India and Russia have signed a nuclear cooperation agreement, which will see Russia assist in the building of around 20 'ultrasafe' reactors at three locations in India. European states could take unilateral measures on Iran sanctions if a vote on a long-awaited UN resolution fails, French and Finnish ministers have apparently said. The US is approaching the removal of nuclear weapons in Europe with caution, in consultation with NATO, says the Washington Post. Russia's no. 2 gas firm, Novatek, saw better than expected profits in 2009, rising 13.7%. Cnooc Ltd., China's biggest offshore oil explorer, will buy a 50% stake in Argentine producer Bridas Corp. for $3.1 billion. Targets in China remain 'very aggressive'. A predicted rise in demand from Asia has sent IEA forecasts up. The EU is apparently confident that stability under new Ukrainian President Viktor Yanukovych will reduce the possibility of gas disputes and interruptions. The Gazprom-led Nord Stream gas pipeline consortium and banks are, according to the Moscow Times, currently negotiating $5.4 billion in financing.
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The advent of 'game-changing' shale gas is the subject of a glut of articles in today and yesterday's press, all of which make no denial that this gas could have a seismic effect on the global energy trade and force a re-alignment of the power politics of energy resources (spelling little good news for predominant European energy strangleholder Russia). This from the Economist:
Results tagged “energy”
The advent of 'game-changing' shale gas is the subject of a glut of articles in today and yesterday's press, all of which make no denial that this gas could have a seismic effect on the global energy trade and force a re-alignment of the power politics of energy resources (spelling little good news for predominant European energy strangleholder Russia). This from the Economist: A gasified American economy would have profound effects on both international politics and the battle against climate change. Displacement of oil by natural gas would strengthen a trend away from crude in rich countries, where the IEA believes demand has already peaked as a result of the recent spike in oil prices. Another consequence of the energy market's bull run, the unearthing of vast new supplies of gas, could bring further upheaval. If the past decade was characterised by the energy-security concerns of consumers, the coming years could give even the world's powerful oil producers reason to worry, as a subterranean revolution shifts the geopolitics of global energy supply again.
Apparently India's state-run Oil and Natural Gas Corp may be invited to develop projects in Russia, and is looking for stakes in partnership with Rosneft and Gazprom in the Yamal Peninsula, East Siberia and the Sakhalin-3 project. Improving nuclear ties also look promising, according to the WSJ. ONGC has already agreed to collaborate with oil-to-telecoms group Sistema, which controls assets in Bashkortostan, and may also gain a foothold in profitable oil and gas projects in Russia's far north. The Russian government has initiated construction of a pipeline designed to increase crude exports to Asia. The new Ukrainian Prime Minister has said that Ukraine will hold talks with Russia on an optimal gas price. The head of Russia's fourth-largest oil producer, Surgutneftegas, has claimed his company has no plans to sell its stake in Hungary's MOL, as shares are rising, despite tensions between the two firms. Igor Sechin is apparently trying to mollify investors as Rosprirodnadzor recommends that TNK-BP lose its license to develop the huge Kovykta gas field in east Siberia. China's 'insatiable demand for energy' is examined in Reuters. Could shale gas be its secret weapon? The Economist takes a look at the gas' alluring dissimilarity to coal.
French President Nicolas Sarkozy's 'wheeling and dealing' with Dmitry Medvedev 'has become expected as European governments seek to close the gap between their own shrinking energy resources with those provided by Russian mega-supplier, Gazprom,' says the WSJ, but the revolution in North America's gas supply could change all that. Gazprom Neft's smaller-than-expected fourth quarter profit was not due to production, and the company said that its shares gained more value last year than those of the average oil company. This article takes a brief look at India's relationship with Russia in matters of energy and trade. BP has announced a $7 billion deal to buy international oil and gas assets from Devon Energy off the coast of Brazil, 'one of the world's most exciting areas for oil exploration'.
The Federal Anti-Monopoly Service wants to ban oil companies from buying and building gas stations in regions where they have at least 35% of the market, to restore the balance for independent gas station owners who are slowly losing their retail market lead. Venezuela has approved a joint development project with Russia on Junin 6, a major oilfield in the Orinoco oil belt. The Nord Stream pipeline project has unearthed a series of centuries-old shipwrecks in the Baltic Sea. Yulia Latynina compares US and Russian gas extraction figures, and concludes that Russia's best move would be to abandon attempts to 'gain control of Europe with the help of gas pipelines', and develop its own chemical industry instead. ITAR-TASS comments on progress made during recent meetings between Rosatom and France's EDF on a possible joint venture. Construction starts tomorrow on Transneft's $1.34 billion Purpe-Samotlor pipeline link, which will help secure crude supplies from Russia to China. International Power explains the reasons for the fall-through of its deal with GDF Suez. Chevron will cut another 2,000 jobs this year in Europe, the Caribbean, and Central America.
