Here is my talk [English & Ukrainian videos] for the Ukraine Energy Security Dialogue of 01.12.21, via Zoom, organized by Kyiv’s Dixie Group. Program & Speakers are below.
I outlined failures of the legal and political models Russia’s Gazprom has embraced to eventually bring the Nord Stream 2 pipeline into operation under the anti-monopoly provisions of the EU’s Third Energy Package law..
Critical observers have understandably interpreted the public optimism and “gas-Godfather”-like posturing of Kremlin and Gazprom officials as evidence of self-confidence, even arrogance. In contrast, here I outlined what actually amounts to a history of repeated failures of Nord Stream 2 AG strategies.
I termed its first two failed strategies as “Plan A” and “Plan B,” and the current one as “Plan C.”
Here’s my extended interview in Kyiv with two great Kosatka.Media journalists [Read in UA, RU]
18 NOVEMBER 2021 — AUTHOR YAROSLAV MARKIN, TETIANA HUZENKO In 2021, the energy sector of Ukraine faced myriad threats related to the completion of Nord Stream 2, increasing gas prices and coal shortage just before the heating season. At the same time, green trends require decarbonizing the industry and developing the hydrogen direction.
Kosatka.Media discussed what direction is better for Ukraine, whether it should wait for the protection against Nord Stream 2, and where global green trends could take us, with Dr. Thomas W. O’Donnell, international expert and senior energy and geopolitics analyst at GlobalBarrel.com, who participated in the Ukraine Gas Investment Congress held in late October in Kyiv.
One of the key messages at the congress is that whatever the ‘green’ trends are, gas is a transition fuel and we will use it for a long time. Are there any other case scenarios? How should Ukraine act in this situation?
In the long run, we want to have a world that’s not dependent on hydrocarbons. The worst hydrocarbon is lignite and brown coal. And that’s what people s\should concentrate on eliminating. Natural gas in fact is a great way to eliminate coal.
It’s actually an improvement for Ukraine, not only because of global warming, because of CO2, but also for the health of the people since natural gas does not produce environmental pollution. So, increasing the use of natural gas (or also nuclear energy) in a country like Ukraine is to the benefit of the environment and to the people’s health.
However, Ukraine is not a typical European country, it is a country that unfortunately is at war. In such a situation, it has found an intelligent way to access natural gas, which is virtual reverse flow.
This AP article today quotes me (about half way in, marked in red) on Nord Stream 2, on Putin acting like the EU’s “gas godfather,” and on the implications for the EU gas crisis. It’s in numerous USA local papers. A nice job by AP’s DAVID McHUGH (Frankfurt) and VLADIMIR ISACHENKOV (Moscow).
FRANKFURT, Germany — Europe is short of natural gas — dangerously short. A cold winter could mean a severe crunch, and utility bills are headed higher, burdening ordinary people and weighing on the economic recovery from the coronavirus pandemic.
Russian President Vladimir Putin has promised to help fill European gas storages as energy prices soar — but supply shortages and political tensions have continued to rattle energy markets, keeping prices high. That’s pinched businesses and forced them to pass along costs to customers already facing higher bills at home.
With Europe dependent on imported gas and Russia supplying 40% or more of those imports, Putin has leverage. He’s said the new pipeline already is filled with gas and could help increase supplies “the day after” it’s approved.
Here are important factors behind the gas crisis:
HOW DID EUROPE GET INTO THIS MESS?
Multiple reasons. One was a cold winter that drained gas reserves, which are used to generate electrical power and typically replenished in summer. That didn’t happen this year.
Hot weather drained more gas than usual through demand for air conditioning. Less wind meant less renewable electricity, leading generators to reach for gas fuel. Limited supplies of liquid natural gas, an expensive option that can be delivered by ship instead of pipeline, were snapped up by customers in Asia.
On top of that, Europe for years has pushed for day-to-day spot pricing, instead of long-term contracts. Russian-controlled gas giant Gazprom has fulfilled those long-term contracts but hasn’t pumped additional gas beyond that. Putin says customers who have those contracts pay much less for gas than other buyers.
Prices were seven times higher in October than they were at the beginning of the year and have eased to about four times higher lately.
I moderated this very lively & frank panel at the Ukraine Gas Investment Congress (UGIC) in Kyiv on 22 October 2021. [The high-level event participants are listed below].
I thoroughly enjoyed this lively debate, and learned a good deal. It’s an hour long; but I think it is well worth a watch, especially as the debate gets going.
