Gas is becoming customised
The energy and gas world is in full motion. The climate issue has led to a great deal of work being done at international and certainly national level as well to bring about a climate-neutral energy supply. This is a complex problem with many options and major financial consequences. The first yardsticks have been set up: the authorities have been and are taking steps aimed at a substantial and structural reduction in greenhouse gas emissions, especially CO2 emissions. Businesses, often helped by governments, are investing in sustainable alternatives to fossil fuels. Larger wind farms are being created; some people are having solar panels put on their roofs; interest in sustainable projects is increasing; scientific bodies are examining the possibilities of technological innovations; there is an intense social debate on a more rapid transition to fully climate-neutral energy management. In the Netherlands this debate and the sense of urgency is heightened by the earthquakes caused by the extraction of gas from the Groningen field.
A major challenge lies ahead of us. On the one hand the current energy system, in which GasTerra plays an important role as a major gas trading company, must continue to work well. On the other hand we have a role in the responsible implementation of the energy transition. The success or failure of this depends to a significant degree on whether enough support can be gained for what are sometimes far-reaching measures. After all, the transition will take a long time and place heavy demands on people and businesses. Support is not automatic whether it comes to gas extraction, the construction of wind farms or a rise in energy bills.
What does all this mean for the position of gas in the energy mix and for GasTerra?
To start with the latter point: for the time being, less than might be expected. Although the share of natural gas in the energy supply will eventually decline significantly, at present it still meets the heat needs of the vast majority of the Dutch energy market, and of a considerable part of the European energy market, and this is likely to remain the case for a considerable time to come. Gas also plays an important part in European industry, and so GasTerra’s business model has not changed. We buy gas from producers and sell it to market operators such as energy companies and industrial firms. We add as much value as possible to our product by performing additional services to clients.
This of course does not mean that external social developments have no influence on GasTerra’s strategy. We contribute to the energy transition in both tangible and intangible ways, by supporting knowledge institutions, funding projects, marketing green gas and participating actively in the social debate on this topic.
The earthquakes in Groningen continue to demand close attention. The Groningen residents affected are entitled to this. Safe gas extraction and the repair of damage caused must therefore remain our top priority. In addition, security of supply for the millions of households reliant on Groningen gas must be guaranteed.
Climate change and the safety issue have created an image problem for gas in the Netherlands. Fossil fuels, a category which includes natural gas, are part of the problem. But at the same time gas has the capacity to be part of the solution. Our product plays a vital role in the energy transition. The Gas by Design concept devised by the gas sector creates a bridge between the essential process of reducing CO2 emissions and making energy supply sustainable and the need for security of supply and cost-effective measures. The essence of this strategy, which we as a gas sector have developed, is that natural gas will only be used in the energy transition where sustainable alternatives such as wind and solar power are less attractive or impossible for whatever reason. As has been said, we cannot do without gas now and in the near future; renewable gas in particular can make a valuable contribution to the energy supply even in the context of climate-neutral management. In particular cases, combinations of gas and sustainable sources are the best solution. At the same time, green gas can enable emission reductions in other sectors which are harder to make sustainable. In other words: gas is becoming customised.
Finally, GasTerra’s results. Both sales volumes and prices were lower than in the previous reporting period. The amount of gas sold fell to 63.9 billion cubic metres (2015: 70.3 billion cubic metres), and the average price fell to 15.3 cents per cubic metre (2015: 20.8 cents per cubic metre). This means that turnover was 9.9 billion euros (2015: 14.7 billion euros). The fall in income is due primarily to the fall in the gas price, something over which GasTerra has no influence. But wherever GasTerra can make a difference, it does all it can: managing and optimising our portfolio, maximising the value of additional services, renegotiating contracts and managing our budget. I am convinced that this will not change in 2017.
I do not want to end this foreword without thanking my predecessor, Gertjan Lankhorst. He took the helm of GasTerra for ten years, a time marked by many successes but also a period in which robust action had to be taken to adapt our organisation to changing circumstances. He was a conscientious and successful leader of this process, and can be proud of his achievement in leaving behind a strong business that is ready for the future.
Robert van Rede,