Iran natural gas export on the rise

According to the managing director of the National Iranian Gas Company (NIGC), Iran’s natural gas exports in the current Iranian calendar year increased by 16% as compared to the previous year.

According to Majid Chegeni, the country’s annual liquefied petroleum gas (LPG) exports also registered a 22% increase this year, IRNA reported.

“Since the beginning of the 13th government tenure, more than 5,297 villages with 307,000 households and 41 cities with 94,000 households have been connected to the national gas network,” he said.

He further noted that currently more than 98.6% of the country’s urban population and 86.3% of the rural population enjoy natural gas through the national network.

According to Chegeni, since the beginning of the 13th government’s administration (August 2021), more than 680 trillion rials (US$1.4 billion) has been invested in different areas and sectors of the gas industry (rural and urban gas supply projects, gas transmission lines and pressure boosting stations, refineries and research affairs).

The official further mentioned some of NIGC’s priority projects, saying, “Strengthening the gas network in the northeast of the country is one of the most important projects of the National Iranian Gas Company.”

He pointed to the smartening of the gas distribution network as another priority project of the National Iranian Gas Company and added, “The implementation of this project is one of the legal duties and responsibilities of the NIGC.”

“Last year, the consultant contractor of the project was selected, and soon the project will be implemented as a pilot in six provinces, and after that, the project will be implemented throughout the country, and we hope to be able to distribute 27 million smart gas meters across the country,” he explained.

Sanctions on Iran are because of Southern Pars gas field, not its nuclear program

I started writing these blogs in June 2012. Over the years my focus remained on Iranian nuclear program, which is often termed the main cause of sanctions. However, when I posted my last blog on Leviathan gas field, offshore gas project of Israel, it dawned that the real cause of sanctions on Iran is its Southern Pars gas field, not the nuclear program. I quickly accessed Wikipedia and managed to put together some information.  

Pars field comprising of Southern Pars and North Dome fields is a natural-gas condensate field located in the Persian Gulf. It is by far the world's largest natural gas field, with ownership of the field shared between Iran and Qatar.

According to the International Energy Agency (IEA), the field holds an estimated 1,800 trillion cubic feet (51 trillion cubic metres) of in-situ natural gas and some 50 billion barrels (7.9 billion cubic metres) of natural gas condensates.

On the list of natural gas fields it has almost as much recoverable reserves as all the other fields combined. It has significant geostrategic influence.

This gas field covers an area of 9,700 square kilometres (3,700 sq miles), of which 3,700 square kilometres (1,400 sq mile) (South Pars) is in Iranian territorial waters and 6,000 square kilometres (2,300 sq mile) (North Dome) is in Qatari territorial waters.

The field is 3,000 metres (9,800 feet) below the seabed at a water depth of 65 metres (213 feet), and consists of two independent gas-bearing formations: Kangan (Triassic) and Upper Dalan (Permian). Each formation is divided into two different reservoir layers, separated by impermeable barriers. The field consists of four independent reservoir layers K1, K2, K3, and K4.

According to International Energy Agency (IEA), the combined structure is the world's largest gas field.

In-place volumes are estimated to be around 1,800 trillion cubic feet (51 trillion cubic metres) gas in place and some 50 billion barrels (7.9 billion cubic metres) of natural gas condensate in place. With in place volumes equivalent to 360 billion barrels (57 billion cubic metres) of oil (310 billion boe of gas and 50 billion boe of natural gas condensate) the field is the world's biggest conventional hydrocarbon accumulation.

The field recoverable gas reserve is equivalent to some 215 billion barrels (34.2 billion cubic metres) of oil and it also holds about 16 billion barrels (2.5 billion cubic metres) of recoverable condensate corresponding of about 230 billion barrels (37 billion cubic metres) of oil equivalent recoverable hydrocarbons.

The gas recovery factor of the field is about 70%, corresponding of about 1,260 trillion cubic feet (36×1012 m3) of total recoverable gas reserves which stands for about 19% of world recoverable gas reserves.

