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For the EU, leading on clean energy means talking about #CleanCoal

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coalIn the post-COP21 world, most would agree that climate change is a clear threat that needs to be urgently addressed. Faced with American scepticism prompted by the election of Donald Trump, Europe has emerged as the world’s leading advocate for reducing greenhouse gas emissions. But simply airing fluffy statements is not enough: the hard part comes in designing policies that are appropriate for multiple sectors and industries. And the EU’s current energy policies are falling dreadfully short of that objective, writes Martin Banks.

The European Commission says it wants the EU to lead the clean energy transition instead of just adapting to it. For this reason, the bloc has committed to cut CO2 emissions by at least 40% by 2030 while modernising the EU's economy and delivering on jobs and growth. Its recently unveiled Emissions Trading System (ETS) proposals have three main goals: putting energy efficiency first, achieving global leadership in renewable energies and providing a fair deal for consumers. The catch? It turns out that the EU’s preferred renewable fuel, biomass, is not that clean after all.

A recent policy paper by the respected Chatham House in London contradicts the EU’s assessment that wood burning is carbon neutral – instead, biomass is actually more harmful to the environment than any other fossil fuel. Burning the fuel produces more carbon, nitrogen oxide and methane emissions per unit of energy produced than coal. At best, burning bone-dry woody biomass emits 213 pounds of CO2/mmbtu, compared to 205.3 for coal. However, in most cases, wood is never that dry, which increases the amount of energy used to convert it into energy, thereby further increasing its emissions.

What’s more, when forests are cut down to be transformed into the type of wood pellets needed to power biomass plants, their soil release supplementary quantities of carbon for up to 20 more years. The Chatham House report casts serious doubt on the decision to retrofit (with EU help and British government subsidies no more) the UK’s Drax power plant to use wood pellets instead of coal, a move which was hailed by environmentalists.

Although renewable energies have made giant strides over the past two decades, it is still generally agreed that their reliance on, say, the wind blowing and the sun shining to generate electricity, is a major technological hurdle. While renewables have occupied much of the policy space, the stark reality is that technologies that seek to minimize fossil fuel emissions – such as carbon capture and utilization (CCU) and high energy, low emissions (HELE) technology – shouldn’t be swept under the rug. Not only can they drive down CO2 levels within the threshold required by the EU’s energy policy, they are also economically feasible.

The question for governments, environmentalists and others is figuring out what is the least costly path to reducing energy emissions while also maintaining energy security. Perhaps they should listen to the International Energy Agency, following the Paris Agreement in December 2015, which said that the ability of CCS to reduce emissions from fossil fuel use in power generation and industrial processes – including from existing facilities – will be “crucial” to limiting future temperature increases to “well below 2°C”.

A source in the environment directorate at the European Parliament told this website, “The cost of ignoring this technology could be huge for the climate in the long run.” CCS/CCU technology could close the gap between maintaining energy security and reducing carbon emissions. Echoing a similar sentiment, Scottish MEP Ian Duncan, UK Conservative energy and climate change spokesman, who told this website:  "Technologies like CCS and CCU could make an important contribution to reducing emissions and driving clean growth, but, as we know, initial investment costs can be high.”

The debate about the place these new technologies should have in national energy mixes is also raging in India, the world’s fastest growing large economy which is desperately trying to limit its carbon emissions. In the past, HELE technology has been seen as too expensive for developing countries to afford—but that may now be changing. India’s energy minister, Piyush Goyal, said that upgrading all existing over 25-year old plants with modern, efficient super-critical plants will bring down pollution levels more than the “thrust that’s been given to renewable energy”. For example, upgrading 40GW of such plants will generate “saving[s] [that] will be far greater than possibly the 100,000 MW of solar power that we will be generating. And that should be the national priority.”

It isn’t just India where coal is undergoing an unexpected renaissance and proving to be a cleaner and more efficient energy source than previously thought. According to experts in Australia, the availability and affordability of coal means that it will remain integral to the country’s energy mix for up to at least 2040. The rise of wind and solar power in Australia was predicted to be the death knell for coal use in what is the world's biggest exporter of the fossil fuel. But coal has undergone something of a re-birth and the Australian government is even now considering helping fund construction of new HELE power plants.

