How close is the end of the "green course" and a return to traditional energy sources?

If the world's major oil companies are switching to traditional resources and expanding oil production, wouldn't it be worth Latvia to think about more adequate use of wood and peat for energy production? This is a question to think about when reading news about energy trends in the world. Wars of superpowers, disagreements, laws, ideology and reality. We offer reflections on this topic.

The “Green Deal” has noble goals – to save the Earth, prevent resource depletion and prevent climate catastrophe. Therefore, all attention is focused on ways of obtaining energy that are renewable and consume as little energy as possible. However, while Latvia is only thinking about building large wind farms, which should be ready in at least three years (more here  and here  ) and at the same time occasionally raises talk about eliminating wood fuel, the world's large energy companies have already become disillusioned with the “green deal” and are starting to move away from it, planning to increase the extraction of fossil energy resources.

Large companies plan to return to increasing oil and gas production – for shareholder peace of mind and ensuring profits 

According to the BBC and Reuters, global oil giant BP, following Shell and Equinot, is determined to “fundamentally review” its strategy after a sharp decline in profits last year. BP’s net profit in 2024 has fallen to 8.9 billion US dollars, compared to 13.8 billion US dollars the previous year. Management explains this by lower prices for hydrocarbons and a decline in profits from oil refining.

Five years ago, BP embarked on an ambitious attempt to transform itself from an oil company into a company focused on low-carbon energy technologies. It aimed to create 50 GW of electricity generation capacity from renewable sources by 2030. However, declining profits – understandably followed by investor concerns about future profits and a decline in the value of the company’s shares – have forced BP to remember its roots – that it is a major oil and gas market player and developer that needs to take care of its own growth. Therefore, BP’s announcement about reducing funding for renewable energy projects and increasing it for oil and gas extraction is expected at any moment.

BP is said to be investing billions of dollars in new oil and gas projects, including in the Gulf Coast, the US and the Middle East. BP has suspended 18 early-stage hydrogen projects and announced plans to sell wind and solar farms. In December, it transferred most of its offshore wind assets to a joint venture with Japan’s Jera, and in the summer it froze new wind projects. The workforce was cut by 5% at the start of the year (affecting 4,700 employees and 3,000 contractors). The “green projects” are the first to be abandoned by the company in its restructuring plans, which aim to save $2 billion by the end of 2026.

BP’s move follows a European trend in which rivals Shell and Norway’s Equinor are also scaling back their plans to switch to “green” energy to improve efficiency and profitability, as well as to compete with US-based Exxon Mobil and Chevron. In December, Shell, which already has a large portfolio of renewable energy and clean fuel projects, decided not to invest in new offshore wind farms. At the same time, Shell announced the creation of a joint venture with Equinor in the UK, which could potentially become “the largest independent oil and gas producer in the North Sea.” Equinor also said it was abandoning its previous 2030 target of diverting half of its capital spending to renewable energy.

The only notable exception to this trend is France's TotalEnergies, which continues to invest in low-carbon technologies, far ahead of its competitors in Europe.

Azerbaijan Energy Games

The example of Azerbaijan is interesting . Oil and gas extraction accounts for half of Azerbaijan's economy and more than 90% of its exports. The country is heavily invested in fossil fuels, has minimal climate protection measures, and in this respect Azerbaijan is on a par with Saudi Arabia, Russia and Iran.

Last November, the UN climate conference COP29 was held in Baku , but at the same time, news about new oil and gas deals and investment in oil and gas extraction was revealed. COP29 chairman E. Sultanov, who is also the deputy minister of energy and a member of the board of the state oil and gas company SOCAR, does not deny that the climate crisis must be addressed. But at the same time, he is also ready to discuss oil and gas deals, investments in their extraction and the creation of new infrastructure, the formation of joint ventures. In short, to do “business”.

The UN Intergovernmental Panel on Climate Change acknowledges that some oil and gas will be used until 2050 and beyond, but rules out the development of new oil and gas fields, which is incompatible with limiting global warming to 1.5 degrees Celsius, as agreed upon by climate-friendly countries.

The reality is that the more we restrict, the more methane, which affects the climate, increases.

Last September, climate researchers concluded that methane emissions are accelerating climate change and that the concentration of this gas in the air has – indeed – increased. Let us recall that in 2015, an international agreement was reached in Paris to limit global warming to 2C, and the countries that signed the agreement should be committed to climate rescue measures.

