The concession Groningen: A lawyer’s view

Abstract

AbstractThe discovery in 1959 of natural gas in a well drilled by the Nederlandse Aardolie Maatschappij (NAM) near Hoogezand, Gemeente Slochteren, a town in the Province of Groningen, led to the development and establishment of major natural gas production in the Netherlands. This important industrial development could not have started and the necessary investments would not have been made by the industry, if not in accordance with the then applicable Napoleonic Mining Law of 1810 a concession had been applied for and granted allowing to exploit this discovery. From this point of view, admittedly a lawyer’s view, the award of the concession, which was named Groningen, should be considered to be the actual starting point for the aforesaid development.On 1 July 1961 NAM submitted its application for a concession based on its Slochteren discovery and with this submission the negotiations started between the Netherlands government on the one side and NAM and its two shareholders, viz. Shell and Exxon, on the other side, on the terms and conditions to be incorporated in the applied for concession. On the government’s side attention was focused on two aspects: how to integrate the natural gas discovered into the economy of the country and how to involve the State in the production and disposal thereof. From the outset the government intended, that the State’s interests should be represented by the Staatsmijnen in Limburg (State Mines) in order to give this coal mining enterprise a future outside and independent from its ailing coal mining business in the Province of Limburg. To this end the government arranged for State Mines to enter into a maatschap (partnership) with NAM. In this partnership State Mines would get a 40% participating interest, leaving 60% for NAM. The concession would be granted to NAM, but the latter would be obliged to produce the natural gas reserves contained within the concession for the account and responsibility of the partnership. The partnership would be managed by State Mines with a 50% voting right and by NAM’s two shareholders each with a 25% voting right.In the deed of concession, which was granted on 30 May 1963, it is stipulated, that any natural gas not needed by the concessionaire for its own operations should be sold to a corporation to be designated by the Minister and the articles of association of which would require the latter’s approval. This corporation, named the NV Nederlandse Gasunie (the Gasunie), was established on 6 April 1963. Its shareholders were (and still are) State Mines (now Energie Beheer Nederland (EBN)) with a 40% shareholding interest, the two shareholders of NAM, each with a 25% interest, and the State itself with a 10% interest. The Gasunie is allowed to realise from its business of buying, transporting and selling natural gas an after tax profit of NGL 80 million per year. Any surplus revenues are transferred to NAM (the transfer sum) in payment of the gas delivered by NAM.The concession area comprises about 2,970 square km, covering the territory of the Province of Groningen and the territorial waters adjacent to the Province. The concession area includes part of the Waddenzee, an area in respect of which special environmental/zoning rules and regulations are in force. As a matter of fact any exploitation of the gas reserves situated in that area is ruled out, at least for the foreseeable future.The concession area also includes an area described as the Common Area in the Supplementary Eems I Dollard Agreement of 14 May 1962. Under the terms of this Agreement natural gas produced from the gas reserves situated in the Common Area had to be shared with German concessionaires. NAM was appointed the operator for implementing the provisions of the Agreement.A certain varying amount of subsidence is experienced throughout the concession area. In this matter the partnership agreed to compensate, up to a certain financial limit, third parties which incurred costs or suffered damage in connection with said subsidence.