These countries make a good case why outfitting existing coal plants in the EU with new technology is more advantageous than switching to biomass or, worse, closing them down. Not only would these plants reduce CO2 emissions but also nitrogen oxide, sulphur dioxide and particulate matter emissions. Offering HELE clean-energy subsidies (as has been the case for solar and wind for years) would send a clear signal of the EU’s commitment to such technologies.

With renewable energy unlikely to prove sufficient to stabilize the climate, coal executives, together with energy experts, are urging the EU to follow the example set by India, Australia and others and reconsider the role coal can play in maintaining the Old Continent’s competitiveness.

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Kazakhstan will continue to increase oil production under OPEC+ agreement

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Kazakhstan will continue to increase oil production in May, June and July of 2021 following the 15th meeting of OPEC (Organisation of the Petroleum Exporting Countries) and non-OPEC ministers meeting that took place virtually, the Kazakh Ministry of Energy press service reported, writes Abira Kuandyk in Business.   

“On 1 April, a ministerial meeting of the countries participating in the OPEC+ agreement took place. Collectively countries decided to increase the current production level of OPEC+ countries by 350,000 barrels per day in May and June and by 450,000 barrels per day in July,” said the Kazakh Ministry of Energy in a press statement. 

Kazakhstan’s obligation under the OPEC+ agreement states that oil production will amount to 1.46 million barrels per day for May and June and 1.47 million barrels per day for July. 

The data on the trading platform illustrates that the cost of Brent crude oil has risen in price by almost 3.6 percent and rose to US$65 per barrel. 

The Meeting welcomed the positive performance of participating countries. “Overall conformity reached 115 per cent in February 2021, reinforcing the trend of aggregate high conformity by participating countries,” said OPEC in a press statement.  

On 4 March, Kazakh Energy Minister Nurlan Nogayev participated in the 14th meeting of OPEC and non-OPEC ministers after which Kazakhstan and Russia were allowed to increase oil production to 20,000 barrels per day and 130,000 barrels per day, respectively, in April. 

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Azerbaijan unearths first gas condensate in Shafag-Asiman

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Azerbaijan’s SOCAR has made the first gas condensate discovery in Shafag-Asiman fields, the company reported.

According to the statement: “As we reached a depth of 7,189 metres in an exploration well drilled in the Shafag-Asiman block, part of the Azerbaijani sector of the Caspian Sea, the first gas condensate was found. That meant the successful completion of the drilling of the Fasila formation in the gas field. At the same time, to fully grasp the extent and size of the reserves, appropriate technical design will be needed to drill an extra lateral appraisal well towards the structure’s arch.”

Exploration at the Shafag-Asiman block is underway as part of the SOCAR-BP venture. In accordance with the Production Sharing Agreement (PSA), the well was drilled by BP at a depth of 623 meters, using the Heydar Aliyev semi-submersible rig operated by the Caspian Drilling Company (CDC). The drilling kicked off on January 11, 2020.

Shafag-Asiman, a complex of offshore geological structures that was discovered in 1961, lies 125km south-east of Baku and covers an area of 1,100 square meters. Here the water depth ranges from 650 to 800 meters. On October 7, 2010, SOCAR and BP entered into a 30-year agreement on exploration, development and production sharing of the Shafag-Asiman offshore block in the Azerbaijani sector of the Caspian Sea. Under the contract, BP conducted a 3D seismic survey at the Shafag-Asiman block in 2012. Having examined the data, the two partners identified the location of the first exploration well and spudded it in 2020.

SOCAR is involved in exploring oil and gas fields, producing, processing, and transporting oil, gas, and gas condensate, marketing petroleum and petrochemical products in domestic and international markets, and supplying natural gas to the industry and the public in Azerbaijan.

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The world still needs coal

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In the Asia-Pacific region, coal consumption has been going up for many years now, and the Asia-Pacific countries plan to keep this trend going in the next decade. (Researchers at China’s Tsinghua University argue that coal is the prime source of energy production in East and South Asia, where the countries are building new coal-fired plants,) writes Fridrich Glasow, PhD, MMM and O&G expert

There is a great deal of discussion now going on in the world about the development of decarbonized energy. At the same time, Moscow is once again mulling the prospects of developing the coalmining industry, which looks somewhat paradoxical amid the rapidly "greening" European energy sector. On the other hand, it was interesting to compare the evolution of the coal industry in Europe and Russia. After all, pertinent reforms have been introduced in both of them.

