War in Ukraine benefits the fossil gas industry

Topics : Ukraine, war, Russie, fossil gas, Greenpeace, shock strategy,

Imports of liquefied natural gas have enabled Europe to compensate (in part) for the loss of Russian gas. But Greenpeace accuses the gas industry of taking advantage of the situation to build infrastructure at any cost, at the risk of perpetuating fossil gas when it should instead be freed from it in the context of the climate transition.

The « shock strategy »

The latest Greenpeace report does not beat about the bush: the NGO accuses the fossil gas industry of having taken advantage of the effect of shock and fear provoked by the Russian invasion of Ukraine and its consequences on the energy market to « lock in » the construction of more transport infrastructures and thus ensure the continuation of its activity for several decades. « The gas industry knows that it will eventually disappear, » says Mathieu Soete, Climate and Energy Officer at Greenpeace Belgium. « It has taken advantage of the crisis to buy itself ten or twenty more years of life.

At issue: the fear of a gas shortage following the closure by Moscow of its pipelines that supplied Europe with Russian gas. A fear fuelled by an « intense blitz » by fossil gas lobbies, explains Greenpeace, which points out in its survey that the discourse of the two main organisations representing the sector at European level (ENTSO-G and GIE) « has switched from the place of natural gas in the energy transition to the issue of energy security ».

Reversal of the narrative
A « reversal of the narrative » that has had an effect, as EU countries quickly began looking for alternative supplies to replace the 150 billion m3 of Russian gas that Europe had become accustomed to importing at low prices – i.e. 40% of the EU’s imports. A real supply crisis, offset in particular by an increase in Norwegian gas imports via pipelines. The President of the European Commission, Ursula von der Leyen, also travelled to Baku to negotiate a doubling of Azeri gas exports via the TAP pipeline – in which the Belgian gas transmission system operator, Fluxys, is a shareholder. But it is mainly on an increase in liquefied natural gas (LNG) imports, mainly from the United States and Qatar, that Europe has relied. US President Joe Biden quickly promised an additional 15 billion m3 of American LNG – in fact, the EU has already imported more than 32 billion m3 since the beginning of the war, according to Greenpeace.

A legitimate response to a « supply crisis » that was « enormous », even Greenpeace concedes. « Of course, when we look at Germany, for example, and its dependence on Russian gas, we know that we could not deprive ourselves of such a quantity overnight, » explains Mathieu Soete. « We had to be able to absorb this short-term supply shock, which we did with LNG. Greenpeace regrets that the political response on demand was not as quick. « The measures to reduce consumption – the voluntary target of a 15% reduction in consumption in the Member States – only came six months after the invasion, » deplores Mathieu Soete. « Yet we have seen that it is possible: from August to March, consumption fell by an average of 17.7% in Europe compared to the average for the last five years. This is a first step, but we need to invest in order to go even further.

Most importantly, the NGO notes that the fossil gas industry « took advantage of the situation » to boost a series of long-term investments in LNG regasification infrastructure in Europe. « The RePowerEU plan, the European response to the gas crisis, includes around €10 billion in subsidies for gas infrastructure, » says Greenpeace. This money is intended, among other things, to increase the number of gas terminals to receive LNG cargoes. « European states have announced plans for an import capacity of 227 billion m3 in the coming years, » the report says. « In total, there are eight LNG terminal projects under construction and another 38 under development. Most of these projects will not be operational until 2026, far too late to address the current supply crisis. Above all, according to the NGO’s estimates, if all of these projects were to be completed, « it would add the equivalent of 950 million tonnes of CO2 emissions per year » (see elsewhere).

« In a future dictated by the Green Deal, where demand for fossil gas will have to decrease, member states are expanding their gas infrastructure on a massive scale, trapping us with expensive and unnecessary new facilities, » insists Greenpeace, taking the example of Germany, whose gas consumption forecasts should fall « from 96 bcm in 2021 to around 70 bcm in 2030 and 20 bcm in 2040, in order to meet their climate targets. « The German Ministry of Climate and Energy has just published a note that already questions this oversizing of infrastructures, » adds Mathieu Soete. « These projects will overcompensate for the Russian volumes lost.

Stranded assets

In its response to the crisis, the European Union has also encouraged the conclusion of long-term supply contracts with gas producers, particularly American ones, to guarantee security of supply and prices that are less dependent on market fluctuations. But, as Greenpeace notes, these contracts have the effect of perpetuating the demand for fossil gas for fifteen or twenty years, or even longer, and, in turn, of confirming investment decisions for a number of projects on the other side of the Atlantic, to build new units – liquefaction units – in order to increase the United States’ export capacity. This could double to nearly 440 billion m3 per year if all the projects are completed.

« However, » the Greenpeace expert points out, « we can see that we have managed to respond to the supply crisis with existing LNG infrastructures (whose utilisation rate last year was only 63% on average in the EU, according to Greenpeace). Knowing that the demand for fossil gas in Europe must decrease to reach our climate objectives, we will end up with an infrastructure that will not be used, what we call « stranded assets ». However, for Mathieu Soete, « we should not be surprised ». « Many of these industry plans were already on the table, » he continues. « They just took advantage of the opportunity. When you ask the gas industry what their response to the crisis is, and that’s what the politicians have done, you can expect the answer to be ‘more gas’… even though it’s fossil gas that’s causing the crisis. Our problem is the dependence on fossil gas, whether it is Russian, American, Azeri or Norwegian. It is bad for the climate, the environment, health, local communities, and it is too dependent on market mechanisms, which we have seen lead to excesses in terms of price.

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