With Russia's invasion of Ukraine, the geopolitical landscape continues to shift rapidly and the international game is being played out on crude oil and LNG.
Having pushed through the embargo on Russian fossil fuels, US president Joe Biden announced in a speech at the White House that starting from next May, and for six months, 1 million barrels per day of crude oil – oil that has not undergone any processing – will be released from the strategic petroleum reserve. This is undoubtedly a sign that the United States is expanding its global fossil energy leadership. Just days ago, an agreement was signed with the European Union for the supply of 15 billion cubic metres of liquefied natural gas (LNG) in 2022 and around 50 billion cubic metres per year in the years ahead.
LNG is simply natural gas extracted from underground deposits and subjected to a cooling process at -160 degrees, which reduces its volume. The result is a mixture composed of 90–99 per cent methane and, for the remainder, butane, ethane and propane, with a density half that of water (meaning it can float).
LNG is transported on vessels called LNG tankers equipped with cryogenic tanks that keep the cargo in liquid form until it reaches the port of destination. There it is pumped into storage tanks and returned to gaseous form to be injected into the national gas grid. The conversion from liquid to gaseous state takes place in facilities called regasification terminals, which can be built onshore, offshore or on floating vessels. Alternatively, LNG can be used directly as fuel for maritime transport or stored in small-scale facilities for distribution to refuelling points for heavy vehicles or small gas networks disconnected from the national grid.
In redrawing the international balance of power, the geopolitics of energy appears to be throwing the doors wide open to fossil fuels. News has emerged in recent days that the Porto Viro regasification terminal, off the coast of Rovigo, operated by Adriatic Lng – a company in which ExxonMobil holds a 70.7 per cent stake, Qatar Petroleum 22 per cent and Snam 7.3 per cent – has been given the green light to increase its capacity without carrying out any work on the facility. It will go from 8 to 9 billion cubic metres per year and will be able to cover 12 per cent of total national consumption.
It is the largest of the three regasification terminals currently operating on Italian soil. There is another onshore site at Panigaglia, in the province of La Spezia, and a third offshore at Livorno, the Fsru Toscana operated by Olt Offshore Lng. For the latter, the Tuscany regional environment councillor, Monia Monni, recently approved the resolution containing a favourable opinion on increasing the number of bunker barges – as the smaller vessels received at the site are known – that can be accommodated there.
The number of facilities could grow in the near term. After a seven-year hiatus, Enel Group chief executive Francesco Starace announced at an event the resumption of the investment of one billion euros in the Porto Empedocle facility, in the province of Agrigento. And Prime Minister Mario Draghi has signed the Dpcm concerning strategic energy infrastructure for Sardinia, which provides for a regasification terminal in Oristano and a potential additional facility in Cagliari.
As mentioned, the United States will release 1 million barrels of crude oil per day for a total of 180 million barrels, equivalent to roughly two days of global demand. The strategic reserve, the Strategic Oil Reserve, is a substantial stockpile to draw from: it is the world's largest emergency supply and is managed by the United States Department of Energy.
The underground storage caverns are located in the states of Louisiana and Texas and can hold more than 700 million barrels. The mechanism of drawing on oil reserves was established to address the 1973 oil crisis, which broke out with the Yom Kippur War and the embargo imposed by the Arab member countries of Opec, the Organisation of the Petroleum Exporting Countries, which caused a sharp oil shortage and the consequent rise in prices. The mechanism therefore works by increasing supply – drawing on what is an emergency stockpile of around 1.5 billion barrels – in order to bring prices down.
The abundance of fossil fuel is also guaranteed by the method used to extract it: in the United States, particularly in Texas, the technique of fracking is employed – a term referring to the hydraulic fracturing of rock using water mixed with sand and chemical agents injected at high pressure into the subsoil. This operation has a significant environmental impact because it requires high water consumption and is therefore not viable everywhere; it makes use of a mixture of additives whose exact composition is not known (radioactive effects have also been mentioned) and relies on wastewater disposal wells that can increase pressure levels in the rock for prolonged periods relative to the fracking operations themselves.
"We will not allow him to use Russia's energy resources as a weapon," the White House incumbent declared, referring to his Russian namesake Vladimir Putin. Biden's decision was taken in agreement with the member countries of the governing board of the IEA, the International Energy Agency, with which it had already been agreed to draw on reserves for a total of 60 million barrels of oil. It concerns the "largest release of oil reserves in history," as he himself stated, and is intended to avert the risk of a global shock caused by large-scale disruptions to Russian oil production. It will attempt to contain the inflation that is afflicting American consumers, seeking to ease "the pain of the American people" between now and the end of the year.
This is the third time in the last six months that Washington has drawn on its strategic petroleum reserve, and the intention, the president made clear — in his speech at the White House, where he appealed to patriotism and called on the country's industries to "do more" to speed up the pace of drilling so as to bring down petrol prices at the pump, which rose during the Russia-Ukraine crisis. Biden also criticised companies that "prefer extraordinary profits to investments that increase production" and pointed the finger at oil companies guilty of profiting from the war: "This is not the time to sit on record profits, it is the time to step up for the good of your country."
In line with this position is Biden's request to Congress to impose fines on oil companies that do not produce on the federal lands for which they hold licences. As well as the appeal to a wartime law guaranteeing the production of minerals, such as lithium, nickel, cobalt and graphite, for the manufacture of batteries for electric vehicles.
And still we talk about fossil fuels. And about regasification terminals. The subject has been discussed for years, yet little has been done and progress has been slow — a symptom of the country's lack of foresight, which also manifests itself in the poor diversification of supply. The risk is of breaking free from Russia only to forge a bond, perhaps an even stronger one, with another supplier, especially in light of the ban on Russian coal imports — a cornerstone of the fifth package of Western sanctions announced by European Commission President Ursula von der Leyen.
While we let the opportunity to increase production from renewable sources slip through our fingers, we continue to cling to fossil fuels and call gas by a different acronym, all while thinking about building new sites and transporting ever more of it — overlooking the environmental impact of all these activities.
