LNG produces more emissions than coal

From The Guardian

Exported gas emits far more greenhouse gas emissions than coal, despite fossil-fuel industry claims it is a cleaner alternative, according to a major new research paper that challenges the controversial yet rapid expansion of gas exports from the US to Europe and Asia.

Coal is the dirtiest of fossil fuels when combusted for energy, with oil and gas producers for years promoting cleaner-burning gas as a “bridge” fuel and even a “climate solution” amid a glut of new liquefied natural gas (or LNG) terminals, primarily in the US.


But the research, which itself has become enmeshed in a political argument in the US, has concluded that LNG is 33% worse in terms of planet-heating emissions over a 20-year period compared with coal.

“The idea that coal is worse for the climate is mistaken – LNG has a larger greenhouse gas footprint than any other fuel,” said Robert Howarth, an environmental scientist at Cornell University and author of the new paper.

“To think we should be shipping around this gas as a climate solution is just plain wrong. It’s greenwashing from oil and gas companies that has severely underestimated the emissions from this type of energy.”

Drilling, moving, cooling and shipping gas from one country to another uses so much energy that the actual final burning of gas in people’s homes and businesses only accounts for about a third of the total emissions from this process, the research finds.

The large resulting emissions mean there is “no need for LNG as an interim energy source”, the paper says, adding that “ending the use of LNG should be a global priority”.

The peer-reviewed research, published on Thursday in the Energy Science & Engineering journal, challenges the rationale for a huge surge in LNG facilities along the US Gulf coast, in order to send gas in huge tankers to overseas markets. The US is the world’s leading LNG exporter, followed by Australia and Qatar.

Previous government and industry estimates have assumed that LNG is considerably lower emitting than coal, offering the promise that it could replace it in countries such as China, as well as aiding European allies menaced by the invasion of Ukraine by Russia, a major gas producer.

“US LNG exports can help accelerate environmental progress across the globe, enabling nations to transition to cleaner natural gas to reduce emissions and address the global risks of climate change,” Dustin Meyer, director of market development at the American Petroleum Institute, has said.

But scientists have determined that LNG expansion is not compatible with the world avoiding dangerous global heating, with researchers finding in recent years the leakage of methane, a primary component of gas and a potent planet-heating agent, from drilling operations is far higher than official estimates.

Howarth’s paper finds that as much as 3.5% of the gas delivered to customers leaks to the atmosphere unburned, much more than previously assumed. Methane is about 80 times more powerful as a greenhouse gas than carbon dioxide, even though it persists for less time in the atmosphere, and scientists have warned that rising global methane emissions risk blowing apart agreed-upon climate goals.

Howarth’s research found that during LNG production, around half of the total emissions occur during the long journey taken by gas as it is pushed through pipelines to coastal terminals after it is initially drilled, usually via hydraulic fracturing, or fracking, from areas such as the US’s vast shale deposits.

The energy used to do this, along with the leaks, causes pollution that is exacerbated once the gas gets to the export facilities. There, it is supercooled to -162C (-260F) to become a liquid, which is loaded into huge storage containers on tankers. The tankers then travel long distances to deliver the product to client countries, where it is turned back into a gas and then burned.

“This whole process is much more energy intensive than coal,” said Howarth. “The science is pretty clear here: it’s wishful thinking that the gas miraculously moves overseas without any emissions..”

Howarth’s paper has caused something of a firestorm before its publication, with a draft of the study highlighted by climate campaigners such as Bill McKibben to the extent it was reportedly a factor in a decision earlier this year by the Biden administration to pause all new export permits for LNG projects.

This pause has enraged the oil and gas industry – prompting lawsuits – and its political allies. Last month, four congressional Republicans wrote to the US energy department demanding correspondence between it and Howarth over what they called his “flawed” and “erroneous” study.

Gas-friendly groups have also argued that the paper overstates emissions from LNG, an stance echoed by some energy experts. “It’s hard to swallow,” said David Dismukes, a leading Louisiana energy consultant and researcher. “Does gas have a climate impact? Absolutely. But is it worse than coal? Come on.”

Howarth said the result of this unusual scrutiny was “more peer review than I’ve ever had before”, with five rounds of review being conducted by eight other scientists. Howarth said: “I don’t consider the criticism valid at all – it feels like a political job.”

Howarth said the US has a “huge choice” to make in the presidential election, with Donald Trump vowing to undo Biden’s pause on his first day back in the White House to allow a raft of new LNG projects. Kamala Harris, meanwhile, has backed away from a previous plan to ban fracking but has promised action on the climate crisis.

More than 125 climate, environmental and health scientists wrote to the Biden administration last month to defend Howarth’s research and urge a continuation of the pause on LNG exports.

The Howarth paper’s findings are “plausible”, said Drew Shindell, a climate scientist at Duke University, who was not involved in the research.

“Bob’s study adds to a lot of literature now that shows the industry’s argument for gas is undermined by the option to go to renewables,” Shindell said. “The debate isn’t really about whether gas is slightly better or worse than coal, though. It should be about how both are terrible and that we need to get rid of both of them.”

