Streetwise Professor

November 30, 2011

What the Frack: Gazprom Goes Green

Filed under: Economics,Energy,Politics,Russia — The Professor @ 3:17 pm

Showing its deep, deep concern for the environment, Gazprom is warning about the hazards of natural gas fracking:

But in a sign the phenomenon is in fact being taken seriously, the board of directors at the world’s biggest gas producer, state-owned OAO Gazprom, this week highlighted environmental risks and the high costs of production in Europe.

“The production of shale gas is associated with significant environmental risks, in particular the hazard of surface and underground water contamination with chemicals applied in the production process,” Gazprom said in the statement following the board meeting.

Now surely, this has absolutely nothing to do with the fact that expanded gas production, especially in Europe, would be devastating for Gazprom.  The experience in the US shows how quickly the gas market can turn.  In 2006, the consensus prediction was that the US was facing a low supply-high price gas future, and that the country would be a gas importer.  Gas prices were well north of $10/mmbtu.  A few short years later, the US supply situation was turned on its head.  Gas prices are now in the mid-$3/mmbtu range, and the play of the day is to figure out how to export gas to Europe and Asia.

LNG sourced from the Middle East or the US is already a near-to-medium term threat to Gazprom, as the ongoing disconnect between gas prices and oil prices (which determine the price of Gazprom gas under its long term contracts) indicated.   Even a modest increase in production in Europe would put even more pressure on the company.  And as the US experience shows, that increase can take place extremely rapidly (though for a variety of reasons such speed is unlikely in Europe).

Hence, it is doing what comes naturally to Sovoks: propaganda.  It is pulling out all the stops to discredit shale and fracking, not just in Europe, but elsewhere.  The next time you hear anti-fracking flacking, it’s fair to ask who’s paying for it.  No, not all the opposition is from Gazprom: some is from the well-intentioned, some from those who reflexively oppose any kind of energy production.  But knowing the way Gazprom works, no doubt some Gazprom money is funding anti-fracking lobbying, politicking, and information campaigns

But the enviro angle is really just too much.  Sorry, but lectures on environmentalism from the direct descendent of the Soviet Ministry of Gas (the USSR being history’s largest environmental catastrophe), and a company with a pretty poor environmental record to boot (witness the huge problems with leakage from Gazprom pipelines), are enough to challenge the strongest gag reflex.

But the fact that the company feels compelled to engage in such risible hypocrisy is actually encouraging news.  The more Gazprom execs squeal about shale, the more you know that it is a threat to them.

So yet again: Gazprom gripes–music to my ears.

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  1. There is a difference between a pipeline leaking 5000 km away and fracking at home. What does it all matter anyway? All the profits are off-shored, ditto for the sovereign wealth fund.

    Comment by So? — November 30, 2011 @ 4:22 pm

  2. I don’t know about the extremist Randroids on this blog, but I rather agree with Gazprom that promoting groundwater contamination by the cocktails of chemicals fracking seeps into the ground, methane leaks, earthquakes, and the fact that the process emits as much CO2 as coal (while producing miserly EROEI) is the way to go about things. So who cares if Gazprom’s motives are self-interested and venal – whose aren’t among corporations? – I’d rather not have EQ’s and poisoned water in my backyard just for a short-term decrease in the price of natural gas. The French agree, having banned fracking on their territory. Where they payed off by Gazprom too, SWP?

    Hence, it is doing what comes naturally to Sovoks: propaganda. It is pulling out all the stops to discredit shale and fracking, not just in Europe, but elsewhere. The next time you hear anti-fracking flacking, it’s fair to ask who’s paying for it.

    I wonder when SWP is going to ask about who’s funding the AGW denial that dominates right-wing media and political discourse in the US. *crickets chirping* Thought so.

    Comment by Sublime Oblivion — November 30, 2011 @ 4:44 pm

  3. EROEI is a BS concept. Any water problems are associated with the well casings, or water disposal, not the fracking process itself. No process is perfectly safe, and the record with shale is excellent. Glad to see you are such an eager consumer of Gazpromprop.

    And believe it or not, S/O, citing the (dirigiste) French is hardly the way to persuade me. Kinda works the other way, in fact.

    Re AGW denial–whatever. Live in your fantasy world. The fricking Canadians are bolting from Kyoto, FCS. The Canadians. And believe me, they weren’t persuaded by Exxon or whomever.