Methane, a hydrocarbon that is a component of natural gas, used as a fuel and in the production of synthetic gasoline, and from which carbon black for photocopiers is obtained, is one of the gases that affects the climate. It enters the atmosphere during the extraction of coal, oil and natural gas, as well as when waste rots in landfills and as an exhaust gas from living beings. The same one that has forced us to reduce our cattle herds to avoid releasing “soot” into the atmosphere.

It seems that we have done a lot – there are few livestock left, we do not extract gas and oil, but a lot of waste is still being produced. Meanwhile, the satellites of the company “GHGSat” recorded about 20,000 places in the world last year, where the amount of emissions reached at least 100 kilograms per hour. Compared to the previous year, 5,000 more such places have been found. 47% of the places are related to the oil and gas sector, 33% to waste management, 16% to industry, and 4% to other areas, including agriculture. “Last year, we have discovered more emissions than ever before, despite the global promises and plans to reduce them, which were adopted at “COP 28”.

Trends are driven by Russia's war in Ukraine and the decline in profitability of offshore wind farms

Industry analysts cite two main reasons for the above trends: the fallout from Russia's invasion of Ukraine and the decline in the profitability of renewable energy projects, especially offshore wind farms, due to rapidly rising costs, as well as supply chain disruptions and technical issues.

European countries, actively fighting against energy dependence on Russia and having already formulated ambitious energy “greening” goals, have significantly increased their renewable energy capacity, breaking records in the number of solar and wind power plants. The renewable energy market has grown rapidly and too much. It turns out that it is too dependent on weather conditions, unstable. It would be impossible to ensure stability without fossil energy.

“Germany shut down its last three nuclear power plants in April 2023, much to the delight of greens, but today, as Bloomberg notes, “the German power grid is more weather-dependent than ever.” That means the Germans have to rely on their neighbors – the energy produced in the country is not always enough, especially in the winter months. Neighboring countries, especially Norway, are not happy about this – as more Norwegian energy flows into the German grid, prices in Norway itself, which are traditionally low due to an abundance of hydroelectric power plants, are rising.”

How will Europe live without Russian gas?

Russian gas supplies to Europe via Ukraine were only cut off on January 1 of this year. Ukraine had finally decided not to renew the contract with Gazprom – to help Europe wean itself off Russian resources. As the BBC reports , now there is only one gas route to Europe left – through Turkey (which will be used, for example, by Hungary). But in general, in this way, Europe is determined to ensure losses by cutting off this closest and most profitable market to Russia, despite Slovakia’s dissatisfaction. Europe plans to completely abandon Russian gas in two years.

During the transition years, Europeans have already learned to save light and heat. Energy supplies have increased from Norway, the USA and Qatar. Solar and wind energy production has increased. Prices are high. Industry is suffering. Europe is losing significantly to the world's two largest economies - the USA and China. This, of course, also affects the well-being and satisfaction of its citizens, one could say - increases dissatisfaction and encourages people to look towards the politics of national survival.

Let us recall that Russia’s main gas pipeline to Europe, Nord Stream, was blown up in the fall of 2022, causing unpleasant consequences for the German economy. Meanwhile, while Russia’s Gazprom transit pipeline passed through Ukraine, Russia did not purposefully bomb or destroy gas pipelines and pumping stations in either Ukraine or Russia during the entire invasion. Now, this risk seems set to increase.

Meanwhile, the current president of the US White House, Donald Trump, is now loudly promising to make the US the main energy power on the planet and to flood not only America but the whole world with cheap oil and liquefied gas. Most likely, he is exaggerating. However, the US is already the largest producer of energy resources in the world, producing more than 13 million barrels per day of oil and gas condensate alone - about 2.5 million more than Russia or Saudi Arabia. In addition, the US is the largest exporter of liquefied gas and after separating from Russian gas supplies to it, the position of US exporters in Europe has strengthened. Other countries, including Qatar, are also trying to do the same.

So…

All this has put European oil and gas companies in a difficult situation: investors demand profits, suppliers avoid signing long-term contracts, oil and gas are slowly but steadily becoming cheaper, and demand for them is growing sluggishly – the International Energy Agency estimates that it will grow by about one percent this year.

True, for a number of reasons, the penetration of US resources and manufactured goods into European markets has not yet occurred to the extent promised by current President Donald Trump, and in general his plans will not be realized soon or will not be realized at all. However, the general vector of development of the industry in Europe has taken shape, and it is high time for the plans for the “green” energy revolution to be revised.

