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The Groningen Field at 50: The success of teamwork and technology
Remarks by Rex W. Tillerson
Groningen 50th Anniversary
Groningen, the Netherlands
June 16, 2009
Your Excellency, distinguished guests, respected colleagues. I am honored to join you as we celebrate the 50th anniversary of the Groningen Field.
Since the first days of its discovery a half century ago, the Groningen Field has been an extraordinary proving ground for the technical skill, innovative ideas and inspiring vision that have helped shape the energy industry as we know it today.
The Groningen Field ranks as the European continent’s largest natural gas field and, indeed, it is one of the greatest energy discoveries in history. But its size is only part of the story it has to tell. Today I will talk about what we can learn from its use for the future.
For the past 50 years, the Groningen Field has helped improve the quality of life in the Netherlands and across Europe. It has been a reliable source of energy and has provided greater energy diversity and security across the continent. And it has done so not just by adding a valuable source of supply, but by being highly adaptable and responsive to market needs on a daily basis.
As important as the Field’s daily contribution is for Europe, its development also provides invaluable lessons for our industry in general — lessons on how we can take on the energy challenges that we face today, and will face into the future.
Over the past five decades, the men and women of NAM, GasTerra, Gasunie, Shell, ExxonMobil, EBN and the Dutch government have worked together through the Gasgebouw to make the natural gas of the Groningen Field a valuable resource for Europe.
Today, the achievements of this partnership are almost taken for granted. In our industry, that is the ultimate sign of success.
But our shared success was not achieved overnight. It was the result of teamwork, technology and long-term thinking. Each was instrumental to making this anniversary a reality. And each will be critical to meeting our energy challenges in the future, here in the Netherlands and around the world.
Of course, when the Groningen Field was discovered 50 years ago, few dreamed of the impact it would have on energy supplies.
The first traces of natural gas were detected in 1955. It was not until July 22, 1959, however, that the first well had been drilled at the Slochteren-1 drill site. A year later, another well was drilled 20 kilometers away from that original site.
As you heard, only later did it become clear that these scattered wells all tapped a single, enormous resource — a discovery not even the most optimistic prospectors would have expected.
So even at the dawn of its development the Groningen Field offers our industry a lesson — never underestimate the extent of the world’s energy endowment.
This surprising discovery was coupled with a bitter disappointment, however. The wells here did not strike oil, a valuable resource then and now. They struck natural gas, which at the time, was viewed as having very limited commercial value.
Even when the potential for substantial natural gas began to become clear, there were some who did not believe it should be developed. The continent was heavily reliant on coal. And many did not see a future for natural gas because they saw a future that would be dominated by nuclear power.
Fortunately, creative and enterprising minds saw more. Beginning in late 1959, officials from the joint venture partners Esso and Shell held a series of meetings to discuss the future of the new discovery and the benefits it could bring to the Netherlands.
One of these officials was Douglass Stewart of Esso. Stewart envisioned that natural gas could be used to supply more than just Dutch industry — although there was no doubt that this was an important strategic benefit for the Netherlands. He understood from the experience of the United States that natural gas could also be used to supply households throughout the Netherlands as well.
This bolder vision was eventually adopted by the partnership, and we began to commercialize the resource for both industrial and consumer use.
This, then, was the second lesson of the Groningen Field — innovative thinking can help turn a seemingly disappointing discovery into an extraordinary success in the energy field.
Realizing this ambitious vision required the operational expertise that the international energy companies involved in this venture brought to the table. Through NAM, Shell and Esso, a strong partnership was forged that brought needed skills in project and risk management, technology development and operational excellence. And to its credit, the Dutch government appreciated the contributions of this partnership to the successful development of this national resource.
From early on, the government of the Netherlands implemented sound energy policies to allow national energy companies to partner with international companies.
Individuals like Minister De Pous of Economic Affairs and Minister Zijlstra of Finance worked to ensure that maximum value flowed to the people of the Netherlands by supporting long-term, commercial energy development. They had the vision to see the role that energy companies and energy markets could play in delivering value to all stakeholders, including the Dutch people.
