Netherlands

Gas Production

Natural gas is used in the Netherlands for cooking, for heating houses, in industry and for power generation. Approximately 50% of Dutch daily energy needs are provided by natural gas. Natural gas is by far the cleanest fossil fuel.

The Groningen field is one of the largest in the world and has become a strategic deposit in managing the future energy needs of the country. When the Groningen field was discovered in 1959 there were high expectations for expansion of nuclear energy. It was expected that by the year 2000 nuclear energy would be cheaper than fossil fuels. The policy in the early 1960s was therefore to produce the Groningen field quickly and deplete its resources over 30 to 35 years, believing that natural gas would not be needed with nuclear energy development.

Public resistance to nuclear development and the oil crisis in the seventies changed all that. The Dutch government created a policy in 1974 to stimulate the development of smaller fields onshore and offshore. The small fields policy is directed at preserving the gas reserves of the Groningen field and reducing Dutch dependence on foreign energy supplies.

Vermilion Oil & Gas in the Netherlands

Vermilion Oil & Gas Netherlands BV ("VOGN") is a subsidiary of the Canadian company Vermilion Energy Inc. ("Vermilion"). Vermilion produces oil and gas in Canada, Australia, in France and, since May 2004, in the Netherlands. VOGN’s head office is located in the province of Fryslân (Friesland) in the town of Harlingen.

• a. Production
  
  Production licenses for the extraction of natural gas, previously known as concessions, were acquired by Vermilion in 2004. These production license areas are dispersed over the North of The Netherlands in the provinces, Friesland and Noord-Holland. Vermilion produces gas in the province of Noord-Holland from the production license area Slootdorp, in Friesland from the Leeuwarden, Oosterend, Gorredijk and Steenwijk concessions, and from the production license Zuidwal in the Dutch Waddenzee.
  
  Vermilion has been actively developing it’s assets in the Netherlands since 2004. Development funds have been spent to:
  • Make modifications to existing wells to increase productivity.
  • Optimize of gas processing to increase efficiency and reduce power consumption.
  • Drill new wells to produce the existing gas fields more efficiently.
• b. Exploration
  
  Vermilion is now ready to assess the hidden value of these concessions. Several potential natural gas production prospects were identified when the concessions were acquired in 2004. Our plan is explore those opportunities in the coming years. The prospects Vermilion intends to drill and develop fall into the Dutch national small fields category.
  
  These exploration prospects were identified by means of seismic surveys. Seismic analysis involves the use of sound waves projected into the ground and reflected from the layers of rock back to the surface. Seismic surveys locate possible sources of natural gas. An exploratory drilling operation is required to prove the presence of natural gas and to determine if it is economic to produce.
  
  The first step is to find a suitable location for drilling operations. This location should be as close as possible to the expected subsurface target. If additional wells are needed later to fully develop the resource, the location should allow for additional drilling to minimize both cost and the impact to the surroundings. Proper planning should allow for small scale or even temporary expansions to the existing location later, if required.
  
  Vermilion is planning to undertake three to four exploratory drilling operations the coming year, and maturing several new prospects for further exploration drilling in years to come.

• c. Drilling
  
  Natural gas is present at depths of some 1 to 4 km. A drilling rig (vertical drilling construction) is used to facilitate drilling at these depths. The first step in a drilling operation is the construction of the drilling location. These locations are normally fenced and partially paved to protect the public and to prevent leaks into the soil. Great attention is given to the collection, separation and transportation of substances used in the drilling operations. Additional measures are taken to avoid odor-disturbance outside the drilling location.
  
  Building a drilling location requires the movement of material and equipment. In each instance a traffic plan is prepared and approved with local authorities to ensure safety. The traffic plan may include temporary road adjustments, restricted trucking hours, and special speed limits for construction vehicles. These measures also help to control traffic noise.
  
  A drilling rig is around 30 meters high and will be visible during drilling operations. Drilling takes place over 24 hour operations until the target formation is reached. That may take from one to three months to complete. For safety-reasons artificial lighting is obligatory. Wherever possible, disturbance by lighting will be avoided.
  
  If gas natural gas is found, a test has to be conducted to determine the volume of gas and its properties. This requires a short period of flow and flaring of the gas. Testing activities may last several days. Vermilion will plan the testing for periods when the impact on the surroundings can be minimized.
  
  The drilling operation is a temporary activity. After the well has been drilled the drilling rig is removed. From that moment the well is equipped at surface with a series of valves. This stack of valves (commonly known as a Christmas tree) is approximately two meters high.
  
