Shell and ExxonMobil have started arbitration proceedings against the Dutch state to obtain financial compensation over their gas extraction agreements.
The companies, both shareholders of the Dutch Petroleum Company (NAM), accused the state of poor implementation and violations of their agreements relating to their gas extraction business, including Groningen’s gas field.
An outline agreement was established in 2018 when intentions to stop gas extractions in Groningen by 2030 due to the damaging earthquakes were announced by Eric Wiebes, the then Minister of Economic Affairs and Climate. However, a year later, the state declared extractions needed to end by 2022. An interim agreement was formulated that same year. In 2020, there was a failed attempt to start a joint arbitration case. Further discussions to address disagreements were made in 2022 and 2023 but to no avail.
The two oil and gas companies originally sent a letter stating their intention to initiate the case on December 4th 2023, to the State Secretary for Mining, Hans Vijlbrief. Vijlbrief submitted a letter informing the House of Representatives of the start of the arbitration procedure yesterday.
In their letter, Shell and ExxonMobil outline the main points addressed in the arbitration case, which include the handling of gas storage facilities, financial losses of NAM, and the conditions to charge NAM for damage settlements.
An arbitration is a legally binding procedure whereby a neutral third party, composed of a selected group of experts within a field, forms a committee to judge a case. The parties involved can appoint the experts who judge the dispute.
If the verdict favours Shell and ExxonMobil, it could cost the state billions, according to multiple media reports.
Last month, outgoing Dutch Prime Minister Mark Rutte spent Wednesday night at a temporary housing facility in the municipality of Groningen as part of his visit to areas affected by earthquakes triggered by years of gas extraction.
