Dutch government cuts Groningen gas field production

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By Toby Sterling

THE HAGUE, June 23 (Reuters) - The Dutch government ordered a further tightening of gas production at Groningen, Europe's largest gas field, in response to a spate of earthquakes that have caused extensive property damage in the Netherlands' northernmost province.

Output at the field, the world's 10th largest, will be capped at 30 billion cubic metres (bcm) for the whole of 2015, Economy Minister Henk Kamp told reporters on Tuesday. At the beginning of the year, production of 39.4 bcm was planned.

"The earthquakes are still there, and we will have to reckon with earthquakes in the future," Kamp later told Reuters. "We can do two things to preserve safety: reduce the production of natural gas and strengthen houses and we're doing both."

Dutch news agency ANP had reported on Monday that Kamp would propose a further tightening of production at Groningen, sending European gas prices higher.

In early afternoon trade on Tuesday, Dutch gas prices at the TTF hub gained further. The July contract rose 1.21 percent to 20.90 euros per megawatt-hour (MWh), while the third-quarter contract was 1.31 percent higher, also at 20.90 euros per MWh.

British natural gas for October climbed 2.51 percent to 44.95 pence per therm, becoming the biggest gainer on the UK gas curve.

In February, output was cut to 16.5 bcm for the first half of the year after the Dutch Safety Board said gas companies and state regulators had failed to take the threat of earthquakes seriously enough. In the second half of the year, output will be capped at 13.5 bcm.

"We'll do whatever is necessary for the safety of the people in Groningen," Kamp said.

The government would use the second half of the year to assess how to meet supply needs from 2016 onwards. Excess demand from 2016 would be met using some combination of imported gas - mostly from Russia - and conversion plants that turn imported high-calorific gas into the low-calorific gas upon which Dutch energy infrastructure is based.

No physical injuries have been reported as a result of the quakes, but thousands of buildings across the region have suffered damage.

(Writing by Thomas Escritt; Editing by Dale Hudson)