Lack of Government Control in Exploitation of Depleting Gas Fields

If the Netherlands is to derive maximum benefit from its empty or near-empty gas fields in the future, the government should really take a more proactive approach. Time is of the essence now, with gas reserves dwindling rapidly and policymaking for the extraction of natural gas soon to take place outside the Netherlands, owing to the internationalization of environmental legislation and the liberalization of the natural gas market. This is the message of Professor Jan Willem Velthuijsen in his inaugural address upon accepting his position as Professor of Finance and Control in the Energy Sector at the University of Groningen on 19 January 2010. Velthuijsen proposes to conduct a study into future exploitation options of Dutch gas fields.

Countries around the North Sea have benefited from the gas reserves in their region for well over half a century now, their fossil fuel resources still continuing to produce considerable wealth. However, these reserves are beginning to be depleted. The question what is to be done with the depleting gas fields is becoming more and more pressing, not only for governments but also for companies exploiting them and for other interested parties, such as environmental organizations.

Great Changes in the Offing

Owing to all the changes and insecurities in the international natural gas market, the question what is to be done about the depleting gas fields is of a staggering complexity. ‘When international treaties will make carbon dioxide emissions more expensive, it may be an attractive option to store carbon dioxide in depleting gas fields,’ explains Velthuijsen. Moreover, developments in technology will allow gas extraction in fields where this is as yet unprofitable. Velthuijsen: ‘We’re running out of time. Right now, the Dutch government is still in a position to make its own gas extraction policies to some extent; soon the natural gas market will be largely liberalized, and decisions will be made in Brussels, Moscow and elsewhere.’

Government Should Show Greater Interest

Dutch ideas about the future exploitation options of Dutch gas fields lack coordination and structure, says Velthuijsen in his inaugural address. He gives the example of decision-making processes on pipeline maintenance in the North Sea. ‘The majority of these pipelines were constructed between the 1950s and 1970s. We know that after thirty years or so pipelines need to be either replaced or written off. The Dutch government is showing little interest in this subject matter. It wouldn’t hurt to do some academic research into this issue and answer these questions from society’s perspective.’

Small Gas Fields: a Niche Specialization

The North Sea gas fields are exploited by major companies. In his inaugural address, Velthuijsen raises the question whether these major companies actually have enough in-house expertise for the optimum exploitation of depleting gas fields. Velthuijsen: ‘The technology, the budget structure and the strategy of these big companies are all geared towards exploiting major gas fields. What is an optimum result for such companies may not necessarily be an optimum result for society. Perhaps smaller, more specialized companies are in a better position to extract the last remnants of natural gas and dismantle gas fields or re-designate them for new uses, such as gas and carbon dioxide storage.’

Dismantlement

Velthuijsen will dedicate his professorship to developing models that will assist governments in their policymaking tasks. Moreover, his work is also expected to convince power companies of the value of depleting gas fields. The new professor also means to map out how the exploitation of depleted gas fields is to be terminated in the best possible way. Velthuijsen: ‘We still only have little experience with dismantling fields. How are we to manage and monitor such processes? I would like to investigate whether there are lessons to be learned from the dismantlement of mines or nuclear power stations.’

Curriculum Vitae

Jan Willem Velthuijsen (1958) is a consultant with PricewaterhouseCoopers. In addition, he is Professor of Finance and Control in the Energy Sector at the Faculty of Economics and Business at the University of Groningen and programme director of the international Executive Master’s Programme ‘Finance and Control in the Energy Sector’. Velthuijsen studied econometrics at the University of Amsterdam and obtained his doctorate in economics from the University of Groningen in 1995. From 1997 to 2009, he held the position of Professor of Economics at the University of Amsterdam.

Contact: Prof. Jan Willem Velthuijsen