However, looking closer at the subject one will realize that these reforms took place in completely different ways. First, the reform that took place in Europe can be called routine as it lasted for decades and was initiated by the state, concerned about the shrinking segment of the coal industry in the energy sector of the economy. Secondly, just tens of thousands of people were released from working in the most difficult conditions and reassigned to other sectors of the economy.

A closer analysis shows that the reform carried out in Russia was absolutely one of a kind. One should bear in mind the sad legacy that the young Russian Federation inherited from the Soviet Union: the collapse of all economic indicators (with an automatic drop in coal consumption), and mounting social tensions. The coal industry was falling apart across the board in terms of technology, labor safety, etc. Labor productivity and production efficiency were extremely low too.

In addition, coal was being “squeezed out” of the economy by natural gas (although back in the early 90s, even in Moscow there was a large segment of anthracite generation). The Russian coal industry (100% subsidized by the state) was no longer competitive on the world market.

To make things worse, the social crisis in Russia was nothing short of catastrophic with the living conditions in the mining towns and cities being extremely harsh. The number of people working in the coal sector stood at 900,000 and taking into account their family members, about 3 million people had found themselves in an incredibly difficult situation. The industry itself was in a real fix both when it comes to coal production, sale, underfunding and dim prospects for the future.

It was against this background that the reforms were launched with a program of restructuring the coal industry developed by the Ministry of Fuel and Energy, led by Yuri Shafranik. The program was three-pronged: closure of hazardous and unprofitable industries (with the withdrawal of all government subsidies, provision of social protection for laid-off workers and technical re-equipment of enterprises, along with measures to encourage new viable projects.

Results of the restructuring in figures

Due to increased labor productivity, the number of people employed in the coal industry fell from 900,000 in 1992 to 145,000 in 2018. The volume of production in 1990 was 395 million tons, and in 2019 - 439.2 million. Coal exports in 1990 stood at 52.1 million tons, while in 2019 they spiked to 217.5 million tons. Foreign currency earnings from exports increased fourfold, reaching $16 billion in 2019. This means that the Russian coal industry is now fully efficient, money earning and competitive. By the way, as a result of privatization, private companies now account for 100 percent of the total volume of coal mined in the country (the state has developed mechanisms of working with the private industry, regulating, helping and creating conditions for development).

However, just like in the case of the "gas problem," as soon as Russia entered foreign markets with more and higher quality coals (and cheaper too), it started facing complaints from Old and New World competitors that it was ignoring “green energy."

Well, in the first ten days of February 2021 alone, Germany increased the purchase of Russian gas by 47.8 percent compared to the same period in 2019. In January 2021, Italy had increased its purchases from Gazprom by 221.5 percent, Turkey - by 20.8 percent, France – by 77.3 percent, the Netherlands - by 21.2 percent, and Poland - by 89, 9 percent. Clearly, Europe does not want to freeze. The surprises that the process of global warming can hold for us can hardly be predicted by definition, so no one knows just how much natural gas the EU countries may need at the end of the day.

Coal remains very much in demand with low temperatures and rising gas prices putting Europe’s coal-fired power plants back to work and Russian coal exports going through the roof. And Europe is not the only one to face such problems. It is no coincidence that, speaking at a meeting dealing with the development of the coal industry, President Vladimir Putin said: “As for the long-term prospects of the global coal market beyond the current decade, I know that there are different forecasts to this effect. It is no secret that some of them imply a significant contraction of the market, including due to technological changes in the global fuel and energy complex and the extensive use of alternative fuels. What is happening we know all too well: Texas froze up during the cold season, and the windmills had to be heated in ways that are far from environment-friendly. Maybe this will also introduce its own adjustments."

P.S. - When I delved into this topic, I was surprised by how little I knew about it, and now I’m sure that 99 out of 100 European energy specialists were unaware of the fact that  Russia had succeeded in effecting such a phenomenal reform with such incredible results. Therefore, I firmly believe that Russia will not just give up its share of the world coal market.

We are often guided by political and economic clichés, but we must never forget just how efficiently the Russian people managed to mobilize in the most difficult moments of their country's history - Fridrich Glasow, PhD, MMM and O&G expert.

                                           

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