ENERGY CRISIS IN EUROPE

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Context: As winter approaches, Europe faces an energy problem. The numerous leaks — apparently caused by explosions — to the Nord Stream 1, which is an energy pipeline connecting Russia to Germany, has driven supplies to a halt. Amid anxieties about building up energy reserves, the gas field in Groningen in the Netherlands has once again come under the spotlight.

Details:

Why is this gas field relevant?

• The region of Groningen in the Netherlands has a gas field that began operations in 1963.
• During the 1980s, the area saw numerous earthquakes — minor enough to avoid large damage but big enough for local buildings to develop cracks. Following these quakes, the Dutch government had earlier said that it would shutter the field in response to local protests.
• The closure date was also advanced to 2022 from 2030.However, due to recent geopolitical tensions, the Dutch government wants to keep options open.

Can oil or gas exploration cause earthquakes?

• Man-made or induced earthquakes can be pretty damaging.
• Examples of human activity that could lead to ‘induced seismicity’ are damming of rivers to create reservoirs, oil or gas extraction, and mining.
• Fluid extraction from hydrocarbon reservoirs (rocks that hold hydrocarbons which are oil and gas) causes an increase in net effective stresses, which, when supported by the geomechanics of the rock, may lead to development of new faults and fractures.
• In the case of Groningen, the ground subsiding has been caused by extraction alone over several years. Such extraction causes rocks to contract — as the pores get to hold less and less hydrocarbons over time.

Should India be concerned about gas in the Netherlands?

• India’s domestic gas price is determined from the average of four global indices viz U.S.’s Henry Hub, the U.K.’s National Balancing point, Canada’s Alberta and Russian gas.
• Compared with pre-pandemic times, the average domestic price of gas has more than doubled from $5.08/MMBTU to $11.62
• This is bound to rise again when the six-monthly reset takes place for April-September 2023.
• India consumed about 63.9 bcm in FY22, about 3.1 bcm more than in the previous year.
• Imports alone accounted for close to 50% of consumption, at about 30 bcm.
• Global production is estimated to decline from 4,109 bcm in calendar 2021 to 4,089 bcm in 2022.
• The situation would become challenging for the government unless the formula for determining domestic gas price is reviewed, he says. Till then, the government has to bear the higher subsidy burden on fertilizer — in the manufacture of which natural gas is used — as well as for the LPG sector.

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