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April 4, 2024
Issue 77  |  View Past Issues
Inside Gas
Published by Global Energy Monitor

Editor's Note

Canada’s Minister for Energy and Natural Resources has told the country’s mostly fledgling LNG industry that it shouldn’t expect the federal government to hand out “inefficient fossil fuel subsidies.” A major consultancy firm has also warned that the country’s most developed export project, due online next year, could face feedgas difficulties as a result of extreme drought conditions in the province of Alberta. Another major export terminal, Arctic LNG 2 in Russia, is in clear difficulty as the effects of sanctions have forced a suspension of production just a few months after start-up. 

“AI revolution will be boon for natural gas, say fossil fuel bosses” ran a recent headline in the Financial Times, and a timely new report provides counterevidence and recommendations that fossil fuel bosses will not like to hear. New data and analysis from Global Energy Monitor puts a figure to the likely methane emissions from planned oil and gas production projects and — more worryingly — describes how underreporting of emissions is still rife among most of the big industry players.

With this year’s shareholder meeting season at the world’s big banks already underway, new revelations suggest that many of the top fossil financiers are abandoning their low-carbon transition facades just as global heating records are being smashed with each passing month.     

Inside Gas will return on April 18. 
 

Grieg Aitken

Features

Europe a key driver of new Middle East fracking boom

As experts and front line communities warn that fragile water supplies in the region are threatened by the water-intensive fracking process, Saudi Arabia, Egypt, Algeria, and Tunisia have plans to expand gas extraction via the controversial drilling technique in order to meet European demand and fulfill blue hydrogen ambitions, write Nick Ferris and Eman Mounir in an investigation for Energy Monitor

Japanese PM Kishida has to stop derailing Southeast Asia’s energy transition

Ahead of a trilateral meeting next week between Japan, the Philippines, and the United States’ heads of government, the problems linked to Japan’s fossil fuel-biased energy policy and huge public finance support for gas are stacking up, write Gerry Arances and Elizabeth Bast in Newsweek

The EU’s Modernisation Fund is an open door for new gas investments in Romania

A €60 billion fund that’s supposed to be aligned with Europe’s energy and climate targets and the Paris Agreement has leaked more than €500 million to support new gas infrastructure in Romania, writes Raluca Petcu in EUobserver.

Is Europe’s energy crisis over? 

Despite abundant gas supplies and falling prices, the wider economic damage caused by Europe’s acute gas supply crunch over the last few years is still playing out, writes Jillian Ambrose in The Guardian.

Top News

Report lays out the tools utilities can use in the short term to manage growing data center demand without new gas power: As the gas industry talks up the buzz around the high power consumption needs of mushrooming data centers and the artificial intelligence revolution, which they claim will require a lot more additional gas power plants, a new report from a U.S.-based energy and climate policy think tank has urged power market regulators to proceed with caution in the short term and in the face of aggressive network load projections. Other than the fact that Big Tech firms such as Google and Microsoft have sustainability and net zero targets, and have set ambitious goals to use only certified green electricity in the coming years, Energy Innovation’s report argues that a range of practicable solutions exists to mitigate short-term load growth while regulators work out how to deal with incremental growth in the long term. Proven energy efficiency measures are central to Energy Innovation’s recommendations, while the report points out that the success of such steps over the last two decades to deal with data center demand management is being overlooked as the power sector ramps up its load projections and pro-gas rhetoric. (Energy Innovation Policy & Technology [requires registration], Latitude Media, Financial Times [paywall]) 
   
