Russian output plans undermined, won't win 'energy battle': IEA's Birol

Russia has undermined its own oil and gas output plans including its ambitions for big increases in LNG capacity due to a loss of trust and the relationships with companies needed to help realize such plans, International Energy Agency Executive Director Fatih Birol said Aug. 29.

Speaking at Norway's Offshore Northern Seas (ONS) conference, Birol described claims Russia was benefiting financially from the commodity price surge since the invasion of Ukraine and associated sanctions as a "shallow, myopic view of the situation."

He said the switch away from oil and gas as part of energy transition efforts could even be accelerated by Europe's energy crisis.

Speaking of Europe and the plunge in Russian gas exports to the continent — estimated at 75% — Birol said: "Russia has lost one of the strategic energy partners. Russia lost big trust among customers around the world. One should not mix losing a strategic energy partner vis-a-vis having some opportunistic, short-term trade exchanges."

"We don't think Russia is winning or will ever win the energy battle," Birol said, echoing previous comments in which he has condemned the invasion of Ukraine.

Birol said Russia's hopes of replenishing long-term oil supply would flounder due to the complexity of hydrocarbon fields in locations such as the Arctic, adding it would be "back to the drawing board" for Russian plans to expand LNG capacity to as much as 130 Bcm annually.

Prior to the invasion, the IEA's 2021 'World Energy Outlook' foresaw Russia raising its oil output by around half a million barrels a day to 2030 under the central 'stated policies' scenario.

"In terms of oil, Russia's oil outlook will significantly suffer without the support coming from the companies, the technology companies and also service providers because most of the growth would have come from the much more geologically complex fields — from Arctic, from offshore — and this will not be possible without the support of those companies," Birol said.

"In terms of LNG, Russia's goals of bringing the current 30 Bcm of LNG capacity to 130 [Bcm] will be going back to the drawing board. To realize that LNG growth will not be possible in the absence of those companies that have been working on that," he said.

Decoupling

Western companies have for the most part been uncoupling from Russian projects, although TotalEnergies retains stakes in the Yamal LNG and Arctic LNG 2 projects and in gas and LNG company Novatek.

Birol estimated Russia's gas storage was now 92% full due to the plunge in exports to Europe, which he said would lead to high levels of Russian gas venting and flaring.

"We will see more and more of this in the next months to come as Russia's storage is 92% full — only a very small amount of storage level left to fill. Therefore, we will see lots of methane flaring in the next months to come," he said.

He went on to reject claims Europe's energy supply shortfall could be blamed on energy transition efforts and under-investment in hydrocarbons, although he noted the crisis also reflected a loss of French nuclear capacity due to equipment failures and maintenance.

Recalling the 1970s push to diversify oil supply away from the Middle East in response to oil embargoes, he said: "The current crisis may well be a historical turning point to accelerate clean energy technologies and clean energy efforts."

"This crisis is nothing to do with pushing clean energy options," he added.