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There’s a lot of talk about the importance of global energy security these days, but the perspective of Ukraine’s new ambassador to Canada drives home the point in a sobering way — and highlights the role this country should play.
“We in Europe, and especially in Ukraine, do know that Russia was using energy as part of its weapon, both on Ukraine and also (a) weapon on the whole European continent,” Yulia Kovaliv told the Global Energy Conference on Wednesday.
“Canada, we do believe, and the other countries . . . have to support us in providing the additional sources of energy since the European continent is rethinking, in general, their energy security.”
Kovaliv, making her first visit to Calgary after becoming ambassador earlier this year, spoke at a panel focused on energy security issues in Europe following Russia’s invasion of Ukraine.
Security of supply was also a broader theme on the conference’s second day, coming as oil and gas prices have spiked this year and western countries have taken steps to ban Russian imports.
It’s put a spotlight on the discussion around fossil fuel production, the need for increased investment in an era of ESG concerns and how countries can best balance energy security considerations with climate commitments.
Canada and the United States have already made moves to stop energy imports from Russia. Earlier this month, the European Union (EU) said it would ban Russian oil imports by tankers by December, and two months later for refined products.
At the Global Energy Show, officials with state-owned Naftogaz noted natural gas production is continuing in Ukraine, albeit under extraordinary conditions.
“Our main refinery has been destroyed (by) multiple missile strikes, three or four times, with four or five missiles each time,” Naftogaz chief operating officer Mavrikiy Kalugin told the conference.
“We’re no longer capable of refining our own products, but we do have an upstream section mostly focused on gas.”
Oleg Tolmachev, Naftogaz director of exploration and production, noted total output is down about six per cent from pre-war levels, a remarkable feat given some wells and gathering facilities are behind, or close to, the front lines.
“We actually have several hundred employees that have been living on those production facilities,” Tolmachev said.
“We have production facilities that get shelled by artillery every day. People go into shelter, they come out and go back to work on the wells because they understand that if they don’t do it, then the nation will suffer.”
Under such circumstances, what role will energy-rich countries like Canada and the United States play in the months and years ahead?
The federal government has promised Canadian petroleum producers will boost output by an additional 300,000 barrels of oil equivalent per day by the end of the year, although Alberta has said that number could be far higher.
On Wednesday, Canada announced new sanctions on Russia by banning the export of 28 services to its oil, natural gas and chemical sectors, including technical, management, accounting and advertising services.
The ambassador thanked Canadian energy companies that have already cut business ties to Russia, but called on those that haven’t, to do so quickly. She also spoke about the role the Canadian industry can play in future European energy security.
“We do now believe that European markets are now open for the new entrants in all sectors of the energy supply — and it’s the right time to do this. Replacing Russian energy in Europe is crucial to decrease Russia’s revenues and the ability to wage the war,” Kovaliv said.
“And (for) Canadian companies, we do think that they should take an opportunity to enter and expand in the EU market.”
Before the war, Russia supplied about 38 per cent of total EU demand for natural gas, while 2.3 million barrels per day of Russia’s 4.6 million bpd of crude oil exports were shipped to Western countries, according to Wood Mackenzie.
Officials with Naftogaz noted their country has large natural gas reserves, but will need future investment and access to technology to rebuild.
A separate panel on North American energy security discussed the need for more investment to meet oil and gas demand, as well as the delicate balancing act that’s required between increasing output and lowering emissions.
For consumers, cheap abundant supplies of oil and gas have kept prices relatively low for much of the past decade. That has changed because of chronic underinvestment in new supplies amid growing climate considerations.
West Texas Intermediate crude closed Wednesday at US$122.11 a barrel. Even before the war, Brent crude prices had moved up to $95 a barrel and European natural gas prices reached record levels, noted Amrita Sen, director of research at Energy Aspects in London.
She pointed out global markets need about $520 billion of new investment each year to keep oil output flat and meet demand. In the past eight years, such investment has averaged less than $400 billion.
“That gap is enormous,” she added. “The supply side has collapsed. The demand hasn’t.”
Sen believes the energy security debate has become polarized, with Europe “doubling down” on the shift toward renewables, while many Asian countries are worried about surging energy costs and turning to higher-emitting coal.
“In the West, energy transition had trumped energy security,” she said in an interview.
Governments now want security of supply, but they must also provide security of future demand to developers of major energy projects — such as LNG plants — that can take years to permit and need 15 or 20 years to see a return on investment, Sen added.
During her speech, Kovaliv said Canadian industry can play a part in helping provide energy independence to Europe.
Ukraine is looking for co-operation with Canadian businesses, in terms of attracting investment in resource development and providing technology, both for fossil fuels and clean energy.
“Ukraine and . . . Europe needs the gas and oil from Canada,” she added.
“This is something that helps us to ban all the consumption (of) Russian fossil fuels. And we do count on our working together on that.”
Chris Varcoe is a Calgary Herald columnist.
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