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August 18, 2021
Issue 1  |  View Past Issues
Inside Gas

Editor's Note

Welcome to Inside Gas, Global Energy Monitor’s news bulletin on European and global gas issues. This first issue comes in the wake of the latest United Nations’ Intergovernmental Panel on Climate Change report which, for the first time, devotes significant attention to the need for major cuts in methane emissions to minimize the impacts of climate change. Described by UN Secretary-General António Guterres as a “code red for humanity,” the report is the latest warning to the gas industry which continues to take advantage of lax regulations on the disclosure of methane emissions. Increasing satellite evidence of the industry’s methane leakage problem is making the case for action ever more urgent, and forthcoming EU methane emissions legislation is expected to hit those gas companies both within Europe and among its global suppliers who fail to address their leaky business practices.

As a proposed LNG import terminal near Hamburg was visited by more than 2,000 climate activists, another slated German import terminal took a blow to its planned supply chain following the cancellation – primarily on climate grounds – by Québec’s provincial government of a major LNG export project. In Italy, the Teodorico gas extraction project in the Gulf of Venice is facing legal action due to its proximity to an EU-protected marine site which is home to dolphins and sea turtles. One of the country’s biggest banks, Intesa Sanpaolo, has taken initial steps to restrict its gas financing but remains in the running to fund the US$21 billion Arctic LNG 2 terminal in Siberia.  

Grieg Aitken

Features

Carbon neutral LNG doesn’t add up

Major energy companies are increasingly pitching LNG as ‘carbon neutral’, but the offsetting schemes they are relying on are opaque and riddled with question marks, write Stephen Stapczynski, Akshat Rathi, and Godfrey Marawanyika in Bloomberg.
 
Huge gas buildout plans face increasingly strong headwinds
 
A slated US$2 trillion global pipeline of new gas power plants, pipelines, LNG terminals and extraction fields is currently lined up, but much of it is unlikely to materialize as the climate and economic risks of gas become more widely recognized, writes Nick Ferris in Energy Monitor.
 
Gas industry’s voluntary accounting for emissions laid bare
 
As satellite imagery increasingly exposes the extent of methane leaks across the gas industry, companies will continue to get away with underreporting their methane emissions unless stricter regulations are introduced, writes Akshat Rathi for Bloomberg.

Campaigns

Ende Gelände switches focus to LNG in global days of action against gas

Building on six years of demonstrations aimed at stopping destructive lignite mining in Germany’s Rhineland, more than 2,000 climate activists from the Ende Gelände (‘Here and no further’) movement and other groups demanding an immediate phase-out from gas peacefully protested at the site of the proposed Brunsbüttel LNG import terminal and in the nearby city of Hamburg. The Brunsbüttel terminal has not been sanctioned but, if it proceeds, would see the arrival of fracked gas imports from the US despite a ban on unconventional fracking in Germany itself. The end of July protests against gas also saw 23 demonstrations take place in 13 countries across Europe and North and South America. (Clean Energy Wire, Ende Gelände, Global Energy Monitor)

Ireland urged to endorse global ban on fracking at the UN

Over 700 environmental groups, scientists and celebrities have signed onto a letter calling on the Irish government to endorse a resolution to the UN General Assembly that seeks a global ban on the use of hydraulic fracturing, or fracking. Ireland outlawed the practice on its own soil in 2017. The appeal comes as the Irish government is under fire from Irish activist groups for entertaining US company New Fortress Energy's plans to apply a second time for planning permission to develop the Shannon LNG terminal in County Kerry. Imports of fracked gas are expected if the project proceeds. (Irish Independent, Safety Before LNG)

Top News

Methane cuts central to latest United Nations Climate report: With major implications for the gas industry, the United Nations’ Intergovernmental Panel on Climate Change scientific assessment report released on August 9 outlines how countries must make “strong, rapid and sustained reductions” in methane emissions to limit global warming. According to the IPCC, which had not focused so extensively on methane in previous reports, around 0.3C of the 1.1C that the world has already warmed by comes from methane, and the growth in methane pollution since 2007 is “largely driven by emissions from the fossil fuels and agriculture” sectors. (BBC, Reuters)
 
Canadian LNG terminal for exports to Germany axed: The provincial government of Québec has refused to approve construction of the Énergie Saguenay LNG Terminal, citing the failure of promoter GNL Québec to demonstrate its C$14 billion (US$11.2 billion) project – including a 780-km gas pipeline – would satisfy the government’s requirement that the project result in a net reduction of global greenhouse gas emissions. Challenged for several years by citizens, Indigenous communities and environmental experts, the terminal’s cancellation came just weeks after the announcement of a partnership that would have seen GNL Québec export LNG to the proposed Stade LNG terminal near Hamburg in Germany. (Government of Québec [French], CBC-Radio Canada, gasworld)
 
