Smog on the water

What does it mean when the Chinese authorities plead with people to please not set off fireworks during the Chinese New Year celebrations? I guess it means good news for the global gas industry.

With smog in Beijing and elsewhere in China reaching ever more disastrous levels, there seems little choice for the Chinese government to follow the British example in the 1960s: to replace coal-fired power as quickly as possibly by cleaner alternatives, for which gas is the prime candidate.

Most people in Europe have probably forgotten that air pollution was as bad here as it is now in China. We tend to think that pollution is getting worse all the time, but that's not true in every case. Here is a BBC news story from 1962:

Choking fog spreads across Britain

A thick layer of fog which has covered London for the last three days is spreading all over the country. Leeds has recorded its highest ever level of sulphur dioxide in the air and pneumonia cases in Glasgow have trebled. A spokesman for London's Emergency Bed Service said 235 people had been admitted to hospital in the last 24 hours and issued a "red warning" to prepare for more patients as thick fog continues to affect public health. So far 90 people have died since the crisis began and the fog is not expected to lift for another 24 hours.

The Ministry of Health is warning those at most risk, such as sufferers of chest and heart complaints should "stay indoors and rest as much as possible". The ministry's medical advisors said doctors should prescribe masks for vulnerable patients or "do-it-yourself masks" such as thick cotton gauze or a scarf around the mouth and nose.

General advice to the public was also issued:
Only use coke or other smokeless fuel
Do not bank up coal fires at night
Don't burn rubbish or light bonfires
Keep windows closed and draughts out

If you replace the British geographical names with Chinese ones, the story could have been written yesterday. And mind you, this was hardly a one-off event. Ten years earlier, the Great Smog of 1952 had killed 4,000 people in Britain.

So find out who is best positioned to supply gas to China and buy those stocks today!

If China is suffocated by smog, the province of Groningen in the northern Netherlands has been hit by a different problem recently: earthquakes. Relatively small earthquakes, to be sure, with a lot of damage to homes and no deadly victims. Nevertheless, there are implications for the gas industry here as well, and this time they are not positive.

Groningen is home to the largest gas field in Western Europe, which has been producing large amounts of gas now for over fifty years, netting the Dutch government hundreds of billions of euros (last year €12 billion). Gas production in Groningen, which is taken care of by a joint-venture between Shell and ExxonMobil (called NAM), has always given rise to small earthquakes, but with the Groningen field now over 70% empty (see this document in Dutch), the tremors are getting worse and more frequent - for reasons which are not known at present.

Despite increasing local protests, the Dutch government has up to now refused to order a stop to gas production. Instead, it has commissioned 11 separate investigations that should shed more light on the problem by the end of the year.

So what does this mean for the gas industry? Given the importance of the Groningen field to the Dutch economy, gas production there will no doubt continue - but the situation will surely have a strongly negative impact on the public acceptance of new gas ventures. In particular shale gas, of which the Netherlands has quite large reserves. The Big Groningen Shake-Up will probably also have a strongly negative impact on how other people in Europe may look at new shale gas ventures.

As hard as times may be for people in Groningen and Beijing, there are always people who have it worse. In Kosovo, for example - a part of Europe that we don't hear much about, but which has a 45% unemployment rate and where people regularly have to go without power, as a result of the poor state of the energy sector. Neither the EU nor the US - which, oddly enough, still has a very significant presence in Kosovo - has been able to spur the country on to growth. Nor, apparently, have the Kosovars themselves.

Help may be coming now, though, from a - perhaps - unexpected quarter: the distribution and supply part of Kosovo's national energy company KEK has been bought from the State by two dynamic Turkish companies. Free-lance journalist Ana-Maria Tolbaru, who spoke to the CEO of one of them and to a former CEO of KEK, wonders - in a new article for EER - whether the Turks can do what Europeans and Americans so have far failed to accomplish: breathe new life into Kosovo's ailing energy sector.

Even more difficult than in Kosovo, is life for many people in India, Pakistan and Afghanistan, where hundreds of millions of people do not have electricity at all. In this respect, India's power blackout wave last year is quite comparable to China's current smog wave in the impact it will undoubtedly have on energy policy.

What could lift India and Pakistan out of their misery, Danila Bochkarev of the EastWest Institute in Brussels points out in a new and important analysis for EER is imports of gas from Turkmenistan and hydro-electricity from Kyrgyzstan and Tajikistan.

Plans to get these cross-border energy flows going have long been on the table, but the problem is that they have to go through troubled Afghanistan. This will only happen, writes Bochkarev, if the countries involved manage to come to a multilateral energy agreement that would provide a stable framework for energy investments.

Fortunately, says Bochkarev, such an agreement is available: it is called the Energy Charter Treaty (ECT). If countries in Central and South West Asia could be persuaded to join the ECT, it could even become what the European Coal and Steel Community was to Europe, Bochkarev suggests.

Of course to create a better life for people who suffer from blackouts and smog is far from simple. But the example of Britain shows that seemingly intractable problems can be made to suddenly vanish - like smoke on the water.

PS
Our Brussels correspondent Sonja van Renssen has the latest for you on what the EU budget means for the energy sector. See further on in this newsletter under Headlines & Viewpoints for her very timely (and in some ways alarming) report.

Note that last week we also published a report from Sonja about the latest EU proposals for new rules on biomass.

(Respond? karel.beckman@europeanenergyreview.eu)