Descalzi (Eni) and the new world energy order: why a gas cap is needed

from Federico Rampini

The CEO in New York: price tensions will be very heavy, they will hurt families and companies if Draghi’s proposal does not pass

It is building before our eyes the new world energy order. According to Foreign Affairsthe most authoritative American geopolitical journal, will carry far more weight in that order the issue of security, alongside the goal of sustainability. We will see a strong return of the state’s role in the energy sector, to an extent unknown in recent times, large-scale public interventionism will take us back to the 1970s.

Europe, with the war in Ukraine suffered its 11 September, and will be a laboratory for this new experiment. Reducing carbon emissions will remain a priority goal – argue Harvard scholars Meghan O’Sullivan and Columbia University’s Jason Bordoff – but security of supply will be just as important. This means a revenge of pragmatism: the transition to renewable sources can only be gradual, their (increasing) use will need to be accompanied for a long time by fossil fuels, natural gas in the lead.

For the Wall Street Journal the war is only the latest shock, an abrupt reminder of reality, but this energy crisis had begun earlier: at least since last summer. The business newspaper sees a world that is reorganized around three blocks: The United States and their Western allies who use their purchasing power as a political weapon; China and other emerging nations such as India Turkey and Vietnam who continue their business with Russia; Saudi Arabia and other Middle Eastern producers which remain neutral and seek to gain market share.

the end of the free energy market, this vital sector for the rest of the economy will be deeply marked by geopolitical barriers. In this context it fits the trip to the United States of Eni’s CEO, Claudio Descalzi
. The messages it sends are not reassuring in the short term. Next winter will not be easy for Italy, price tensions will be very severe, they will hurt families and industry, if Draghi’s proposal for a gas price ceiling does not pass to Brussels. Unfortunately, oppositions to that idea remain strong, as other European players make money from a price system full of distortions.

In the medium term, the outlook improves, Minister Cingolani’s goal of replacing all Russian gas in two half years is realistic. It helps us that Eni has gas reserves in many countries including Egypt Libya Algeria Ghana Congo Indonesia. Therefore, he must not go to buy other people’s gas, he must negotiate permits to transport it to Italy. Looking further ahead, Eni’s chief executive glimpses a better future not only for Italy or the West but potentially for the whole of humanity. The reason for his visit to the United States is in fact an inspection at a pilot plant of nuclear fusion: the Commonwealth Fusion System (Cfs), a project born by the Massachusetts Institute of Technology (MIT) with the support of the US federal government, and of which Eni the largest private shareholder. The prototype will be operational in 2025, the industrial plant will follow in 2030, and starting from that year Descalzi expects nuclear fusion to have an important spread. At least starting with the United States and the United Kingdom, the two countries at the forefront of this field. The Washington Congress believes in this and wants to allocate significant funds to the merger. Fusion is the opposite of fission, he points out, recalling that this new technology it does not generate radioactivity, it does not produce waste.

It has low costs, use as a raw material “heavy” water, that is, not distilled: even that of the sea. And it consumes it in small quantities, from a bottle it can generate 250 megawatts in a year. The initial investment is not huge, one billion for the prototype, and if we were to go towards many replicas, the costs would go down again. Nuclear fusion or the clean atom, a dream that science has been pursuing since the 1950s. The Eni CEO thinks the odds of success are encouraging this time, he hears a close turn. He considers the benefits for the global order enormous: The world would no longer be divided between those who have and those who do not have access to rare resources, be it oil or gas or minerals for electric car batteries. Everyone has heavy water. The plants would be small. Low-cost electrification would become accessible even to the poorest areas of Africa, where electricity is still a luxury for hundreds of millions of people. We would have small, widespread power plants, within the reach of those who have hitherto been dependent on the raw materials of others.

The 2030 horizon may seem very distant to us as we grapple with the Ukrainian tragedy hour by hour, but if we don’t want to be frozen in the winter of 2030 today we have to start preparing. If the United States and the United Kingdom start building nuclear fusion power plants, will the resistance of the Italians, the Germans, the Japanese fall? Descalzi is convinced that if the merger keeps its promises, if it works, all countries will want to have it, the low costs together with the absence of radioactivity will be an irresistible argument.

The chief executive of the Italian multinational noted that paradigm shift underlined by the inquiries of the Wall Street Journal and Foreign Affairs, in the attitude of its US shareholders. Even at the beginning of 2021 they only wanted to talk about sustainability and renewables. Already last summer – when the energy shock began, months before the Russian attack on Ukraine – suddenly everyone began to worry about the scarcity of fossil energy supplies. Covid was retreating, the global recovery was going strong (with China in the lead, then), and the king was naked: the scenarios of a hyper-fast transition to all-renewable were clearly illusory, so much so that China, India and others even went back to drawing on coal in order to avoid economic paralysis. At night, in winter, and on many other occasions when the sun and wind do not contribute, the use of fossil fuels remains irreplaceable. Not to mention all their derivatives, such as fertilizers for agriculture. But two factors have depressed investments in traditional energy infrastructures in recent years: price volatility, and an environmentalism transformed into ideology, or even religious dogma.

Today a large part of the traditional energy industry is unable to increase its supply quickly, as a result of the lack of investment in past years. Joe Biden forced to triple somersault with twist. I’m going to Saudi Arabia to say the opposite of what his special climate envoy John Kerry said until yesterday: the world needs OPEC to pump more oil and gas, not less. The same Biden has decided to suspend duties on photovoltaic panels imported from Asia. Patience if the American panel industry was devastated by unfair competition from the Chinese, today the production capacity is all in the East; Americans who want to install panels on their roofs and industries who want large solar power plants, either buy Asian or find almost nothing.

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