  If no economical recoverable gas is found and no other use for the well is identified, the location is dismantled and restored to its original state. If economic recoverable gas is present, the site will be converted into a production location.
  
  After the removal of the drilling rig a production installation is built which normally contains equipment to separate and store small amounts of liquid products and meters to quantify the amount of gas produced before it is delivered into a pipeline. The produced gas is then transported by an underground gas transportation pipeline system to VOGN’s own gas treatment facilities in Garijp or Harlingen. The gas is conditioned for sale at this facility and then delivered to the operator of the national gas distribution system, Gasunie. Gasunie then delivers the gas into the Dutch natural gas grid where it is finally delivered to customers.
  
  A producing natural gas field lasts 10 to 30 years. During the production phase more wells might be needed, requiring additional drilling operations. Currently Vermilion has 40 gas production locations in the provinces within its production license areas. The number of gas production wells per location varies between 1 and 3. In total, some 60 wells are being managed by Vermilion.
  
  If the drilling is un-successful, or production has come to an end, the location is dismantled and restored in cooperation with the legal owner. Nothing is left behind.

• d. Water Injection

  Gas fields which produce natural gas for many years, will produce less gas and more water coming from the gas layer over the years. This water, which is called formation water, consists of a high level of mineral salts. Together with traces of natural gas condensate and incidentally also with traces of methanol, a waste stream is created which is called production water. In the current situation, Vermilion treats this production water in two ways:

  • Treatment on Vermilions gas treatment station (GBI) in the industrial area of Harlingen, and
  • Storage in a former gas production well in the vicinity of Noordwolde in the municipality of Weststellingwerf, Friesland.

  The GBI at Harlingen is used to treat gas which is coming from many different production wells. During this treatment, among others the water (apart of formation water and production water) which is present in the natural gas is removed.  This water is treated at the water treatment plant of the GBI. It is being discharged together with other waste streams at the sewerage system of Harlingen. Hereafter, the water is treated further in the water treatment plant of Harlingen and finally, the water is discharged on surface waters. The discharge permit of Vermilion allows little amounts of production water being present in the total waste water stream the GBI treats. However, Vermilions amount of production water will increase in the future. To enlarge the treatment capacity, Vermilion currently also has got a permit to inject limited amounts of production water in the well near Noordwolde.

  Because Vermilion wins natural gas out of a lot of small fields and because these fields will produce an increasing amount of formation water, Vermilion is in need of future facilities to treat the waste water stream. The water quality administrator "Wetterskip Fryslân" has informed Vermilion that alternative ways of water treatment should be investigated to treat waste water streams with a high chloride content. This has been secured at Vermilions permit on the law on surface water pollution. Existing studies have pointed out that the injection of salty production water in former natural gas wells, like the injection at the Noordwolde/Weststellingwerf well from an environmental point of view is a good alternative to treatment via water treatment installations and discharge on the sewage system, like is happening in Harlingen in the current situation.

  Pointing at the increasing amounts of formation water Vermilion will produce in the future, Vermilion wants to increase the capacity at the existing installation in Noordwolde/Weststellingwerf. Next to this, Vermilion would like to convert two other former gas winning stations to water injection stations. These two wells are situated at existing, (partly) depleted locations for gas winning which can be made suitable for water injection (Oldelamer and Nijensleek). An Environmental Impact Assessment will be carried out for both the location with capacity increase as for the two new locations. By the way: the "new" in the term new locations is about a new activity. The locations however already exist and currently or in the past are used for the production of natural gas.

  At this moment, the Environmental Impact Assessment (EIA) to transform the existing gas winning locations to water injection locations is being made. The starting document of this EIA with technical information about Vermilion's intention can be downloaded here (Dutch Only).

  
  
  • a. Protection of people and the environment
    
    Protection of people and the environment is of great importance to Vermilion. Our concern is not only for our employees, but also for our neighbors and the public in general. All of our production activities are executed in a safe and environmentally friendly manner. Our facilities and work processes meet the highest technical requirements and safety standards.
    
    The Dutch Ministry of Economic Affairs and its agency, Staatstoezicht op de Mijnen (SodM), approve and monitor our production and development activities.
    
