February 9, 2015 / 6:32 PM / 3 years ago

UPDATE 1-Gas prices rise as Dutch govt cuts Groningen output -traders

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MILAN/LONDON, Feb 9 (Reuters) - Gas prices across major European trading hubs rose sharply after the Netherlands imposed a new cap on production from its giant Groningen gasfield to 16.5 billion cubic metres (bcm) in the first half of the year, traders said.

Dutch Economic Affairs Minister Henk Kamp detailed the decision to cap production in a letter to parliament on Monday after continuing public concern over earth tremors in the area.

An energy spokesperson for the Dutch government was not immediately available to comment.

The government announced a year ago that it would cut gas production at the largest gasfield in western Europe by about a quarter over a period of three years after local residents lobbied for gas production to stop as the tremors caused cracks and other damage to homes and buildings.

The new cap on production implies an annual production cap of around 33 bcm. The previous cap for 2015 was set at 39.5 bcm.

Gas prices at the Dutch TTf gas hub for second-quarter delivery rose 3.4 percent to 21.40 euros per megawatt hours, while the summer contract was up 5.3 percent at 21.63 euros per megawatt hour at 1702 GMT.

Gas from Groningen is sold mostly to utilities and large industries in the home market, although some gas is piped to Germany, Italy, France and Britain.

“Further regulation on Groningen impacts all neighbouring markets as Dutch gas is a key supply source across western Europe, especially in peak winter demand periods,” said Oliver Sanderson, analyst at Thomson Reuters Point Carbon.

Gas from the field goes to GasTerra, a Groningen-based international company that trades in natural gas.

“Gas Terra has an important contract with Centrica for delivery to the UK via the BBL pipeline and there is a risk that these volumes will drop in March increasing the call on other sources,” Sanderson said. (Reporting by Oleg Vukmanovic in Milan, Sarah McFarlane in London and Anthony Deutsch in Amsterdam, editing by David Evans)

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