Natural gas boon turns out to be a bit of a bane

The answer is often the same when a Dutch official is asked: "What wiil the Netherlands do when the natural gas runs out?" "I wish I knew," goes the reply, usually with a roll of the eyes.

The Dutch hope they find the answer quickly, before their windfall dries up, sometime in the next 30 to 40 years.

A few years ago, a more common attitude was something like, "So what if the gas does run out? We won't need it anyway."

Until the petroleum price shocks of 1973-74 and 1979, the gas that was discovered in the late 1950s under Groningen Province, in the northern part of the country, was regarded as a nice way for the Netherlands to meet its energy needs until the end of the century.

By then, it was felt, nuclear power would be so widespread that gas would be obsolete.

Holland, in fact, felt it had enough gas to go around to sign long-term export contracts with West Germany, France, Belgium, Italy, and Switzerland. Today it sells about half its gas abroad.

To replace coal and oil use in homes, the government launched a massive -- and costly -- conversion program. The incentive to get homeowners to convert to gas was rather simple: The government paid for the whole thing. Treated as an expendable resource, the gas altered the social fabric of the Netherlands. A succession of governments was elected on the promise to bring more social services -- increased social security, higher unemployment benefits, low-cost health care, and other programs -- without similarly large increases in taxes. By giving itself 90 percent of the profits from gas exports, the Dutch government took in over $5 billion last year to help pay for these services. At its peak, gas exports were responsible for about 10 percent of Dutch revenues.

But this rapid distribution of new wealth caused an addiction to it. And, in fact, the practice of using income from natural resources to pay for social services instead of, for instance, new industry was given a name worldwide: the "Dutch disease."

But while the Dutch admit the mistake, they feel the title is unfair, since much the same thing happened in Norway and Britain after offshore oil was found.

"The Dutch did spoil their bonanza of natural gas revenues," acknowledges W. A. Kimmon, of the division of economic planning in the Ministry of Economic Affairs.

But today, with only two nuclear plants in the country -- opposed by many Netherlanders -- the Dutch attitude has changed.

"Since 1973, people have been working hard to arrive at a more balanced energy policy," says Hans Dercksen, director of strategy for Esso-Netherlands.

This would mean, he adds, cutting gas and oil use to no more than a third of energy needs and increasing coal use so it also provides about 33 percent of the fuel mix.

The government is also trying to alter those long-term export contracts, many with 15- to 20-year terms but due to expire in the next few years.

Since 1973, the Dutch government has tried to match each boost in oil prices on the European spot market with an equivalent increase in natural gas prices. This linkage was supposed to keep Holland's foreign trade deficit down and slow depletion of its gas reserves.

But with the widely gyrating oil prices of recent years, and the effect of long-term contracts, the price of gas has not kept up, and Dutch gas has become cheap.

The Netherlands hopes increased gas imports and new gas discoveries at home will lengthen the life of its gas reserves.

Holland currently imports slightly less than 10 percent of its gas supplies. The government hopes to increase this to as much as 50 percent in the next few years.

It's been estimated Holland's gas would run out by 2010. New gas discoveries in the north have extended reserve life by an unknown amount. Netherlandse Gasunie, which markets the Dutch bonanza, has not publicized the discoveries for fear of di scouraging conservation, officials say.

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