The estimates for the Iranian section are 500 trillion cubic feet (14×1012 m3) of natural gas in place and around 360 trillion cubic feet (10×1012 m3) of recoverable gas which stands for 36% of Iran's total proven gas reserves and 5.6% of the world's proven gas reserves.

The estimates for the Qatari section are 900 trillion cubic feet (25×1012 m3) of recoverable gas which stands for almost 99% of Qatar's total proven gas reserves and 14% of the world's proven gas reserves.

Since the field is a common field and the reservoir is highly homogenous, the ultimate recoverable reserves of each country may vary from this technical assessment which only considers the static data and does not include rate of gas migration. Therefore, it is better to say that the ultimate recoverable reserves of each country would be a factor of cumulative gas production by each of them.

The Iranian section also holds 18 billion barrels (2.9 billion cubic metres) of condensate in place of which some 9 billion barrels (1.4 billion cubic metres) are believed to be recoverable, while Qatari section believed to contains some 30 billion barrels (4.8×109 m3) of condensate in place and at least some 10 billion barrels (1.6 billion cubic metres) of recoverable condensate.

The South Pars Field was discovered in 1990 by National Iranian Oil Company (NIOC). The Pars Oil and Gas Company, a subsidiary of NIOC, has jurisdiction over all South Pars-related projects. Field development has been delayed by various problems - technical (i.e., high levels of mercaptans and foul-smelling sulfur compounds), contractual issues and, recently, politics.

Gas production started from the field by commissioning phase 2 in December 2002 to produce 1 billion cubic feet per day (28 million cubic metres per day) of wet gas. Gas is sent to shore via pipeline, and processed at Assaluyeh.

As of December 2010, South pars gas field's production capacity stands at 75 million cubic metres (2.6 billion cubic feet) of natural gas per day. Gas production at South Pars rose by nearly 30% between March 2009 and March 2010. The field's reserves are estimated at 14 trillion cubic metres (490 trillion cubic feet) of natural gas and 18 billion barrels (2.9 billion cubic metres) of natural gas condensates.

NIOC is planning to develop the field in 24 to 30 phases, capable of producing about 25 billion cubic feet (710 million cubic metres) to 30 billion cubic feet (850 million cubic metres) of natural gas per day. Each standard phase is defined for daily production of 1 billion cubic feet (28 million cubic metres) of natural gas, 40,000 barrels (6,400 m3) of condensate, 1500 tons of liquefied petroleum gas (LPG) and 200 tons of sulfur.

However some phases have some different production plans. Each of the phases is estimated to have an average capital spend of around US$1.5 billion, and most will be led by foreign oil firms working in partnership with local companies.

 

 

Kazakhstan and Russia to construct gas pipeline up to China

Kazakhstan and Russia have established the route for a future gas pipeline to support shipments between the two countries and to China, Kazakhstan's energy minister said on Tuesday.

The pipeline would help Russia, hit by Western sanctions over its invasion of Ukraine to boost sales of its energy and commodities in Asia while also ensuring that Kazakhstan secures supplies for its central, northern and eastern regions.

"The issue of building a gas pipeline from Russia through the northern territories of Kazakhstan to China is being discussed, the route has been preliminarily determined, the conditions for the construction of this gas pipeline are being discussed," Kazakhstan's energy minister Almasadam Satkaliyev said.

Russia has been discussing a possible gas union with Kazakhstan and Uzbekistan to support shipments between the three countries and to other energy buyers, including China.

Russia's pipeline gas exports to Europe, which used to be the main supply market for oil and gas from Russia, almost halved last year following the start of what the Kremlin says is a special military operation in Ukraine.

To make up for the loss of the European market, Moscow is forging close trade and political ties with Asia, which has become the main buyer of Russian oil, a major source of revenue for the Kremlin.

Keen to increase sales of natural gas to China, Russia has been in talks with Beijing on the construction of a second pipeline, the Power of Siberia 2, with an annual capacity of 50 billion cubic meters (bcm), roughly in line with the 55 bcm capacity of the damaged and idled Nord Stream 1 undersea pipeline to Germany.

The talks have been fractious and there is still no agreement on the gas price.