    Prior to conducting an exploratory drilling operation, the impact of such an operation on the surroundings is assessed by the following studies:
    • A quantitative risk assessment (QRA) to minimize the risk for the people surrounding the operation;
    • A subsidence study: Drilling itself causes no subsidence. However subsidence may occur during the production of natural gas. A study shows the expected subsidence and stipulates the measures that have to be taken in order to minimize the effects of subsidence;
    • A noise study to determine the need for noise reduction measures;
    • An air emission study to determine the pollutants released into the atmosphere;
    • A flora and fauna study to check possible disturbance to nearby plants and animals, and what measures must be taken to limit the impact of our activities; and
    • An archaeology study to determine if there are historical sites to be protected.
    VOGN takes all measures necessary during its operations to assure a safe and healthy working environment. This starts with the choice of the surface location for exploratory drilling operations. These locations are preferably constructed in a rural area away from populations in order to prevent disturbing everyday life. Where possible, VOGN ensures that these measures are developed in close cooperation with local authorities and local inhabitants.
  • b. Sustainability
    
    It is Vermilion's objective to produce natural gas in the Netherlands in a sustainable and responsible manner. This objective is in alignment with the policy of the Dutch Government to maintain the deliverability of natural gas from its reserves during the transition period towards other, more sustainable, energy sources.
  • Vermilion Oil & Gas Netherlands B.V.
    Manfred Steffens, HSE Coordinator
    Zuidwalweg 2, 8861 NV Harlingen
    Tel. 0517 493 333
    msteffens@vermilionenergy.com

Policy

 


Permits

Permits are need for the exploration and the production of natural gas. That includes the seismic research, the exploration drilling, producing, and also for dismantling and restoration of the location.

If gas is encountered, an application for a production license is required. That requires the submission of a "winningsplan". This winningsplan is approved by the Dutch minister of Economic Affairs. The frequency of subsidence measurements is a critical issue and is based on the winningsplan.

Licenses required to explore, drill, and produce natural gas in the Netherlands are granted by competent authorities representing the Dutch national government, the provinces, the municipalities, the district water boards, and other public agencies.




Subsidence and Earth Tremors

The land under the Netherlands is moving. Some ground movement is natural. In the Netherlands there are 2 types of earth movement caused by human activities: subsidence and earth tremors.

Drilling natural gas wells does not cause subsidence; however subsidence may occur during the production phase of natural gas. During production, the pressure in the reservoir is reduced and the formation compacts. The pressure in the small spaces in the rock containing gas diminishes slowly while the weight of the ground above the gas reservoir, the overburden, remains constant. The weight of the overburden causes the reservoir rock to compress. The amount of subsidence is typically small, in the order of a few centimeters, and occurs little by little over a long period of time.

Subsidence can also occur due to other human activities like the reclamation of land from the sea or lowering the ground water level.

The so called winningsplan includes an analysis and forecast of subsidence for every gas field. Actual subsidence is determined by measurement of the ground level over time. Production plans may be modified if indicated by the actual progress of subsidence.

Generally, subsidence due to gas production activities occurs little by little but sometimes it occurs rapidly. This can occur if the rock in the overburden has been sticking on the edges of fractures and suddenly settles into place. In the Netherlands this can lead to light earth tremors. All earthquakes in the Netherlands are registered by the KNMI (Royal Dutch Meteorological Institute). Since the start of gas producing activities in the 1970's no earth tremors have taken place above the gas fields VOGN now owns.

Recent measurements show that the subsidence above Vermilion’s gas field between Harlingen and Franeker occurs at a greater speed than expected. At present it is unclear what causes this higher rate of subsidence. The gas field concerned is unique because it is the only producing chalk reservoir onshore in Europe. This means that there is less data available on which to make forecasts of the expected subsidence.

Vermilion has chosen to stop the gas production from this field and expects to know more about the subsidence by mid year 2009. An application to resume production will be submitted if it is supported by the new measurements and analyses.

All other formations from which VOGN produces natural gas in the Netherlands consist of sandstone or well consolidated carbonates. Historically the actual subsidence of these formations has remained within the forecasts made in the winningsplans. The new natural gas exploration prospects are sandstone or carbonate formations.




Planning and Project Activities

Our goal for 2009 is to undertake between 4 and 6 exploratory drilling operations and one development drilling operations from an existing surface location. These are located near De Hoeve, De Kom, Nieuwehorne/Katlijk, Vinkega, Wommels, Middelburen.

Preparations for these drilling operations have already begun. The preparatory activities include the different environmental and security studies mentioned in this document as well as informing the various public agencies and the inhabitants near the proposed drilling locations.




Questions & Answers

If you have any questions we will be glad to answer them. You can reach us by telephone or e-mail, or by post at: If you have any comments or complaints related to Vermilion's existing or proposed activities, contact Vermilion Oil & Gas Netherlands B.V at the address or email noted above. We welcome your feedback and will try to address your correspondence in a reasonable time frame.

If individuals believe that there has been damage to land or buildings caused by Vermilion’s operations, they should contact Vermilion by any of the means noted above.