So from two causes:

1.  Leaks.  Methane is +-80 times as potent a greenhouse gas as coal.  So even quite small leaks (as a percentage) will undo the benefits of switching to gas.
2. Refrigeration, pumping and transport.   

Together, these are likely to substantially reduce or (as this analysis says) completely undo the benefits of gas over coal.  However, gas still has the advantage that it is much easier to ramp up and down than coal, which means that it is a good complement to renewables.

Wind turbines are friendlier to birds than oil and gas

From The Economist

Birders get nervous when they see landscapes covered in wind turbines. When the wind gets going, their blades can spin at well over 200km per hour. It is easy to imagine careless birds getting chopped to bits. Campaigners often point to the possibility when opposing the building of new wind farms.

No one doubts that wind turbines do indeed kill at least some birds. But a new analysis of American data, published in Environmental Science & Technology, suggests the numbers are negligible, and have little impact on bird populations.

Wind power has expanded dramatically in America over the past 20 years, from 2.6 gigawatts of installed capacity on land in 2000 to 122 gigawatts in 2020. Many studies have analysed the effects in specific locations or on specific bird species. But few have looked at the effects on wildlife at the population level. Enter Erik Katovich, an economist at the University of Geneva. Dr Katovich made use of the Christmas Bird Count, a citizen-science project run by the National Audubon Society, an American non-profit outfit. Volunteers count birds they spot over Christmas, and the society compiles the numbers. Its records stretch back over a century.

Dr Katovich assumed, reasonably, that if wind turbines harmed bird populations, then the numbers seen in the Christmas Bird Count would drop in places where new turbines had been built. He combined bird population and species maps with the locations and construction dates of all wind turbines in the United States, with the exceptions of Alaska and Hawaii, between 2000 and 2020. He found that building turbines had no discernible effect on bird populations. That reassuring finding held even when he looked specifically at large birds like hawks, vultures and eagles that many people believe are particularly vulnerable to being struck.

But Dr Katovich did not confine his analysis to wind power alone. He also examined oil-and-gas extraction. Like wind power, this has boomed in America over the past couple of decades, with the rise of shale gas produced by hydraulic fracturing, or fracking, of rocks. Production rose from 37m cubic metres in 2007 to 740m cubic metres in 2020.

Comparing bird populations to the locations of new gas wells revealed an average 15% drop in bird numbers when new wells were drilled, probably due to a combination of noise, air pollution and the disturbance of rivers and ponds that many birds rely upon. When drilling happened in places designated by the National Audubon Society as “important bird areas”, bird numbers instead dropped by 25%. Such places are typically migration hubs, feeding grounds or breeding locations.

Wind power, in other words, not only produces far less planet-heating carbon dioxide and methane than do fossil fuels. It appears to be significantly less damaging to wildlife, too. Yet that is not the impression you would get from reading the news. Dr Katovich found 173 stories in major American news outlets reporting the supposed negative effects that wind turbines had on birds in 2020, compared with only 46 stories discussing the effects of oil-and-gas wells. Wind turbines might look dramatic. But their effect on birds is not.

 

Fossil fuel price fall as world econ slows

 ... and perhaps, as EVs reduce oil demand and renewables reduce coal demand over and above the decline due to a slowing economy.

The coal price is falling fast:

Russian business confidence plunges

 Up till now, Russian economic data (at least those that the government continues to publish) have held up quite well.  This has led some commentators to conclude that the government is fudging the stats, which is entirely possible.   Business confidence (seasonally adjusted) plunged in February 2022 when Russia invaded Ukraine, then rallied, but has fallen again this year as the oil price cap and plunging gas sales have started to bite, which is at least consistent with the probable path of the economy.  The government has stimulated the economy with fiscal measures as well as cutting interest rates, and the imposition of tight exchange controls and the prohibition of foreigners selling Russian property and shares have all held the economy up, so that the year-on-year fall in GDP in Q3 was "only" 3.7%.   

Oil and gas revenues fell 40% year-on-year in January:

Russia’s revenues from oil and gas exports dropped by nearly 40% in January as price caps and Western sanctions squeezed the proceeds from Moscow’s most lucrative export, the International Energy Agency said on Tuesday.

Russia’s oil and gas export revenues were $18.5 billion in January, 38% lower than the $30 billion Moscow received in January 2022, a month before its invasion of Ukraine, according to IEA numbers shared with Reuters.

IEA Executive Director Fatih Birol said Western measures targeting Russian energy exports had achieved their aims of stabilising oil markets and reducing Moscow’s revenues from oil and gas exports.

“Our expectation is that this oil and gas revenue decline will be steeper in the next months to come. And even more steep in the mid-term, as a result of the lack of access to technology and investment,” Birol told Reuters.

International restrictions imposed on Russia in response to the Ukraine war, including a $60 a barrel crude price cap imposed by Group of Seven countries, have left Russia’s Urals blend being sold at a heavy discount to Brent.

The 27-country European Union also banned Russian seaborne oil imports from December, and has placed sanctions on exports to Russia of technologies needed for oil refining. The United States and Britain have also imposed restrictions on Russian oil imports.