Last year, Kremlin-controlled Gazprom also agreed to supply Chinese state energy major CNPC with 10 bcm of gas each year from Russia's far eastern island of Sakhalin.

Currently, Russia supplies China via the only one route - Power of Siberia pipeline, which is expected to reach full annual capacity of 38 bcm by 2025.

 

 

US natural gas output rising, despite sinking prices

US natural gas prices last week plunged to a 30-month low, slipping below US$2 per million British thermal units (mmBtu) for the second time this year, even as some producers have cut drilling to stave off further convulsions.

Since the start of the year, US gas futures have collapsed by about 50%, a record drop for a quarter, on rising output and mostly mild weather so far this winter that kept heating demand low and allowed utilities to leave more gas in storage than usual.

There seems little chance of stopping output from continuing to grow. The amount of gas in US storage, meanwhile, sits about 21% higher than is normal for this time of year, and that surplus will set up US inventories to reach record highs before next winter's heating season.

Big gas producers including Chesapeake Energy and Comstock Resources Inc are reducing their drilling. But gas that comes up with oil will continue to rise in the biggest shale fields. And oil producers are not cutting back.

"About a third of US gas production is associated gas - produced from oil wells," said Jacques Rousseau, a managing director at research firm ClearView Energy Partners LLC. "This production is unlikely to decline given current oil prices."

The Permian basin of Texas and New Mexico, the nation's biggest shale field, is hitting record monthly highs in oil output this year, according to US Energy Information Administration (EIA) data. Gas from the Permian also has climbed to record highs every month this year.

While US gas futures were down by 50% in the first quarter of 2023, at US$2.22 per mmBtu, they are not low enough to forestall output gains, say analysts.

"Gas prices are begging the market to cut back on supply, amid falling US consumption and constrained LNG export options," said Stephen Ellis, an energy strategist at Morningstar Research Services LLC.

US gas production remains on track to hit 100.67 billion cubic feet per day (bcfd) this year, up from last year's record 98.09 bcfd, according to the US government.

Projected US gas usage, including exports, will ease to 107.3 bcfd this year from a record 107.4 bcfd last year due to expected declines in domestic consumption from residential, commercial, industrial and power generation customers.

That usage drop comes despite an expected 14% increase in US liquefied natural gas (LNG) exports now that Freeport LNG's export plant in Texas has returned to production after an eight-month outage.

When operating at full power, Freeport LNG, which shut after a fire in June 2022, consumes about 2% of total US gas supply.

Despite low gas prices, US drillers have 160 rigs seeking gas up 16% from a year ago, according to data from Baker Hughes Co.

Gas output in the Haynesville shale field in Arkansas, Louisiana and Texas where Chesapeake and Comstock are dropping rigs, also is on track to reach fresh highs in March and April, according to the EIA.

 

Iran 3rd train of South Pars refinery goes operational

The third train of the South Pars phase 14 refinery has gone operational, according to the operator of the phase 14 development project, Mohammad-Mehdi Tavasoli-Pour.

Tavasoli-Pour told Shana that the fourth and last train of the refinery is also scheduled to be put into operation by the end of the current Iranian calendar year.

The first train of the phase 14 refinery went operational in mid-March 2022 and the second train was inaugurated in late November last year.

Phase 14 development is aimed at producing 56.6 million cubic meters per day of rich gas, 75,000 barrels/day of gas condensate and 400 tons/day of sulfur, and 1 million tons/year of liquefied petroleum gas and one million tons/year of ethane to be fed to petrochemical plants.

South Pars Phase 14 Refinery can be considered the final refinery to be completed in the South Pars complex. Before the construction of this refinery, 12 refineries received gas from the offshore platforms of the field and processed it.

However, after the inauguration of four offshore platforms of phase 14, the need to create more refining capacity in this complex was felt more day by day. Accordingly, the 13th government has put it on the agenda to complete the South Pars Phase 14 refinery by the end of the current Iranian calendar year and make it fully operational.

South Pars gas field, which Iran shares with Qatar in the Persian Gulf water, is divided into 24 standard phases of development in the first stage. Most of the phases are fully operational at the moment.

