Russia's Gamble on Natural Gas Dependence

A quick explainer on the geopolitical and climatic realities surrounding Russia's invasion of Ukraine by a man who barely knows what he's talking about.

I was working on writing an explainer for how natural gas (it's really not very natural, it takes an incredibly long time for dead algae and seaweed [not dinosaurs, sorry] to become buried in the earth's floor and even longer for the geothermal forces to realign the carbon into coal, oil, and/or "natural" gas) has run it's course and needs to be removed from our homes and our energy gird. It was going to be great! I was going to talk about how gas stoves and ovens increase the risk of, and exacerbate existing, asthma and how methane is a far more potent, but less permanent, greenhouse gas than carbon dioxide. It was going to be a really fun, lighthearted read. But then Russia invaded Ukraine, and it seems there's a more important story about natural gas that needs telling.

European Reliance on Russian Gas

Europe, like most industrialized regions, rely heavily on natural gas (NG) for energy, both as an end source for heating/cooking and as a source for electricity generation. Shown below, per the EU, NG made up over 35% of the final energy consumed in households in 2016. NG was also used to generate around 20% of the electrical energy according to the IEA.

That's nearing half of the region's consumption, but where is this gas coming from? If you look at the chart below from the EIA you'll see that Russian imports are the largest contributor. By my guess from looking, Russia provided something close to 30% of the region's NG, and that's before including the 20% of the liquified natural gas (LNG) imports also coming from Russia according to the EIA.

One country is often being singled out in these discussions lately: Germany. And with good reason, Germany is the largest NG consumer in the region per the EIA while only producing 3% of the NG it used in 2018.

This extreme dependence on imports from Russia, Norway, and the Netherlands, leaves Germany in a precarious position on a good day. There have been plans for a NG pipeline called Nord Stream 2 to allow a more direct connection to Russian NG for a while, but the recent set of sanctions by the United States and others have pointedly stalled, if not doomed, the project.

It's Just a Big Gas Station

On the other side of this coin, Russia's entire economy can really be summed up in two words: fossil fuels. Oil, NG, and coal made up over 58% of the country's exports in 2019 according to the Observatory of Economic Complexity.

Meanwhile, per a random article published by Harvard you can find by Googling "Ukraine oil and gas reserves," Ukraine holds the second largest known reserve of NG in Europe. This single fact seems like a far more convincing reason to try to occupy neighbor than de-nazification. And when better to attack that in the middle of winter, a time when energy demands always sky-rocket do to heating, making Europe's already significant reliance temporarily excruciating.

But unless Europe turns the valve off on Russian NG, any sanctions levied against the Kremlin will contain blind spot large enough to question if they are sufficient.

Immediate Solutions?

There are plenty of people ready to cash in on any war effort, and this one is no different. The current crisis is pretty straight-forward. Europe needs energy to get through the rest of winter, but their ties to Russian NG means they are indirectly paying for the current invasion of Ukraine. Not an ideal situation. What could get them out of this?

Well, in hindsight they could have not built a grid so reliant on fossil fuels or they could have chosen to boost a different nation's energy economy besides Russia's. And while some people *cough* the IPCC *cough* told them that fossil fuel bit ahead of time, the second part is just about convenience. Honestly, they both are! The status quo is easy until it leads to war or suffering. Two things climate change will absolutely without a doubt bring. And by bring I mean has brought.

But what can actually be done right now?

1. Turn on any non-NG energy production they have that they aren't already using. Smarter minds than I are discussing this very real option, but unfortunately rarely are energy markets flush with unused assets during a winter peak. One of those smarter minds, Gernot Wagner, wrote a very compelling article I highly recommend. In said piece, one big option would be for Germany to turn back on some nuclear plants they had intended to sunset.

2. Find a replacement source for NG. Something easier said than done, sadly. Russia has the infrastructure in place to provide these countries with NG that other's don't, and they have the supply. Outside of one elephant in the room (Saudi Arabia), thanks to a global capitalist economy, all the oil and NG that comes out of the ground is already spoken for. Which brings me to the third option...

3. Use less energy. While the effectiveness of this would vary based on each country's generation fleet, peaker plants are almost exclusively NG plants. The other side of this, and a truly beautiful idea to me, is that this actually works anywhere in the world. We here in America, if we made a concerted effort, could lessen our own usage of NG to free it up to be liquified and shipped over to Europe! It would require a lot of work, one could even call it a war-time effort, but what better time to commit to such an effort than to stop an actual world war?

Profiteers and the Climate

Now I just laid out some real options, and you'll notice I didn't mention renewables. That's because setting up wind and solar plants takes time. Time not available right now. Should Europe dive head first into renewables to ensure independence from Russia next winter? Of course! They should have been doing that already because of the inevitable death and suffering our fossil fuel infrastructure assures us. But they (and we) haven't done that in the last 40 years. If we had, this whole thing could have been avoided. But we didn't because powerful people can still get rich extracting and burning old, dead, mushed together plant matter. Believe it or not, those same people have a four step plan to solve European dependence on Russian NG.

You are all going to find it hard to believe, but I don't much care for this plan. Not just because numerous groups made clear that the only feasible way to limit warming by 2°C is to halt investment in new fossil fuel infrastructure (take the IEA, for example), but also because none of these steps help the current crisis, except maybe the last one, but I'll get to that.

Releasing permits on federal lands and announcing offshore leasing auctions would be terrible for all kinds of reasons, but would also only open up these lands for exploration. It would easily take a year before any new developments would be putting oil and NG into the market (or directly into the air and sea, as they are wont to do).

Accelerating infrastructure permitting really just means okaying new pipelines, most of whom go through indigenous land and all of whom should take significant time to assess because they are a serious danger to the people and environments they run through.

This last one though, I'll give them. We should reduce uncertainty. A big problem is that most of the legal and regulatory uncertainty comes from how our government changes its makeup every 2-6 years for some weird reason, but let's ignore that for now.

One good way to lessen uncertainty would be to actually levy the sanctions needed against Russian energy. Take them out of the equation and life gets a whole lot easier. Well...easier to predict. Life would be tough removing their supply from the market, but it's a burden I view as worth bearing. There has been a small thing holding up such sanctions since the first set went out after Russia illegally annexed Crimea in 2014. Can you guess what it was?

Turns out global oil conglomerates work on the Russian oil wells too! Here are some highlights from a great thread covering these ties:

Exxon has a whole page dedicated to their work in Russia.

BP has an ongoing partnership with Rosneft, a Russian oil giant run by close ally's to the Kremlin.

Shell Oil is a major shareholder in the Nord Stream 2 pipeline project.

Their lobbying, as well as Europe's dependence on Russia, is still limiting international actions. Today it was announced Russian banks will be removed from the SWIFT network, a truly large step that should be applauded. Except not all their banks, because research is being done to avoid any banks who manage energy-specific payments.

This has the chance to be an enormous moment for removing fossil fuels from the global energy fleet, if we have the courage to take it on. But it could just as easily fall the other way, and sink us even deeper into carbon debt. Either way, right now the people of Ukraine deserve our respect, our aid, and our best efforts.