And thanks to the commitment to the rule of law and policy stability, the leaders of the Netherlands created an environment that encouraged investment and innovation. With these components in place, new partnerships applying new technologies were able to solve the energy challenges at Groningen — and could continue to do so for the decades that would follow.
In fact, the government’s efforts to reach consensus helped create the companies and relationships that would bring the Groningen Field’s tremendous reserves to market. In August of 1961, Minister De Pous created the Van der Grinten Committee, which had three key members representing different political parties and constituent needs in the Netherlands.
These committee members sat down, they listened to one another, and they helped build the model and lay the groundwork for gas production and distribution partnerships. These leaders also used their influence and cooperation to build industry and public support for their decisions.
In addition, farsighted government policies helped make natural gas an important source of energy first for the Dutch people – and then for Europe. Looking back, it is hard to believe today that anyone could question this, but at the time it was a massive undertaking to bring a new energy source to market. It required building a vast new infrastructure as well as explaining to the public the benefits of natural gas.
In 1964, a nationwide campaign was launched to educate the Dutch people about the ease of conversion and the benefits of natural gas for consumers. These efforts included brochures mailed to homes and a film called “From Town Gas to Natural Gas.” The film was aimed to dispel a popular misconception that natural gas was not suitable for old cooking pans.
At the time, natural gas was so novel that the government and industry even had to explain that it was cleaner than coal.
The same year, work also began on constructing the first 500 kilometers of a gas pipeline network after successful negotiations with landowners led by the Dutch Natural Gas Pipelines Planning Committee. In just a few short years, a gas distribution system was constructed under the supervision of Gasunie that would eventually include some 11,000 kilometers of pipe extending throughout the Netherlands. And by the end of the decade, Groningen gas flowed into almost every Dutch home — fewer than 10 years after it had been discovered.
Working with Esso, Shell and the people of Gasunie and NAM, the Dutch government also took action during this time to allow the Groningen Field to serve as a resource for industry not just in the Netherlands, but also in France, Belgium, and Germany — reaffirming its commitment to free trade and investment, decades before the formation of the European internal market we all take for granted today.
Such policies are a reminder that our world is strengthened by energy diversity — and the best way to increase energy security is to expand global energy supplies and allow free markets to find the most efficient use of those energy resources.
We have also learned another lesson as we have developed this resource together: energy production and environmental protection are not incompatible. We can achieve both, as our experience here shows.
Many may not realize that the underground gas storage facility Norg, which is part of the Groningen system, lies within a nature reserve. In addition, some 400 kilometers of gathering lines move gas and liquids underground to minimize the impact on potato and sugar beet fields above. And the clusters above ground are built low and surrounded by trees so that they do not detract from the Dutch countryside.
For these efforts, NAM has earned a reputation as a responsible environmental steward, working closely with the provincial authorities and the local governments to design the facilities in a manner that is compatible with community and environmental needs.
Of course, all of our shared successes would not have been possible at the Groningen Field without harnessing the power of technology and human ingenuity. Here, too, is a lesson. In the decades ahead, technology will play an increasingly important role as we work together to ensure the Groningen Field can continue to supply energy to the people of the Netherlands and Europe.
Technology has already enhanced performance and increased efficiency. The powerful compressors pioneered by NAM have helped compensate for declining field pressure. With such technological advances in place and with more on the horizon, NAM is ensuring that cleaner-burning natural gas will continue to fuel homes and businesses throughout Europe for the next 50 years — and beyond.
The Groningen Field also teaches us the value of long-term thinking. The relationships that foster teamwork and technology require time and trust to develop. The Groningen Field has been a success because the Dutch government and its partners have been willing to invest that time and cultivate that trust.
In an age of information revolution and global transformation, it can be hard for the public and even policy makers to understand the time horizons needed for success. But here at Groningen we have seen the value of investing for the long-term.
And with this long history of cooperation and innovation, the Groningen partnership has proven how to overcome energy challenges despite the ups and downs of the business cycle, through the swings of the commodity price volatility, and even in the face of global economic downturns or political disruptions. Our decades of success here have become a model for policymakers, resource-owning nations, and energy companies operating across the globe.
