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UPDATE 2-Netherlands to halt Groningen gas production by 2022

Bart H. Meijer

* Gas production at Groningen field to end by 2022

* To end 8 years earlier than initially planned

* Groningen production capped at 11.8 bcm in 2019/2020

* To be kept operational until 2026 at latest in case of exceptional demand (Adds detail)

AMSTERDAM, Sept 10 (Reuters) - The Netherlands will halt production at Groningen, Europe's largest onshore natural gas field, by 2022, eight years earlier than initially planned, the Dutch government said on Tuesday.

Groningen produced nearly 54 billion cubic metres (bcm) of gas in 2013 before tremors blamed on drilling damaged buildings and prompted a series of lowered caps on output and protests by residents and campaigners.

An unusually strong earthquake in January 2018 prompted the government last year to promise to end production by 2030.

But Economy Minister Eric Wiebes last month signalled the end could come a lot sooner, citing greater capacity to convert high calorific imported gas to the low calorific standard of Groningen gas and a switch by large industrial users to other sources of energy.

These measures will enable production to fall to zero by mid 2022, assuming average weather conditions, Wiebes said on Tuesday.

After that, the field will be kept operational until 2026 at the latest, he said, in order to meet high demand for gas on exceptionally cold winter days.

Discovered in 1959, the Groningen field in the north of the Netherlands - run by Royal Dutch Shell and Exxon Mobil joint venture NAM - was long one of Europe's main suppliers of natural gas. Output hit a peak of 88 bcm in 1976.

A 3.4 magnitude earthquake in May increased pressure to end production faster than planned, as the gas sector regulator called for an immediate 40% reduction, to less than 12 bcm, to limit seismic risks.

Although it had earlier said such a step would be difficult to achieve, the government on Tuesday did set a production cap of 11.8 bcm for the 12 months through October 2020.

This reduction will cost the Dutch state around 400 million euros ($441 million), Wiebes said, while a preliminary agreement with Shell and Exxon Mobil on the future use of the Norg gas reserve has resulted in a 90 million euro settlement.

Wiebes said he expects to reach a final agreement on the costs relating the end to Groningen production with Shell and Exxon in the first half of 2020.

($1 = 0.9064 euros) (Reporting by Bart Meijer; editing by Jason Neely)