Exclusive: Shell, Exxon start selling large Dutch gas subsidiary. Energy giants want to get rid of NAM.” Reuters news agency caused a stir on Tuesday with the message that the Nederlandse Aardolie Maatschappij was put up for sale by its two shareholders – the entire company ostensibly, which has so much to do in the Netherlands because of the gas quakes in Groningen and which is now at the center of a parliamentary inquiry. It could hardly have been more spicy, but in reality it is something else. Six questions about the NAM sales plans.
1Is the NAM indeed for sale?
No, NAM only has part of its activities on display: the small gas and oil fields outside Groningen (both on land and at sea) and the associated platforms, installations and infrastructure. October last year announced to sell NAM to these activities. Documents about the sale process leaked through Reuters on Tuesday, which has now formally begun.
In a response, NAM, Shell and the Ministry of Economic Affairs confirm this. A total of forty fields are offered for sale at sea. They do not want to comment further on the sale, but according to Reuters, Shell and Exxon hope that the explosively increased energy prices will help entice potential buyers. In total, the sale of all activities should generate 1 to 1.5 billion euros.
2What does this mean for NAM?
For NAM, this is the next step towards its end. Society is doing a clean-up, whereby, as mentioned, share interests in all kinds of pipelines and processing installations are also being sold. And gas extraction in Groningen has been rapidly scaled back. While NAM still had 2,000 employees in 2016, this year the company expects to have fewer than 900 employees.
What will remain is a bag of money, the extraction and exploitation rights on the Groningen gas fields, and two underground gas storage facilities in Norg and Grijpskerk. It is clear that race is also approaching the end for the most important dairy cow, the Groningen gas field Slochteren. The cabinet has decided to stop extraction completely in 2023 or ’24. However, due to the current energy crisis, there is a chance that gas will be pumped from Groningen for a little longer. That is mainly a political decision.
Also read: Shell subsidiary NAM to sell 100 oil and gas fields
3So Shell and Exxon are not getting rid of ‘Slochteren’?
Shell, NAM and Economic Affairs say that this is not the case. The ‘oils’ would probably like to get rid of it, but the Groningen gas field is unsaleable, analysts say. Because it is unlikely that (much) will ever be gained from it and ownership can especially cost a lot of money, due to claims. “Only the state might be able to buy it,” says ex-Shell employee and today analyst Jilles van den Beukel of The Hague Center for Strategic Studies, a think tank. “That is not inconceivable, by the way.”
4Is NAM becoming a bereavement construction?
That is indeed the question. Analyst Van den Beukel thinks so. “The basic scenario remains that Slochteren will close. And NAM is transferring the renewable energy business to Shell.” In other words: then there is virtually nothing left, except the stores. “And NAM may also want to sell it in the future.”
Everything seems aimed at dissolving NAM, if only because its original objective – extracting and selling gas and oil – can no longer be achieved. Then the key question will be how to deal with a company whose most important asset is a pot of money and on which a claim of dubious size rests: compensation for earthquake damage and the reinforcement of houses in the area. Rijk and NAM have been arguing about this for some time. It also ensures that the settlement of the damage and the reinforcement operation in Groningen are excruciatingly slow.
Critical outsiders will be especially alert to how much money remains in the shell of NAM. How much is NAM allowed to pay out to its owners and how much should be left behind to compensate victims of Groningen citizens? Groningers will want to ensure that too much money does not flow to shareholders Shell and Exxon, and that there is enough left over for reinforcements of the houses and repair of damage. The only problem is that this will be an extremely complex corporate law issue.
At the same time, NAM itself sees new opportunities. There is still “tens of billions” to be earned from the gas and oil industry in the Netherlands, NAM director Johan Atema told last year. NRC. For example, cleaning up all drilling platforms and gas wells – a task for which NAM is responsible as a producer. In 2019, NAM closed the first of the three hundred wells in North Groningen. “It is my dream to build up that industry with companies from the north of the Netherlands,” said Atema. But, a spokesperson for the gas company now says, that is “not a business model for NAM”.
5Can the Netherlands do without those fields now that Russia hardly supplies any gas?
Sales could actually contribute to security of supply – albeit marginally, because production remains relatively small. The potential buyers that Shell and Exxon are targeting are often small to medium-sized players who specialize in operating these types of fields. They are more inclined to invest in this than the large oil and gas companies, according to analyst Van den Beukel.
Documents seen by Reuters show that last year 2.4 million cubic meters of gas was pumped from all fields (both onshore and offshore) every day. According to Shell and Exxon, this could grow to 2.8 million cubic meters without further investment. There are reports in the sector that some potential buyers find it annoying that NAM’s assets are being sold in pieces. Some would prefer to have bought all fields, others only fields that are close to fields they already own.
6Is there a chance that the fields will fall into the hands of Russian companies?
It is not known whether potential buyers have already registered. But the risk that the fields might be bought by companies from Russia, with which Europe is engaged in a fierce energy war, seems small. Russian energy companies are hardly active in this part of the North Sea, says Van den Beukel. Only Wintershall, of which Gazprom owns 50 percent, is still there, “but that company would rather grow organically than through acquisitions”.
A version of this article also appeared in the newspaper of September 7, 2022