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EurOil COMMENTARY EurOil

needed to ensure supply security, it said. Green shift
Solutions may include contracting capacity There is a risk that even more restrictions could
at low-calorie gas fields outside the Netherlands, be imposed on the Dutch upstream sector in the
the operator noted. coming years, given rising antipathy towards
fossil fuels in Europe. To hedge against this risk,
Hard times some operators want to move into hydrogen
Groningen’s phase-out comes as other Dutch development.
gas producers grapple with record low gas prices Neptune Energy, the country’s largest gas
in Europe and permitting difficulties as a result producer, plans to install a 1-MW electrolyser at
of a court ruling last year on nitrogen oxide one of its platforms, in order to produce green
emissions. hydrogen from water. The process would be
The September contract for gas at the Neth- powered by offshore wind energy. The PosHy-
erlands’ TTF gas hub closed at €6.05 ($7.10) per don project, which Neptune is implementing
MWh on July 31 – a near-historic low, although with multiple business and research partners,
representing a recovery from €5.45 on July 20. is expected to become the world’s first offshore
Faced with such bearish market conditions, green hydrogen plant.
some Dutch gas producers such as Tulip Oil Meanwhile Shell, ExxonMobil and other
have opted to cut production, leaving gas in the companies want to produce so-called blue
ground until prices pick up. hydrogen, derived from gas, at a site in Rotter-
Investment deals have also been scuppered dam, under the H-vision project. H-vision’s
because of the market turmoil. London-listed Solo supporters say it will create the foundations for
Oil cancelled plans in March to acquire stakes in 14 large-scale green hydrogen supply in the Nether-
Dutch gas fields from local producer One-Dyas. lands, as costs come down and Dutch gas output
Making the situation worse, very strict rules falls.
were imposed last year on onshore nitrogen The Netherlands is seen as an ideal loca-
deposition, making it difficult for operators to tion for hydrogen production for two key
secure permits for project work. This was after reasons. First, it has an extensive gas pipe-
the Council of State ruled that the Netherlands’ line network which could be repurposed
previous standards for issuing construction per- for hydrogen. Second, it has abundant wind
mits violated EU laws protecting the environ- power supply, with capacity nearing almost
ment from nitrogen oxide emissions. 4.5 GW at the end of last year. But some of
Contending with this hardship, many pro- this supply goes to waste because of a lack of
ducers are waiting on support from the govern- energy storage – a role that hydrogen could
ment. The government announced plans two fulfil.
years ago to expand incentives under its mar- On the demand side, several ventures are
ginal fields programme. But the programme is underway to create a market for hydrogen.
yet to be passed by either Parliament’s first or sec- Air Liquide agreed on a joint initiative with
ond chambers, and there are fears it could take the port of Rotterdam in early July aimed at
until 2021 to be approved. This is a considerable getting 1,000 hydrogen-powered trucks on the
wait for producers, and some could choose to roads connecting the Netherlands with Belgium
decommission fields and infrastructure rather and Germany by 2025. This fleet will mostly han-
than signing off on investments needed to keep dle cargo arriving and leaving the port, Europe’s
them profitable. largest.
Incentives for marginal fields already exist, Meanwhile, Norwegian consultancy DNV
but the governments wants to make them appli- GL said last month it had established a consor-
cable to brownfields that cannot turn a profit at tium with Dutch glass maker Celsian and over 30
current prices, rather than just exploration sites. other partners to trial a burner technology that
The uplift, or the tax deducted from investment, will help energy-intensive industries make the
will also be increased from 25% to 40%. transition from gas to hydrogen. ™

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