This does not mean that we have not had our differences along the way. We have. But from the beginning, each partner in this historic project invested not just in the resource, but in our relationships with one another — building trust, respecting each other’s viewpoints, and keeping the focus on our shared goal of finding the greatest value for this resource. And because we invested in our relationships, we succeeded in turning the inevitable differences among us into opportunities for even greater success over time.
In the years ahead, the world will need to apply the lessons that our industry has learned from the Groningen Field.
The world is undergoing tremendous economic transformation — and, despite the current global economic downturn, energy demand will continue to grow. By the year 2030, we expect global energy demand to be about 30 percent higher than it is today.
To meet this demand, we will need to follow the example of the visionaries before us who saw the need to develop the natural gas of the Groningen Field when others believed other resources were superior. Simply put, we will need oil, natural gas, coal and nuclear energy as well as wind, solar, and other renewable fuels. We will need them all to play a role in the global energy mix for decades to come.
We know that natural gas will be one of the most important fuels of the future because of its scalability, affordability, versatility and its efficiency.
In fact, natural gas demand is expected to increase by more than 50 percent by the year 2030. This growth has a positive, long-term benefit. Natural gas is a cleaner-burning when compared to other conventional sources. And this environmental advantage is important to the future.
As this audience understands, expanding the world’s energy supplies is only part of the energy challenge we face.
And as energy demand grows, especially in the rapidly developing economies, we are likely to see an increase in greenhouse gas emissions associated with energy use.
Globally, energy-related carbon-dioxide emissions are forecast to rise by an average of one percent per year through the year 2030 — even with substantial energy efficiency gains and growth in the use of less carbon-intensive fuels.
Our best hope for increasing efficiency and reducing emissions is to push forward with teamwork and technology.
We have already seen our industry advance important technologies that are making a difference. One of these is cogeneration, which is the simultaneous production of electricity and steam, typically by using natural gas.
For example, in March, we inaugurated our newest high-efficiency cogeneration plant at our Antwerp refinery, just a few hundred kilometers from here. In addition to generating 125 megawatts of power — or the equivalent of the amount of electricity produced by 230 wind turbines — the new plant will reduce Belgium’s carbon-dioxide emissions by approximately 200,000 tonnes per year — the equivalent of taking about 90,000 cars from Europe’s roads.
This is just one of the many initiatives that companies such as Esso, Shell and others in the energy industry are undertaking to improve efficiency and to reduce emissions over the long term.
Finally, we must apply the lessons of long-term thinking, long-term discipline, and long-term commitment. Our energy challenges will not be solved overnight. But the 50 years of success at Groningen point the way to solving our energy problems over time.
Every sector of society needs to be part of meeting the world’s energy challenges — from consumers and businesses to governments around the world.
With a stable legal and regulatory framework and a proven dedication to the rule of law like that shown in the Netherlands, energy companies like ours can have the confidence to invest in difficult solutions for the long term.
This is critical, as the International Energy Agency estimates that the cumulative investment in global energy-supply infrastructure needed to the year 2030 will exceed $25 trillion.
Thus, we will need public policies that encourage free trade, free exchange, stable tax policies, and the rule of law. These factors ensure that our industry can develop reserves in an affordable, secure, and environmentally responsible way.
As we reflect on the past, we look out at a different world than the men and women here did 50 years ago.
But the mission of our industry remains the same — to provide safe, reliable, affordable, and environmentally responsible supplies of energy. And the lessons for achieving this mission, as Groningen shows, are the same.
With sound, stable and sensible policies, we can expand and diversify the world’s energy supplies, we can unlock promising new technologies and meet the challenges of providing more energy, while we reduce the growth of greenhouse gas emissions.
ExxonMobil is proud of our role in the extraordinary story at Groningen.
We appreciate the relationships we have forged working together with NAM, Shell, Gasunie, GasTerra, EBN and the Dutch government.
We look forward to taking on new challenges as we extend our partnership over the next 50 years and beyond.
None of us know what the future holds, but we can face the future confidently, knowing that teamwork and technology can build the solutions we need to overcome any challenge. The men and women of Groningen have proven that for the world to see.
I thank you for your kind attention.