No federal subsidies for Canadian LNG projects, says minister: Jonathan Wilkinson, Canada’s Minister for Energy and Natural Resources, has kept up his recent tough talk on the country’s LNG sector by stating that the federal government is not prepared to provide “inefficient fossil fuel subsidies” to new LNG export facilities. “That's the role of the private sector. They need to assess the business case and make the investments,” said Wilkinson during a television interview. With six new export projects centered on the west coast province of British Columbia (B.C.) in various stages of development, the think tank Clean Energy Canada has issued a new report warning that the target export markets in Asia — most notably Japan — will be facing oversupply by the end of the decade just as several of the B.C. proposals are planned to come online. Noting declining public support for LNG expansion in the province, the report also calculates that all six facilities would be a major burden to the electricity grid, requiring 69% of B.C.’s total demand for electricity for the whole of 2022. “Diverting this much power to LNG would mean less is available for households or cleaner industries on a less risky growth path,” the report states. Consultancy firm Deloitte Canada also warned that extreme drought conditions are likely to impact gas producers in Alberta that are gearing up to supply Shell’s LNG Canada facility. (Reuters, Clean Energy Canada, Yahoo Finance Canada) 

Protest against major Black Sea extraction project: Greenpeace activists from Romania, Bulgaria, and the Czech Republic protested the development of the Neptun Deep gas field at the Bucharest headquarters of OMV Petrom, the company leading the Black Sea extraction project. Analysis from Greenpeace Romania has found that Neptun Deep, which is in line for public money support from the EU, threatens EU carbon neutrality targets with a projected 200 million tonnes of greenhouse gas emissions over 20 years. Europe’s potentially largest offshore gas extraction project also threatens wildlife in the Black Sea, according to Greenpeace. OMV Petrom “refuses to disclose the massive amounts of chemicals that will be dumped into the Black Sea to extract this gas,” said Alin Tanase, campaigns coordinator at Greenpeace Romania, “while daring to tell anyone who will listen that this project has a negative carbon footprint.” (Greenpeace) 

Report identifies huge methane implications of planned extraction and industry underreporting: New data and analysis from Global Energy Monitor (GEM) finds that 74 oil and gas extraction projects around the world scheduled to go into operation and reach peak production by 2030 have the potential to annually emit nearly as much methane as the entire fossil fuel production sector in Europe. Were these projects to operate using current practices, GEM has calculated, their cumulative annual emissions would total 2.4 million metric tonnes of methane, equalling 3% of methane emissions from global oil and gas production in 2023. GEM research identified that Half of those emissions come from just twelve oil and gas fields under development, and roughly a third come from four fields in Saudi Arabia and two fields in Guyana. As international calls intensify for the industry to rapidly step up methane abatement, widespread underreporting of methane emissions by companies continues to hinder global efforts. The report lays out how the majority of the top 20 operators pursuing new projects did not provide data to the latest publicly available disclosure report from the Oil and Gas Methane Partnership 2.0, the United Nations-led reporting and mitigation programme. (Global Energy Monitor [pdf])

Chinese solar producer refocuses on gas amid industry momentum: With growth in China’s overall gas demand forecast to slow this year, according to China National Petroleum Corporation, but still rise by around 6%, the National Development and Reform Commission, the country’s top economic planner, is looking to remove fixed residential price caps for gas consumers before the end of the year in a move that could spur an increase in LNG imports. It has also emerged that one of the country’s top solar producers, CGL Holdings, has sold off hundreds of solar assets in a bid to reenter the gas market. The privately-run company is developing teams to focus on gas importing and LNG trading. GCL is also considering a return to drilling in Ethiopia, with the construction of a 600,000 ton-per year LNG export facility being mooted for the African country. A 9.8% increase in oil and gas exploration investment in 2023, totaling US$12.6 billion over twelve months according to the Ministry of Natural Resources in its annual report, reaped dividends for China with several new gas field discoveries as well as major potential for new coalbed methane extraction. As of the close of 2023, the nation’s remaining technically recoverable gas reserves saw a 1.7% increase to reach over 6.6 trillion cubic meters. (Bloomberg, Reuters, Upstream [paywall])

