Shell Entering Arbitration With Dutch Over Groningen; Pathway To Some Certainty

Shell (SHEL LN) has filed for arbitration (alongside JV partner Exxon) with the Dutch government over the Groningen field. Largely known but arbitration at least sets a process in place.

• The Dutch government is accelerating the run-down of the Groningen gas field due to earthquake incidence affecting local residents. The original end date was meant to be 2030 but, in Sep-19, the Dutch moved this forward to 2022. This date was then revised back again to “2023 or 2024”.
• A public inquiry into the damage done was concluded in Feb-23 and the field was closed down last year. The Dutch government is now interested in restitution for the damage done to local residents. The JV partners view appears to be that tax revenues from Groningen production were hugely beneficial to the Dutch government in any case.
• Shell’s recent announcements, along with the 2022 annual report, do not give guidance as to the possible extent of any damages but this cannot be seen as a credit positive at this stage but arbitration at least gives a chance of some certainty as to the outcome.