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Jagdeo is wrong about Europe and natural gas

Apr 18, 2023 Features / Columnists, Peeping Tom

Kaieteur News – Vice President President Bharrat Jagdeo is misreading, yet again, the smoke signals emanating from the developed world. At his most recent press conference – if it can be called that – he suggested that Europe is changing its stance towards natural gas and is moving towards greater acceptance of it as a transitional fuel.

Jagdeo could not be more misinformed. Europe is firmly on the road towards increasing the use of renewables and is not necessarily shifting its focus away from this objective. Europe remains firmly committed to increasing renewables as a share of its energy supply by 2030.

Europe, of course is highly dependent on natural gas for its heating during winter. More than 30% of homes in the European Union depend on natural gas for heating.  Prior to the invasion of Ukriane, Russian accounted for about 40% of Europe’s gas imports. While Europe has cut imports of pipeline gas from Russia, it has ironically increased its imports of liquefied natural gas (LNG) from that country.

The conflict involving Russia and Ukraine triggered Europe to take a decision to reduce its dependence on pipeline gas from Russia. Europe developed a plan to cut natural gas imported by almost two-thirds and to reduce the use of gas by 15% in 2022. Russia countered this by putting conditions on imports. The combination of these threatened to throw energy markets in Europe into a tailspin during the winter months.

But America and milder winter came to the rescue. America’s exports of liquefied natural gas to Europe more than doubled in 2022 over the 2021 level. This is just one of the ways in which the Americans are benefitting from the war in Ukraine. Norway was also a prime beneficiary of cutback in Russian supplies. It is now the leading exporter of natural gas to Europe.

But Europe did not use as much of its natural gas reserves as its presumed because the winter was less severe than had previously been predicted.  As such, Europe has higher than anticipated inventories. All of this had the effect of pulling natural gas prices downwards, something that does not fit into Jagdeo theory about Europe’s relationship with natural gas. This cutback in supplies of natural gas by Russia and fears over shortages led to increased investment in LNG infrastructure. Germany, in particular, accelerated the production of LNG storage infrastructure.  However, it is now being suggested that Europe may have overshot its mark and risks having more LNG capacity than it would need leading to the end of the decade.

Jagdeo is therefore confusing investments in LNG terminals and storage infrastructure, intended to handle greater imports of LNG, with the idea of Europe switching more to natural gas as a transition fuel. The fact is that natural gas production in Europe is on a declining path, including in Norway and the Netherlands, major natural gas producers. Prices have also declined in recent times thus serving as a disincentive to new investments in natural gas.

Europe plans to cutback gas consumption by a massive 40% by 2030. It has already cut back on its use of natural has by 20%.  So why invest in natural gas when these things are happening? It makes you wonder where Jagdeo came up with this idea that Europe may be making an about turn on its position regarding natural gas?

He obviously needs to justify the highly risky investment which the PPPC is making in a gas-to-shore project. That project is intended solely to meet domestic demand and is not likely to be factor in natural gas exports.

Guyana is never going to be a major LNG exporter. The United States is now one of three leading exporters of natural gas in the world and this why Jagdeo needs to be extremely cautious about the role of US companies and financing in the gas-to-shore and gas- to-energy projects the PPPC is undertaking. And it is for this reason also that he needs to examine alternatives to the use of natural gas in Guyana. By turning a blind eye of less riskier and cheaper alternatives, Jagdeo may be clutching at straws and at misinformation concerning the future of natural gas in Europe’s energy mix.

(The views expressed in this article are those of the author and do not necessarily reflect the opinions and beliefs of this newspaper and its affiliates.)

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