* Torsten Wöllert, Minister Counsellor; Energy, EU Delegation to Ukraine
* Olga Bielkova , Director on Government & International Affairs Gas Transmission System Operator (GTSOU)
* Oleksiy Ryabchyn (Rye ab chen), Advisor to the Chairman of the Board, Naftogaz of Ukraine
* Sergiy Nahorniak, (Nach hor niak) MP and Chairman of the Subcommittee on Energy Conservation and Energy Efficiency Verkhovna (Ver kavna) Rada Committee on Energy and Housing and Communal Services
* Steve Freeman, Head of Energy Transition, Digital and Integration Schlumberger
* Dr. James Watson , Secretary General, Eurogas
* Moderator: Dr. Thomas O’Donnell, Hertie School of Governance, Berlin; and Energy and International Affairs Analyst
It was a respectful but clearly exasperating confrontation, a between contradictory imperatives pitting:
a) Ukraine’s necessity to boost its domestic natural gas production in the interests of its national security and independence, and the people’s social-economic needs,
b) The demands from Brussels and especially from highly developed Western-EU Member States insisting that Ukraine abandon all fossil fuels (including gas) ASAP,
Green-Deal-inspired insistence by Brussels for rapid gas-abandonment imposes the difficulty or outright banning of financing for increasing Ukraine’s domestic gas production. Many EU-zone financial institutions cannot any longer finance “upstream” projects (E&P: exploration and production), including the World Bank, whose representative pointed out earlier at the Congress that his institution is now outright banned from making such investments.
Nevertheless, no one on my panel, or throughout the Congress disagreed that, for the foreseeable future, investments in new upstream natural gas exploration and production are precisely what Ukraine urgently needs. The constant threats from Moscow, of Putin, his energy ministry and Gazprom to end transit of Russian gas to the EU via Ukraine would make the present “virtual reverse flow: method by which Ukraine obtains much of its natural gas, so vital for electricity generation but especially for citizens winter heating, will become impossible.
This is whey how to raise financing for domestic new gas E&P was precisely the urgent topic of this Congress organized by Naftogaz, the state natural gas company.
The interview was on Monday with no evidence of Gazprom filling EU storage on the date promised. Today, Wednesday, Gazprom has begun filling at least two of five promised EU storage sites.
To the best of my knowledge, from various sources who follow the industry and/or politics of this closely:
Gazprom began using its recently unused Yamal pipeline, flowing 30mcm/day (million cubic meters per day) to the Mallnow, Germany pumping station. This Russia-Belarus-Poland-Germany. pipeline, has a total capacity of 85 mcm/day (31 bcm/year – billion cubic meters per year).
Gazprom also applied to use its previously booked-and-paid-for but also recently unused capacity across Ukraine under the December 2019 transit contract with Naftogaz of 40 bcm/year (109.3 mcm/day). Of this, :Velke Kapusany, Slovakia station is receiving 92mcm/day, with SE Poland and Moldova receiving 18 mcm/day.
Gazprom is flowing via the Nord Stream 1 pipeline (directly from Russia into Germany via the Baltic Sea) 165mcm/day. This would be 60 bcm/year if continuous with no annual maintenance downtime, but its annual nameplate capacity is 55 bcm).
This is well below the total flow Gazprom was routinely sending in recent years via Yamal (31 bcm) plus via Ukrainian pipes (89.6 bcm in 2019, and 55.8+ bcm in 2020)
Thus, these are not yet “surge” supplies; it is not yet a concerted effort to urgently replenish the EU’s worryingly low gas storage levels before winter gets colder and in the likely event winter winds will drop significantly as they did last year, requiring still-more gas, for electrical generation. (This combination ran the then-nearly full EU and Ukrainian storages to very low levels, which have still not been replenished sufficiently for this winter.).
Such drama and uncertainty from Europe’s main energy supplier when it needs reliability and transparency is heghly problematic (though, of course, Europe and especially Berlin have been amply warned about this high degree of dependence on Gazprom)..
Oh, and note that the USA is evidently quite concerned about the Russian troop buildup on Ukraine’s border. However, the EU seems at a complete loss, absolutely absent from joining with the Biden Administration in dissuading Mr. Putin from some new aggression.
My interview with Euronews of 08.11.21, on Gazprom & Putin’s refusal to begin filling gas storage in the EU. This is the only way to diminish the possibility of a gas crisis, of serious heating and electricity shortages should we have another cold and windless winter.
Putin, as always, is “the decider.”
I said: No one knows his game. Will he send his ample gas supplies to Europe, now that Russian storage is filled as of 7 Nov.?
This is a serious issue of the reliability and transparency of Gazprom and Putin’s Russia – the supplier of about 40% of Europe’s imported gas,
The person who invaded Ukraine in 2014 now refuses to send gas across Ukraine. He now has the gas available it and Ukraine is even offering him a 50% discount on transit fees. This could significantly help to alleviate Europe’s looming winter energy crisis.