    The ProfessorComment by The Professor — November 30, 2011 @ 5:23 pm

  4. EROEI is a BS concept.

    Please expound. Thousands of energy economists (or for that matter, medieval peasants who only had access to horses and waterwheels for their meager energy surpluses) would beg to differ.

    Glad to see you are such an eager consumer of Gazpromprop.

    I am likewise glad to see you drinking the fracking industry Kool Aid. (Take it easy, it’s contaminated with hydrocarbons, heavy metals, and other toxins). :)

    Re-Canadians. Those fricking Canadians have a denier PM, have the biggest oil production from tar sands (which make fracking look clean) in the world, and really don’t have any reason to care because – like Russia – they will mostly benefit from AGW anyway. So, in your own words: “And believe it or not, SWP, citing the (polluting) Canadians is hardly the way to persuade me. Kinda works the other way, in fact.”

    Comment by Sublime Oblivion — November 30, 2011 @ 6:40 pm

  5. It is complete BS, because it reduces a multidimensional problem into 1 dimension. The production of usable energy requires the employment of multiple inputs, e.g., various forms of labor, various forms of capital. A process that produces less energy out per unit of energy put in can be far more efficient, properly considered, if it economizes on the use of these other inputs. Indeed, even energy itself is not homogenous. I would gladly engage in a process with an EROEI of less than 1 if the type of energy I get out is sufficiently more useful/valuable than the energy I put in.

    EROEI is essentially an “energy theory of value” which is as defective as the labor theory of value. Which is to say completely so.

    To illustrate the silliness of the concept, consider an analogous concept: labor returned on labor invested. For virtually every good, that is zero. Labor is put in, and cars, videogames, insurance policies, etc. are produced–but no labor. Or capital returned on capital invested. Huge amounts of capital are used to produce electricity–which is the epitome of a consumption good because it cannot be stored economically. Here, capital returned on capital invested equals 0.

    But, amazingly, 0 LROLI and 0 CROCI activities are ubiquitous.

    And if you’ve been paying the slightest attention, you will have noted that (a) Canada has always been a major energy producer, and (b) it has also been one of the most stalwart advocates of Kyoto and other initiatives related to global climate. Per your theory, (a) and (b) cannot possibly be true simultaneously. But lo and behold, they have been for years. Hence, your analysis of the determinants of Canadian climate policy is quite frankly as BS as your reliance on EROEI.

    The ProfessorComment by The Professor — November 30, 2011 @ 7:51 pm

  6. Can energy units become the new gold standard?

    Comment by So? — November 30, 2011 @ 7:54 pm

  7. S/O has no technical background to judge the merits of AGW nor hydrofracking. Just two things he plucked from the ideosphere that always sound so darn good to the go with the flow “intellectual” but know little political crowd.

    Gazprom’s expressed concern displays ignorance on so many levels.

    I always thought in some way oil did become the post gold gold standard.

    Comment by pahoben — November 30, 2011 @ 9:21 pm

  8. Here is how bogus AGW is presented to children-

    Climate change is melting the North Pole and it’s no longer safe for Santa and his Workshop. So our dear old friend is packing up the sleigh to find somewhere else to live.

    Comment by pahoben — November 30, 2011 @ 9:37 pm

  9. On the contrary SWP, Gazprom have always taken environmental matters seriously. Witness how they were ready to take charge of the Sakhalin II project when it was deemed that Shell was rampantly abusing the environment and threatening the life and livelihoods of thousands of people. Once Gazprom took over, no further environmental breaches were reported by the ministry, thus providing ample proof that Gazprom is far more responsible towards the environment than Shell could ever be.

    Comment by Tim Newman — November 30, 2011 @ 9:45 pm

  10. It is complete BS, because it reduces a multidimensional problem into 1 dimension.

    Indeed. I remember arguing some months back with some idiot who was not an engineer, not a physicist, not an employee in an energy company but a failed former schoolteacher who made a similar point about nuclear power, i.e. that the energy input over the entire cycle of construction, generation, and decommissioning was less the output generated.

    The same could be said about beef production. The energy input to make a steak is considerably more than the calorific value of the steak itself, be it burned or eaten. But the point of producing a steak is to have a reliable source of food in a convenient place of a convenient size and of appealling taste. The point isn’t to combine thousands of disparate sources of energy into one.

    And the same is true for oil and gas production. What is required is oil and gas of certain standard and quality is produced in a certain place in a certain time, the reliability of such ultimately meaning people can switch on their lights when they want to. It is of little use to consumers of electricity to point out that there are other, greater sources of energy sitting right outside their doorstep, such as heat radiation from the sun, as that isn’t going to get their fridge working. Energy production is more about utility and reliability than efficiency, but a failed former schoolteacher was never going to understand that, especially if there is a green tax-drum to beat.

