Statement Executive Board

Statement Executive Board

The changes in the European energy landscape continued in 2014. New developments and innovations follow each other in rapid succession. We see the rise of small-scale and local energy generation facilities. Traditional energy companies are letting go of old securities and are looking for new possibilities and opportunities. The Dutch energy sector also finds itself in a radical transition, which at the same time offers many challenges. Gas and gas infrastructure can play an important role as a link in the future energy system that is clean and climate-neutral, and which is also reliable and affordable. This may seem obvious, but the challenge is to actually prove this and to present it well. Because public and political support for natural gas, not only in the Netherlands but also elsewhere in Europe, is under pressure following discussions about fossil fuels, shale gas and geopolitical developments, this will require a greater effort than before.

New phase

In 2014, it became clear that a new phase is dawning in the Dutch gas supply. The earthquakes resulting from gas extraction from the Groningen field make inhabitants feel unsafe. This undermines people’s trust in gas extraction and has led to discussions about the role of natural gas. It is important that actions are taken to restore this trust. The Dutch Minister of Economic Affairs is currently investigating the possibilities of reducing gas production from the Groningen field. The reduction of natural gas production in Groningen in the longer term had already been anticipated, as the gas field will at some point be empty, but because of the earthquakes, this reduction is upon us sooner than expected. To keep up security of supply in the Netherlands and the rest of Europe, natural gas will increasingly have to be imported, via pipelines or in the form of LNG. Thanks to the gas roundabout, this will be possible. A next step will be to “greenify” the gas roundabout itself by feeding in sustainably produced gas and by working together with other, sustainable energy sources. This is also part of the new chapter in gas supply.

Positive results

Amidst these developments, we can look back on a solid year, both operationally and financially. In 2014, we put a lot of new infrastructure into operation, and our activities led to a net profit after taxes of € 603 million on invested capital of € 9,295 million. Of this amount, € 362 million is returned to our only shareholder, the Dutch State, in the form of dividend. The income from the new infrastructure largely set off the efficiency discounts imposed by the regulator. The relatively mild winter meant that less gas needed to be transported and our energy costs were lower. In the future, these will be settled in the tariffs. The tariff settlement repayment obligation that GTS had in 2012 and 2013 towards its customers has ended. The lower financing costs have also contributed positively to our result. In the Netherlands and Germany, we ensured continuous security of supply, with the exception of one very short interruption at one company.

Replacing coal and oil with gas is a way to make rapid environmental progress at the lowest possible cost.

Gas roundabout

Over the past few years, work carried out on realising the Northwest European gas roundabout has been successful. In this respect, Gasunie’s gas infrastructure in the Netherlands and Germany plays an important facilitating role. As a result, in 2014, the Netherlands was able to grow into one of the most attractive gas trade markets in Europe. The liquidity of the gas trading platforms TTF in the Netherlands and GASPOOL in North-Germany has further increased. In 2014, TTF grew into one of the most liquid gas hubs in Europe besides the British NBP. In the bilateral Over-The-Counter trade (OTC), TTF became frontrunner in Europe in 2014. The joint regulators in Europe, united in ACER, have concluded that TTF, the Dutch virtual marketplace for the gas trade, is functioning well. Parties that need gas or that want to trade in gas do not encounter any problems when entering into contracts on the Dutch marketplace. ACER has concluded that the Dutch gas market is a well-functioning market, with healthy competition, which leads to lower gas prices.

Replacing coal and oil with gas is a way to make rapid environmental progress at the lowest possible cost, thereby maximally reducing the cumulative emissions of CO2 in the coming decades. A well-functioning emissions trading system (ETS) is essential in this regard. Besides facilitating and attracting international gas flows, “greenifying” the gas roundabout is on the agenda. This can be achieved by feeding in sustainably produced gas (green gas). Together with the company HarvestaGG, we are investigating the possibility of building a new installation that can convert grass into various green products, including biogas. Gasunie can subsequently convert this into bio-LNG, which can be marketed by HarvestaGG.

Implementation of quality conversion

At the beginning of 2014, the Dutch government informed the House of Representatives about the way in which it plans to minimise the negative consequences of gas extraction from the Groningen field. One of these measures is reducing the production from this field. As a result, less low-calorific gas will be available. The reduction of the Groningen gas can be compensated for by implementing quality conversion. Quality conversion is the conversion of high-calorific natural gas (such as gas originating from the North Sea fields and from outside the Netherlands) to low-calorific natural gas by mixing it with nitrogen. It should be noted in this respect that sufficient high-calorific gas needs to be available in the market. At the request of the Minister of Economic Affairs, among others, GTS is preparing the expansion of its quality conversion facilities. The expansion is planned to be completed by the end of 2019, in order to safeguard security of supply for customer as of 2020.

Flexible gas storage

Gasunie’s participation EnergyStock successfully marketed its available storage capacity in 2014 through new, flexible services. These services are offered via auctions and via bilateral contacts with customers, who receive tailored services. Because EnergyStock offers the option of very quickly storing a lot of gas, which can then also be supplied very quickly, traders can optimally leverage daily and monthly price swings on TTF.

Liquefied natural gas for goods transport

In 2014, Gate terminal developed further in its role as European hub for liquefied natural gas (LNG). Gate terminal contributes to spreading the supply routes of natural gas and, in doing so, helps ensure the security of supply in north-west Europe. In 2014, the number of ships for the supply and transit of LNG grew to 34 (2013: 23). This growth mainly concerns small-scale (particularly truck loading) and reloading activities. LNG is a cleaner transport fuel than, for example, diesel, which means that natural gas makes an important contribution to reducing harmful emissions in shipping and road transport. Since January 2014, Gate terminal has at its disposal a loading station for a maximum of 5,000 tank trucks per year. In 2014, together with co-shareholder Vopak, Gasunie took the definitive investment decision to further expand Gate terminal’s LNG break bulk infrastructure and services.

Energy in transition

We are striving for an energy supply that is CO2 neutral. Everyone – individuals, companies and countries – is working on this in their own way. The challenge is to keep cleverly connecting all existing and new activities. In this way, a strong and multiple energy system can arise that supports and stimulates local initiatives, while the overarching and underlying energy system ensures the necessary reliability, flexibility and efficiency. It is our challenge to show that gas and gas infrastructure can offer society valuable solutions in achieving a CO2-neutral energy supply in 2050. To achieve this, we must look beyond the boundaries of our own infrastructure. Collaboration with other partners, including from outside the gas sector, will be essential in this. In the future, natural gas will not in all cases and at all times be the only solution. But the smart use of gas and gas infrastructure can make an essential contribution to making our energy supply more sustainable. By cleverly combining various technologies and disciplines, a balanced and sophisticated CO2-neutral energy supply will be within reach.

The smart use of gas and gas infrastructure can make an essential contribution to making our energy supply more sustainable.

Finally, we wish to express our gratitude to our customers, contractors and business partners. We have enjoyed working with them and are looking forward to continuing our good relationship with them in the coming years. Above all, we thank all the employees of our company. Their dedication, commitment, professional way of working and energy form the foundation on which our company can keep building a beautiful future.

Han Fennema
René Oudejans