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Shell (SHEL) and Exxon (XOM) Seek Compensation Over Groningen
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Shell (SHEL - Free Report) and Exxon Mobil Corporation (XOM - Free Report) -operated Groningen gas field has been asked to permanently halt production by the Dutch government. The Dutch Senate has pushed back vote on a law concerning the permanent closure of the gas field. The delay has angered the government, which has repeatedly enunciated that gas production will not be continued owing to seismic activities that are related to the extraction of gas from the field.
The Groningen gas field, located north of the Netherlands, was one of Europe’s major suppliers of natural gas. Gas production at the Groningen field was ceased last October, following years of output cut. This development was aimed at limiting seismic activity related to gas extraction that has caused severe damage to several buildings in the region. However, during a cold snap in recent months, the field was temporarily available for limited production.
Backed by the Lower House of Parliament, the government proposed a law that would permanently shut down the field by Oct 1, 2024. However, several Senate factions challenged the law on grounds of energy insecurity for the country. The Senate factions have said that they need more guarantees to ensure that the move does not jeopardize the security of gas supply for the nation.
The delay has enraged the government, as it could postpone the final decision by a year and a half. In particular, the mining state secretary has threatened to resign unless the Senate changes its stance at the earliest.
Three of the four parties that are trying to form a government tried to postpone the vote. These include the nationalist PVV party and the centre-right VVD of the outgoing prime minister Mark Rutte.
In response to the Senate’s concerns, the government has assured that the risk regarding the security of supply is minimal, approximately one in 80,000. The risk would occur only if the country encountered two exceptionally cold winters in a row.
Shell and ExxonMobil operate the gas field through their joint venture NAM. Both the companies have sought an arbitration court to come to a decision about whether they should receive compensation from the Dutch government for halting gas production at Groningen, which still has huge reserves.
The Dutch treasury has received approximately 363 billion euros ($391.13 billion) since its production began in the 1960s. Shell and Exxon's profit from Groningen, at that time, was around 66 billion euros.
Zacks Rank and Key Picks
Currently, both SHEL and XOM hold a Zacks Rank #3 (Hold).
Archrock is an energy infrastructure company based in the United States, with a focus on midstream natural gas compression. It provides natural gas contract compression services and generates stable fee-based revenues.
Hess Midstream LP owns, operates, develops and acquires a wide range of midstream assets, providing services to Hess and other third-party customers. The partnership has a stable fee-based revenue model secured via long-term commercial contracts. Since Hess Midstream operates through 100% fee-based contracts, it is exposed to minimal commodity price risks.
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Shell (SHEL) and Exxon (XOM) Seek Compensation Over Groningen
Shell (SHEL - Free Report) and Exxon Mobil Corporation (XOM - Free Report) -operated Groningen gas field has been asked to permanently halt production by the Dutch government. The Dutch Senate has pushed back vote on a law concerning the permanent closure of the gas field. The delay has angered the government, which has repeatedly enunciated that gas production will not be continued owing to seismic activities that are related to the extraction of gas from the field.
The Groningen gas field, located north of the Netherlands, was one of Europe’s major suppliers of natural gas. Gas production at the Groningen field was ceased last October, following years of output cut. This development was aimed at limiting seismic activity related to gas extraction that has caused severe damage to several buildings in the region. However, during a cold snap in recent months, the field was temporarily available for limited production.
Backed by the Lower House of Parliament, the government proposed a law that would permanently shut down the field by Oct 1, 2024. However, several Senate factions challenged the law on grounds of energy insecurity for the country. The Senate factions have said that they need more guarantees to ensure that the move does not jeopardize the security of gas supply for the nation.
The delay has enraged the government, as it could postpone the final decision by a year and a half. In particular, the mining state secretary has threatened to resign unless the Senate changes its stance at the earliest.
Three of the four parties that are trying to form a government tried to postpone the vote. These include the nationalist PVV party and the centre-right VVD of the outgoing prime minister Mark Rutte.
In response to the Senate’s concerns, the government has assured that the risk regarding the security of supply is minimal, approximately one in 80,000. The risk would occur only if the country encountered two exceptionally cold winters in a row.
Shell and ExxonMobil operate the gas field through their joint venture NAM. Both the companies have sought an arbitration court to come to a decision about whether they should receive compensation from the Dutch government for halting gas production at Groningen, which still has huge reserves.
The Dutch treasury has received approximately 363 billion euros ($391.13 billion) since its production began in the 1960s. Shell and Exxon's profit from Groningen, at that time, was around 66 billion euros.
Zacks Rank and Key Picks
Currently, both SHEL and XOM hold a Zacks Rank #3 (Hold).
Some better-ranked stocks in the energy sector are Archrock Inc. (AROC - Free Report) and Hess Midstream LP (HESM - Free Report) . Archrock presently sports a Zacks Rank #1 (Strong Buy), while Hess Midstream carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Archrock is an energy infrastructure company based in the United States, with a focus on midstream natural gas compression. It provides natural gas contract compression services and generates stable fee-based revenues.
Hess Midstream LP owns, operates, develops and acquires a wide range of midstream assets, providing services to Hess and other third-party customers. The partnership has a stable fee-based revenue model secured via long-term commercial contracts. Since Hess Midstream operates through 100% fee-based contracts, it is exposed to minimal commodity price risks.