The astronomical cost of producing and consuming energy in Europe is one of the biggest factors holding back the continent’s economy and preventing sustainable growth, according to one of the most trusted advisors to the oil and gas industry.
Speaking at the Third Annual Russian Energy Forum in London on Wednesday, Phillip Lambert of boutique advisory firm Lambert Energy said that he believes the huge cost of energy, and the underutilisation of oil and gas from Russia on the continent — thanks in part to sanctions against the country — is a key reason for tepid growth in Europe.
Here is what Lambert told a crowd of oil industry professionals, top Russian and UK businessmen, and a handful of journalists earlier on Wednesday:
“The fact is, right now, Europe is struggling economically. We will find out tomorrow whether British people want to stay in Europe — I passionately hope they do — but Europe as a whole, including the British economy is not as strong as it should be. One of the reasons for that is that the cost of our energy has gone up. The British steel system has not recently collapsed for just economic reasons. The energy base cost has gone up 90% in the last two years. An industry can’t survive against that background.”
Lambert’s basic argument is that many of Europe’s economic problems — GDP growth of just 0.5% in Q1, persistent deflation, and a bleak industrial picture — can be put down, in part at least, to the high cost of energy. Before Europe can achieve meaningful economic growth, it needs to address the price of energy.
The quickest way to do this, Lambert argues, is to push ahead with the creation of the Nord Stream 2 pipeline — a transcontinental pipeline backed by Shell, BP, Gazprom and others — which, if built, will bring natural gas from Russia into Europe through the Baltic Sea.
Advocates of the pipeline say it will provide Europe with an abundant supply of cheap, relatively clean energy, while those opposed say that Russian gas is unreliable, argue that keeping an undersea pipeline operational would be prohibitively expensive, and say that Nord Stream 2 would make Europe far too dependent on Russia for its energy.
Lambert disputes those arguments, saying:
“The Russians are offering a project here that offers cheap energy into the European system, as they have broadly done for the last few years, a reliable system, and a system by the way if you want to look at the carbon footprint. If Europe really is interested in reducing carbon, the best way of displacing coal in the European system would be to have Siberian gas sweeping away German coal and coal elsewhere in the European system. And yet too many European politicians just don’t want it.”
At the Russian Energy Forum, he went on to assert that failing to build Nord Stream could make the European economic situation even worse, saying that “millions of jobs” could be lost in Europe if Nord Stream 2 isn’t built.
“US manufacturers, Asian manufacturers at the heavy industrial level will be thrilled. European industry will become even less competitive, and more jobs will migrate, in their millions, from Europe to the United States, Asia and elsewhere. Hurrah! Who won’t cheer are European customers and European workers.”
As previously mentioned of the biggest arguments against the creation of Nord Stream 2, Lambert noted, is the belief in some quarters that the geopolitical tensions in Russia and the surrounding countries makes Russian gas unreliable, and that if Europe is too reliant on the pipeline it could wreak havoc with the continent. Lambert disputed this:
“I’ve heard so much rubbish about Russian gas being unreliable. When I was a boy, Russian gas production started. Russian gas has been coming into Europe for 17,500 days. For 14 of those days [when the pipeline ceased operations in 2009 because of a dispute between Ukrainian oil and gas company Naftohaz Ukrayiny and Gazprom over natural gas supplies, prices, and debts] there was a problem. If I had a worker who worked reliably for 17,500 days and had an unreliable two weeks, I think I would give that worker a pretty big bonus. But those two weeks are used by every single European politician on the radio waves and the television to prove that Russian gas is unreliable. That is simply not true.”
While he may not be a household name — Lambert Energy Advisory runs from an office on a single floor in Mayfair and the firm doesn’t have a website — Lambert is well-respected in the energy industry, and is probably best known for his instrumental role in driving the early stages of a collapsed $10 billion deal between Rosneft and BP in 2011, which fell through after BP missed a last minute deadline.
Lambert previously told an energy conference earlier in June that the “greatest risk to the global economy today is that the fossil fuel industry … becomes so battered that it doesn’t invest enough to keep the system going.”