[Read more here]

Only 7% of Europe's oil now comes from Russia.  Building new pipelines, to sell gas into other markets, is possible, but will take years.  And oil and gas make up most of Russia's exports (the government has stopped publishing these data, but we know what is happening from data covering imports from Russia by other countries).  

I think Russian economic data will start to deteriorate from now on.  That's if they continue to be published.  

The EU now gets more gas from the US than Russia

 

Russia's PMI still holding up.

Russia's PMI fell at the start of its war against Ukraine, but then rebounded.  Business confidence fell, but didn't rebound.  

Putin increased pensions by 10%; imposed exchange control; and at first, the prices of its main exports, oil and gas (80% of total), rose as it shut down supply.  The problem is that the surge in oil/gas prices has plunged Europe into recession.  In the USA, the sharp jump in inflation (partly due to the rise in oil and gas prices) has led to the Fed upping the Fed Funds rate, which together will likely push the US into deep recession.  Out of the "Big 8" economies, only India has so far been holding up.  

So a world recession is likely.  As the recession deepens, fossil fuel prices will fall.  The surge in these prices has also begun an accelerated shift towards renewable energy in Europe.  Thus, short-term and long-term, Russia's export revenues will slump.  In the meantime, Western sanctions are biting ever deeper, leading to declining production, and the military call-up must also be affecting output.

I believe that the Russian economy will start to slide soon, with GDP going deeply negative.  We'll see.

Commodity prices to fall further

 It's obvious that commodity prices, as measured by the CRB index, have peaked.  Commodity prices follow the world growth rate, though of course there are obviously other factors, such as war, droughts or boycotts, which help nudge prices higher at times.  

The chart below shows my world diffusion index, which measures the percentage of monitored times series rising.   At zero, all series are falling, at 50% half are rising, and at 100% all are rising.  My world diffusion index monitors up to 303 time series, covering a wide range of different activities for most countries in the world.  It is not weighted by country GDP, unlike, for example, my calculation of the Big 8 PMI or industrial production.   

In my judgement, world economic activity is going to continue to slow, and so world commodity prices on average will too.  "On average" is a key qualification.  Some commodities, such as lithium, are still rising.  But oil and gas are falling, despite supply constraints, though the declines are not yet precipitous.

Russia's catastrophic oil and gas problem

 An interesting video which connects Russia's and Ukraine's oil and gas reserves with the invasion of Ukraine, as well as the invasion of Georgia.  It's a long analysis, and I won't summarise it here.  But its theories and ideas about Russia, Europe, oil and gas, and Ukraine are compelling and explain much. 

Watch it before YouTube takes it down.

Costly and impractical ― blending H2 with natural gas

From RenewEconomy

A major international energy body has warned that efforts to blend hydrogen into mains gas supplies could be costly and impractical, and push up household energy costs for minimal emissions reduction.

The new report from the International Renewable Energy Agency (IRENA) warns that blending hydrogen in mains gas networks is a complicated way of cutting household emissions and would likely cost more than $US500 per tonne of emissions abated.

The findings suggest that the use of hydrogen in residential appliances like stove-tops and water heating would be prohibitively expensive, and electrification could serve as a cheaper path to cutting emissions.

While the exact abatement cost would depend both on the cost to produce hydrogen and the prevailing market price for fossil gas, even dramatic reductions in the cost of hydrogen would still likely see the effective abatement cost exceed $US200 per tonne.

“Blending leads to limited CO2 benefits and to a large increase in energy cost,” the IRENA report says.

“This translates into a very high cost of mitigating the GHG emissions of natural gas. Given the current production cost for renewable hydrogen, the cost may be above US$500/tCO2 for most gas prices.”

The findings suggest that hydrogen may never be able to play a major role in the decarbonisation of residential energy use, given technical limitations on the amount of hydrogen that can be blended in the mains gas supply and the comparatively higher costs.

Several Australian gas suppliers are currently trialling small volumes of hydrogen blending to demonstrate that existing gas infrastructure can be adapted for zero emissions energy supplies.

But critics of such trials have argued that hydrogen blending has minimal potential to cut emissions, and they are largely being undertaken as a way of delaying the phase out of fossil gas use altogether.

IRENA’s findings mirror the recent comments of ACT energy and emissions reduction minister Shane Rattenbury, who told the Smart Energy Expo this week that he saw no future where hydrogen would be piped to homes and businesses as a replacement for mains gas.

Rattenbury said that switching the supply of mains gas to hydrogen would require the replacement of virtually all gas appliances with ‘hydrogen ready’ alternatives, and it would be cheaper and easier to simply transition households onto electric devices.

Switching to electric appliances would be less complex and less costly while achieving the same emissions reduction benefits, Rattenbury said, because they could be powered by renewable electricity.

Rattenbury warned that gas companies faced the prospect of a demand ‘death spiral’ as rising costs of fossil gas pushed households onto cheaper alternatives.

“We do not see a future where we will be piping hydrogen or biogas to individual consumer households,” Rattenbury said. “We have clear advice that electrification is the most practical and cost-effective pathway.”

“Most people say around 10 per cent or so may be safely blended with fossil fuel gas in our network and still work with most of the existing gas appliances.

“Switching to 100 per cent hydrogen would likely require a complete replacement of gas appliances with hydrogen-ready appliances.”

