largest gas field in western
Europe, by about a quarter over the next three years, the
Economics Ministry said on Friday, bowing to public concerns
over earth tremors in the area.
The decision to cut production will mean lower revenues for
the government at a time when it is already struggling to meet
the European Union's budget deficit targets, even after years of
"The studies showed that there are risks and consequences,
including earthquakes," of the gas extraction in Groningen,
Prime Minister Mark Rutte told reporters at his weekly press
conference before the details were announced.
"They not only cause material damage but also serious
emotional damage. The cabinet understands that people are
The first tremors were reported in 1986 nearby in Assen, and
since then about 1,000 have been recorded in the area, with a
maximum magnitude of 3.6 on the Richter scale, according to the
Dutch Meteorological Institute. Local residents want gas
production to stop after the tremors caused cracks and other
damage to homes and buildings.
Government revenues from the Groningen gas field amount to
about 12 billion euros ($16.3 billion) a year.
The reductions in output will cut state income by 600
million euros in 2014, 700 million in 2015 and 1 billion euros
in 2016, excluding additional costs earmarked for damage,
infrastructure and investments in the local economy that were
agreed by the cabinet on Friday, according to the Economy
The ministry said production would be cut in 2014 and 2015
to 42.5 bcm and in 2016 to 40 bcm, adding that it was
technically possible to reduce Groningen's output to 30 bcm a
year and still meet domestic demand.
The field's production amounted to 53.8 billion cubic meters
(bcm) in 2013, mainly due to an unusually long and cold winter.
The annual outlook to 2020 was previously for around 49 bcm.
PRICE RISE ANTICIPATES MOVE
Gas from Groningen is sold mostly to utilities and large
industries in the home market, although some gas is piped to
Germany, Italy, France and Britain.
The gas market has been expecting a decision to cut output,
which has already driven up gas prices, analysts said.
"The decision is overall bullish for gas prices, but
contracts did not move much today as the market already priced
the news in earlier this week," said Oliver Sanderson, senior
gas analyst at Thomson Reuters Point Carbon.
Dutch wholesale gas prices for delivery next winter have
risen by 65 euro cents since the start of the week. They traded
at 27.78 euros per megawatt-hour (MWh) at 1300 GMT on Friday,
only slightly higher than the opening value for the day.
The gas field near Slochteren in the north of the
Netherlands is operated by a joint venture between Royal Dutch
Shell and Exxon Mobil called Nederlandse
Aardolie Maatschappij BV.
Gas from the field goes to GasTerra, a Groningen-based
international company that trades in natural gas.
Discovered in 1959, the Groningen gas field has been
expected to continue to pump natural gas for at least another 50
The field has produced more than 2 trillion cubic meters so
far and has more than 700 billion cubic meters remaining.