Legal action launched to block gas platform in Venice’s iconic gulf: Environmental law group ClientEarth and Italian environmental organisations have started legal action in a bid to overturn the Italian government’s approval for the Teodorico gas project in the Po Delta, a UNESCO World Heritage site in the Adriatic. Owned by Australia’s Po Valley Energy, the project consists of a gas platform, wells and pipelines and would be sited next to a marine protected area established by the EU to protect bottlenose dolphins and loggerhead sea turtles. ClientEarth lawyers charge that the project breaches Italian and EU prohibitions against construction near protected areas, and that no impact assessments were carried out. (ClientEarth, Proactive)

US Treasury guidance for development banks leaves the door open for LNG and gas plants: Carrying out an Executive Order issued by President Biden in January, the US Treasury Department has published new energy financing guidance to multilateral development banks (MDBs) which states that it “will oppose” MDB support for coal, oil, and upstream gas projects. At the same time, it will continue to support – in limited circumstances – midstream and downstream gas projects in poor and vulnerable countries. As the largest shareholder in MDBs such as the World Bank and the European Bank for Reconstruction and Development, the US government announcement is expected to advance the Paris alignment process at MDBs around the world. US backing does, though, remain permissible for LNG and gas power plant projects in poorer countries which are in line for funding by the MDBs. “The Treasury guidance leaves loopholes for continued fossil fuel financing that are so big, you can drive an LNG ship through them,” commented Luisa Galvao, International Policy Campaigner at Friends of the Earth US. (US Treasury Guidance on Fossil Fuel Energy at the Multilateral Development Banks [Pdf], Reuters, Friends of the Earth US) 

​​Greenland ends oil and gas exploration due to climate concerns: Naalakkersuisut, the Government of Greenland, has decreed that it will stop issuing new licenses for oil and gas exploration in Greenland. Despite significant hydrocarbon reserves off Greenland’s eastern and western coasts, the government’s decision was based on climate, environmental and economic grounds. Kalistat Lund, Greenland’s Minister for Agriculture, Self-sufficiency, Energy and Environment, said in a statement that “Naalakkersuisut takes climate change seriously. We can see the consequences in our country every day, and we are ready to contribute to global solutions to counter climate change.” (Naalakkersuisut, Reuters)

Germany and the US strike Nord Stream 2 deal: Top level diplomatic efforts between Germany and the US to patch up differences over the Nord Stream 2 gas pipeline reached a compromise agreement which commits Germany to supporting Ukraine with funding for low carbon energy development, and to ensuring that “Russia will not misuse any pipeline, including Nord Stream 2, to achieve aggressive political ends by using energy as a weapon.” Other measures include a new US-Germany Climate and Energy Partnership to support energy transitions in the emerging economies of central and eastern Europe, and deeper German engagement with the Three Seas Initiative, which could see greater funding support for the initiative’s priority gas and renewable energy projects. (US Department of State, The White House, Politico)

Norway refuses to budge on oil and gas expansion: Fifty years after Norway’s first oil field started production, and ahead of parliamentary elections in September, Prime Minister Erna Solberg has said that Norway will continue to drill for oil and gas in spite of the International Energy Agency’s call this year for an immediate stop to new oil and gas developments in order to achieve net zero emissions by 2050. This comes after statements from state-owned Equinor following the IEA’s Net Zero by 2050 report in May that it will continue to develop new oil and gas fields indefinitely. (Financial Times, Bloomberg)

“[Europe] is a tough market to crack because they are so ESG bonkers and there's a lot of governments that don't want US shale gas, I think, even if you do carbon sequestration for some of them,”

said Michael Smith, CEO of the Texas-based Freeport LNG terminal.

News

Austria: Clean Air Task Force captured video footage of previously unknown methane leaks at 17 out of the 25 Austrian oil and gas facilities it visited.

Denmark: The Baltic Pipe project is facing delays due to concerns from Danish authorities over the 600-km gas pipeline’s impact on protected mice and bat species, leading to construction work being stopped on an onshore section in Denmark.

Europe: Increases in power demand as the European economy opens up post-Covid lockdown, combined with shortages in gas supply and efforts to decarbonize the economy, are resulting in increased utility bills for European consumers this summer.

Germany-Russia: The Nord Stream 2 gas pipeline is 99% complete, according to the pipeline operator, with construction expected to be completed by the end of this month.

Global: Citing countries such as Germany, Poland and the UK, new analysis from BloombergNEF shows that building and operating new large-scale wind or solar plants is now cheaper in almost half the world than running an existing coal or gas power plant.  

​​UK: A High Court Judge has allowed the Paid to Pollute campaign to challenge the UK government in court over the legality of tax breaks for North Sea oil and gas firms which, campaigners allege, contradict UK commitments on net zero emissions.

