Nitrogen+Syngas 374 Nov-Dec 2021
30 November 2021
The shape of things to come?
“Europe’s issues are more long term and structural”
Global nitrogen and methanol markets are currently in the grip of a crisis in feedstock prices. Mostly this is about Europe’s dependence on imported natural gas, but – particularly on the methanol side – it has also been exacerbated by high coal prices in China, where heavy rains have led to flooding in Shanxi province, the source of one third of China’s coal. These have followed similar floods in Henan in July, and come at a time when China is facing power rationing due to a lack of electricity supply. The world economy’s long-awaited bounce back from the covid pandemic has also led to a general global surge in energy demand, and consequently higher oil and gas prices.
These are mostly temporary disruptions, but arguably Europe’s issues are more long term and structural. Falling gas production in the North Sea and a switch away from nuclear energy and coal-fired power for environmental reasons has left Europe ever more dependent on imported natural gas supplies; either shipped in as LNG or piped across from Algeria, Norway, but above all Russia. Relying on LNG supplies means Europe must bid against the energy-hungry markets of Asia; Japan, China, and India, and at times of shortage, such as now, that often means being outbid. Meanwhile, relying upon Russia and its mercurial president Putin offers a different set of risks. Europe already has long experience of Russia’s use of gas as an economic weapon in its long struggle for dominance over Ukraine, with gas supplies to Ukraine, and hence Europe, being cut off in 2005 and 2008. Consequently, pipelines have been constructed to bypass Ukraine, but the most recent one, a major expansion of the Baltic Nordstream pipeline, remains controversial in Europe, and some have suggested that delays over its certification have caused Russia to apply pressure again via gas supplies, at least in part causing the present crisis.
Europe hopes that in the longer term it will rid itself of this dilemma by large scale decarbonisation. The continent already produces 35% of its electricity from solar, wind and hydro-electric power. But it is prone to cold winters when energy demand for heating is high and available hours of sunlight are low. When the wind doesn’t blow – something that has been the case this summer – other means must be used to keep the lights on. The UK saw wind provide only 7% of power generation in September compared to a normal average of 25%, and had to switch its last coal-fired power station back on to make up the shortfall.
A glance at the news section of this and the previous few issues of the magazine will quickly show the extent to which the syngas industries are aiming to move towards green power as a source of hydrogen. This potentially decouples them from increasingly volatile global gas markets, but does instead make them reliant on the vagaries of renewable power. That may be fine for a Middle Eastern producer where hours of sunlight are relatively reliable, but potentially difficult for northern hemisphere producers who are relying on wind. It does make me wonder whether we could one day be seeing renewable feedstock volatility in ammonia and methanol markets rather than gas and coal price swings, and speculate exactly how much storage might be required to even that out.
In the meantime, let’s hope for a mild winter.