The huge offshore field covers an area of 9,700 square kilometers, 3,700 square kilometers of which are in Iran’s territorial waters in the Persian Gulf. The remaining 6,000 square kilometers, called North Dome, are situated in Qatar’s territorial waters.

The field is estimated to contain a significant amount of natural gas, accounting for about 8% of the world’s reserves, and approximately 18 billion barrels of condensate.

 

Iran gas revenues increase 64% in a year

The Managing Director of National Iranian Gas Company (NIGC) has said the country’s gas revenues have increased by 64% since the current government took office last August, IRNA reported.

“An 11% increase in gas exports to Turkey and the continuation of negotiations to increase exports, the collection of about US$1.6 billion of Iran's gas dues from Iraq, and a 138% increase in gas swaps are among other measures taken to promote energy diplomacy in the 13th government,” Majid Chegeni said on Sunday.

Speaking at a ceremony for inaugurating several gas projects on the occasion of Government Week, Chegeni noted that over the past year Iran has reached a new record in gas condensate exports and the country has been established as a major player in the region’s gas market.

According to the official, the Islamic Republic’s natural gas refining capacity has also reached 1.030 billion cubic meters in the past 12 months and 530 kilometers of new gas pipelines have also been constructed to transfer fuel to seven power plants.

Operating the largest natural gas network in West Asia, NIGC continues to expand this network into the country’s most remote areas so that currently over 95 percent of the Iranian population enjoys natural gas through this huge network.

With a total length of over 36,000 kilometers, Iran’s gas network is also among the world’s most modern networks and it enjoys the most modern and updated measuring, transmission, and pressure boosting instruments and equipment.

This vast network of pipelines is growing bigger and bigger every year as NIGC tries to increase the coverage of the national network to nearly 100 percent.

According to NIGC data, Iran is currently producing over 810 mcm of natural gas daily which is mostly used within the country by the domestic sectors as well as fuel for the power plants. A small portion is also exported to neighboring countries like Iraq and Turkey.

Israel-Egypt-European Union sign initial gas export agreement

The energy ministers of Israel, Egypt and the European Union signed a memorandum of understanding to export Israeli gas to Europe, at a ceremony in Cairo on Wednesday. The agreement comes as Europe looks for alternative sources of energy to Russia in light of its invasion of Ukraine.

The gas will be transferred from Israel to Egypt via an existing pipeline. Egypt will use its facilities to liquefy the gas for export to ensure a steady stream of natural gas to Europe, while ensuring the energy security of all sides.

“The MOU will allow Israel to export natural gas to Europe for the first time, and that is even more impressive when considering that significant agreements we have signed in the past year, making Israel and its energy and water market a key player in the world.”

The arrangement is meant to continue until at least 2030, and will be gradually reduced until 2050. The sides agreed to work together on carbon capture and the reduction of carbon emissions, as well as to cooperate with the private sector on green energy and energy efficiency initiatives.

In addition, the sides agreed to work on a plan to make gas exports to Europe more efficient. The EU will encourage European companies to take part in searching for and producing natural gas in Israeli and Egyptian economic waters.

Energy Minister Karin Elharrar characterized the signing as a great moment in which little Israel becomes a significant player in the global energy market.

“The MOU will allow Israel to export natural gas to Europe for the first time, and that is even more impressive when considering that significant agreements we have signed in the past year, making Israel and its energy and water market a key player in the world,” Elharrar stated.

European Commission President Ursula von der Leyen, who was present at the signing, tweeted, “With this... agreement we will work on the stable delivery of natural gas to the EU from the East Med region. This will contribute to our EU energy security. And we are building infrastructure fit for renewables – the energy of the future.”

Von der Leyen addressed the important role of EU-Israel energy cooperation in her remarks to Prime Minister Naftali Bennett in Jerusalem on Tuesday.

“The EU was the biggest, most important client of the Russian supplier – for oil, gas and coal,” she said, “But with the beginning of this war and the attempt of Russia to blackmail us through energy, by deliberately cutting off the energy supplies, we decided to cut off and to get rid of the dependency on Russian fossil fuels and to move away from Russia and diversify to trustworthy suppliers.”

