* Annual gas revenues to decline rapidly in coming years
* Unconventional resources need better technology
* Experts eye ways to preserve gas wealth
* Country aims for transition to gas trading hub
By Catherine Hornby and Harro Ten Wolde
AMSTERDAM, Sept 10 (Reuters) - Developers in the Netherlands are eyeing new ways to exploit gas as traditional Dutch natural gas resources decline, but they say technological advances and state stimulus measures will be needed for projects to go ahead.
Dutch gas resources, including mainland Europe's biggest gas field near Groningen, have contributed about 200 billion euros to state income since about 1970, but annual income from gas is seen halving in coming years as resources dry up.
The Dutch Economy Ministry estimates that the Netherlands, which currently sits on Western Europe's second biggest gas reserves after Norway, will be a gas importing country by 2025. At the moment it exports more than half of its production.
The ministry expects state gas revenues in 2009 of more than 12 billion euros ($17.5 billion), but these are seen tumbling to 7.5 billion euros in 2010 from a delayed effect of a lower oil price and declining output, and to 6.8 billion euros and lower in coming years.
The issue is a key consideration for the crafting of the Dutch government's budget, which is to be unveiled next week on Sept. 15
In the meantime, the country is repositioning itself as a gas import and trading hub in North Western Europe, with construction of terminals for liquefied natural gas (LNG) and plans for gas storage underway.
But Dutch developer Energie Beheer Nederland (EBN) has said there could be trillions of cubic metres of gas still to be discovered in and around the Netherlands, more than the total amount of gas that has been found in its territory so far.
Most of this would be unconventional forms, however, such as gas extracted from coal beds, shale and gas in tight reservoirs, which involve more sophisticated extraction equipment.
"A lot of these plays require additional types of development techniques, such as drilling quite a lot of wells," said Berend Scheffers, technical manager at EBN.
"The Netherlands is a quite densely populated area, so that's quite difficult. What must become available is new drilling techniques which require less space and are more efficient in tapping these resources."
Total known Dutch natural gas resources at present are estimated at 1,345 billion cubic metres, of which about 86 percent are located onshore, according to government data. EBN said it is yet to give a breakdown of how much of the unconventional resources may be onshore.
Gas projects in the North Sea also face competition for space from renewable energy projects, with the Dutch planning to partly meet alternative energy targets by expanding their offshore wind capacity.
The Abu Dhabi National Energy Company (Taqa) which is expanding its portfolio of North Sea assets, said government stimulus measures will be crucial for developing unconventional gas projects.
GOVERNMENT MEASURES
Paul van Gelder, managing director of Taqa Europe, argues that countries in the region will have to maintain tax policies that keep the industry active.
"These stimulative measures combined with the right gas price will cover the financial and technological risks and create profitable opportunities," said Van Gelder.
The Dutch government's small fields policy tries to promote the drilling of at least 15 new oil and gas wells every year with tax incentives. The state also requires companies give back permits they are not using to make sure as many fields as possible are in operation.
But construction of new facilities could also face challenges in securing environmental permits as well as opposition from locals in densely populated areas, which has recently delayed a carbon capture project.
While new forms of gas exploitation in the region are being considered, the Dutch are also discussing ways to hold on to their natural gas wealth for as long as possible.
Currently, part of the state's revenues go into a fund that helps finance infrastructure projects such as flood defences while the rest is used to lower state debt, but some experts argue that a more sustainable system could be created.
"Gas proceeds in the end are just a temporary source for financing. Because it is a temporary source you have to find a way to make it a permanent source," said Bas Jacobs, a professor of economics and public finance at Erasmus University Rotterdam.
One proposal by Jacobs is to use gas proceeds to build up a sovereign wealth fund. Norway already invests its oil and gas revenues in foreign stocks and bonds to save for future generations and now has the world's second biggest sovereign wealth fund after that of the United Arab Emirates.
With only about a third of the gas remaining in the Groningen field, the Dutch are busy bolstering their negotiating position in the gas landscape by developing their role as an import, trade and transport hub.
"The Dutch market has potential for becoming the reliable point of supply for Europe, due to its infrastructure, pipelines, underground storage and LNG facilities," said Gertjan Lankhorst, director of Dutch gas supplier and trader GasTerra.
(Editing by Keiron Henderson)