DREAMS of a rapidly dawning age of carbon-free energy are not yet lost in Europe. But today, in anticipation of the inevitable cold, this topic has been put on the back burner. The German government has voiced concern that a shortage of gas this winter could lead to crisis in regions across Germany. Meanwhile, in France, heads of industry have serious concerns about the rising cost of gas. They are not ruling out the most grievous consequences, including a total collapse of industry.
Incidentally, the Russian side had previously approached its European partners to conclude long-term supply contracts for natural gas. However, Brussels considered that proposal a nonstarter, giving preference to procuring gas based on floating spot prices.
Thinking on a large scale and not just in seasonal terms requires a firm grasp on what the overall demand for natural gas worldwide will be over at least the next five years. For example, the driver of this demand – China – over the last five-year period has increased consumption by some 30 billion cubic meters. And it has set a goal of achieving 15% of its energy balance in gas by 2030. This means that even an insignificant growth in this driver’s appetite will require, by 2027, and especially by 2030, an addition of a substantial volume of gas. Where this amount comes from is a different matter. That depends on China’s energy policy.
And there’s more to it. Over the last few years, those who have relied on the “fuel experts,” who are themselves guided by the interests of the developed economies and primary hydrocarbon consumers, are being flooded by so-called predictions that are extremely politicized and unprofessional. These “experts” carelessly toss around hundreds of billions of cubic meters of gas into the “plus” or “minus” column. The worst thing is not that they’re putting forward an unrealistic analysis, but that the analysis reflects the contradictory and inconsistent policy of the US and Europe as a whole.
So, the question is: Are hydrocarbons needed in growing volumes or not? Are we moving past coal or are we going to continue to use it? Is nuclear energy needed in the future, or is it also one of those factors that should be contained? All of these matters are constantly being spun in contradictory directions at the highest political levels of the nations that follow in the wake of the US. They are clearly lost at sea. And for the world’s energy future, this is absolutely unacceptable, and even extremely dangerous!
Meanwhile, the ongoing pandemic (as an objective factor) and climate change have become acute to the point of absurdity. Thus, energy producers have lost their bearings for five to 10 years to come. The politicians have practically forbidden banks to finance hydrocarbon projects and to insure risks for extractive companies. This, for example, has led BP to announce that it is abandoning the hydrocarbon energy market in 10 to 20 years. And yet any serious project with energy demands an investment of many billions of dollars over a timeline of at least 25 years.
I am sure that demand for natural gas will grow. In the coming five or six years, the planet will need an additional 150 billion cubic meters. If one took away Russian gas from European markets, that would mean having to find another 300 billion cubic meters or so by 2027, over and above the 2021 volumes.
That is a tall order. Here in Russia alone, usage measures 150 billion cubic meters: for making liquefied natural gas; fertilization; petrochemical production; and to finish the country’s gasification project. This means that not all 150 billion cubic meters of Russian gas will “disappear” from the world balance. But the global balance as a whole is supposed to grow by 200 billion cubic meters. Especially given the heated announcements concerning an increased use of coal, there are some aspirations to add more nuclear power plants, or use other means. This all speaks of vanity and recklessness. There truly will not be enough hydrocarbon energy to go around, and the gas problem is already becoming more acute.
And this concerns the world at large, which naturally includes us. We are faced with one task above all others here: Just as during the creation of the Western Siberia oil and gas complex, a project that previously was never accessible to anyone (except us), it has become necessary to develop another equally ambitious plan. What shape shall it take?
We’ve still got for sale those 150 billion cubic meters of gas that Europe is turning down. Who will they go to? What will we do with them? We have to decide today.
We need a clear and resolute program with explicit volumes of allocated resources, specific recipients, realistic timelines, and individuals in charge (and without any useless “roadmaps”).
According to my estimates, 20 billion cubic meters a year will be needed to complete the gasification of the nation. LNG production – including low tonnage (which we’re already able to do) and medium tonnage (which we’ve got to get a handle on) – will call for another 30 billion cubic meters. But here we must systematically hold people responsible for implementing the program, and assist, organize, and incentivize them. We must attract “brave” foreign investors or, if that doesn’t work, rely on our own efforts.
On the production of fertilizers we spend around 25 billion cubic meters, but in partnership we could use up an additional 20 billion cubic meters on refining. This is not easily done, and will be even more difficult with the foreign market, but – nothing ventured, nothing gained.
With petrochemicals there is a particular situation. Over the last 10 years we have increased the purchase of imported chemical products from $15 billion to $30 billion a year. In the good old days, they would have made us lessen this sum by at least half over a couple of years. That means getting production of high value-added items going in Russia for $15 billion. This is a direct obligation of those who should be clearly designated to carry it out.
Still ahead lies not merely an economic-energy issue, but a political-economic-energy issue. That issue is Sila Sibiri [Power of Siberia] 2, which it would be good to bring online in 2027-2028. Of course, with Sila Sibiri 1 at full capacity, that will make 38 [billion], plus 10 billion more from the Far East by 2025.
Everything I’ve said above is doable by the government and enterprises, provided that it is clearly laid out who is doing what, who is responsible for what task and how. After all, we have previous experience with mobilization, as a great power typically does.
I reiterate: In the 1970s and 1980s, we were able to create the wonderful Western Siberia oil and gas complex, and now we’re facing another, very serious, but less daunting task. However, we are going to have to mobilize for real.
We are duty-bound to act, and without regard for the contradictory decisions that have entangled the energy policies of Washington and Brussels. It is time to act and to stop trudging along under the banner of Western campaign slogans.