The International Comparative Legal Guide to: Gas Regulation 2009 A practical insight to cross-border Gas Regulation work Published by Global Legal Group in association with Ashurst LLP, with contributions from: ÆLEX Garrigues Portugal, S.L. Lovells LLP Allen & Gledhill LLP Ghellal & Mekerba Loyens & Loeff N.V. Azmi & Associates Gorrissen Federspiel Kierkegaard Matheson Ormsby Prentice Baker & McKenzie Minter Ellison Grata Law Firm Bell Gully Miranda & Amado Abogados Haavind Vislie CMS Cameron McKenna Muranov, Chernyakov & Partners Hadiputranto, Hadinoto & Partners Criales, Urcullo & Antezana, Abogados, Soc. Civ. Pachiu & Associates Dewey & LeBoeuf LLP Herbert Smith LLP Schönherr Dr. Kamal Hossain & Associates Hogan & Hartson Trench, Rossi e Watanabe Advogados Freshfields Bruckhaus Deringer LLP IndoJuris Vellani & Vellani www.ICLG.co.uk Chapter 21 Netherlands Roland de Vlam Loyens & Loeff N.V. Marc Custers 1 Overview of Natural Gas Sector granted a 40% share in the gas developments. At the end of the 1970s, the first lines became visible of the Small Field Policy (kleine veldenbeleid or planmatig beheer). (Also 1.1 A brief outline of the Netherlands natural gas sector, including a general description of: natural gas reserves; referred to as the ‘marginal field policy’. Sometimes, a distinction natural gas production including the extent to which is made between small fields and marginal fields whereby production is associated or non-associated natural gas; production from marginal fields is more sensitive to economic (oil importation and exportation of natural gas, including prices) and/or legislative (depreciation) circumstances.) The Small liquefied natural gas (LNG) liquefaction and export Field Policy (SFP) became the framework under the Dutch facilities, and/or receiving and re-gasification facilities regulatory regime, to optimise production from the smaller fields (“LNG facilities”); natural gas pipeline transportation and (i.e. smaller than the Groningen field) and to maintain for as long as distribution/transmission network; natural gas storage; and possible the valuable aspects of the Groningen field. (All fields in commodity sales and trading. the territory of the Netherlands and on the Dutch part of the continental shelf, except the large ‘Groningen’ field are considered Following the discovery of the “Groningen” field in the north of the small fields.) The SFP has proven to be highly successful. It has Netherlands - and in particular the appreciation of its magnitude - in stimulated gas production in the Netherlands as it guaranteed the early 1960s, the Netherlands has grown to be one of the major producers that the gas would be purchased directly. (Unlike the gas lands in Europe. Broadly 29% of all the European natural gas Netherlands, in many North Sea countries there are waiting lists of reserves are located in the Netherlands, accounting at the end of gas fields awaiting production as there is no purchaser available.) 2006 for 0.7% of the global natural gas reserves in the world. The SFP exists of three key-elements: The system in which the Dutch gas sector is organised is often 1. Guaranteed market-based price for the field lifetime. referred to as the Dutch ‘Gas Building’ (Gasgebouw). The Gas Building was installed following the discovery of the large 2. Guaranteed taking of the produced gas from all Dutch fields. Groningen field, one of the largest reservoirs in continental Europe. 3. Using the “Groningen” field to balance seasonal fluctuations After the Groningen field was discovered, a production license was in supply so that production from the Small fields can be granted to NAM, a 50/50 joint venture of Shell and ExxonMobil, taken at a high load factor. under the condition that NAM would enter into a general partnership In 2005, the activities of N.V. Nederlandse Gasunie have been with a state owned holding company Energie Beheer Nederland unbundled and subsequently the trading activities have been split (EBN), which partnership was called Maatschap Groningen. (In this off. Gas transportation is the responsibility of Gasunie subsidiary partnership, the State has a 40% financial share and NAM 60%, Gas Transport Services (GTS). Gasunie is now a 100% state- however the voting rights are 50/50.) The Maatschap Groningen was owned company. The trading activities have been transferred to a to enter into a gas sales agreement with N.V. Nederlandse Gasunie, new company GasTerra. Shareholders in GasTerra are the Dutch another joint venture of Shell and ExxonMobil (each 25%) and the State (50%) and Shell and ExxonMobil (each 25%). Dutch State (10% + 40% via EBN) for the entire gas production The legal framework of the Small Field Policy has been laid down from the Groningen field. N.V. Nederlandse Gasunie was made in Section 54 of the Dutch Gas Act describing the statutory responsible for the marketing and distribution of the gas. This