Sun.
Jul 25
2021
energy transition
Image: nikita velikanin via Unsplash

Energy transition overtures by governments, corporates and investment funds are idealistic by necessity.

While sharing climate aims, Russia is where the romanticism ends. The world’s largest energy exporter is mainly pragmatic concerning its own interests. In this case, that’s selling energy to an expanding global population.

The world’s leading industrial nations (and energy consumers) — namely the United States, the European Union and China — seek to combat global warming by decarbonizing energy. They are pursuing this mainly via renewable energy generation, alternatives to fossil fuels, carbon offsets or sequestration. To those ends, some have sought the end of fossil fuel investment, while other proposals range from renewables subsidies to use of hydrogen as a clean-burning energy carrier, to a carbon border tax.

But one thing is certain: the pressure on Russia to deliver lower carbon energy will only increase. This was the message from Tatiana Mitrova, Head of Research at Russia’s Skolkovo Energy Center, during a panel on climate change at Renaissance Capital’s annual investment conference.

Russia’s national goals on climate change may not seem ambitious compared to other countries. Yet the nation’s corporates are focusing on the issue and tend to compare well internationally on these metrics. Russia’s second-largest natural gas producer, Novatek, sought to frame the energy transition discussion with accountable rather than aspirational aims.

Contemplating a future without fossil fuels is “not realistic,” considering access to affordable energy in maintaining economic development and the likely addition of 2 billion people to global populations by 2050, according to Mark Gyetvay, deputy chairman of the management board at Novatek.

“Our pathway to decarbonizing society is through natural gas,” Gyetvay said. The fuel is not just a bridge fuel, but will be key to further decarbonizing society for decades to come, he said.

Over the past decades, natural gas from Russia has been instrumental as a replacement fuel in Europe’s effort to shut down pollutant-heavy coal generation. The rise of renewables has done its part, yet the work by natural gas should not be ignored in legislation or future plans, he said.

Novatek plans to increase production of liquefied natural gas (LNG) to about 62 million tonnes a year by 2030 from almost 19 million tonnes last year. It also plans to further remove coal from utilities generation operations that are shared by partner and shareholder TotalEnergies. Notably, the company’s LNG can be delivered to Asia, where coal remains the dominant energy source.

The aim is not simply to cast core business as a virtue. Russian energy producers like Novatek, Gazprom and Lukoil are also developing renewable energies, examining carbon storage, hydrogen production and methane reduction actions, which some see as more viable routes than eliminating carbon.

Meanwhile, newly-listed forest products company Segezha has tabbed its role in re-forestation and agricultural land use as plant-based means of capturing carbon. Petrochemicals producer Sibur has, likewise, begun working with the cities of Tyumen and Voronezh on forestation-as-carbon-capture studies.

Global climate aspirations will cause Russian oil and gas producers to shift strategies and make contributions. Some of that may involve forests, some methane and infrastructure. Additionally, simple energy efficiency gains can do a lot to cut carbon, Mitrova said.

And if all else fails, Russia, with its 11 time zones, is number one in the world for wind and solar potential. So maybe there’s room for some romanticism as well.

By Stephen Bierman

Stephen Bierman is an energy markets journalist and the editor of New Economy Observer.

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