    Comment by Tim Newman — November 30, 2011 @ 9:54 pm

  11. Tim-at one point we were collecting so many water samples for Russian regulatory agencies that I told them I was afraid we were creating an environmental disaster by draining the Sea of Okhotsk through the mandated sampling program.

    Comment by pahoben — November 30, 2011 @ 9:59 pm

  12. pahoben,

    I remember one incident when a slick of oil was found in the Sea of Okhotsk. The local politicians, rent-a-gobs in Moscow, local environmental groups, and the local media went apeshit, saying Sakhalin Energy is destroying Russia, has no respect for the environment, etc. etc. Sakhalin Energy said “Hold on a second. Let’s just run a sample through our labs, shall we?” Turns out it wasn’t their oil, it was from one of the onshore Rosneft fields which had been discharging into a river. The story disappeared from the local media and politics like morning fog.

    Remember, this is a country which thinks it needs special technology hubs to attract more foreign investment.

    Comment by Tim Newman — November 30, 2011 @ 11:48 pm

  13. I have more detailed rejoinders, but they will have to wait until I get some time this weekend.

    For the time being, I certainly never claimed that EROEI is the be all and end all of all energy analysis. Obviously, factors such as energy intensity and versatility also enter the question. For example, that is the reason Nazi Germany and South Africa invested in CTL despite its EROEI being lower than one – you need liquid fuels for cars and Panzer engines. But I certainly don’t see how one can regard EROEI as being “BS” at the macro-level, since a civilization (indeed, life itself) needs a consistent energy surplus to sustain itself. All else equal, higher average EROEI’s result in higher net energy levels, allowing greater room for economic expansion. Is it really a coincidence that the Industrial Revolution coincided with the UK transitioning to a coal-powered society (which has a far higher EROEI than wood), or that the era of fastest global economic growth (1950-73) correlates perfectly with the short era of hyperbolic growth in oil production (which has a higher EROEI than coal, and is additionally far easier to convert into useful work)?


    Anyone who spouts ideologized sound bytes like “bogus AGW” has no right – no right whatsoever – to denigrate others’ “technical background.”

    It’s simply too absurd, like a flat earther trying to lecture someone on Newtonian mechanics.

    Comment by Sublime Oblivion — December 1, 2011 @ 1:20 am

  14. [...] – What the frack? [...]

    Pingback by FT Alphaville » Further reading — December 1, 2011 @ 2:21 am

  15. Sublime Retardation, I suggest you look at ancient history, for example the fact that the Romans grew grapes in southern Scotland, does not really work so well now. Temperatures on Earth have risen and fallen quite naturally, without human intervention.

    Comment by Andrew — December 1, 2011 @ 2:52 am

  16. The community least-persuaded of AGW appears to be climate scientists.

    Comment by Green as Grass — December 1, 2011 @ 3:52 am

  17. For the time being, I certainly never claimed that EROEI is the be all and end all of all energy analysis.

    No, but you seem to think that it should be considered. I don’t know how representative my experience is, but I have been in the audience of very high-level confidental presentations of the exploration and production strategy of a major oil company (the President of E&P gave the presentation in person, and I was invited). I have also been party to presentations from the same major’s Head of Global Production detailing the challenges the company faces in maintaining production and those of the industry in meeting global energy demands. Never have I heard any of these people – who are grilled by investors whose money they are spending on a weekly if not daily basis – mention EROEI, and nor Peak Oil for that matter. The E&P president did, however, mention the importance of shale gas, to the effect that his company has just invested an enormous amount of capital in it. If EROEI is a significant concern when developing shale gas reserves, those responsible for the development seem unaware of it.

    Perhaps these captains of industry and the investors they represent are in denial, and the assorted cranks, academics in non-related disciplines, armchair experts, and those with woolly connections to the “energy industry” are right. But I know which group I listen to.

    Comment by Tim Newman — December 1, 2011 @ 6:32 am

  18. Russia’s AIDS infection rate up 250% while Putin has governed the country.

    Putin is killing Russia, literally.

    Comment by La Russophobe — December 1, 2011 @ 6:54 am

  19. Russia remains the world’s most corrupt major economy, with higher levels of graft than in Pakistan, Cameroon and Niger.