way, obligations of GasTerra. GasTerra must take the gas produced from production and marketing of the Groningen gas was coordinated to the Groningen field in such a manner that production from the small the maximum extent. This system of central marketing has been fields is taken into account. GasTerra is obligated to purchase gas applied to all gas production in the Netherlands. produced from the small fields at the request of the holders of a The magnitude of the Groningen field drew the worldwide attention Dutch production license, against reasonable conditions and against of the oil-industry and international oil companies came to the payment of a market based compensation. These two provisions Netherlands to do seismic research and to drill for gas. This facilitate the development of new fields by providing an immediate development urged the government to create a new policy for the market for all gas production. development of the gas reserves on shore and on the continental The statutory required market based compensation is reflected in shelf. New legislation of 1965 introduced the conditions under the so-called Normative Buying Price (Norm Inkoop Prijs or which exploration and production licences were to be granted. In “NIP”). Conceptually, the NIP gas price mechanism attempts to essence this implied an adoption of the Groniningen model. provide a proxy for GasTerra’s end user market by deriving a price Production was allowed provided that the licensee would enter into based on competitive fuel in the industrial sector (heavy fuel oil) an agreement of cooperation with EBN in which EBN would be and residential market (gasoil) in both the domestic (Rotterdam 162 WWW.ICLG.CO.UK ICLG TO: GAS REGULATION 2009 © Published and reproduced with kind permission by Global Legal Group Ltd, London Loyens & Loeff N.V. Netherlands pricing point) and export markets. In recent years, Zeebrugge, NBP projects are directly connected to the GTS transmission system. and TTF-prices have also become a factor in the NIP-formula. Gas storage is to be further expanded. In 2007, the MEA has The Dutch Ministry of Economic Affairs (MEA), in cooperation awarded one storage licence to TAQA Energy for the Bergermeer with the Dutch Institute for Applicable Geosciences TNO and State area. Four underground gas storages are being built for VOF Supervision of Mines, publishes a yearly report on gas and oil in the Zuidwending, a joint venture between Nuon and GTS. Work on the Netherlands. As of 1 January 2008, the total natural gas reserves first underground gas storage began in June 2007. The storage were assessed at 1,390 bcm; 1,075 bcm is attributable to the facility is expected to be operational in 2010. Groningen reservoir, 117 bcm to other onshore reservoirs and 198 bcm to the Continental Shelf. Natural gas produced in the 1.2 To what extent are the Netherlands energy requirements Netherlands is to a large extent non-associated gas. met using natural gas (including LNG)? In 2007 the gross natural gas production from the Dutch gas fields Netherlands amounted to 68.3 bcm; 37.8 bcm of which was from ‘small fields’ Approximately 44.4% of the Dutch energy requirements are met (i.e. not Groningen). This reflects a decrease of 3.4% compared to using natural gas. the 2006 figures; the production from the territory decreased by 6.3% and production from the Continental Shelf increased by 1.7%. 1.3 To what extent are the Netherlands natural gas The Netherlands has 406 discovered reservoirs, of which 219 are requirements met through domestic natural gas developed, 60 of which production ceased, 55 are yet to be production? developed and of 72 reservoirs it is uncertain if and when these will be developed. Approximately 78% of the Dutch natural gas requirements are met The total import of natural gas in the Netherlands increased from 10 through domestic natural gas production. bcm in 2006 to 10.1 bcm in 2007. The total export of natural gas decreased from 51.8 bcm in 2006 to 50.4 bcm in 2007. 1.4 To what extent is the Netherlands natural gas production In the Netherlands the development of liquefied natural gas (LNG) exported (pipeline or LNG)? facilities is accelerating. Vopak and Gasunie are in the process of building an LNG terminal at the Maasvlakte in Rotterdam (Gate- Approximately 50.4 bcm natural gas is exported. To Germany terminal) which is planned to be operational in 2011. The terminal 37.3%, Belgium 14.09%, France 15.67%, Italy 15.48%, will have an initial throughput capacity of 12 bcm per annum and will Switzerland 1.19% and to the United Kingdom 16.27% of the total consist of three storage tanks and two jetty’s. Annual throughput exported 50.4 bcm natural gas. capacity can be increased to 16 bcm. 4Gas is developing an LNG terminal at the Maasvlakte in Rotterdam (Liongas-terminal) which is planned to be operational during 2012 with an initial capacity of 9 2 Development of Natural Gas bcm.