From the Editor: Russian conflict upends transition plans [Gas in Transition]

The winter of ’21-’22 has not been an easy one for green transition wonks who thought eliminating fossil fuels from the energy equation and replacing them with wind and solar would solve everyone’s climate change problems.

When the wind stopped blowing and grey skies limited solar generation, many countries – Germany and the UK chief among them – found themselves short on electricity and natural gas to heat and power homes, businesses and factories.

Natural gas had been ignored through the summer storage injection season, so when temperatures dipped, the Continent was woefully short of reserves. Same in the UK, where major storage caverns had been shuttered in recent years and Boris Johnson had turned his back on substantial shale gas resources that might have provided some level of energy security.

With renewables lacking the muscle of fossil fuels – primarily natural gas – Europe looked east to Russia and west to North America for piped gas and LNG to meet the needs of its consumers.

Gulf Coast LNG producers did their part, diverting cargoes originally destined for Asia to take advantage of European gas prices that had soared to record levels.

Piped gas volumes from Russia, most everyone said, were already at contractually obligated volumes, and the consensus seemed to be that not much more could be done.

Then came February 24, and the game changed completely. In the wake of Russia’s unprovoked invasion of Ukraine, sanctions against Putin and his band of oligarchs were ramped up, and suddenly the security of that piped gas was questioned, not to mention crude oil. Russia has historically provided about a quarter of Europe’s oil needs and as much as 40% of its natural gas requirements; with War in Europe (hands up those who thought they’d never hear that phrase again) Europe is scrambling to find new energy sources, and to hell with the idea of transitioning to a green energy economy.

That was made abundantly clear earlier this month, when a new report from the UN Intergovernmental Panel on Climate Change – the famous/infamous IPCC – warning that with climate change running amok the world will only get “sicker, hungrier, poorer, gloomier and way more dangerous” caused hardly a stir anywhere.

Energy security and affordability, it seems, has trumped the environment – a cautionary tale the natural gas industry the world over has been telling and re-telling at least since Paris.

US gas producers say they have the ability to replace Russian gas in Europe, but Europe itself lacks the import infrastructure to make it happen.

In a post-invasion interview with the BBC, Toby Rice, CEO of EQT, which produces about 5% of all the natural gas in the US, said American producers had enough gas to quadruple output by 2030.

The problem, he said, is that Europeans have shunned the development of LNG import terminals, preferring instead to put all their future energy eggs in the renewables basket. We all know how that’s worked for them.

Germany – which gets half of its gas from Russia and a third of its oil – got the memo: just days after Russian tanks began rolling through the Ukrainian countryside, it did a remarkable about-face, cancelling the certification of the controversial Nord Stream 2 pipeline from Russia and announcing that it would pursue the immediate development of two LNG import terminals, at Brunsbuettel and Wilhelmshaven, that have been fighting intense headwinds for a number of years.

Some in Scotland, too, are aware of the sea-change in the European energy landscape. Fergus Ewing, a former energy minister in Nicola Sturgeon’s Scottish National Party, which heads a coalition government alongside the Scottish Greens, now says natural gas output from the Scottish North Sea should be ramped up to provide jobs and energy security, especially in light of what is happening on the Continent.

“The Greens in the UK need to learn…that the Ukraine war has utterly changed the energy supply system and is likely to have far reaching and long-term consequences in further tightening supply,” he says.

Even the administration of US president Joe Biden, who won election largely on the strength of a tough environmental agenda, recognises that Russia’s war-mongering has changed the complexion of the energy transition.

At one of the world’s largest energy conferences in Houston in early March – CERAWeek by S&P Global – a key theme emerging from many sessions was “don’t let an oil shock or invasion of Ukraine distract anyone from the climate fight.”

But then Biden’s energy secretary, Jennifer Granholm – a Canadian-born former governor of Michigan who made it her mission to transform her state’s rustbelt image into a green energy reality – asked American producers the same thing her boss has asked of OPEC in the past.

“We are on a war footing – an emergency…That means you producing more right now, where and if you can.”

Even Biden’s climate change envoy, John Kerry, while imploring conference delegates not to lose sight of the climate fight, admitted that “national security and energy security [have] moved to the forefront,” overshadowing any idea of a green transition.

That, in a nutshell, is the same message the natural gas industry has been delivering for years. It’s unfortunate it took a war in Europe, the forced displacement of more than three million civilians and untold numbers of dead and wounded on both sides, for green energy wonks to get the memo – if indeed they have.