“When people say to me ‘but we won’t have to pull out their gas cooktop and put an electric cooktop’, they don’t think about the fact that when they say, ‘let’s use hydrogen’, we have to do the same thing.”

The ACT government has committed to phasing out the use in the territory, and would likely avoid any attempts to try and replace existing fossil gas supplies with hydrogen.

In its report, IRENA analysis suggested the use of hydrogen in ammonia production and for heavy transport applications could provide for more cost-effective avenues for emissions reductions.

Additionally, ammonia would likely be the most cost effective medium for transporting hydrogen between countries – rather than as liquid hydrogen.

Natural gas composition

Germany's progress on energy independence from Russia

 From a Twitter thread by Samuel Ramani

Germany's progress so far on energy divestment from Russia

Coal :Pre-war: 45%     Now: 8%

Oil: Pre-war: 35%      Now: 12%

Gas: Pre-war: 55%      Now: 35%

A note on the coal stat. The Guardian, citing Germany's Economy Ministry, used the 45% figure for pre-war. Germany's permanent representative to the EU citing Der Spiegel says 50% as the pre-war figure

Russia's war in Ukraine will lead to Germany ― and Europe ― moving must more aggressively towards renewables, EVs, and green hydrogen & methane.  It will now become a goal in the developed world to achieve energy independence. 

Ukraine war causes biggest price shock in 50 years

From the BBC

The war in Ukraine is set to cause the "largest commodity shock" since the 1970s, the World Bank has warned.

In a new forecast, it said disruption caused by the conflict would contribute to huge price rises for goods ranging from natural gas to wheat and cotton.

The increase in prices "is starting to have very large economic and humanitarian effects", Peter Nagle, a co-author of the report, told the BBC.

He said "households across the world are feeling the cost of living crisis".

"We're particularly worried about the poorest households since they spend a larger share of income on food and energy, so they're particularly vulnerable to this price spike," the senior economist at the World Bank added.

Energy prices are set to increase more than 50%, pushing up bills for households and businesses, the World Bank says.

The biggest rise will be in the price of natural gas in Europe, which is set to more than double in cost. Prices are forecast to fall next year and in 2024, but even then will remain 15% higher than they were last year.

The World Bank said this means that from the lows of April 2020 until the highs of March this year we have seen "the largest 23-month increase in energy prices since the 1973 oil price hike", when tensions in the Middle East sent prices soaring.

Similarly oil prices are expected to remain elevated into 2024 with a barrel of the benchmark measure, Brent Crude, projected to average $100 this year, something which will lead to widespread inflation.

Russia produces about 11% of the world's oil, the third biggest share, but the report said "disruptions resulting from the war are expected to having a lasting negative effect" as sanctions mean that foreign companies leave and access to technology is reduced.

Russia currently provides 40% of the EU's gas and 27% of its oil, but European governments are moving to wean their countries off of supplies from Russia. That has helped push up global prices by creating more demand for supplies from elsewhere.

The World Bank commodity outlook also warned many foods are set to see steep rises in their costs. The UN food prices index already shows they are at their highest since records began 60 years ago.

Wheat is forecast to increase 42.7% and reach new record highs in dollar terms. Other notable increases will be 33.3% for barley, 20% for soybeans and 29.8% for oils and 41.8% for chicken. These increases reflect the fact that exports from Ukraine and Russia have fallen drastically.

Before the war the two countries accounted for 28.9% of global wheat exports according to JP Morgan, and 60% of global sunflower supplies - a key ingredient in many processed foods - according to S&P Global.

Prices for other raw materials including fertilisers, metals and minerals are also predicted to go up. The costs of timber, tea and rice are amongst the few expected to fall.

"Wheat is one of the hardest agriculture exports to replace," according to a research note from the Bank of America. It points out that poor weather conditions in North America and China are likely to exacerbate the impact of Ukrainian supplies being reduced, something which will continue because the war has disrupted the spring planting season.

The note also suggests grain and oilseed shipments from Ukraine have fallen more than 80% because of the fighting and these lost exports, over the course of a year, "equate to about 10 days of world food supply".

Ukraine is a major exporter of crops such as sunflower oil but the war has reduced supplies
Source: BBC/Getty Images

This is very bad news for the world's poor.  And it is likely to lead to a deep recession as well as adding to already surging inflation.

How Europe can cut gas imports from Russia

 From the IEA.  These are the key points of their analysis.

• Do not sign any new gas supply contracts with Russia. [Impact: Enables greater diversification of supply this year and beyond]
• Replace Russian supplies with gas from alternative sources [Impact: Increases non-Russian gas supply by around 30 billion cubic metres within a year]
• Introduce minimum gas storage obligations [Impact: Enhances resilience of the gas system by next winter]
• Accelerate the deployment of new wind and solar projects [Impact: Reduces gas use by 6 billion cubic metres within a year]
• Maximise power generation from bioenergy and nuclear [Impact: Reduces gas use by 13 billion cubic metres within a year]
• Enact short-term tax measures on windfall profits to shelter vulnerable electricity consumers from high prices [Impact: Cuts energy bills even when gas prices remain high]
• Speed up the replacement of gas boilers with heat pumps [Impact: Reduces gas use by an additional 2 billion cubic metres within a year]
• Accelerate energy efficiency improvements in buildings and industry [Impact: Reduces gas use by close to 2 billion cubic metres within a year]
• Encourage a temporary thermostat reduction of 1 °C by consumers [Impact: Reduces gas use by some 10 billion cubic metres within a year]
• Step up efforts to diversify and decarbonise sources of power system flexibility [Impact: Loosens the strong links between gas supply and Europe’s electricity security]

Vultures

 Germany and France pay billions a year to Russia for oil and gas, and then give their widow's mite to Ukraine to support her.   Embargo Russian fossil fuel exports now.