Companies + Markets

LNG slips through EU ‘Fit for 55’ package but clampdown on methane is approaching: The European Commission launched its new climate strategy, dubbed ‘Fit for 55’, in mid-July, featuring a proposed carbon border adjustment mechanism (CBAM) which would tax certain commodities based on the carbon emitted in their production. Energy, including oil and gas, may eventually fall under CBAM but only after 2025. This reprieve, however, for LNG exporters to Europe is likely to be short-lived. Proposals on new EU methane rules are expected before the end of this year, with analysts predicting that high methane content US gas in particular may be hit hardest unless exporters “find a way to green up”. (Financial Times)

Spain’s Naturgy to downsize gas exposure: Spain’s multinational energy company Naturgy has announced plans “to move and move quickly” in a bid to reduce its gas exposure and make a fourfold increase in its capex for renewables. The company’s shift in strategy for 2021-2025 will involve reducing its gas procurement commitments as well as looking to hybridize or close its non-performing gas plants. Naturgy currently operates 7.4 GW of gas plant capacity in Spain, equivalent to 30% of the country's operational capacity. The company says it will also look to reduce its fleet of 11 LNG tankers. (S&P Global)

Italian bank issues first restrictions on gas financing: Intesa Sanpaolo, one of Italy's largest commercial banks, has committed to end “all forms of financing” for projects and companies involved in Arctic region upstream and midstream activities associated with both shale gas and offshore gas. The bank’s new rules also state that it will end its exposure to these and other ‘unconventional’ oil and gas sub-sectors by 2030. The new restrictions, the first from Intesa to affect the gas sector, do not cover LNG, and the bank is expected shortly to be confirmed as a project financier of Novatek’s US$21 billion Arctic LNG 2 terminal. The export credit agencies of France, Germany and Italy have come under pressure from members of the European Parliament not to back Arctic LNG 2. (Intesa Sanpaolo [Pdf], Global Energy Monitor, Reuters)

US LNG uncertainties force contract manoeuvres by Poland’s PGNiG: Multiple delays to Sempra Energy’s Port Arthur LNG export terminal have compelled Poland’s national oil and gas company PGNiG to terminate a 20-year, 2 million tonne-per-year deal to import gas from Sempra’s proposed Texas terminal. To compensate, PGNiG concluded a deal to increase its purchases from Venture Global LNG by 2 million tonnes a year to 5.5 million tonnes, with the LNG to be imported from the company’s under-construction Calcasieu Pass terminal and proposed Plaquemines terminal, both in Louisiana. (S&P Global)  

Sovereign wealth funds investing more in oil and gas than renewables: According to data from the International Forum of Sovereign Wealth Funds, since 2015 the state-owned investment fund sector has invested globally over US$26 billion in oil and gas deals compared to US$7.2 billion for renewable energy. Sovereign wealth funds, which collectively hold nearly US$8 trillion in assets, are also lagging in their approach to climate risk and the environmental, social and governance (ESG) factors attached to their investments, according to a survey conducted by Reuters which also found that more attention is starting to be given to ESG. Funds which have been more focused on ESG have been found to have made better financial returns in recent years. (Reuters)

European Investment Bank backs Hydrogen Europe: Under a newly signed consultancy services agreement, the European Investment Bank will provide financial backing to hydrogen projects developed by Hydrogen Europe, an industry-led hydrogen technology and R&D association. The partnership will also involve collaboration on market development initiatives and market outreach. Part of the European Green Deal, the European Hydrogen Strategy foresees the potential ramping up of hydrogen’s share in Europe’s energy mix to 14% by 2050 from less than 2% currently, with accompanying investment needs for EU hydrogen production estimated at between €180 and €470 billion (US$211 and US$553 billion). (European Investment Bank)

“This idea that we are going to burn more fossil fuels to solve climate change is ridiculous. By investing in LNG now, we are going to be locking in climate pollution for 25 to 40 years,”

said Tracey Saxby, a marine scientist with My Sea to Sky, a British Columbia-based grassroots organization opposing LNG.

Resources

Who owns the North Sea? Common Wealth, July 2021.

This interactive database shows that international state-backed fossil fuel companies and private equity firms are increasing their ownership of oil and gas licenses in the North Sea, putting at risk UK government plans to reach net zero emissions and secure a just transition for workers.

Hijacking the recovery through hydrogen, Fossil Free Politics, European Network of Corporate Observatories, July 2021.
 
This 34-page report finds that extensive lobbying by the fossil fuel industry in Italy, France, Portugal and Spain has resulted in at least €8.3 billion (US$9.7 billion) of EU Covid-19 recovery funds going to support hydrogen and renewable gases such as biomethane.