Obtain the data you need to make the most informed decisions by accessing our extensive portfolio of information, analytics, and expertise. Sign in to the product or service center of your choice.
Fossil fuel production must not increase despite high energy
prices amid war in Ukraine, according to a panel at the 14 March
Energy Transitions event hosted by UK policy institute Chatham
House.
European governments have discussed allowing new domestic oil
and gas production to source more gas supplies amid high oil and
gas prices.
Platts Dated Brent was assessed at $106.48/bbl on 16 March, down
from a 14-year high of $137.65 last week, S&P Global Commodity
Insights data showed. Dutch gas futures were trading around €110
per megawatt-hour (MWh) on 17 March, having declined from the
record high of €345/MWh hit last week.
In the UK, Prime Minister Boris Johnson on 14 March met with oil and gas company
executives to discuss increased natural gas production in the North
Sea. The UK has also vowed to stop consuming Russian
oil. Russia accounts for 8% of the UK's oil consumption and 4% of
its natural gas imports.
Despite pledging to reach net-zero in 2019, the UK has also
launched a consultation on future North
Sea oil and gas licensing rounds, provided they were consistent
with a proposed "climate compatibility checkpoint."
Norway's state oil company Equinor announced on 16 March it will
ramp up natural gas production from the Troll, Oseberg, and Heidrun
fields to meet high European gas demand.
Likewise, after Germany suspended certification for Russia's
Nord Stream 2 gas pipeline, Finance Minister Christian Lindner said
it should consider removing a ban on North Sea oil and gas
production.
Already, Germany plans a new LNG terminal in
Brunsbütte to import natural gas from abroad to reduce dependence
on pipeline gas imports from Russia, which contributes 55% of
Germany's gas supplies.
However, fossil fuel production is not expected to provide
relief from the energy price crisis.
One reason is that production projects take years to start
operating. The General Manager of the Federal Association of
Natural Gas, Petroleum and Geoenergy (BVEG), Ludwig Möhring has said it is not possible to
increase domestic gas production in the short term.
Climate experts say new oil and gas infrastructure will not
solve the problem and will only reverse climate progress. "The key
is to avoid those siren calls, we're hearing more and more … in the
US but not just, to open up all sorts of new supply opportunities
for investment," said Michael Lazarus, director of the US arm of
the Swedish non-profit Stockholm Environment Institute.
"Brand new LNG terminals, offshore investments, and ending
restrictions on licensing: All that won't yield returns until
three, four, five, or 10 years from now. It will not address the
current crisis, but it could lock us in, and undermine our ability
to not only get to a more climate-safe future, but a more
energy-secure one, as well," said Lazarus.
International production
The EU's response to the Ukraine crisis includes increasing its
fossil fuel imports from the US, the Middle East, and Africa by
January according to a Communication on 8 March.
Drawing on African countires, it plans to import LNG from Egypt
and pipeline gas from West Africa and Algeria.
But fossil fuel production burdens should not be merely shifted
internationally, another panelist at the Chatham House event
argued.
"With regard to the Russian invasion of Ukraine, [before the
crisis] 60% of energy investment that was coming to Africa was
going to fossil fuels, and so it was effectively hooking Africa on
a dirty environment, and now, as Europe looks for energy security
away from Russia, it unfortunately looks into Africa, and
especially North Africa, as the new gas producer," said Mohamed
Adow, director of Kenyan energy policy think tank Power Shift
Africa.
Europe must not only phase out fossil fuel production, but it
must also help to finance Africa's energy transition away from
fossil fuels and ensure transition costs are shared "fairly --
based on historical responsibilities," he added.
Europe can support energy transition in extraction-dependent
poor countries in Africa so that they can decarbonize quickly, Adow
said.
Treaty on managed decline
Likewise, South American countries require financial assistance
to transition their energy sectors. "Let's face it, there are a
number of countries right now that are considering expanding
[production], like Ecuador in the heart of the Amazon, just to feed
their debt," said Tzeporah Berman, chair of the Fossil Fuel
Non-Proliferation Treaty Initiative.
The Initiative is campaigning for an international treaty that
would see states legislate for managed declines in fossil fuel
production.
"An international treaty on fossil fuel production can deliver
negotiated legal instruments on managing the transition from fossil
fuels, and the fact is that right now, without that, you have
countries only just starting to look at regulating production
within their own borders. You have very little collaboration on
critical issues like debt forgiveness that are going to be
essential for an actual global just transition," said Berman.
Without new legal frameworks, the Organization of the Petroleum
Exporting Countries (OPEC) would decide oil and gas production
levels, she said.
Adow argued for so-called "supply-side" policies, or regulations
that place the burden of fossil fuel decline onto producers. "What
I'm trying to say is supply-side policies simply seem to turn off
the tap rather than plug a million holes," said Adow.
Lazarus agreed that switching off the tap on production was
necessary. "We need to both clean up production and wind it down,"
Lazarus said. He noted that policymakers had for a long time
ignored the need to look at winding down supply and focused on
winding down demand.
A minimum of 60% of existing oil and gas reserves can be
developed for the world to have a 50% chance of limiting global
warming to 1.5 degrees Celsius, according to a September paper by the Institute for
Sustainable Resources, University College London.