Putin's cash cow

 From The Guardian

Ukraine believes the only way the Russian president will back down is if his economic power base in fossil fuels is seriously threatened. Putin thinks Europe and the US are too weak to do it – but some believe there is a way.  

Allies of the Ukrainian president, Voldymyr Zelenskiy, say Vladimir Putin will only accept a compromise on Ukraine’s future neutrality if he is facing a credible threat to his economic power base by a rapid and permanent exclusion of Russia’s oil and gas exports from its lucrative European markets. The Russian government receives 40% of its budget revenues from energy exports.

But Ukraine is meeting stubborn resistance from Germany, which insists its economy would be plunged into recession if it suddenly lost access to Russian gas and oil.

In an interview reflecting the moral pressure Germany is under to do more, the country’s Green economics minister, Robert Habeck, admitted Europe in the past had fed Ukraine false promises, but said Germany could not afford “the loss of hundreds of thousands of jobs” that a full energy embargo would require. He said Germany at best could be freed of Russian coal by the autumn, of its oil by the end of the year, but could set no date for ending German reliance on gas.

The impasse is leaving senior allies of Zelenskiy feeling frustrated, and appealing to the UK and the US to use the G7 to try to persuade the German chancellor, Olaf Scholz, to sign up to a western timetable to end dependence on Russian energy.

Scholz and Emmanuel Macron, the French president, spoke with Putin again at the weekend. Zelenskiy’s chief negotiator, Mykhailo Podolyak, has said the talks between Ukraine and Russia are now virtually continuous, and have got past the stage of trading ultimatums. But the French sound less optimistic. Jean-Yves Le Drian, the French foreign minister, said: “We are in front of a wall. The worst is ahead of us. This war will be long.”

The frustration with the German position is such that Zelenskiy is willing to turn to one of Scholz’s predecessors, Gerhard Schröder, to act as a mediator with Putin. The former chancellor has accepted the role, possibly to salvage something from the ruins of his reputation, and reportedly had talks with Putin last week.

Zelenskiy has repeatedly stressed he is willing to meet Putin to discuss new security guarantees for Ukraine in return for his country’s future neutrality, either as an alternative to membership of Nato, or as an interim measure prior to joining the defence pact.

Speaking last week after his largely inconclusive talks with Sergei Lavrov in Turkey, Ukraine’s foreign minister, Dymtro Kubela, said “the real issue for Ukraine is security guarantees and hard security guarantees, similar to the ones that members of Nato have. We need these guarantees primarily from Russia since it is the country that committed an act of aggression against us, but also from other countries including permanent members of the UN security council. The idea is that we have a treaty, an agreement where countries would oblige themselves not to commit aggression or put economic, or any other, pressure on us”.

He confirmed the president had cooled down on Ukraine’s Nato application “because, despite our best efforts, Nato is not ready to integrate us. The reaction to the aggression by Nato has been to delegate to member states to deal with us on a bilateral basis.” But he added that until Ukraine knew the strength and reliability of the guarantees it was not yet ready to say the guarantees could be a substitute for Nato membership. “We are not yet in a position to abandon Nato membership”, he said.

The idea is for a legally binding treaty signed by numerous countries that guarantees the security of Ukraine in a way that the Budapest Memorandum signed in 1994 failed to do. The memorandum was supposed to guarantee Ukraine’s independence in return for the country abandoning its nuclear stockpile. Britain, in the form of John Major, was one of the co-signatories. The memorandum in effect became a dead letter. Zelenskiy insists the talks are serious and no longer merely an exchange of ultimatums.

“It’s hard to offer an overture when the Kremlin’s position continues to be that we’ll continue to pummel Ukraine until it bows to maximalist demands,” a senior US official said last week. Putin’s public position is still to demand the “demilitarisation and de-nazification” of Ukraine, in effect regime change, as well as Ukrainian recognition of Crimea and of the Donbas. He thinks he is winning, the White House judges.

That leads the US and UK to argue the economic endurance test between the west and Russia must continue, and be intensified, until what Putin’s spokesperson Dmitry Peksov oddly describes as “the hostile bacchanalia” becomes so intense that Putin finds his inner circle desert him, or even assassinate him.

But Zelenskiy’s allies feel Scholz, a fortnight after Germany’s great “turning point” on defence spending, has reverted to cautious type. A delegation has been in Europe this week arguing the EU, now on its fourth sanction package, has still not taken the decisive step – a total embargo on Russian energy.

