Energy: Learning from the Dutch experience

Experts from the Netherlands give advice on what Israel should do with its newfound gas reserves.

By
November 14, 2013 22:35
Leviathan holds 453 billion cu.m. of gas.

Leviathan 521. (photo credit: Albatross)

 
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When the enormous 2.7 trillion- cubic-meter Groningen gas field was discovered in the Netherlands’ northeast in 1959, the country’s energy strategists initially thought that gas would prove to be a useless resource in comparison to the potential of nuclear energy.

At the time, Dutch energy experts thought the gas era would end within 10 to 20 years, and the government chose to export as much as possible. Today, Israel stands in a similar position to that of the Netherlands half a century ago.

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An Israeli press delegation met with various Dutch energy experts on the subjects of gas and sustainability during a four-day tour of the country this week.

“I think looking in hindsight, we were a bit too enthusiastic in exporting the gas,” said René Peters, director of gas technology at TNO: Netherlands Organization for Applied Scientific Research, which serves as an intermediary among universities and industry, and as a laboratory for many government ministries.

“You are where we were 50 years ago,” Peters told journalists, from the TNO office in Delft on Monday.

The Israeli government decided in a June 23 cabinet decision to keep at least 540 million cu.m. of its natural gas finds at home, thereby limiting export quantities to 40 percent of the country’s currently estimated reserves. This decision, which represented a significant decrease from an originally proposed 53% export cap, is still at the center of a heated dispute between environmentalists and MKs, who argue the export allocations are too liberal.

The Netherlands has been trading gas for half a century and consumes about 45 billion cu.m. of the resource per year, about five times that of Israel’s use today. The vast majority of Dutch gas trade occurs under the auspices of GasTerra, a half public, half private company that oversees the trade of 83.4 cu.m. meters of natural gas annually.



About 47.2 b.cu.m. from this total comes from the dwindling Groningen field, which experts say may deplete within nine years; about 25.9 b.cu.m. comes from small fields in the North Sea; and about 10.3 b.cu.m. is imported from other countries like Russia and Norway, Anja Hulshof, a communications adviser for GasTerra, told journalists at the company’s Groningen office on Wednesday afternoon.

GasTerra supplies less gas for the Netherlands than is consumed in the Netherlands as other small gas trading firms do operate in the country, explained Bert Coelingh, a manager for gas sales at GasTerra. Only 34.8 b.cu.m. of gas supplied by GasTerra worldwide is actually sold domestically in the Netherlands, he explained. The company exports to many other European countries, including Belgium, France, Germany, Italy, Switzerland and the UK, Hulshof said.

Although the Dutch have faced intense criticism that despite their originally enormous gas reserves, they have come to the point where they are now importing gas to supplement their needs, the GasTerra executives maintained there is no gas scarcity.

“At the moment we don’t have a shortage of gas, but it’s known that the Groningen field is going into decline,” Hulshof said.

“At this moment we have no problems in delivering the gas to the contracts. We do not have a shortage of gas if we talk about contractual obligations.”

Establishing such contracts was critical in the past because the Netherlands had initially hoped to transition to nuclear power within 20 years, Coelingh reiterated. There is no limit on export quantity in the Netherlands, but in order to export under long-term contracts, GasTerra must receive a mandate from its shareholders – half of which include the Dutch state.

Asked if the Netherlands would have made the same decisions regarding export allocations in today’s conditions rather than those of 1959, Coelingh explained he was confident that the country would still choose to export as much as possible. By the time a Groningen-sized reservoir would be consumed in this era, “we would have come up with some sustainable energy source,” Coelingh said.

In addition to deciding about export quantities, another decision that Israel has been faced with involves determining what to do with the national revenues generated by gas production and sales. The Israeli government has chosen to establish a Norwegian- style sovereign wealth fund, to which the government will only have limited access for socioeconomic purposes or in times of national emergency. Officials made the decision to establish such a fund in part to avoid the symptoms of a so-called “Dutch Disease,” an economics phenomenon in which an unexpected increase in revenues from resources causes a sharp appreciation in exchange rate and thereby prompts a decrease in the production and competitiveness of the tradable sector.

The copious supplies of natural gas revenues and subsequent Dutch Disease that occurred “made the Netherlands very lazy,” stressed Antoine Maartens, a program manager for Sustainable Texel at the Dutch environmental organization Urgenda.

Maartens suggested that Israel invest a large chunk of its natural gas revenues into the development of renewable energy technologies.

“Spend it on becoming energy-neutral,” Maartens told journalists on a Tuesday tour of renewable energy technologies on the Dutch island of Texel, which is aiming to become energy-neutral by the year 2020.

Amid brisk and rainy November weather, the island boasted an enormous potato storage facility running entirely on solar energy – even feeding a surplus to the grid – as well as a car dealer operating 90 percent on the resource, and a shooting and archery club making use of solar panels and LED lighting.

“We are running out of gas,” said Brendan de Graaf, director of TexelEnergie, who is essentially directing the island’s switch over to alternative energy resources.

In addition to developing renewable energy technologies, advancing innovative methods for making use of the natural gas still available – both domestically and through import – will be crucial for Holland and nations around the world, experts agreed.

Peters and his colleagues at TNO, for example, are exploring the idea of using liquefied natural gas as a fuel for heavy transport, particularly for ships, as Holland’s Rotterdam harbor is one of the largest in the world and has serious climate issues. With its first ship in Rotterdam running on Liquid Natural Gas (LNG) in addition to some 100 trucks doing so as well, the Dutch ambition is to see 50 ships operating on this resource by 2020, Peters explained.

Although no national infrastructure, fueling systems or government safety regulations are yet in place for such LNG use, the researchers have found that LNG has a very high energy density in comparison to other types of natural gas currently used in transportation, such as compressed natural gas (CNG).

Meanwhile, because LNG can be shipped from anywhere in the world, the Netherlands can then also reduce dependency on Russian petroleum and natural gas imports by readying ships for use of the fuel, Peters explained.

Jorg Gigler, managing director for the consultancy foundation Dutch Gas Innovation Team (TKI Gas), said he and his colleagues are focusing on several pillars that will be crucial to the natural gas future of the Netherlands. Many of these points can also be applicable to Israel’s gas future, he told journalists at a Wednesday breakfast meeting on Texel island.

Two critical elements will revolutionize production methods, looking for ways to safely extract non-traditional gas resources like those trapped in shale rock, as well as producing usable green gases like biomethane, he explained.

Another critical issue is that of mobility – employing natural gas in buses, cars, trucks and ships in order to reduce emissions of nitrogen oxides, sulfur oxides and fine particulate matters, Gigler continued.

Perhaps most critical is the subject of public acceptance of natural gas and the infrastructure that continues to come along with it. Communicating and cooperating with the public is necessary to overcoming “the negative feeling about natural gas,” he said.

In addition, the natural gas systems need to become more flexible, so they can seamlessly integrate with renewable sources and intelligently adjust to supply and demand needs, he added.

“We are in a time that the transition to a sustainable energy system is going ahead,” Gigler said. “One thing is for sure in the future – we will use less natural gas.”

The author was a guest of the Netherlands government and the Netherlands Embassy in Tel Aviv.

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