Expensive LNG is fuelling Europe’s deindustrialisation, according to Greek shipowner George Prokopiou, who has raised concerns about the continent’s energy policy.
- Expensive LNG is fuelling Europe's deindustrialisation, according to Greek shipowner George Prokopiou, who has raised concerns about the continent's energy policy.
- “This shows a European tendency to make decisions that ultimately backfire,” Prokopiou remarked, reflecting on the need for a balanced approach to emissions reduction and market stability.
Expensive lng: Critical Assessment of Energy Policy
Speaking at the 1st Mare Forum Chios, Prokopiou delivered a stark critique of Europe’s approach to energy amidst the ongoing crisis exacerbated by the war in Ukraine. He argued that political decisions surrounding shipping, natural gas, and LNG have led to increased costs and a weakened industrial base. Prokopiou stated that “political decisions often create consequences that businesses are later forced to absorb,” highlighting the disconnect between political promises and business realities.
The Business of Shipping
Prokopiou differentiated between the realms of politics and business, explaining that while politicians often make decisions based on electoral gains, business leaders are compelled to provide their clients with the unvarnished truth. He revisited conversations from approximately seven years ago in Cyprus regarding a more gradual transition to sustainability within the shipping industry. He noted that reducing vessel speeds by as little as two knots could have immediately cut emissions by around 30 percent. However, Northern European countries resisted the idea, insisting that containerships should maintain higher speeds, even during a time when many companies in the sector were operating at a loss.
“This shows a European tendency to make decisions that ultimately backfire,” Prokopiou remarked, reflecting on the need for a balanced approach to emissions reduction and market stability.
Natural Gas and Rising Costs
Transitioning to natural gas has been fraught with challenges, according to Prokopiou. He attributed the surge in energy prices to political and financial decisions that limited investment in the sector, primarily due to environmental concerns. He explained that while the production cost of fracking in the US was previously around $50 per barrel, it has now increased to approximately $62 to $63 for companies to break even. This slowdown in investment has pushed firms to prioritise returning capital to shareholders instead of expanding production.
“Energy prices in Europe had already risen by around 200 percent before Russia’s invasion of Ukraine,” Prokopiou asserted. He challenged the notion that the war alone caused the price hike, asserting that the crisis had roots in diminished US production prior to the conflict.
The Dependence on LNG
Prokopiou expressed scepticism about whether Europe could effectively compete with neighbouring gas supplies while relying on costly LNG import infrastructure from nations such as Qatar, Morocco, and the US. He pointed out the inherent challenges in importing LNG, which requires liquefaction, transportation, and regasification before it can be utilised. This complex process adds layers of expense that further strain Europe’s industrial capacity.
The Impact on Germany’s Industrial Base
Germany, in particular, has felt the brunt of soaring energy prices, which Prokopiou claims are leading to deindustrialisation. He noted that Europe is gearing up for expansive re-equipment and restructuring programmes for its industries, amounting to €8.15 trillion, with Germany at the forefront. However, Prokopiou cautioned that many of these investments hinge on unstable geopolitical assumptions, particularly the reliance on consistent energy flows, which can change based on external factors.
Geopolitical Risks and Future Considerations
Turning to Russia, Prokopiou acknowledged the uncertain political landscape, suggesting that shifts could occur either gradually or suddenly. He noted that discussions within Germany indicate a potential interest in re-establishing natural gas imports from Russia, even before the ongoing conflict concludes, due to pressing energy requirements.
While he unequivocally condemned the war and any acts of invasion, Prokopiou argued that escalation does not provide a viable solution and may instead prolong the crisis. He urged a deeper examination of Europe’s energy choices, claiming that the continent has been ensnared in decisions that carry substantial costs and unpredictable outcomes.
Reflecting on Business Interests
In a notable admission, Prokopiou conceded that his observations run counter to his business interests. As the owner of 29 LNG carriers, more than half of which are engaged in LNG transportation, he is personally invested in the sector he critiques. His warnings serve as a critical reminder of the intricate balance between political decisions and economic realities, particularly in the context of Europe’s energy landscape.