Andriy Kobolyev, the former boss of Ukraine’s energy firm Naftogaz, and now spearheading an international push for comprehensive western energy sanctions on behalf of Zelenskiy, finds the German caution frustrating.

He said: “Until European leaders understand Putin sees them as a weak and easy victims in his geopolitical strategy, he will continue doing what he is doing. That is why the only way to prove Putin wrong is to put on a full-scale energy embargo. Europe has to play a different game and say ‘we know we can cope without Russia’. It has to say ‘we are large economies, and with a different energy mix we can cope because for us it is a matter of principle’. It has to say ‘we are putting an end to this right now and you Russians will lose our market forever’. That poses an existential threat for Russia.”

Kobolyev has negotiated with Putin and his energy barons, and insists he knows their mindset. He believes the Russian president will face their wrath, and that of the FSB security service, if they feel Putin totally miscalculated not only Ukrainian resistance, but the west’s willingness to make the sacrifices to wean themselves off Russian energy, and so blow a massive long-term hole in the Russian budget.

It would also upend all the assumptions of the Russian energy elite around Putin, such as Igor Sechin, the boss of Rosneft. Sechin, like Putin, is highly conservative on issues such as climate change. He remains convinced absolute oil consumption will increase by 10% by 2040 and by 20% in Asia. Kobolyev says it would be a complete shock to Sechin if his most profitable market just disappeared overnight. “Their sacred cash cow would have been killed.”

So far only the US has said it will end oil imports, but since the US imported an average of only 209,000 barrels per day (bpd) of crude oil and 500,000 bpd of other petroleum products from Russia in 2021, it is hardly a great sacrifice. The UK has said it will join the embargo by the end of the year.

But Scholz has set his face against the move. He said last week: “At the moment, Europe’s supply of energy for heat generation, mobility, power supply and industry cannot be secured in any other way. It is therefore of essential importance for the provision of public services and the daily lives of our citizens,” he added.

Annalena Baerbock, the Green foreign minister, has said much the same. “If we end up in a situation where nurses and teachers are not coming to work, where we have no electricity for several days. Putin will have won part of the battle, because he will have plunged other countries into chaos.” Scholz was one of a group of leaders who insisted on the removal in an EU council statement of any reference to the proposed target date of 2027 for the EU to end its dependence on Russian gas.

His concern is understandable. Oil accounts for 32% of German energy input, and one third of that comes from Russia.

Yet oil is central to Putin’s war machine. Thane Gustafson, the chronicler of Russia’s energy sector, points out in his latest book, Klimat, that in 2019, the last pre-pandemic year, income from oil – worth $188bn – accounted for 44% of Russian exports in value, and gas only 12%. Hydrocarbons generate 56% of Russia’s export income and 39% of the federal budget.

Kobolyev is convinced that if the EU banned Russian oil, other sources could be found. “There is a Russian proverb: a sacred place is never empty for long”, he explains.

In a game of geopolitical chess with Russia, Biden is already working to find alternative oil supplies. For now he is trying to fill the shortfall through drawing on the US reserves, oil from Venezuela, the world largest oil producer, Iran and Saudi Arabia.

White House officials were in Caracas for the first such talks in 20 years. Venezuela’s Nicolás Maduro government has signalled its willingness to cooperate with the White House by releasing two political prisoners in a goodwill gesture. Venezuela’s oil output could rise by at least 400,000 bpd, the country’s petroleum chamber said on Friday. But Biden has to tread carefully since the idea of reconciliation with Maduro is leading to a reaction in Congress.

Difficult talks about Saudi Arabia boosting output are continuing, according to Kobolyev. But Saudi’s weekend execution of 81 “criminals and terrorists” hardly suggests the kingdom is desperately seeking the west’s approval. The executions hardly makes a mooted visit to Riyadh by Boris Johnson, the UK prime minister, more likely.

In the case of Iran, Russia has stepped in at the last minute to try to block Iran’s nuclear deal, fearing that an agreement, and the lifting of oil sanctions on Iran, would result in Tehran being able to unleash as much as 2m barrels of oil a day on to the global market.

To turn to the autocrats of Venezuela, Iran and to Saudi Arabia, or the indeed the UAE, to save the west from Putin has its ironies, but some say needs must. If Paris was worth a mass, oil, it seems, is seen as worth some diplomatic humble pie.

The more complex issue is gas. As a compromise between those that favour a ban, such as Poland and the Baltic states, the EU has produced a plan by which the EU cuts its consumption of Russian gas by two-thirds before the end of 2022. The EU would then become independent from all Russian fossil fuels by 2027 or “well before 2030”. “By the end of this year, we can replace 100bn cubic metres [bcm] of gas imports from Russia. That is two-thirds of what we import from them”, the EU commission said in a statement.

The EU argued it can receive about 10bcm more gas from alternative pipeline suppliers such as Norway and Azerbaijan. The main bulk of this replacement would, however, come from imported liquid natural gas, which officials estimate would need to reach 50bcm of additional imports by the end of 2022, possibly via a joint, strategic EU contract, although legal details remain to be resolved. Federico Santi, a gas specialist at the consultancy Eurasia Group, said: “That is a huge figure, equivalent to around 10% of global LNG consumption in 2021.”