A feud between Finance Minister Alexei Kudrin and Rosneft Chairman (and deputy prime minister) Igor Sechin over tax breaks for oil companies could damage growth in oil output and jeopardize exports to Asia, says Bloomberg. Gazprom is seeking compensation of about $135 million from Lithuania for six years of losses that it says were caused by an alteration to a deal on heating prices, although the Lithuanian government says that it is merely a third party. The Bosnian Serb Republic is set to join the South Stream gas pipeline project with a pipeline in northern Bosnia. According to Rosatom, by the end of this year, Russia will provide its first batch of low-enriched uranium for a UN-regulated international nuclear fuel reserve bank. The pipe-supplying business of a 'longtime friend' and judo partner of Vladimir Putin has won a contract to work with Gazprom, but the energy giant says it's all above board. Iran's Pars Oil and Gas Co. issued $1 billion worth of eurobonds in a bid to boost the development of its giant South Pars gas field.
Chinese Foreign Minister Yang Jiechi says construction of a Russia-China oil pipeline - part of the East Siberia-Pacific pipeline - will be finished by the end of the year, and will have the capacity to pump 1.6 million barrels of crude per day. Reuters has a Q&A on a new draft proposal for UN sanctions on Iran over its nuclear program. The FT considers the shale gas rush that is driving world prices down. Britain's energy infrastructure is apparently at risk from uncertainty over policy and regulation after the May elections, which are likely to result in a hung parliament. Royal Dutch Shell and PetroChina have made a joint offer thought to be worth at least A$3.7bn (US$3.4bn) for Australia's Arrow Energy, which focuses on coal-bed methane gas. A €34 billion North Sea energy 'super-grid' is due to be launched today by a group of 10 European companies. China's national crude demand is going to rise by 150 million tons over the next decade to 550 million tons, 350 million of which will have to be imported.
From the Financial Times on the Yukos trial at the European Court of Human Rights (ECHR) in Strasbourg:
"It is now entirely in the hands of the court. There will be no further pleadings," said Piers Gardner, lawyer for the plaintiffs, who are led by Steven Theede, Yukos's former chief executive, and Bruce Misamore, its former chief financial officer. Today's hearings "ultimately represented the final watershed, the last word." The plaintiffs say any damages awarded would be distributed to former Yukos shareholders. (...)
"Yukos' contention is that it fulfilled its responsibilities and paid its taxes as any other taxpayer would throughout the years 2000-2004 and that at the very end of 2003, frankly out of a virtually blue sky, everything changed," Mr Gardner said. "Yukos argued this was exceptional treatment... a grossly unfair burden on Yukos. This is the balance the court now has to resolve."
"The question is whether it is ever in the public interest to expropriate a company for pure political motivation," said Bruce Misamore, Yukos' former chief financial officer. "In Russia, there is a broader public issue that the expropriation has had a severe negative effect on investment.. on the willingness of companies to invest their money in Russia that was manifested in the severe economic downturn."
Gazprom is conducting an internal audit of export schemes in an attempt to eliminate unnecessary intermediaries. Just in time for Viktor Yanukovych's visit to Russia, the Kremlin says it wants Ukraine to stick with its existing gas deals with Russia, although, says Reuters, 'many analysts believe Kiev's desperate public finances mean Yanukovich must change a long-term gas deal signed in 2009 by his election rival, former Prime Minister Yulia Tymoshenko, which made Russian gas more expensive for Ukraine than for most European countries.' The European Commission claims that the €200 million it's pledging for construction of the Nabucco pipeline is a 'milestone' for European energy policy. Russia and China are renewing calls to Iran for diplomacy, and for it to accept a UN nuclear fuel proposal aimed at easing concerns about its atomic program. Russia is likely to own at least 51% of the shares in the company building Turkey's first nuclear power plant, says Bloomberg. '[T]he prospect of developing a huge unconventional gas source using new technology could render meaningless the decade-long fight for control over the gas pipelines from Russia to Europe.' Gazprom insists that natural gas demand is rising. How important is next year's oil price to Russia's recovery?