Ukraine’s gas hub and biomethane export ambitions in focus: Two new commentaries have set out differently slanted visions for how Ukraine is set up to potentially become both a gas hub for eastern Europe and a major source of biomethane for the EU as a whole. Citing domestic gas production, new supply routes that bypass Russia, and extensive Ukrainian gas storage, Mykola Kolisnyk, the country’s deputy energy minister, envisions the creation of a “new Ukrainian business model.” Kolisnyk’s emphasis is more on Ukraine’s storage infrastructure, located mostly at five separate sites in the west of the country, than on domestic production. The 25.3 billion cubic meters (bcm) of storage capacity could be utilized from summer 2024, he writes, and cover the supply needs of eastern European countries for winter 2024 and onwards. Following the passing of a new law by the Ukrainian parliament that lifts restrictions on the export of the country’s biomethane, ICIS energy analyst Aura Sabadus points to how biomethane companies are aiming to export first volumes to Germany by May this year, with plans underway for a lot more to subsequently enter the EU. Other than security challenges as a result of the recent intensification of Russian military strikes, Sabadus notes that there is also the potential for opposition from European farmers who may object to low-price Ukrainian biomethane. (EURACTIV [registration required], Atlantic Council)

“If you talk to the oil people they are going to say the only way we can meet this energy demand is to use fossil fuels, but many of the customers of these data centres have made net zero CO2 commitments so they will say the power has to be renewables,” 

said Peter Herweck, head of energy management group Schneider Electric.

News

Azerbaijan: The institute of former British prime minister Tony Blair, who has previously lobbied on behalf of a major gas pipeline project running from Azerbaijan to Italy, is reported to be interested in supporting the Baku regime in the running of this year’s UN climate summit. 

Bulgaria: Romania’s OMV Petrom has taken over operational control from TotalEnergies of the Han Asparuh oil and gas block in northern Bulgarian waters of the Black Sea, which has the potential to produce 13 billion cubic meters of gas per year from two fields. 

Colombia: Brazil’s Petrobras intends to drill two offshore evaluation wells this year at the Tayrona block with counterpart Ecopetrol. 

Greece: During a visit to Montreal, Prime Minister Kyriakos Mitsotakis indicated that Greece is interested in importing LNG from Canada. 

Indonesia: A 20-year construction contract for several planned LNG import facilities in the Sulawesi-Maluku cluster has been awarded to domestic companies. 

Israel: The government has given the go-ahead to Energean for Phase 1 development of the offshore Katlan/Tanin area, with a final investment decision expected shortly. 

Moldova: In a bid to diversify away from Russian gas, state-owned energy firm Energocom has purchased 2.6 million cubic meters in test volumes of U.S.-origin LNG from Greece’s new floating import terminal at Alexandroupolis.

Norway: An appeals court has put on hold an injunction, secured by Norwegian environmental groups in January, that would have halted the development of hydrocarbons in two offshore fields; an emergency hearing on the injunction will be heard this month.  

Qatar: Newly-signed agreements for 44 newbuild LNG carriers have raised the number of such vessels that QatarEnergy currently has under construction to 104. 

Ukraine: A Russian missile strike on an underground gas storage site in western Ukraine caused damage to surface infrastructure but did not critically impact operations, according to Naftogaz CEO Oleksiy Chernysho, “since the gas is stored deep underground.”

U.S.: In a bid to bypass courts that have rejected climate lawsuits, the state of Vermont is advancing legislation that would require major fossil fuel companies to pay a share of the damage caused by climate change.
 
U.S.: The U.S. Energy Information Administration reported that national gas production rose by 4% in 2023 while also projecting a production contraction in 2024 due to low gas prices and a relatively stable rig count.

Venezuela: Amid a reported flurry of diplomatic activity, Shell is seeking to secure a longer license from the U.S. government before it is able to take a final investment decision on the offshore Dragon field that is estimated to hold up to 4.2 trillion cubic feet of gas.