    Comment by La Russophobe — December 1, 2011 @ 6:58 am

  20. Russia Mars probe failure underlined by successful U.S. launch

    Comment by La Russophobe — December 1, 2011 @ 7:00 am

  21. Russian Bungling: A Funny Thing Happened on the Way to South Ossetia.,8599,2100950,00.html

    Comment by La Russophobe — December 1, 2011 @ 7:08 am

  22. John Helmer, the next Luke Harding, booted out of Russia.

    Comment by La Russophobe — December 1, 2011 @ 7:38 am

  23. @S/O
    Someone actually living on a flat earth would agree with Newtonian mechanics and could lecture on this topic without problem. In fact on the small scale we experience daily and in which we observe normal Newtonian mechanics the earth does have essentially a flat Euclidean surface. If you draw a small triangle on the ground the angles will measure in total 180 degrees as you would expect on a flat surface and not more than 180 as you would expect with a spherical triangle.

    I see no insurmountable problem with a flat earther lecturing on Newtonian mechanics.

    Comment by pahoben — December 1, 2011 @ 7:44 am

  24. Ha ha, pahoben! I remember saying much the same thing to somebody who, in a completely different context than the one under discussion, described me as a flat-earther. For most applications, we are all flat earthers. I for one never saw a design of a building which took curvature of the earth into account.

    Comment by Tim Newman — December 1, 2011 @ 9:37 am

  25. Yup when S/O is walking to the Berkely (I never put in the unnecessary pretentious e) chapter meeting of Citizens Against Warm Weather he walks Euclidean straight lines and not great circles.

    Comment by pahoben — December 1, 2011 @ 9:57 am

  26. Well actually at this scale they are essentially both.

    Comment by pahoben — December 1, 2011 @ 10:14 am

  27. > It’s simply too absurd, like a flat earther trying to lecture someone on Newtonian mechanics.

    Even more so: it is as absurd as Copernicus trying to lecture some religious fanatics on planet movement.

    Comment by Ivan — December 1, 2011 @ 12:32 pm

  28. How so Ivan?

    Comment by pahoben — December 1, 2011 @ 12:41 pm

  29. Sarcastically so, pahoben.

    Comment by Ivan — December 1, 2011 @ 12:57 pm


    What Is Shale Gas and Why Is It Important?

    Shale gas refers to natural gas that is trapped within shale formations. Shales are fine-grained sedimentary rocks that can be rich sources of petroleum and natural gas.

    Horizontal Drilling and Hydraulic Fracturing

    Over the past decade, the combination of horizontal drilling and hydraulic fracturing has allowed access to large volumes of shale gas that were previously uneconomical to produce. The production of natural gas from shale formations has rejuvenated the natural gas industry in the United States.

    Comment by Anders — December 1, 2011 @ 6:10 pm

  31. The mafia state of Russia nr 154

    Comment by Anders — December 1, 2011 @ 6:14 pm

  32. And you Anders are shamelessly bragging about New Zealand’s exemplary rating.

    Comment by pahoben — December 1, 2011 @ 6:48 pm

  33. Oil and gas is the problem .

    10 Norway 8.6

    But my son work in Denmark he is better

    1 Denmark 9.3

    Comment by Anders — December 1, 2011 @ 7:07 pm

  34. Synthetic fuel or synfuel is a liquid fuel obtained from coal, natural gas, oil shale, or biomass. It may also refer to fuels derived from other solids such as plastics or rubber waste. It may also (less often) refer to gaseous fuels produced in a similar way. Common use of the term “synthetic fuel” is to describe fuels manufactured via Fischer Tropsch conversion, methanol to gasoline conversion, or direct coal liquefaction.

    I really like this Subtil Olivion , I love him . Berkeley have to be a fantastic place for fun-loving rich gas promp boys .

    Comment by Anders — December 1, 2011 @ 7:23 pm

  35. rich gazprom boys -sorry Anatoly -

    Comment by Anders — December 1, 2011 @ 7:43 pm

  36. Actually Phaoben, I would be the one shamelessly bragging about NZ’s rating, being from there LOL.

    Comment by Andrew — December 1, 2011 @ 10:53 pm

  37. Well said Anders

    Comment by Andrew — December 1, 2011 @ 10:54 pm

  38. [...] Gazprom goes Green – because it’s in its own financial interests, reports the slightly cynical Streetwise Professor. [...]

    Pingback by This Week in Russia Blogs #2 | Siberian Light — December 2, 2011 @ 1:15 am

  39. Andrew sorry I confused the names.

    Comment by pahoben — December 2, 2011 @ 7:06 am

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