The long awaited, historic trial of Yukos shareholders vs. Russia is underway in Strasbourg. We're all very curious to see how the Kremlin's high powered legal team will defend the theft of what was once Russia's largest and most transparent company. From the AFP:
"This was an expropriation by any other name," Yukos lawyer Piers Gardner told the court in Strasbourg at the opening of the one-day hearing.
It was the first time in the decade-long saga that Yukos and Russian lawyers met face-to-face in an independent court, whose ruling will be binding on Russia as a member country.
Western powers have sent a revised proposal for new sanctions against Iran to Russia and China, in a bid to dissuade Iran from continuing with the production of nuclear energy - 'China, which relies on Iran for much of its energy, has not responded'. Poland's PKN Orlen oil company is considering bringing in a partner to help turn around its $3.7bn investment in Lithuania's troubled Mazeikiu refinery, and despite the 'controversial' nature of Russian involvement, 'a Russian investor would be the most obvious partner,' says the FT. GDF Suez cut its key profit target, as sharply lower gas prices capped the group's core earnings growth 1% in 2009. A report for the next International Energy Forum this month in Mexico warns that current biofuels targets risk causing another oil supply crunch in the middle of this decade and calls for a review of existing policies.
'Economically, he's doing well,' Vladimir Putin said of Mikhail Prokhorov. 'As they say, he cashed out. I have very good relations with him. He is looking where to invest his funds. But he must fulfil his [power investment] obligations.' But Prokhorov has refuted Putin's claims, saying 'Incorrect documents concerning investment programs must have been provided to the prime minister. The issue is that all companies, without exception, postponed their investment programs.' Following a question from a French businessman at a meeting in Paris, President Dmitry Medvedev said he would 'try to see' if there were any alternatives for the historic Khimki oak forest that is due to be replaced with an $8 billion highway between Moscow and St. Petersburg. The Nord Stream consortium, led by Gazprom, will complete its financing this month, and aims to start construction on April 1. Warm winters in recent years are forcing raindeer herders in Russia's Arctic Kola Peninsula to delay the rounding up of their reindeer 'at great economic cost'. BP is looking to cut costs to 2004 levels to improve profitability, particularly on refining and sales. China and Russia have reached an initial agreement on pricing and supply of natural gas. Exxon Mobil says it's 'early days' for unconventional natural-gas projects in Europe.
Russian coal producer Kuzbass Fuel is considering an initial public offering to fund plans to double output, which would be the first in Russia's energy coal sector. Ecologists protesting the reopening of the Baikal paper mill, believing that it will cause toxic waste to be dumped into Lake Baikal, say that they are receiving home visits from the police over their criticism of the project. TNK-BP's profits are falling, but reserves are up thanks to 'better pricing or more effective geological work'. Gazprom and Gaz de France have signed a memorandum on the latter's accession to the Nord Stream project, pledging to close the deal before construction begins on the pipeline. Russia reduced its export duty on crude by $18 per ton yesterday.
'Iran is standing on 50% of the world's energy and should it so decide Europe will have to spend the winter in cold'. The Telegraph reports that the US is upping the pressure on Russia to toughen its stance on Iran. Sanctions would apparently be aimed at Tehran's financial sector and at transportation. Read a story that unveils how Iran acquired nuclear equipment here. Energy is on the agenda for Medvedev's meeting with Sarkozy in Paris,
including possibly the prospect of increased
Gazprom exports to France. TNK-BP is apparently contemplating venturing into unconventional gas exploration in former soviet states. The company reportedly expects hydrocarbon production in 2010 to increase by 1-2% (excluding Slavneft). It is expected that the topic of Russian gas transit will be prominent at Ukrainian president Viktor Yanukovich's meeting with EU leaders. Gazprom has renegotiated contracts with its four largest customers for a period of three years, a designated 'crisis' period. The chairman of the board of Russian oil and gas giant Trans Nafta has
been found dead in the company's Moscow office; apparently murder has been ruled out.
Russia has begun work on a new nuclear power station in Kaliningrad, to the concern of local residents and ecologists, despite Rosatom's assurances that the project is completely safe. The Federal Customs Service could be ready to continue its export-duty duel with Gazprom if the company agreed to new rules on disclosing pricing for foreign clients. The former says the measures would increase transparency; the latter that they would decrease company revenue. Gazprom is considering swapping part of its stake in Novatek for 51% of Sibneftegaz and merging it with another small company, apparently due to concerns about Novatek's partnership with oil trader Gennady Timchenko. The President of the Council of the Russian Union of Oil and Gas Producers has given an interview on his thoughts on stabilized oil production and the endurance of the oil era. The failure of the Copenhagen negotiations will not prevent Russia from meeting its objective to cut emissions by 25% by 2020, says Dmitry Medvedev. Japan's Mitsubishi Power Systems is planning to invest £100 million in new research and development for offshore wind power in the UK.
