Wednesday, July 23, 2014

FGCI White paper
Susan Whitepaper 21st WPC
Drew EGC Report

Crimea’s Standoff Great Help for Cameron’s Shale Plans

Shale gas will hardly be the silver bullet that will solve European energy security problems, but the unconventional hydrocarbon industry could still be a major winner of the Crimea’s standoff. An increased interest in fracking could be indeed motivated by difficult relations with Russia and by widespread scepticism about Ukraine’s politicians.

“It’s a wake-up call to Europe of the need to develop more energy sources of all kinds. We can’t be more and more dependent on imports from unstable regions,” Britain’s energy minister Michael Fallon said recently to the Telegraph.

In the actual context, shale gas arguments can be easily put forward in countries that already voiced their intention to go all the way to exploration and production. Along with Poland, the United Kingdom is clearly the main proponent of shale gas in Europe. And Downing Street seems well intentioned to take advantage of the tensions between Russia and the West. 

“I think something positive should come out of this for Europe, which is to take a long hard look at its energy resilience,” UK Prime Minister David Cameron recently echoed Fallon’s words on the sidelines of the Nuclear Security Summit in The Hague. 

The British government spoke about Europe, but it is quite clear that its statements have the clear intention of influencing the domestic debate. 

“While Brussels will have an important role in helping to optimise supplies at a European level, ultimate responsibility for energy supply remains with Member States. A European shale gas (and oil) strategy might facilitate the development of national efforts but is unlikely to be the key driver,” John Loughhead, Executive Director at UK Energy Research Centre, told Natural Gas Europe on Thursday.

In this context, tensions in Ukraine are a real manna. As often happens, the British messages to Europe are mainly a way to increase domestic cohesion around issues high in the political agenda. The tensions in Ukraine are indeed are a tremendous kick for an open national debate about shale gas, but not a real cry of alarm for the already endangered UK’s energy security. 

THE UK IS NOT DEPENDENT ON RUSSIA 

According to an answer by the Department of Energy and Climate Change (DECC) to a request for information under the Freedom of Information Act 2000, ‘some Russian gas could end up in the UK’s National Transmission System, however this is less than 1% of our gas imports.’ 

As a document published by the British government referred to 2011, Norway provides 58% of the British gas imports and Qatar ships another 18%. The remaining was mainly sourced from Belgium and the Netherlands

‘Given that the Netherlands has its own indigenous production and imports gas from Norway and the UK, it is unlikely that the Netherlands exports many Russian gas molecules to the UK.  Although Belgium does not have its own indigenous production, IEA data indicates that only approximately 2% of Belgium’s gas imports in 2011 originated from Russia,’ explains the answer by DECC.

If gas supply would not be affected by escalations with Russia, it is not possible to say the same about coal. According to an overview published by the Energy Information Administration in May 2013, Russia did indeed account for 38% of the UK coal imports in 2011. Despite the reliance, however, this dependence appears not to be a real threat for London. That is for two reasons. Firstly, coal represented just 15% of total primary energy consumption in 2011. Secondly, the UK can easily import coal from other countries, mainly from United States

SO WHAT’S CAMERON DOING?

If it is clear that the UK’s reliance on Russia is negligible, why is Cameron voicing the importance for Europe to bet on shale gas? Is he trying to save Europe, sorting out its energy problems? In light of what already said, the answer cannot be anything but ‘no’. It would be like a patient in his deathbed standing up and saving another injured person. It is simply unrealistic. 

The reality is that the standoff in Crimea could help London to solve its long-lasting energy problems, and the government’s communication campaign is efficient and coherent with the purpose. 

“The current position will lead inevitably to an increased level of political concern about security of energy supplies. It is therefore likely that there will be increased interest in possible additional indigenous production, especially of gas for which distribution systems make it more difficult to switch to alternative supply sources at short notice,” said Loughhead.

Downing Street is playing its cards to speak about energy security, without taking any responsibilities for the current problems. In this sense, the standoff in Crimea and Ukraine is a gift to convince British shale sceptics. 

Cameron perfectly learnt Churchill’s lesson: “A pessimist sees the difficulty in every opportunity; an optimist sees the opportunity in every difficulty.” What remains to be seen now is whether he is just a simple optimist or a realist interested in solving the British infrastructural problems due to lack of investments in the last decades. 

Sergio Matalucci

JOIN US
LNGgc Rachel Noble Informa
EVENT AD: ESGOS (Eric Lewis - Charles Maxwell)
EVENT AD: Chatham House: Energy and Economic Competitiveness
EVENT AD: FT EUROPEAN GAS SUMMIT (Michael Lundby) Oct 23 2014
EVENT AD: European Autumn Gas Conference (EAGS 2014) - Hope Grant/Lawrence Allen
EVENT AD: Chatham House: Climate Change
MAPLECROFT RUSSIA COUNTRY REPORT
Natural Gas Asia
Salans Shale Gas Spain