Russia provided Europe with about 40% of its natural gas consumption per year – more than 150 billion cubic meters (bcm). Israel cannot take Russia’s place altogether, but Eastern Mediterranean states can provide about 20 bcm annually, most of which would come from Israel. The US promised Europe 15-20 bcm of liquefied natural gas following the Russia sanctions, and Qatar is expected to export 20-30 bcm to the continent.

Talks between the EU and Israel toward a framework agreement for transferring gas officially began in late April.

Energy Ministry Director-General Lior Schillat said last month, “The Europeans and Americans expect that the energy crisis will influence the continent not only in the next couple of years but for the next decade as they try to reduce dependence on Russian gas. Israel, as part of this effort, will have to build infrastructure to send more gas to Egypt and then to Europe. It is a long-term effort.”

Gas exploration and production company Energean brought the Karish reservoir in Israel’s northern waters online earlier this month, which works toward the Energy Ministry’s aim of doubling Israel’s gas export capacity in the coming years.

“Today, the local market uses 12 billion cubic meters and we export another 4 to Egypt and 3 to Jordan,” Schillat said. “We will start with low numbers of additional exports and increase as Israel’s capacity grows.”

Surging Energy Prices May Not Ease Until Next Year, says IMF

Soaring natural gas prices are rippling through global energy markets and other economic sectors from factories to utilities. 

According to a report by International Monetary Fund (IMF), an unprecedented combination of factors is roiling world energy markets, rekindling the memories of the 1970s energy crisis and complicating an already uncertain outlook for inflation and the global economy. Energy futures indicate that prices are likely to moderate in the coming months.

Spot prices for natural gas have more than quadrupled to record levels in Europe and Asia and the persistence and global dimension of these price spikes are unprecedented. Typically, such moves are seasonal and localized. Asian prices, for example, saw a similar jump last year but those didn’t spill over with an associated similar rise in Europe.

Analysts expect prices will revert back to normal levels early next year, when heating demand ebb and supplies adjust. However, if prices stay high as they have been, this could begin to be a drag on global growth.

Meanwhile, ripple effects are being felt in coal and oil markets. Brent crude oil prices, the global benchmark, recently reached a seven-year high above US$85 per barrel, as more buyers sought alternatives for heating and power generation amid already tight supplies. Coal, the nearest substitute, is in high demand as power plants turn to it more. This has pushed prices to the highest level since 2001, driving a rise in European carbon emission permit costs.

Bust, boom, and inadequate supply

Given this backdrop, it helps to look back to the start of the pandemic, when restrictions halted many activities across the global economy. This caused a collapse of energy consumption, leading energy companies to slash investment. However, consumption of natural gas rebounded fast—driven by industrial production, which accounts for about 20 percent of final natural gas consumption—boosting demand at a time when supplies were relatively low.

Energy supply, in fact, has reacted slowly to price signals due to labor shortages, maintenance backlogs, longer lead times for new projects, and lackluster interest from investors in fossil fuel energy companies. Natural gas production in the United States, for example, remains below pre-crisis levels. Production in the Netherlands and Norway is also down. And Europe’s biggest supplier, Russia, has recently slowed its shipments to the continent.

Weather has also exacerbated gas market imbalances. The Northern Hemisphere’s severe winter cold and summer heat boosted heating and cooling demand. Meanwhile, renewable power generation has been reduced in the United States and Brazil by droughts, which curbed hydropower output as reservoirs ran low, and in Northern Europe by below-average wind generation this summer and fall.

Coal supplies and inventories

While coal can help offset natural gas shortages, some of those supplies are also disrupted. Logistical and weather-related factors have crippled production from Australia to South Africa, while coal output in China, the world’s largest producer and consumer, has fallen amid emissions goals that dis-incentivize coal use and production in favor of renewables or gas.

In fact, Chinese coal stockpiles are at record lows, which increases the threat of winter fuel supply shortfalls for power plants. And in Europe, natural gas storage is below average ahead of winter, adding risk of more price increases as utilities compete for scarce resources before the arrival of cold weather.

