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UK, Denmark move to step up Russian fossil fuel independence

11 March 2022 Cristina Brooks

Two countries in Europe have plans to set restrictions on the Russian fossil fuels they import: the UK has set a target to ban Russian oil imports, and Denmark will ban Russian natural gas imports.

Denmark aimed to stop Russian natural gas imports "as soon as possible," said Danish Prime Minister Mette Frederiksen during a press conference on 6 March, although she did not specify a date.

In Denmark, natural gas from all sources accounted for 16% of total primary energy supply in 2018, according to the International Renewable Energy Agency.

The UK government, on the other hand, will "phase out" Russian oil imports by the end of 2022 according to a statement on 8 March.

Russian oil imports account for 8% of the UK's oil demand, the government said. It plans to set up a Taskforce on Oil to work with oil-consuming companies on sourcing alternative supplies. The UK also plans would work closely with the US and the EU to end its dependence on "Russian hydrocarbons."

The move follows restrictions on UK port access for all Russian flagged, registered, owned, controlled, or charted ships, announced by UK transport secretary Grant Shapps in a 28 February letter.

The Danish and UK steps mirror those of the EU, which seeks Russian fossil fuel independence via the 8 March REPowerEU proposal. These programs are aimed at reducing consumption of Russian gas by two-thirds this year and completely before 2030.

Ships still bound for the UK

However, Greenpeace suggested that vessels carrying Russian oil and gas continue to travel towards the UK and berth. "A crude oil tanker coming from Russia, the Seatribute, is due to arrive in Fawley, near Southampton, later today, despite a government crackdown on imports of Russian oil and gas," it said in an 11 March statement.

A "loophole" has meant it is not clear to ports which ships are allowed, and Russian cargo is still arriving via ships registered to other countries, according to Greenpeace.

The green group also launched a Twitter feed revealing the country destinations of fossil fuel ships departing from Russia. "If ministers are serious about putting a stop to that, then we need to see firmer action on blocking fossil fuel imports from Russia," it said.

IHS Markit by S&P Global's Commodities at Sea data shows seaborne exports of Russian crude and oil products had declined so far this month, averaging just under 4.9 million barrels per day (b/d) as of 8 March, versus 6 million b/d in February.

Natural gas transition debate simmers

Most oil in the UK is consumed by the transport sector, which used oil and its products as 37.9 million tonnes of oil equivalent in 2020, according to the UK's Department for Business, Energy and Industrial Strategy.

While the UK depends on Russia for 18% of its diesel, most of its road fuel comes from domestic refining, and the UK's Russian diesel demand could decrease as electric vehicles take a larger share of new car purchases each year. The UK plans to ban the sale of new diesel and petrol vehicles in 2030.

The UK uses natural gas for 38% of its electricity needs, but unlike the EU it is not dependent on Russian natural gas. Less than 4% of UK natural gas came from Russia. For imports in 2020, 55% of the country's gas came via pipeline from Norway, and about half of the remainder came in the form of LNG from Qatar.

In a step on the path towards net-zero and away from natural gas consumption, the UK in 2019 set a net-zero emissions target for 2050. England in 2019 passed a moratorium on fracking, while Scotland and Wales already had moratoria.

However, the quest for Russian fossil fuel independence gave rise to a 9 March debate in the UK Parliament about the potential to resume fracking and grant new exploration licenses in the North Sea.

Next week, E&P company Cuadrilla Resources' fracking wells, Britain's only two horizontal shale wells, are set to be shut down.

"In conversation with the Prime Minister, we were clear that it did not necessarily make any sense to concrete over the wells. We are still in conversation about that," Kwasi Kwarteng, the UK's business secretary, said during the debate.

"As I said, our position on the moratorium has always been the same: If fracking can be done in a safe and sustainable way, the government are open to the idea," he added.

Last year the government proposed a North Sea Transition Deal, which will invest £14 to £16 billion to move oil and gas sector workers to industries like hydrogen, but debates around new exploration licenses continue. The UK's advisory body the Committee on Climate Change is pushing for a moratorium.

Commons MP Samuel Wilson noted, "I welcome the Secretary of State saying that turning off domestic production of North Sea oil and gas would be completely insane right now."

Green party MP Caroline Lucas argued this was like "trying to get out of one crisis by plunging ourselves into another" and cited the International Energy Agency's finding that no new oil and gas projects can go ahead globally it the Paris Agreement's climate targets are to be met.

Greenpeace appealed to the need for the UK to add more net-zero technology in the face of rising power costs that shuttered UK energy suppliers. "What we really need right now is an Emergency Energy Package from the UK government to end our dependence on gas. Instead of drilling new oil and gas fields in the North Sea, which will take years and make no difference to our energy bills, Boris Johnson and Rishi Sunak should be turbocharging speedy, tried and tested solutions like UK renewables, heat pumps, and home insulation," Greenpeace said.



This article was published by S&P Global Commodity Insights and not by S&P Global Ratings, which is a separately managed division of S&P Global.

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