(Newswire.net — March 17, 2022) — The attack on Ukrainian soil by Russian President Vladimir Putin could initiate a new energy era. Before the Russian/Ukrainian war, the markets were slowly moving toward a period of new clean energy. Europe started to shut down nuclear plants that generate electricity. Coal energy was dismantled, and wind and solar generation were moving into high gear. The only carbon-related material still moving ahead was natural gas and turbine generation.
The war has changed the clean energy trajectory, which could take several years to recover. To punish Russia, the German government put the Nord Stream 2 pipeline on hold last week. The Nord Stream 2 Pipeline is a natural gas pipeline from Russia that’s expected to bring natural gas to Western Europe. The anger across Europe is palpable. Polish Prime Minister Mateusz Morawiecki called for shutting down Nord Stream 1, which has transferred Russian gas to Germany since 2011, however, EON, the operator of energy networks, rejected such demands.
Energy Sanctions Intensify
Some issues are counter to each other. While the West wants to cut off all money flowing into Russia, the country supplies 28% of the wheat worldwide and plenty of oil and gas. The United States is open to imposing sanctions on the trading of Russia’s oil and gas flows, but this could put oil and natural gas prices at all-time highs. After Russia invaded Ukraine, the White House slapped sanctions on exports of technologies to Russia’s refineries but has stopped short of targeting Russia’s oil and gas exports.
A New Era in Energy
The leverage that Russia has makes it clear that there is less demand for oil and gas in Europe. While Europe is trying to move to a clean energy environment, the process will take time. Even ahead of the beginning of the war, European natural gas prices had hit all-time highs. In the wake of the attack on Ukraine, the United Kingdom ordered that Russian-associated vessels be blocked from its ports, while officials from the EU are considering a ban on Russian ships. Not all countries in Europe get their natural gas from Russia. While Germany is the largest consumer, countries like Norway have their own supply. What is clear is that natural gas trading has made this methane product very desirable.
New Technology Has Blossomed
The most efficient process to get natural gas to Europe is via a pipeline. Unfortunately, most of the land-based sources are in Russia. The alternative is to get Liquid Natural Gas (LNG), which is created from the gas version of natural gas. Since a gas version is difficult to store and move, technologies have been developed to liquefy gas and ship it to Europe. To make this process possible, there is a need for liquefaction terminals on both sides of the Atlantic. There are a handful of terminals in the Gulf Coast and East Coast of the United States, and even fewer liquefaction terminals in Europe. Most of the LNG produced in the United States was shipped to Asia before the surge in LNG trading in Europe. One of the largest independent players in the United States is Cheniere Energy. Many of the major players include Chevron and Exxon. There are also smaller companies like Kinder Morgan which own export terminals. These export terminals can accept the gas form of natural gas and liquefy it and place it on a ship that can take it to Europe.
Another alternative is shipping that can accept the gas form of natural gas and turn it into a liquid on the ship. There is only one company in the United States that has this technology. The company is called Golar (GLNG). The vessels owned by this company can transport LNG and make LNG and then turn it back into natural gas when the ships arrive at their final destination.
The Bottom Line
The issue that has been exposed during the initial stages of the Russian/Ukrainian war is the reliance of Europe on Russian oil and natural gas. While the oil is fungible and can be purchased from other locations as ships move around the globe, natural gas is much harder to move. The technology of moving natural gas from the United States, Australia, and Qatar will usher in new types of technology needed to generate electricity. The eventual goal will be to make energy cleaner, and this process will be accelerated by the innovation that needs to take place in the wake of the attack on Ukraine.