The paper analyzes the decision of the Polish ‘Office of Competition and Consumer Protection’ (‘UOKiK’) of 6 October 2020 imposing exorbitant fines on Gazprom and five Western Companies in conjunction with the Nord Stream 2 project. The market facts on which the decision is based are false without exception. Since it is hard to believe that a competition authority is unaware of the true state of the markets, they are qualified as ‘alternative facts’ brought forward to spread politically motivated ‘fake news’.

The ‘alternative facts’ are presented in ‘sanctimonious hypocrisy’ fashion (“… it is astounding that Western Companies fail to understand…”).

While the description of the European gas markets, meanwhile embedded in a global gas market, is simply wrong, the depiction of the Polish gas market is misleadingly false. Poland continues to obstruct integration of its gas market into the Single European Gas Market by multiple ‘non-physical entry barriers’ including anti-competitive practices such as e.g. ‘predatory pricing’. Instead of assuming the role of ‘headmaster’ for the European Union, the UOKiK would thus be better advised to clean up the foreclosed Polish gas market in front of its own doorsteps.

Perhaps most unsettling is the UOKiK’s claim that NS2 is ‘dividing’ Europe. In reality it is Poland working hard to ‘divide’ Europe: By locking up its market to the Northwest-European transnational market and aspiring to become a ‘pivotal hub’ – at the elevated price level prevailing on the Polish market – for its eastern neighbors, it is preventing its eastern neighbors from becoming part of the (almost completed) ‘European Henry Hub’. What else can be more divisive?

The paper has also been published in ‘Natural Gas World’: (https://www.naturalgasworld.com/uokik-ns2-decision-alternative-facts-and-sanctimonious-hypocrisy-ggp-84051).

The article characterizes Germany’s clean energy strategy as ‘have the cake and eat it, too’ conundrum (‘indecision’?). Namely, counting on renewables both as a source of power generation and production of (green) hydrogen while at the same time phasing out coal and nuclear appears untenable. On the other hand, the support of Nord Stream 2 and LNG terminals indicates potential ‘pragmatism’ with gas stepping in the breach to support decarbonization. The author analyzes the future demand for hydrogen and concludes that electrolyzers fed by excess renewable power only would be uneconomical and small in production output. Wolfgang explained that decarbonized ‘blue’ hydrogen, e.g. from Norway and Russia, will be necessary to accomplish economies of scale and respective cost reduction fast in order to achieve the ambitious decarbonization goals.

The article analyzes the EU’s ambition to use the coronavirus pandemic as an opportunity to accelerate the energy transition, i.a. ending all EU subsidies to fossil fuels by 2025 unless compliant with the so-called taxonomy regulation. Gas might be eligible in member states heavily reliant on coal, lignite, oil and peat, but only where gas infrastructure is already in place, while in regions without gas infrastructure a ‘bigger role’ of renewables is considered. Wolfgang, along with other experts is quoted as saying that a quick demise of gas appears unrealistic. Wolfgang reiterated that, while gas would over time converge towards non-fossil gaseous molecules, the much higher energy density of gaseous molecules vs. electrons would limit any dreams of all-out electrification due to prohibitive costs. The convergence towards non-fossil gaseous molecules would require large scale investments in (blue) hydrogen. The real concern is that ideology, especially in Germany, might be standing in the way: the insistence on ‘green’ hydrogen only might delay the badly needed investments in blue hydrogen in order to achieve economies of scale fast.

The paper qualifies the U.S. NS2 sanctions as an unacceptable extra-territorial interference in European energy policy and a camouflaged U.S. LNG sales campaign. Moreover, it regards the amendment of the Third Gas Directive a discriminatory ‘Lex NS2’, by which the EC is using regulation as a political weapon. The politicization spawns hypocrisy and reveals ignorance, as a few inconvenient truths illustrate. E.g. continued transit through Ukraine, albeit also carrying molecules of the very same Russian origin, saw strong political support. Also Russian LNG, supplied to Europe in large quantities, is not taken issue with. Russian crude oil is not sanctioned by the U.S. but instead imported in large quantities. Both the sanctions and the ramifications stemming from the amendment of the Third Gas Directive obstruct European climate efforts and pose risks to security of supply. Read moreModern, state-of-the-art infrastructure, i.e. new pipelines and new, energy efficient compressors, such as NS2 features, contribute significantly to reduce the carbon footprint of fossil gas. Even vs. the best LNG alternative (Qatar), 55 bcm/a carried by NS2 would save ~17.1 million tons of CO2equ per annum and ~11 million tons vs. transit through the Ukraine. The tacit ‘optimism’ that NS2 will be completed and operational with only a minor delay poses an unnecessary risk to security of gas supply. The yardstick should be certainty rather than optimism, achievable by removing the sanctions and alleviating the ramifications stemming from the amendment of the Third Gas Directive.

Gaseous molecules as energy carrier will be pivotal also for extensive electrification scenarios while a wider use of gas – over time turning ‘green’ – achieves Germany’s decarbonization targets less drastically and less costly in more technology-open scenarios. The paper is also available for download at https://www.ewi.research-scenarios.de/cms/wp-content/uploads/2018/10/ewi_ERS_GVC_Gas_in_the_decarbonizing_German_energy_space_Paper.pdf.

The article discusses plans to build an LNG terminal in Germany. Wolfgang pointed out that a large scale project (e.g. Wilhelmshafen) would likely be uneconomical, since ample Norwegian and Russian pipeline supplies made LNG deliveries pricewise unattractive at present. However, a business case hinging mostly on small scale LNG in Brunsbüttel, a ‘hot spot’ since located at the entry of the Kiel canal and at the same time at the mouth of the river Elbe towards Hamburg port might be economically feasible.

The link to the full trailer in the Russian language is:
https://www.vestifinance.ru/videos/43121