Writing on the WSJ blog The Source, James Herron notes that Gazprom gave its first major sign that it is reeling on its back heels to preserve market share as it has "cracked open some of its sacred texts" of natural gas pricing as linked to the six-month lag behind oil prices, and opened up for renegotiation of several long-term contracts with European customers.
As usual, blame the U.S. oil shale technology for flooding the market with supply. However, I'm not sure I agree with Herron that spot market pricing will stick around forever, but this move away from oil-indexed pricing in global markets is huge news. Cheaper gas is obviously not a huge threat to Gazprom's survival as a colossal global corporation, but it does do damage to its potency as a political weapon.
As usual, blame the U.S. oil shale technology for flooding the market with supply. However, I'm not sure I agree with Herron that spot market pricing will stick around forever, but this move away from oil-indexed pricing in global markets is huge news. Cheaper gas is obviously not a huge threat to Gazprom's survival as a colossal global corporation, but it does do damage to its potency as a political weapon.
In the face of serious discord among its key European customers, Gazprom has offered to shift a portion of the gas it supplies to a free-floating price established on market hubs like the U.K., the Netherlands and Belgium. This is a major concession for a big, conservative, slow-moving company like Gazprom, which has consistently derided the notion that free markets should set the price of its product and even pushed to establish an OPEC-like cartel to control global gas supplies.
Foreign Minister Sergei Lavrov says there is no hard proof that Iran is working on nuclear weapons, while Dmitry Medvedev has called for Tehran to behave responsibly - 'We believe that Iran should adapt its nuclear programs to meet the requirements of international organizations such as IAEA. On the other hand, we want it to conduct its nuclear activities in a transparent manner in terms of control.' Just how green are the Vancouver Olympic games? A merger of the Sibneftegaz, Purgaz and Nortgaz gas companies could be controlled by Gazprom. Finance Minister Alexei Kudrin has been speculating on the future price of oil.
Anders Åslund has a good article published in the Moscow Times on Gazprom and the energy curse.
In sum, Gazprom may have far too much gas in the medium term because of likely energy savings both at home and abroad, whereas the prices that Russian gas can fetch abroad are likely to stay low and decouple from oil prices. Even if domestic gas prices in Russia rise, Gazprom's finances are likely to be squeezed.
Gazprom's management -- that is, the Russian government -- does not seem to understand the severity of these challenges. After a long time in denial, it has reacted ad hoc. It is trying to maintain the old European demand while ceding new markets and cutting its supplies. It has reduced purchases from Central Asia and postponed the development of the giant fields Yamal and Shtokman.
Vladimir Putin has threatened the heads of four energy companies with fines, and said they would not be able to sell power at market prices if they continued to underinvest in Russia's energy sector, noting that foreign power companies were sticking to their investment obligations. Putin also noted that electric power consumption in Russia has returned to pre-crisis levels, and announced that the government would allocate $1.76 billion for the construction of new nuclear power plants. Putin attended the relaunch of the Sayano-Shushenskaya hydropower dam, which had been closed since a fatal accident last August. Read a summary of the problems supposedly facing Gazprom in the wake of the financial crisis, including new competition from liquefied natural gas and shale gas, lower gas prices and demand, and 'unwieldy bureaucracy'. 'Linking gas and oil pipelines and electricity grids will not eliminate dependence on Russia, analysts say. But [European] countries in the region will be able to help each other out in the case of shortages or a disruption in energy supplies.' The Africa chief of Shell has criticized Nigeria's handling of its oil industry, saying that the country risks being eclipsed as the continent's leading oil producer.
Bulgaria's finance minister Simeon Dyankov says he will not authorize a €2.0 billion state-guaranteed loan from Russia's state nuclear corporation Rosatom towards the financing of constructing the Belene nuclear power plant. 'Finland was the most vocal in voicing objections to the Nord Stream proposal, raising specific environmental issues and making clear that they would block the programme,' says a chief strategist at Uralsib. 'The rhetoric changed as soon as Russia agreed to suspend... [higher] timber tariffs.' The UK's largest energy companies are under pressure to cut prices following news of massive profits. The US Department of Energy has announced that it will make a conditional loan of $1.37 billion to solar thermal company BrightSource Energy.
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