Even so, Kobolyev is unimpressed by the lack of ambition and the lack of specific measures.

He insists the EU should at least cut off sales of Russian LNG, which hits the Yamal project, with ties to the Kremlin’s siloviki mafia. He has also proposed that the revenues from Gazprom’s pipelines go into an Iran-style escrow account that will be released only once Russia calls off the invasion. Sums might be deducted to pay for the reconstruction of Ukraine. He claims Russia could not physically turn off the gas taps immediately, taking Europe through to next winter.

Kobolyev is no longer a lonely voice, but is finding influential support in Germany in a way that is starting to discomfort the “traffic light-coalition” government. Norbert Rottgen the CDU former chair of the Bundestag foreign affairs committee, is calling for a full ban, and says he is not sure what happened to Germany’s turning point. He says polls show voters are ahead of their leaders in being prepared to make economic sacrifices to stop funding Putin’s war machine.

On 8 March, the Leopoldina National Academy of Science, and separately a group of nine international economists, mapped out how Germany could absorb an embargo, with the worst scenario a 3% fall in GDP – less than [the] 4% impact of Covid – or probably something like a cost of €1,200 per German citizen.

This figure is contested, including by Habeck, who says the impact is more likely to be 5%. Various economists, lobbyists and gas intensive industries, such as chemicals, are staking out their ground in a heated debate that blends morality, politics and economic modelling.

Scholz has moved under pressure in this war once, over arms sales, Nord Stream 2 and defence spending, and there is no guarantee he will not again.

But if frozen out of European markets, would Putin simply turn to China? Kobolyev says no. “The option of shifting gas sales to Chinese markets is not possible,” he says. “In the case of China it might take 10 to 15 years to build the infrastructure. The existing pipeline to China is small and is not connected to the areas currently supplying Europe.

“Although exporting LNG and oil will be easier, China will know they are his last market, meaning he will lose 80% of his revenues and that is a devastating blow.”

“This is about more than cents and dollars. Putin is paranoid and he would hate to become dependent on China because he is afraid China will eat them alive. Russians perceive China as their smaller brother. Russians brought communism to China, but this will be a humiliation.

“So when Putin goes back to his crony friends – and this is the close KGB circle – and he tells them ‘Look guys, we have been thrown out of Europe completely, but I am trying to negotiate with China’, they are not going to appreciate that. To lose your biggest most lucrative market, to lose 80% of your revenues and become fully dependent on China, that does not look like a very smart or strategic move. That does not look like a victory.

“The Russians and Putin”, he explains, “have always believed Europe can never survive without Russian oil. He thinks if he wins in Ukraine, the Kremlin will be forgiven because there is no alternative and the west is weak. That is how he thinks, it’s how Gazprom thinks and it’s how Rosneft thinks. That is how they see the world. That is why Putin personally controls the energy trade. It is his sacred cash cow.”

 To sum up: 

• Oil exports are four times as important to Russia as gas.
• Europe can eliminate imports of Russian oil by the end of this year
• Eliminating gas would be much harder for Europe, possibly causing a 5% cut in German GDP.
• But killing Putin's cash cow would prolly stop the war.  
• Which means an embargo on oil exports by Russia but not (yet) on gas exports if we want to end the war.

The Nord Stream 2 facility at Lubmin in Germany has been suspended.
Photograph: Hannibal Hanschke/Reuters

Oil's blue hydrogen push

 From Climate Change News

The oil and gas industry is promoting the use of “low-carbon” hydrogen derived from methane that is potentially dirtier than burning fossil gas for energy, scientists and analysts have told Climate Home News.

Observers say the European Commission’s decision to classify gas as a transition fuel in its green investment list leaves the door open to “blue hydrogen” projects with exaggerated climate credentials.

“Blue hydrogen is basically nothing but a smokescreen for more air pollution, mining, and fossil fuel use with hardly any CO2 benefit,” said Mark Jacobson, professor of civil and environmental engineering and director of the Atmosphere/Energy Program at Stanford University.

Unlike green hydrogen, which is derived from water in a process powered exclusively by renewable energy, blue hydrogen comes from methane, with the carbon dioxide emitted during production captured and stored.

The International Energy Agency reported last week that there are at least 50 blue hydrogen projects under development globally, and capacity is set to increase more than tenfold by 2030.

In a delegated act last year, the EU Commission set an emissions threshold of just over 3 tonnes of CO2e per tonne of H2 for hydrogen projects to comply with the green taxonomy.

“Which is not low enough to guarantee that it would be only renewable energy-powered hydrogen,” said Eleonora Moro, a hydrogen analyst at the E3G climate think tank. “It could include some types of high efficiency blue hydrogen projects.”

One such project is a joint venture announced by Equinor and Engie in December to produce “low-carbon hydrogen… at large scale and at competitive cost levels”. The companies claim that they will use a process known as autothermal reforming (ATR), which “allows for decarbonization rates above 95%”.

The project sponsors some editions of POLITICO’s Brussels Playbook newsletter, telling readers: “Hydrogen can accelerate the energy transition but we need to develop well-functioning markets and infrastructure. The H2BE project will help kick-start the Belgian low-carbon hydrogen market.”

