An unprecedented rise in natural gas prices in Europe and Asia, which threatens to disrupt economic recovery, has put the European Union and its national governments in a pretty pickle.
The subsidy-driven introduction of solar and wind power generation in Europe, together with the reduction of coal usage and nuclear power generation, has exposed a weakness in the energy systems taking shape as the continent pursues an energy transition, namely a lack of redundancy.
The need for a diverse source of energy supplies that extends beyond immediate demand needs was highlighted by BP chief executive Bernard Looney in his address last week to an industry event in Moscow.
Looney, together with the backing of TotalEnergies boss Patrick Poyanne and ExxonMobil chief executive Darren Woods, touted natural gas as offering the only viable solution to the current intermittency of renewable power sources.
Among the fossil fuels, gas offers the lowest carbon footprint, while innovations in liquefaction, including compact technologies, are making delivery to customers easier.
The trio of oil and gas executives called for authorities to act fast to create favourable conditions for investments in gas developments.
They warned that without action from governments, the balance between energy supply and demand is unlikely to stabilise anytime soon.
Critics say this is just an example of self-interest on the part of corporate giants anxious to prevent their assets becoming a liability, but surely the world can use cleaner-burning fossil fuels to manage the disruption and price volatility that transition entails without losing sight of the urgency of the decarbonisation goals. The view the executives were offering in Moscow is supported by the worrying resurgence of demand for coal if energy prices surge, especially in developing economies.
While top executives offered their forward vision in Moscow, Russian authorities were striking a different note in their reaction to the European gas crunch.
President Vladimir Putin spent almost two hours criticising European authorities and their energy transition initiatives, blaming them for the crisis.
Putin said Europe can wave goodbye to increased Russian gas deliveries unless customers sign new long-term supply contracts with state-controlled monopoly Gazprom and “administrative barriers” to Gazprom’s new subsea pipeline to Germany, Nord Stream 2, are removed.
Construction on Nord Stream 2 ended in September, and Gazprom said its first line is ready to start operations as it has been filled with gas. However, the project lacks certification from the German authorities and exemption from European gas market regulations.
Explaining Russia’s refusal to pump more gas to Europe via the existing route in Ukraine, Putin has resorted to false claims regarding the country’s pipeline network, saying that it is “outdated” and may “explode” if deliveries increase above current level.
Putin said that Russia will set its own target to become carbon neutral by 2060, a decade or 20 years after most European states.
Russia’s unwillingness to offer a quick fix to mounting gas supply issues on the continent should remind European authorities that energy security requires nimble strategies for the short, medium and long term.
To achieve zero emissions, such policies should also seek to guarantee sufficient investments in gas to backstop the process of building up a toolbox of renewable energy sources. Not doing so could increase the risk of economic and political chaos in many nations.