Energy prices and inflation

Coal and natural gas prices tend to have less of an effect on consumer prices than oil because household electricity and natural gas bills are often regulated and prices are more rigid. Even so, in the industrial sector, higher natural gas prices are confronting producers that rely on the fuel to make chemicals or fertilizers. These dynamics are particularly concerning as they are affecting already uncertain inflation prospects amid supply chain disruptions, rising food prices, and firming demand.

Should energy prices remain at current levels, the value of global fossil fuel production as a share of gross domestic product this year would rise from 4.1 percent (estimated in our July projection to 4.7 percent. Next year, the share could be as high as 4.8 percent, up from a projected 3.75 percent in July. Assuming half of this increase in costs for oil, gas, and coal is due to reduced supply, this would represent a 0.3 percentage point reduction in global economic growth this year and about 0.5 percentage points next year.

Energy prices to normalize next year

While supply disruptions and price pressures pose unprecedented challenges for a world already grappling with an uneven pandemic recovery, the silver lining for policymakers is that the situation doesn’t compare to the early 1970s energy shock.

Back then, oil prices quadrupled, directly hitting household and business purchasing power and, eventually, causing a global recession. Nearly a half century later, given the less dominant role that coal and natural gas plays in the world’s economy, energy prices would need to rise much more significantly to cause such a dramatic shock.

Moreover, we expect natural gas prices to normalize by the second quarter as the end of winter in Europe and Asia eases seasonal pressures, as futures markets also indicate. Coal and crude oil prices are also likely to decline. However, uncertainty remains high and small demand shocks could trigger fresh price spikes.

Tough policy choices

That means central banks should look through price pressures from transitory energy supply shocks, but also be ready to act sooner—especially those with weaker monetary frameworks—if concrete risks of inflation expectations de-anchoring do materialize.

Governments should act to prevent power outages in the face of utilities curtailing generation if it becomes unprofitable. Blackouts, particularly in China, could dent chemical, steel, and manufacturing activity, adding to global supply-chain disruptions during a peak season for sales of consumer goods. Finally, as higher utility bills are regressive, support to low-income households can help mitigate the impact of the energy shock to the most vulnerable populations.

Is European energy crisis self inflicted?

Europe is facing the brunt of an unprecedented energy crunch. Some call it a crisis and term it comparable to the Arab oil embargo of the 1970s, while others classify it self-inflicted. Brent crude is being traded at a 5 year high of US$84 per barrel, while spot natural gas prices are up more than 500% YoY. 

This is forcing gas to coal switching and putting the brakes on the EU’s green energy transition. Resurgent energy demand post-Covid, extreme weather conditions, supply chain disruptions and poor regional and global stockpiling have all contributed to Europe’s current crisis. Russia’s supremo Vladimir Putin may have a reason to pop a champagne bottle in view of the EU’s sanctions on the Kremlin. He says that Europe had created a self-inflicted wound.

Samer Moses, Manager of Global LNG Analytics at S&P Global says, “Europe finds itself between a rock and a hard place. With global liquefied natural gas (LNG) markets tight for nearly a year, and Russia facing its own upstream and infrastructure issues, Europe's two key sources of flexible gas supply have not shown up. Given just how depleted the region's storage situation is, any tremble of bullish news, be it weather or supply outage, has the power to send markets in search of ever higher price anchors, with fundamentals dictating the market will need to balance on demand destruction, a dynamic already being seen in industry across both Asia and Europe.”

This illustrates the concerns of many energy experts about Europe’s hasty transition away from traditional base-load power sources (gas, coal, and nuclear) to intermittent renewable generation. Europe’s master plan for carbon neutrality has pushed the member states away from long-term purchase agreements and towards short-term pricing, making the crisis even more costly to energy utilities and other consumers who are now seeking alternative fuel sources. Gas exporters like Russia and Qatar are ready to cash in.

The Qatari Energy Minister, Saad Al-Kaabi stated, “we have huge demand from all our customers and unfortunately, we can’t cater for everyone.” Qatar prefers East Asian customers who pay a premium. The EU is no longer the top market. This trend is consistent with exporters around the globe. Coupled with a decrease in domestic production, such as the depletion of the giant Groningen gas field in the Netherlands, the EU is left to bid higher and higher for imports. This coincides with overall uptick in demand for LNG across the globe in an effort to use it as a bridging fuel away from hydrocarbons.