ATR involves heating methane gas with a catalyst, then adding water to get hydrogen and CO2 that is then captured. Equinor says it will bury the captured CO2 beneath the North Sea.

The EU’s hydrogen strategy, published in 2020, says that “renewable and low-carbon hydrogen can contribute to reduce greenhouse gas emissions ahead of 2030”.

Jacobson disputed Equinor and Engie’s claim that blue hydrogen can be classified as “low-carbon”.

“Carbon capture equipment is never 95% effective,” he told Climate Home. Blue hydrogen capture technology currently available is at best 78.8% effective, “but that ignores the fact that more energy is needed to run carbon capture equipment, so it is 78.8% of a much larger emission stream”.

Jacobson co-wrote a study last year which found, due to the increased amount of fossil gas needed to power the carbon capture and storage (CCS) process, blue hydrogen likely had a 20% higher carbon footprint than burning methane alone.

A paper by different researchers last month noted that developers’ promises of a 90-95% CCS success rate were based on theory, not practice.

“While these high capture rates are assumed in many national strategies and major reports, they have not yet been achieved in a large-scale commercial plant,” said the paper, published in the journal Applied Energy.

Another issue with blue hydrogen projects is that the methane feedstock can leak, with a short-term warming impact more than 80 times that of CO2.

Countries agreed at the last UN climate summit in November to reduce methane emissions by 30% this decade, and an EU Commission proposal seeks a ban on routine gas flaring and venting as well as penalties on leaks.

Yet the draft legislation doesn’t set specific emissions reduction targets, and E3G’s Moro said leakages – which may be as much as 4% in some countries – could only be penalised if effectively observed.

Researchers also questioned if burying CO2 beneath the sea bed was a durable solution to the climate crisis.

Caitlin Swalec, research analyst and hydrogen specialist at the Global Energy Monitor watchdog, said that no matter how well it is stored, buried CO2 will “eventually leak and make its way back to the atmosphere”.

“This may happen over several hundred years, or a few decades. We don’t really know because we haven’t tested it,” she said.

The Intergovernmental Panel on Climate Change, in its 2005 special report on CCS, suggested that CO2 stored below 3,000 metres would be less likely to leak. At this depth, the gas becomes denser than water.

Equinor says it stores its captured CO2 “1,000-2,000 metres below the seabed” and Swalec said it was not clear how viable the storage was at such depths.

“In order to store CO2 long term under the sea floor, it needs to go very deep which means that it will require a lot of energy to store it,” she told Climate Home. “If it takes more energy (i.e. emissions) to store the CO2 than we remove, the project will cause more problems than it solves.”

Silje Ask Lunberg, a senior campaigner and Norway expert at Oil Change International, said Equinor – previously Statoil – had a history of failed CCS attempts.

These include problems at its Snohvit field in the Barents Sea, which saw one attempt at CCS aborted as the reservoir was at risk of collapsing, and a second paused as the injected CO2 was polluting the methane extracted from the site.


Statoil also mothballed its Mongstad CCS plant after less than a year of operations.

“Mongstad was meant to demonstrate that it was completely feasible to have carbon capture at gas-fired power plants and it was supposed to be 100% from 2014,” said Lundberg. “They ended up failing at their own project.”

Construction of the Nordstream 2 gas pipeline, which analysts say may transport hydrogen gas in future (Image: Paul Langrock/Greenpeace)

Cheap gas? Not so fast

 Calculations of the cost of different generation technologies show that gas, in the USA, is the third cheapest technology after wind and solar, and certainly much cheaper than coal generation.  However, it is much more expensive in Europe, so there, gas has not replaced coal.  Both have been replaced by renewables.

US & European gas prices, US$ per million BTU
Source: Statista

The reason gas is cheaper in the USA than, say, Europe, is because gas used not to exported from the USA as liquefied natural gas (LNG), but since 2016, LNG exports have grown dramatically.  So the decoupling of US  and global gas prices is disappearing.  But a second factor is also playing out.  US gas prices had been driven lower by fracking.  Yet fracking never made that much financial sense.  Ostensibly, frackers were profitable, but in practice they could only pay dividends by raising new capital.  Wall Street has got more and more skeptical of frackers' cash flows and new money has started to dry up.  On the other hand, if the natural gas price doubles again, fracking might restart.

The chart below shows the gap between European and US gas prices even more clearly.  Note that it is a log scale, which shows just how much gas prices have risen recently.  

Some points.

1. US gas prices are going to keep on rising to closer to European levels, making gas for generation uneconomic in the US.
2. At these prices, the switch to renewables will happen even faster, in Europe and the US.  Not only is gas very pricey, its volatility must be playing havoc with profits.  Renewables are fixed price.  Utilities like that.
3. Synthetic natural gas is likely now cheaper than natural gas in Europe.  Making synthetic natural gas involves a 50% energy loss, but as renewables fall in price and natural gas prices rise ....
4. Gas is very clearly a most unsatisfactory bridge fuel.  Much touted by the oil & gas industry as a "bridge" between the old fossil fuel to a new clean and green one, that little conceit looks implausible now.