Companies + Markets

Development bank urged to reconsider funding for Greece–North Macedonia pipeline: Ahead of a funding decision scheduled for April 24 at the European Bank for Reconstruction and Development (EBRD), the central and eastern European NGOs Eko-Svest and CEE Bankwatch Network have lodged a complaint with the EBRD’s redress mechanism calling for an investigation into the public development bank’s likely approval of an approximately €100 million (US$108 million) loan to support the construction of the Greece–North Macedonia gas pipeline. The groups maintain that an environmental impact assessment (EIA) for the project failed to assess the greenhouse gas emissions that will result from the burning of the pipeline’s gas and that a public consultation period, supposed to be mandatory, did not take place prior to the approval of the EIA by the North Macedonian authorities. National and EU law, the groups assert, has therefore been breached as well as the EBRD’s own environmental and social policy. (CEE Bankwatch Network, Balkan Insight)

Financial and climate challenges for exporters and producers in Australia: The federal government has forecast a substantial collapse in the revenues of the country’s gas exporters over the next five years, chiefly due to a predicted slump in prices following the unprecedented global market highs that resulted from Russia’s invasion of Ukraine in 2022. In its quarterly report, the Department of Industry, Science, and Resources foresees total LNG revenues decreasing from A$72 billion (US$47 billion) to A$65 billion in the 2023–24 period, but then potentially falling below A$45 billion by 2029. An expected decline in export volumes coupled with increased global supply coming online from the United States and Qatar are projected to significantly ease prices by end of decade and thus hit the bottom lines of major exporters such as Woodside Energy and Santos. Meanwhile, Italy’s Eni has announced that it has put on hold plans to extract gas offshore Australia’s Northern Territory at the Verus field in the Timor Sea. The company has been forced to review the project’s environmental footprint due to the high carbon dioxide content of the available gas that is reckoned to make Verus potentially Australia’s most carbon-intensive gas field. (The Age, ABC News) 

Sources say Russia’s new flagship LNG project is struggling with Western sanctions: The sanctions-hit Arctic 2 LNG project located in Russia’s Gydan Peninsula has been forced to suspend production, according to two unnamed sources, as the facility’s lead operator Novatek struggles to secure specialist tankers designed to transport LNG through thick sea ice. Despite managing, amid a flurry of Western sanctions in December, to start up production at the first train of the planned three-train, 19.8 million tonnes per year (mtpa) export terminal, the Russian firm’s ambition to start shipping initial small volumes in the first quarter of this year appears to have come unstuck due to the shortage of tankers. One source suggested that train one will now be closed until “at least the end of June.” A Russian media outlet also reported that production at Arctic 2 had fallen from 425 million cubic meters (mcm) in December to only 83 mcm in February. Separately, a new data analysis from Reuters shows that last year, due to discounted LNG cargo prices, Novatek and Gazprom were able to push the share of Russian gas in EU supply up to roughly 15% after it had fallen to 8.7% in 2022 since the invasion of Ukraine. (Reuters, Reuters)

Big banks’ resistance to change now out in the open: Despite the drip-drip of announcements from some of the world’s biggest commercial banks that have recently pledged to reduce their financing and exposure to oil and gas companies, heretofore quiet resistance from some international institutions — primarily those based in North America and Japan — to get tougher on their carbon-intensive clients is breaking out into more public defiance. While increasingly ferocious political attacks on financiers’ embracing of environmental, social, and governance considerations broke out last year in the U.S., Bloomberg reports that a meeting of international financial regulators and institutions in Tokyo this February was a watershed moment: where the threat to fossil fuel-based banking fees from climate change concerns really came out into the open. Echoing the “Energy transition — eventually” mantra that big oil and gas has been deploying more concertedly over the last couple of years, the banking industry has become more intolerant of what it sees as unrealistic demands from regulators and finance campaigners. Arguably, according to some observers, this goes back to 2021 and the COP26 summit in Glasgow when financial institutions lined up to gain PR plaudits through commitments to reduce the climate impacts of their core energy business. Realizing these commitments has proved to be elusive for many. The business incentive to double down on green financing and propel the energy transition forward risks being lost, though, amid technical delays and, according to James Vaccaro of Climate Safe Lending Network, “doublespeak” from banks about both embracing sustainability and maintaining business as usual. (Bloomberg) 

