Global energy crisis has no 'easy fix' and is unlikely to end soon

The global energy crisis, triggered by the Russia-Ukraine war, is unlikely to be resolved any time soon, a senior executive has said. This comes as gas prices continue to increase amid supply constraints.

European markets, in particular, are facing a severe gas shortage after Russia reduced deliveries to the region. "I believe that we will see for some time that this [energy crisis] is staying," Dietmar Siersdorfer, managing director of Siemens Energy Middle East, said during an online media briefing in Dubai on Tuesday. "I don't see at the moment an easy fix that we say 'if we do this now, then tomorrow everything is back to normal'." "I don't see that this is happening, because the crisis that we see with Russia, I don't think that [Moscow] will walk away, and even if the war stops tomorrow, to build the trust again, to re-fix that what we had before, it will take quite some time. At the moment, I see more increasing pressure than decreasing pressure. So we have to learn to live with this change that we have just seen a few months back."

Oil and gas prices have soared since Russia began its military offensive in Ukraine in February, with the US, the EU and their allies imposing sanctions on energy imports from Moscow. Russia is the world's second-largest energy exporter, accounting for about 10 per cent of the world’s energy output, including 17 per cent of its natural gas and 12 per cent of its oil.

Last year, Russian natural gas accounted for 45 per cent of imports and almost 40 per cent of EU gas demand, according to the International Energy Agency. But the bloc aims to gradually reduce its reliance on Moscow.

Late last month, the EU's 27 member states agreed to stop crude oil shipments from Russia, but to leave pipelines open. Ukraine and some EU member states have urged the bloc's leaders to tackle the subject of natural gas imports, but the union is particularly reliant on Russia in that field.

However, Moscow has been reducing its supply to the region — from last October, Russian gas exports to Europe dropped sharply, mostly by constricting flows through the Yamal natural gas pipeline system.

Last week, state-owned energy company Gazprom also said that deliveries through the Nord Stream I pipeline to Germany would be cut, blaming technical issues.

To deal with the crisis, the EU announced funding of 300 billion euros ($321bn) in May for a blanket energy revamp stretching from Finland to Portugal to support the move away from its reliance on Russia.

It is also looking to new markets and recently signed a preliminary agreement to increase liquefied natural gas sales from Egypt and Israel. "I'm confident that we will see the Middle East and Africa as an integral part of solving the energy crisis that we see in some parts of the world," Mr Siersdorfer said.

The new agreements being signed between countries in the region and European nations highlights the change that is coming about, with collaboration also extending to renewable energy sources such as hydrogen, he said.

"There's also electricity exchange ... the grids need to be more interconnected, then also the grids from Africa ... will be connected, in my opinion, in the future to Europe and we will see also maybe Egypt and other countries having links to Europe and exchange electricity."

Looking ahead, while the focus remains on decarbonising the energy industry, the transition will be gradual since the shift requires substantial investments and technology.

In the meantime, investments will need to continue into the hydrocarbons sector to support rising demand and address inflationary pressures in the market, Mr Siersdorfer said.

The energy industry has depended on "the energy triangle which is [about] balancing sustainability with affordability and security of supply", Pierre Samaties, partner at consultancy Roland Berger, told reporters at the roundtable.

"I think we lived in a world for the past 10 years where we had the luxury to really purely focus on sustainability because supply was there and affordability was there as well. This, unfortunately now, has been disrupted, and I think we need to rebalance and this is what we see on the global energy status as of today."