Europe’s Energy Security

A popular saying goes that all problems are the result of bad ideas. Can’t argue that. Once a bad idea gets into someone’s head and starts implementing, problems pile up. The main thing is to understand in due time which idea is good and which one is bad, so to avoid bringing the matter to the point of no return, when the situation can no longer be saved.

European politicians in power view the idea of reducing dependence on Russian natural gas in an extremely positive way – it is a good idea. Fatih Birol, president of the International Energy Agency (IEA), is in full solidarity with European politicians. Under his leadership, in May 2022, the IEA released a report with 10 recommendations on how to successfully abandon Russian gas (A 10-Point Plan to Reduce the European Union’s Reliance on Russian Natural Gas).

In an interview with the Handelsblatt newspaper on January 23, he said: “Germany’s dependence on Russian gas imports was a ‘historical error,’ as a result of which its population and economy must now pay a heavy price.” I’ll try to give my interpretation of this statement.

First of all, Birol admitted that his recommendations did not work as desired, and the rejection of Russian gas had painful consequences in the form of high prices. It’s hard to argue this. Indeed, the Europeans have not been consistent enough in following the IEA recommendations. For example, Birol proposed to maximize the potential of nuclear power, and the German government shut down all remaining nuclear power plants at the worst possible moment.

But we cannot agree with the second statement about the “historical error.” The Russians’ use of gas as an energy weapon is a geopolitical myth unsupported by any facts. Let me remind you that the two “Ukrainian transit crises” in 2005 and 2009 were orchestrated by the Europeans themselves, who, with the coming to power of globalists in the leadership of the European Commission, set themselves the task of discrediting gas supplies from Russia. It was impossible to do without these kinds of shows, as the reliability of supplies from Russia has not caused the slightest complaints for many years.

Over 55 years of operation on the European market, Russia has supplied about 2 trillion cubic meters of natural gas. What did these shipments give to the Europeans? To begin with, they allowed to get rid of coal heating in the communal-household sector. Gone is the choking smog that enveloped European cities during the heating season. Huge volumes of natural gas from Russia have replaced demand for petroleum products and for many years have served to keep world oil prices in check. Gas has all but squeezed the “dirty” heating oil in power generation. It is time to put a monument to Russian supplies somewhere prominent in Brussels or Strasbourg. Where does Birol see the “historical error” in this?

Meanwhile, the EU persists in correcting the “historical error.” LNG supplies are proposed to be included in the next 13th package of sanctions against Russia, and the European Commission is increasing pressure on the few remaining buyers of pipeline gas from Russia to speed up the search for alternative suppliers.

However, after two years since the final break with Russian gas, it is becoming increasingly clear that this break is itself a “historical error,” or a bad idea. I have already written that replacing pipeline gas from Russia with LNG was not justified in terms of reducing global greenhouse gas emissions, as LNG increases these emissions by 3-4 times. Voices of opposition to LNG imports were heard in France and Italy a few years ago. But after the sabotage on the North Streams, those voices were no longer heard.

The problem with the reliability of LNG supplies from the USA lies primarily in the cognitive dissonance inherent in American energy policy. On the eve of the election, President Joe Biden faces a dilemma. On the one hand, the USA has committed to providing Europe with a reliable supply of liquefied natural gas for many years to come. On the other hand, the president’s administration is a proponent of limiting investment in natural gas and is leading a group of countries that pushed through a resolution to phase out fossil fuels at the December UN climate conference COP28.

On Friday, January 27, the manifestation of the mentioned cognitive dissonance was the suspension of new licenses for the export of liquefied natural gas from the United States for an indefinite period. During this period, the national government will scrutinize the impact of LNG supplies on climate change, the economy, and national security.

This moratorium disrupts plans to conclude new contracts for LNG exports abroad and contradicts medium-term commitments to the EU. However, it will not directly affect already approved export projects or gas supplies.

The Biden administration’s attempts to punish the insurgent southern states of Texas and Louisiana, which rebelled against the Democrats’ immigration policies, can also be seen in this decision and the timing of it. With a possible Republican victory in the upcoming election, the moratorium on licensing new projects will likely be lifted. But the problem of reliability of LNG supplies from the USA is not limited to this.

There is a meaningful aspect to the U.S. Department of Energy’s pause to study the impact of new LNG projects on the nation’s energy security. Last year, the USA became the world’s largest LNG exporter, surpassing Australia and Qatar. They have successfully replaced Russian gas in Europe. However, according to credible experts, the growing demand for natural gas for both domestic consumption and exports will not be supported by a sufficient resource base in the future.

Renowned US geologist Art Berman believes that shale gas production, which accounts for 80% of all US gas production, has peaked. He believes that production from the three largest shale gas formations in the USA has stopped growing, despite many new wells being added every month. This, according to Berman, could lead to severe restrictions on natural gas exports. In the end it won’t be enough for a third wave of plants in the US.

In the event that Berman is right, the prioritization between domestic market and exports will be crystal clear. To illustrate, let’s take the events that unfolded in January 2024 with the arrival of abnormal cold weather in the USA.

The low temperatures caused spot prices in the US to spike, creating an incentive for those who could sell gas domestically instead of exporting it as LNG. As a result, export terminals on the Gulf Coast were unable to ship at least five LNG loads to Europe last week. What’s important, the prioritization issue was resolved even without government intervention.

The withdrawal of such an important supplier as the Russian Federation for geopolitical reasons has dramatically increased the vulnerability of the European gas market. Having hooked itself on the American energy needle, Europe has found itself hostage to factors beyond its control. However, after September 2023, the Europeans have no choice.

Zuhreddin Zuhreddinov
Independent Expert Oil & Gas (Uzbekistan)