Pipeline wrangles in Latin America: Commercial disagreements and gas infrastructure bottlenecks are hanging over inter-state negotiations that Brazilian authorities hope will ease the country’s exposure to LNG imports and the volatile prices that come with such dependence. For this to happen, Brazil’s state-owned oil and gas company is looking to tap gas from Argentina’s vast Vaca Muerta shale play, which would then have to be transported through Bolivia’s network of pipelines, a process that requires the reversing of the Andean country’s pipelines. Viewed as the fastest and cheapest option for Brazil, one major sticking point is the current lack of transit infrastructure in Argentina to bring Vaca Muerta gas to the border with Bolivia. Another one has so far proven to be disagreements over the commercial terms for transiting gas north through Bolivia. Compounding matters is rapidly dwindling gas production within Bolivia itself, with regional industry observers warning that the country will no longer be able to export its own gas by 2029. (Reuters, Global Energy Monitor Latin America Energy Portal)

Steel giant’s exploitation of gray areas for public subsidy raids called out in Spain: Environmental group Ecologistas en Acción has called for the cancelation of a €450 million (US$488 million) grant awarded by the Spanish government last year to ArcelorMittal following signals from the steel giant that it is walking back decarbonization plans to use green hydrogen at its steel plant in Gijón in favor of gray hydrogen derived from gas. Spanish media recently reported that the company’s intention to replace coal-burning facilities at the Gijón plant with renewables-based hydrogen by 2025 is likely to be axed owing to the high costs involved. In February this year, ArcelorMittal said that using green hydrogen at its European steel mills was too expensive and unprofitable despite the fact it had received billions in public subsidies to do so. This was swiftly followed by the European Commission’s approval of a plan by the German government to grant the company €1.3 billion (US$1.4 billion) to partially decarbonise two of its steel mills with equipment designed to use green hydrogen. (Ecologistas en Acción [Spanish], Hydrogen Insight, Hydrogen Insight)

“Even when considering those term contracts which European buyers have signed to ensure supply security, there is still a supply gap versus projected demand under the Fit for 55 outlook through 2030. European buyers will continue to rely upon the spot market to meet demand requirements — by 2030, this could be as much as 50 million tonnes. Given that some of the recently signed contracts will only start in the late part of the 2020s, there could be additional spot demand if some of the contracted volumes get delayed,” 

said Jefferson Edwards, Vice President of Shell Energy.

Resources

Outlook for Russia’s oil and gas production and exports, Oxford Institute for Energy Studies, March 25, 2024. (Pdf)

This 60-page report assesses the impact of sanctions on Russian oil and gas production and exports over the last two years and finds the sector to be in relatively resilient shape. 

Drilling Deeper 2024: Global Oil & Gas Extraction Tracker, Global Energy Monitor, March 27, 2024. (Pdf) 

This 23-page report draws on an annual research update and shows that at least 20 oil and gas fields were approved in 2023 involving the extraction of 8 billion barrels of oil equivalent (boe), with plans to quadruple that boe figure by 2030 across 64 additional fields. 

Understanding the proposed guidance for the Inflation Reduction Act’s Section 45V Clean Hydrogen Production Tax Credit, The International Council on Clean Transportation, March 29, 2024. (Pdf)

This 10-page policy briefing summarizes and explains the proposed guidelines for the hydrogen tax credit released for public consultation last December by the U.S. Department of Treasury and the Internal Revenue Service.

Fossil gas: Manufacturing addiction. How the fossil fuel industry and the French State are locking us into an unsustainable energy model, Friends of the Earth France, April 3, 2024. (Pdf)

This 63-page report provides an overview of how the French government, fossil fuel companies, and financial institutions are combining to boost gas expansion both at home and overseas, including under-the-radar plans to boost France’s LNG import capacity even further.