However, instead, Putin has now put large numbers of Russian troops on Ukraine’s borders, de facto threatening the country in recent weeks. The Biden administration is alarmed. It sent CIA director Burns to speak directly to Putin in Moscow – a very unusual event. See CNN here.
This is a serious energy and security situation for Europe and for Ukraine. Shortfalls of winter gas in storage, and also coal in Ukrainian storage is a threat to citizens’ heat and electricity supplies.
Putin’s recent gas-Godfather-like statements that Nord Stream 2 could alleviate the current European natural gas price and supply crisis is an obvious attempt to pressure the EU to rush Nord Stream 2 approval in ways violating the EU’s own rule of law.
As a Polish expert wrote in 2019,: “The amendment to the [European Union’s] gas directive explicitly confirms that EU law applies in the case of Nord Stream 2 (that is, to the section running through German territorial sea), including the rules on unbundling, third-party access, independent operators et al.: (Agata Łoskot-Strachota, “The gas directive revision: EU law poses problems for Nord Stream 2,” OSW, Warsaw, 21.02.2-19.).
However, Putin’s hubris should be taken with a grain of salt. In reality, his options in this regard are subject to current technical-economic constraints of the Russia gas sector, as my research had indicated in recent weeks.
Russian domestic storage was announced to be at 97% full mid-last-week due to its continuing all-out Gazprom filling campaign, reportedly at the high rate of about 300 million cubic meters/day (mcm/d). The plan had been to finish by 1 November.. Thereafter, this maxed-out production has to immediately be choked off or be sent somewhere else – and indeed there is only one option; but it is not Nord Stream 2…
One caveat: a recently announced 7 November Gazprom export start date did not made sense. Where would the maxed out production flows go from 1 to 7 November? However, an article yesterday by Bloomburg [possible paywall] clarifies “Gazprom said Wednesday that the Russian re-injection campaign would be a week longer than the original Nov. 1 conclusion.” This is quite plausible – it is simply taking an extra six days to top off Russian domestic storage.
So to reiterate points I have stressed over the past few weeks (e.g., at Naftogaz’ Ukraine Gas investment Congress closing panel in Kyiv last Thursday-I’ll put a video of this here soon- and in various interviews):
First, while Putin has relished playing the gas-mafia Godfather (e.g., at the St Petersburg gas conference two weeks ago), asserting that, if Nord Stream 2 is rapidly approved, Gazprom exports could save Europe this winter, he has been merely posturing as the strongman decider. He wanted to appear to be craftily withholding extra, non-contracted gas supplies needed to fill the company’s storage facilities in Germany and throughout the EU, all still now at worryingly low levels long after the traditional filling season ended at the start of October.
“Cooperation in energy transformation and trade to increase the economic strength of the Three Seas Region …”
Kongres590 – Warsaw – 14 October 2021
Moderator: prof. dr. hab. Zbigniew Krysiak, Chairman of the Program Council of the Institute of Schuman Thought Panellists:
Dr. Thomas W. O’Donnell, (PhD Nuclear Physics; Lecturer in Berlin & Energy & Geopolitical Analyst),
Julius Zellah, (President of the Light for Africa Online Foundation)
Paweł Kotowski, (Deputy Director of the Department of Economic Cooperation, Ministry of Foreign Affairs)
Jarosław Malczewski, (President of the Polish Dairy Group),
Dr. Krzysztof Malczewski, (President of the B-2M Company)
Key points of my talk:
1. Poland has no previous experience in nuclear energy; and this is a difficult problem that needs to be tackled starting now. Also, any institute needs a sufficient scale to guarantee both high standards and employment security to those trained for industry, academia, safety, and planning. It is for this reason that nuclear training in Poland’ should be done jointly, together with all 12 of the Three Seas Initiative members (i.e., the eastern EU member states, and this may soon include also Ukraine – many of which countries already have established nuclear programs). And, as part of the Three Seas Initiative, this means also in conjunction with the USA, in particular its Department of Energy with a vast network of nationl laboratories and obviously decades of nuclear experience to draw on. Continue reading →
On Friday, 8 October, I was interviewed, with Aura Sabadus (@ASabadus) of ICIS-London, about Nord Stream 2’s impact on European energy politics on”Strait Talk” with TRT host Ayse Suberker. We discussed the geopolitical aims of Russian and German leaders for partnering on this pipeline.
I stressed, the issue is not whether Europe is dependent on Russian gas – it is and it will remain so for the foreseeable future for up to 40% of its imports. The issue is what route this gas takes to arrive from Russia into Europe.
Consider: Russia historically exported 80% of the gas it sends to Europe using massive Soviet-era pipelines transiting Ukraine, the remainder via a Belarus-Poland-Germany pipeline. However, for 20 years Continue reading →