The world will see more energy crises as the energy transition proves more challenging than some may have thought, according to IHS Markit vice chairman Daniel Yergin, Pulitzer winning author of The Prize.
The American energy expert told the Chinese Academy of Engineering’s International High-level Forum on Green & Low-Carbon Energy Revolution held in Beijing on Friday: “You risk global energy crises and economic setback, social political turmoil and we have seen some of them over the past year.”
And he argued that aspects of these crises could arise from a paucity of strategic thinking on energy security as an integral part of the push or energy transition.
He suggested that Europe is paying the price for taking energy security for granted, leading to a rude awakening with Russia's aggressive pushback over NATO's expansion, the invasion of Ukraine and the emergence of a global energy crisis.
Yergin surveyed a scenario in which Europe was relying on Russia for 38% of its total natural gas without paying heed to the principles of energy security and diversification, he suggested.
He gave the example of Germany’s decision to close down its nuclear power, which provided almost 20% of its electricity, and doing so despite high reliance on Russian gas and the relative immaturity of the renewables sector.
LNG price crunch
Apart from the painful price inflation and possible energy shortages faced by Europe, Yergin pointed to a knock-on effect around the world.
Europe is in an energy crisis and the price of natural gas — at the equivalent of $380 per barrel of oil — is acting like a magnet, drawing liquefied natural gas away from Asia and from emerging markets, he said.
“[There] are many emerging markets which can no longer afford to purchase LNG because the costs have gone up,” he warned.
Lower investment in oil, gas and coal and premature relegation of the importance of hydrocarbons to energy security had played their part, he told delegates.
While noting that, for China, energy security was never really off the agenda, it has taken the Ukraine crisis to put this issue back at the top of global concerns, Yergin added.
Germany is now seeking to make up for its lack of attention to energy security by rushing to build LNG terminals and seeking to speed up the development of renewable energies.
With energy security back on the agenda as a foundation of energy transition, Yergin said the oil and gas industry has a dual role to play in delivering hydrocarbons to keep economies running, but also contributing to the transition to a low-carbon world, including the application of capabilities and investment into new energies such as hydrogen.
“Oil and gas have dual roles and mandates with essential responsibilities to provide the supplies, that will be needed for decades to come, in a green way,” Yergin said.
Yergin described the lesson that supply security must underpin the transition to low carbon energy as a fundamental one. “They are two… one needs the other,” he said.
He also called for an intense effort to develop technologies stopping methane emissions and delivering carbon capture and storage, as well as embracing the role for renewable energy within the oil and gas industry.