I was vaguely aware of the looming natural gas crisis bubbling along in the background about a month ago but because it was to do with the UK, and the EU I must admit, I didn’t pay much attention to it at the time. I have a limited tolerance for anything that might be labelled “the aftermath of Brexit” and LNG in the EU usually includes Russia, pipelines and other inscrutable Great Power games of one sort or another. It was only when I saw that the UK was running into a carbon dioxide shortage that I paid attention.

 

I must admit that I was almost wholly ignorant of the demand for carbon dioxide, after all I come from an industry, shipping, that is continually being demonised for producing too much of the stuff, even if, tonne for tonne, it is the most environmentally friendly way of moving cargo around. But there it is, carbon dioxide is used, amongst other things, in the meat industry (stunning chickens and pigs for slaughter), the soft drinks industry for putting the fizz in drinks, for food packaging, for fire extinguishers, in oil refineries, the health service, nuclear power stations for cooling, as well as – in my imagination at least – dry ice for discotheques, but I guess I am showing my age there.

 

The problem is that largest proportion of carbon dioxide produced in the UK is as a byproduct of ammonia production, around 45%. Ammonia production, mainly used in the manufacture of fertilisers, is heavily reliant on natural gas. This will rapidly become an EU issue too. Nippon Gases, one of the major suppliers, estimated their supplies had fallen 50%. Yara, the Norwegian chemicals group said it would cut 40% of its European production of ammonia. As Svein Tore Holsether, chief executive of Yara, pointed out:

 

“We’re running at a huge negative cash flow. Ammonia production with today’s natural gas prices and today’s spot prices for ammonia is simply not profitable on Europe.”

 

In the UK, CF Fertilisers, the main producer went to the UK government for a twenty million pound support package to reopen some of their factories. This would cover the “costs to restart the ammonium plant and produce CO2 for the UK market”, which means that there’s going to be even more ammonium available, as a byproduct almost of carbon dioxide. But the food industry were happy. Ian Wright, chief executive of the Food and Drink Federation, saying that pig and chicken production would continue more or less as normal. Zoe Davies, chief executive of the National Pig Association, said a deal would be “a massive relief which will help with the immediate danger for pigs”, a somewhat unfortunate turn of phrase, considering that renewed production would surely hasten the pigs’ demise, placing them in immediate mortal danger. But the National Pig Association, one assumes, is less about pigs and more about pork. At least there will be enough fertilizer knocking about.

 

It’s the price of ammonia that isn’t enough to support ammonia production, and without ammonia you don’t get carbon dioxide. Natural gas prices are high because of increased demand in energy, either for heating or electricity generation, but also it appears Russia is not playing fair with supplies.

 

The International Energy Agency called on Russia to send more gas to Europe to help alleviate the coming crisis. Not fair, said Gazprom: the company was meeting its supply obligations and was ready to increase production if needed, but warning at the same time that prices could rise further in the winter because of shortages in their underground facilities. Indeed prices rose after Gazprom declined to book additional capacity for export via Ukraine for October and reserved only one-third of the available space on the Yamal gas pipeline via Poland. It seems that some are suspicious that it has restricted sales in order to try to accelerate the decision to approve starting the Nord Stream 2 pipeline to Germany, redirecting it away from Ukraine to starve them of transit fees. Gazprom and Kremlin officials have said Russia could boost gas sales once Germany and the EU approve the start-up of Nord Stream 2, making the shift of supplies to the north from the south more or less permanent. Not that subtle a message from Russia then.

 

If you think that a carbon dioxide shortage in the UK has nothing to do with shipping, think again. Let me tell you what I think:

 

–          LNG prices increase on the back of a lack of supply and increased demand

–          Ammonia production stops because the demand for heat and electricity prices out the demand for fertilizer production, consequently, and coincidentally, stopping production of CO2

–          Demand for energy worldwide is increasing, and Asian buyers are now outbidding European buyers for US produced (and seaborne) LNG

–          LNG prices continue to increase

–          China has announced, no sorry, ordered state-owned energy companies to secure supplies at any cost this winter, I repeat at any cost

–          China still burns more coal than anywhere else in the world for electricity generation, but has struggled to increase domestic coal supply

–          China’s power demand has increased by almost 15% this year, but domestic coal supply is up just 5%

–          According to the IEA, China’s total thermal coal demand is 3.1bn tons, however, with only 240m tons of imports, imports are only serving 8% of total thermal coal demand

–          if demand increases by 1%, imports could increase by as much as 13%

–          China doesn’t like Australian coal

–          China will take as much LNG as it can from whatever source to supplement coal

–          Europe needs coal, and prices are rising too

 

So, for us in shipping, this means an increase in tonne-mile demand for dry bulk carriers, and LNG carriers, and maybe even tankers as the taps get turned on to keep the oil price around US$ 80 a barrel. More simply put, more ships will be moving the stuff over longer distances, more ships will be held up in discharge ports, and smaller ships will be used to carry more coal, as larger ships shift their attention to other routes. It could be a good winter for us.

 

It is interesting to note however how quickly the use of fossil fuels is promoted, and accepted, and needed, as soon as energy security is threatened. Saving the planet is always an option as long as the central heating (or air conditioning) is on. It becomes less important as our homes and offices become very much discomfort zones. Electricity produced by fossil fuels, as we will find, has a much longer sell-by date than we had imagined.

 

And I also hope that it will give those promoters of untenable, untried, and unrealistic marine propulsion systems, and indeed marine fuel, some pause for thought. If the lack a byproduct of ammonia production can cause panic in the UK, and probably elsewhere too, then think of the implications for large scale ammonia, and for that matter hydrogen production for worldwide distribution as a marine fuel. Then think of green hydrogen and green ammonia.

 

I feel at this point I should once again say that I am not a climate change denier, and I believe in the danger of changing the chemistry of the planet by increasing the amount of carbon in the atmosphere. But we cannot change the laws of physics – or chemistry for that matter – with wishful techie thinking at the same time accusing those of being the more visible users of fossil fuels of dragging their feet. I hope that the food industry and others find a more sustainable source of carbon dioxide in the future. But maybe shipping can help here to at least point in the right direction: tankers have been using inert gas systems to blanket flammable cargoes for some time, using in many cases exhaust gases from the main engine or boilers. Would this not be possible with LNG electricity generation too?

 

I know it is not as simple as all that, but until such practical and down to earth solutions are explored, let alone starting to get carbon dioxide out of the atmosphere generally though carbon capture, wasteful and polluting manufacturing processes will continue to cause damage to the atmosphere. And without any real development in the large scale manufacture and supply of alternative and safe fuels for shipping, without a realisation that that it’s the fuel not the ships that cause atmospheric pollution all the finger-pointing and conference grandstanding will sadly remain just a whole lot of hot air.

 

Simon Ward