Pro Forma: To anyone who gets upset, the following is not an opinion over the war either for or against. Just some thoughts from a random person who likes energy and is a geopolitical realist.
First the good news: Europe can wean itself off Russian gas, but only over the course of a decade or more. Specifically Europe would have to:
- Build nuclear power plants
- Build LNG plants
- Build coal plants (coal is easy to store, just a pile. This gives it massive strategic importance)
- Accept even higher energy prices
- Probably accept that CO2/GDP will go up. NatGas is very clean wrt to CO2 compared to coal.
- It's also not obvious that there is gas readily available to be LNGed. (See second list below)
All of these take ten years at best given the regulatory and political realities in Europe. They are also massively expensive and it's not obvious to me that the Europeans have much money left (a lot of that money is in Russia's state coffers). These are things Europe should have done ten years ago.
But it gets worse; the available supply in the short term is tragic for the EU:
- Russian gas that isn't piped doesn't have an LNG terminal (yet). It's therefore a massive hole in global supply. Therefore, the EU would be competing with Japan, Korea, India, etc for Qatari and Australian gas. Prices would increase massively and expect the Asian countries to get very aggressive to protect their supplies.
- The US has little LNG presence. This is because (I believe) until recently it was illegal to export nat gas. Therefore LNG terminals have to be built in the US.
- The export ban and lack of LNG terminals in the US has shielded nat gas users in the US. It's also, effectively, a massive subsidy to American industry. It's not obvious what political support exporting gas will have from the non energy-sector. Heavy industry needs gas and American's want to get back to "building things".
- Currently the US energy sector isn't benefitting from the high energy prices because production is tapped out due to lack of investment in the last five years. Specifically, the US' industry is not obviously sustainable (financially) and banks are getting shy. Expect them to get more shy if interest rates rise.
- On top of that there is a shortage of "shale sand" needed to extract shale oil. US gas is a byproduct of oil extraction.
- Keystone. Or the lack thereof. Oil and gas are somewhat exchangeable goods (in an expensive pinch, you can burn oil in many gas plants. You can also crack oil. The EU is in an expensive pinch). The more oil you make available into the market, the lower nat gas prices gets. Keystone is dead, limiting Canada's ability to export oil
So the EU is not in a good place strategically. How about the Ruskies?
I believe that Russia can more readily wean itself off of the European consumer than vice versa.
- Russian financial reserves are massive. Much larger with respect to her needs than the EU's gas reserves wrt to EU's needs. Look up Russian foreign reserves wrt to Russia's GDP. Remember, Russia only has to supplant 3% (?) of her GDP, not all of it. It appears to me that Russia can stay solvent far longer than EU can stay thawed.
- China is not going to stop buying Russian gas. Neither is India. Or Korea. Or Japan.
- Russia can have LNG terminals too. A short pipeline and a LNG terminal in Murmansk and a lot of the gas that would have gone to Germany can be shipped out.
- Russia has a lot of gas. Gas production requires continual investments. It appears to me that Russia's capacity to produce gas is not resource limited but capital goods limited. By redirecting investments (again, not financial investments, excavator time) to gas fields west of the Urals to those east of the Urals, Russia can tack east.
I'd love to have ppl comment on which ever of those points they disagree with.