an opinion editorial written exclusively for ANZMEX 

12 December 2022
By Chris Sladen

Energy matters – It’s all over?

The last time England won the World Cup in 1966, England’s Geoff Hurst completed a hat-trick against then West Germany. BBC commentator Kenneth Wolstenholme uttered his most famous line as Hurst scored: “Some people are on the pitch; they think it’s all over. It is now!” Every time I watch TV replays, typically every 4 years during the build-up to a World Cup tournament, it always reminds me of things I never expected to happen.

As we wrap up 2022, here are four things I did not expect to happen in the world of energy this year, each one has a lesson learned:

  1. The Russia-Ukraine conflict has changed energy supply and demand forever. I did not expect Russian gas supply into Europe to be cut to essentially zero in a matter of weeks. I did not expect reckless destruction of energy infrastructure, nor bombing of subsea gas lines. Prior to the conflict, the European Union received 40-45% of their natural gas from Russia. Volumes were substantial at around 35bcf/d: Germany 5bcf/d (49%), Italy 2.8bcf/d (38%), Netherlands 1.3bcf/d. Some countries received >50% gas from Russia – Czech Republic, Slovenia, Hungary, Greece, Slovakia, Finland, Bulgaria; for a few it was 100% – Bosnia, Moldova, North Macedonia. The EU also banned most Russian oil imports: around 2.1mmb/d oil and 1.2mmb/d oil products. The conversation quickly shifted to the meaning of energy security and affordability. I did not expect Europe to switch to new suppliers of natural gas and oil so quickly. LNG has arrived from the USA, the Middle East and Australia, and more piped gas from Norway. Gas storage facilities have been quickly filled up, and shut-in storage has been re-opened and restocked. Oil and oil products have been sourced from Africa, the Middle East, and Americas. It is amazing what has been achieved by energy suppliers. Many people may be frustrated that it was hydrocarbons that came to Europe’s energy rescue – yes, oil, gas, and coal too – but had it not been for hydrocarbons, and electricity produced from hydrocarbons such as contingency coal-fired plants, entire economies would have collapsed, and many millions died from cold as the European winter set in. Lesson learned: when needed, there is always a solution; global energy suppliers can respond to massive supply/demand disruptions. 
  2. I did not expect that the year’s largest oil & gas discoveries would be in offshore Namibia. I knew that Namibia had some gas discoveries in the past, and many dry holes too, but I was closed to the concept of there being giant oilfields. I thought of Namibia exploration as a high-risk offshore frontier destined to stay that way. How wrong I was. Explorers had patiently de-risked the petroleum systems, fine-tuned their geophysical interpretations, and reconstructed the geology, piecing it back together with its South Atlantic geological counterparts – offshore Brazil, Argentina, and Uruguay. TotalEnergies’ multi-billion barrel discovery at the Venus field appears to be Sub-Saharan Africa’s biggest ever oil discovery. Shell’s Graff discovery is also a multi-billion barrel discovery. Both are in ultra-deepwater, 2,000-3,000 metres. There appear multiple reservoirs with many more discoveries to come, and quite possibly super giant fields. Namibia is now positioned as the next deepwater exploration hotspot, a country with a population of just 2.5 million. Lesson (re)learned: explorers have a key role in shaping our energy future. 
  3. I did not expect COP27 to be such a big disappointment. I had been expecting countries to build on COP26 and reset their emissions targets, committing to much accelerated emissions reductions, passionately stepping forward to focus on how to achieve these, and revealing the detail. I was expecting to see greater ambition from everyone and lots of action. Instead, COP27 seemed like 40,000 attendees postponing responsibility, taking selfies, and talking about ‘the right direction’. Countries seemed seduced by promises of, a currently empty, trillion dollar fund, that promises to deal with climate impacts, but will not attack the root causes. In the excitement, attendees seemed to forget this is not a match you can win in Extra-Time. Worse still the takeaway was something every football club dreads to see – having an empty stadium but the match has already kicked-off. There seemed nothing to solve the underlying problem of too many emissions, no phase-out of coal, no phase-down of oil & gas. Maybe it is time to completely change out the teams who get to attend COP, cut the size of the squad, bring in new coaches, and put fresh substitutes onto the pitch who score goals? Lesson (painfully) learned: We are a long, long way from reaching Net Zero; a reset of how we get there would be a good thing. 
  4. At year end, I did not expect us to still be talking about the impact of Covid, the latest lockdowns in China, and a very patchy global economic recovery. I had thought it was all over! I had foolishly believed all those economic forecasts that had shown a sharp, near vertical drop in economic performance, and energy demand, followed by a post-Covid very strong rebound and growth in demand. The disruption to energy supply chains and services, struggles with product distribution, the lack of investment in new energy projects, the high cost & wage inflation, and potential for uneven energy demand, as well as changes in workforce expectations, barely needed a mention. Covid meanwhile has become like a Mexican wave continuing to ripple around our planet disrupting economies. The world does not have an energy supply problem; it has an economic growth problem. I painfully admit to being totally sucked in by the slogan ‘Build Back Greener’; it was just so appealing. Lesson learned: the impact of the pandemic on global energy demand, and the global economy, may go on for many more years.

To sum up 2022, what a difference a year can make! I still don’t know what the ‘new normal’ is. There were massive changes in just a few months, and their impacts will last decades. We had finished 2021 with oil around US$ 75/barrel and now, 12 months later as we finish 2022, just look… the oil price is around US$ 75/barrel! We have seen how the world of energy continues to astonish in the ways it is shaping our future; it’s definitely not all over!

Season’s greetings to all my readers. Hope to see you in 2023. Feliz navidad y próspero año nuevo, Chris

About the author:

Chris Sladen runs an advisory service offering insights to inform, shape a decision, policy & regulation, and guide the next steps for energy ventures, acquisitions & divestments, energy transition and climate strategies. Chris has a unique global experience having worked in over 40 countries. This is underpinned by extensive knowledge of petroleum systems and where best to find oil and gas, notably in the Gulf of Mexico & nearby areas, Europe and NE & SE Asia, as well as the development of midstream, downstream & renewables investments in many emerging economies. Chris has extensive experience acquired on the Boards of companies, subsidiaries, business chambers & organisations. Chris has a career of over 40 years in the energy sector, living in Mexico (2001-2018), Russia, Vietnam, Mongolia, China & UK. His contributions to the energy and education sectors have been recognised by the UK Government with both an MBE and CBE, and also the Aztec Eagle from the Mexican Government – the first foreigner in the energy sector to achieve this award. Chris has published extensively over five decades. Chris’ articles for Energy Matters reflect his experience and enthusiasm and are not paid for in any way.

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