At the same time, China, too, is in the throes of an energy crisis aggravated by unprecedented flooding across the country, post-Covid supply chain disruptions, and resurgent demand. To compensate for the lack of domestic coal production China has doubled their LNG imports over the last year (another reason Europe finds itself with lower than normal supplies).  More than 20 provinces have enacted rationing to deal with the worsening situation. “Get energy supplies at any price”, ordered the ruling Politburo, highlighting the giant economy’s dependence on imported coal and gas.

Russia – though appears not to be an outright market manipulator – is well positioned to benefit from the unfolding market conditions as Europe seeks out any and all gas supplies at outrageous prices. Indeed, the gas shortage is being used by the Kremlin to tout the necessity of Nord Stream 2, an ambitious (and highly controversial) geostrategic gambit by the Kremlin to pump 55 bcm of gas directly into Germany via undersea pipe. The project may be framed by certain German manufacturers and Russian policymakers as a boon for Europe’s energy security, but the reality is the pipeline will only make the EU more dependent on – and vulnerable too – the whims of Russia’s state-owned Gazprom.

European leaders were quick to claim that Russia is now weaponizing the gas markets to gain approval of the Nord Stream 2. Currently, Gazprom sends piped natural gas through Ukraine. A new pipeline would circumvent the embattled country. By law, Russian energy producers must satisfy domestic demand prior to exporting, meaning that a missing volume of exports could be attributed to domestic stockpile shortages.

IEA Executive Director Fatih Birol has claimed that “Russia could do more to increase gas availability to Europe and ensure storage is filled to adequate levels in preparation for the coming winter heating season.” Birol went on to say a further 15% could be supplied by Russia immediately.

A staunch pro-Russia actor, former chancellor of Germany Gerhard Schröder published an article claiming that the Russian government is incapable of manipulating the markets: "Anyone who conducts a serious study states: the reasons for the rise in prices should be sought in the international market - increased demand, global trends in the world market, and weather."

As the EU sought to decarbonize their energy infrastructure, Brussels failed to establish a reliable baseline capacity for electricity generation. Today, without the ample nuclear, coal, and gas power stations, Europe would be a dark and cold place indeed. Moreover, they lack sources of energy for low renewable periods like the “windless summer” of this past year in the UK. Low wind speeds and cloud cover are becoming more unpredictable as climate change progresses, and the lack of base-load generation has resulted in the current crisis.

Some of the reactions were to purchase alternative fuels such as coal, a fuel source that produces double the carbon emissions of natural gas. This defeats the purpose of energy transformation.

The United Kingdom, France and Spain have all issued new price ceilings. France has gone a step further and announced a one billion euro investment in nuclear power by the end of the decade.

Germany, despite all rationality, will decommissioned nearly all its reactors next year, while betting on wind and solar, and may soon be forced to bend knee to Russia, and therefore Lord Putin, by embracing Nord Stream 2, for their energy needs. Jack Sharples, a research fellow at the Oxford Institute of Energy Studies had this to say:

“The only way that we will know that for sure is if we see that Russia suddenly pull some spare gas out of their back pocket that we didn't know they had as soon as the Nord Stream 2 commercial operation is approved… Conversely, if/when Nord Stream 2 is approved and launched, we suddenly see gas transit via Ukraine drop to very low levels, that could be an indicator that Gazprom really don't have anything spare and that actually the purpose of Nord Stream 2 is to simply displace Ukraine.”

Depending on Russia to fill the energy supply gap is a risky proposition. But perhaps even more short-sighted is Europe’s unwillingness to partner with the United States beyond short-term contracts. Refusal to engage in long-term purchase agreements has led Europe to fall behind Asia as America’s top destination for LNG.

The energy crisis unfolding in Europe has many drivers, but EU green policy hubris and Russian hard-nosed energy poker are the key. The main lesson is: one cannot will energy transformation into reality without building ample, reliable and economically viable baseline generation capacity.