Firewood and wood fuel are an important energy and heat resource for Latvia – and they also contribute to the CO2 cycle.

Burning wood and wood fuel is Latvia's traditional way of generating heat. We both need it and have an abundant resource available to us.

Several years ago, Europe started talking about banning wood fuel – because it “damages the air” and therefore the climate. Really? Yes, well, perhaps the eight million inhabitants of London could all be banned from lighting fireplaces at the same time, but if we analyze the conditions in Latvia, can we compare ourselves to this situation?

The “green” course means protecting the climate and resources. Forests in our country occupy half of the country's territory, are scenic and absorb CO2, thus purifying the air. Cutting down these “natural lungs of the planet” would reduce these abilities. However, there is another side to this story, as indicated by an article published by mezaipasnieki.lv with a reference to tvnet.lv. Burning wood pollutes the atmosphere. However, the forest “collects it back.”

As reported in this article, Didzis Palejs, head of the Latvian Biomass Association, believes that burning wood does not harm the atmosphere. “Wood is definitely a renewable resource that, when used sustainably, i.e. not cutting down more than it grows, does not cause greenhouse gas emissions into the atmosphere. It is like a closed CO2 circulation circle. A tree grows by absorbing carbon dioxide from the atmosphere, we use wood for energy, releasing the absorbed CO2 again. When it is released, it is absorbed again by growing trees. This process occurs continuously, and both absorption and release occur simultaneously. Considering that the forest in Latvia grows more than we use it, then in our country wood is clearly the best renewable resource to use without polluting the atmosphere.” Over the past 100 years, forest areas in Latvia have more than doubled. This refutes the often-raised accusation that Latvia's forests are being destroyed by logging at an unreasonable pace.

The head of the study “Use of wood biomass for energy production, its consumption forecasts in Latvia” conducted in 2023, I. Krasavcevs     , has confirmed that the use of wood for heating in Latvia is not only a pragmatic choice, but even necessary. “We are one of the countries most provided with wood in Europe. Firewood and pellets are made from trees that cannot be used anywhere else. It is better for the money for energy to remain in the Latvian economy, rather than go to third countries.” The amount of fuel obtained during the logging process is large, we cannot consume it ourselves, we export 8-10 times more pellets than we use locally. About 30% of wood chips are also exported. This means that if necessary, we can dramatically reduce the amount of tree felling and still fully supply ourselves with fuel. "We are a Nordic country, and physics is physics. You cannot overturn the laws of physics with political laws. Solar panels help a lot in the summer by operating cooling equipment. In the fall and spring they only help with heating, but in the winter they do almost nothing," the scientist emphasizes.

In addition, it should be noted that forests in Latvia are cut down to obtain firewood, but energy wood is only a by-product. When producing furniture, approximately 60% of the following by-products are formed - wood chips, bark, shavings, which can be used to produce energy. If they were left to rot, the atmosphere would be filled with greenhouse gases. If we import fuel, then these gases would still enter the atmosphere, in addition to the result of combustion.

A good solution for Latvia would be cogeneration plants – which produce both heat and electricity in a single thermodynamic cycle, and are also an efficient and environmentally friendly solution. Currently, they mostly still use natural gas, less wood fuel. For some reason, such plants have decreased by a fifth in recent years. ( See information on statistics )

Caring for the climate and our planet is a matter of so-called sustainable thinking and survival. However, which arguments based on “science” and/or reason are taken into account by political and economic decision-makers is a matter of human choice.

What is clear is that it is natural for all shareholders of any company to strive for profit, and it is the duty and task of companies to provide it for them. If the "green course" does not take off, and moreover, it loses faith and even "scientific justification" (knowing that a lot of traditional resources are spent on biofuel production, and solar energy and electric batteries become hazardous waste after use), then only fundamental fanatics or charitable organizations will continue it.

It is interesting to what we can attribute the position of Latvian businessmen and the government? Considering that in our energy sector we ourselves are sitting on our own resources, which can provide us with satisfaction of our needs and independence, rejecting them as, from the point of view of foreign ideologists (or business interests?), unfavorable for the planet, but from the point of view of local scientists – sufficient, sustainable and renewable, but forbidding ourselves to use them in a reasonable and useful way. How and in the name of what possible benefit?

The article reflects solely the opinion of abctimber.com and is prepared based on publicly available information. 

Sources: BBC, Reuters, LSM.lv, mezipasnieki.lv, etc. 

Photo: Pexels: James Collington;   Yuri Shkoda ;  Mikhail Nilov