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Tuesday, June 16, 2009

(Russian) Gas projects on the move, june 2009

Today:
  1. Russian firm seen as hostile bidder for Nabucco
  2. Putin and Berlusconi seal ‘South Stream’ pipeline deal
  3. Russia alarmed by Ukraine's 'empty' gas stocks
  4. Turkey to help push Nabucco ahead of rival pipeline
  5. Russia adds final pieces to 'South Stream' puzzle
Quote of the day:...after all, Nabucco gets backing from a very major power-USA, it's hard to stop it, obviously-even the lack of gas for it cannot stop it, and one would think this is more than enough in capitalist world for a project not to be developed. So, if it cannot be stopped, I guess, the next best thing is to be controlled. Another brilliant move from the Russian side

Russian firm seen as hostile bidder for Nabucco

18 May 2009

A Russian oil and gas company considered close to Prime Minister Vladimir Putin has won participation in Hungary's MOL petrochemical group, with the aim of taking over this key member of the Nabucco gas pipeline consortium, experts told EurActiv.

Speaking to EurActiv on condition of anonymity, international energy experts deplored the West's "blindness" at what they described as a Kremlin attempt to interfere with EU plans to set up a foreign energy policy.

Austria, Germany and Italy were singled out as countries whose leaders "thought they were doing big business" with Russia, but had in fact been manipulated by the Kremlin.

The warnings came as the EU and Russia are preparing for a bilateral summit on 21-22 May, at which energy security issues are set to dominate the agenda.

According to the experts, the Kremlin's political motivations were laid bare when Russian oil company Surgutneftgas recently seized control of 21.2% of Hungarian petrochemical giant MOL.

Surgutneftgas, a secretive oil company known to be close to Russian Prime Minister Vladimir Putin, has spent 1.4 billion euros on the deal, more than twice its market value, the experts pointed out, underscoring the move's strategic dimension.

The deal took place on 29-30 March, in the middle of a political crisis which saw the resignation of former Hungarian Prime Minister Ferenc Gyurcsány (EurActiv 23/03/09). But Gordon Bajnai, who replaced Gyurcsány, later condemned the deal.

Other Hungarian officials suggested that Russia was in fact operating through OMV, an Austrian oil and gas group whose bid to acquire MOL was rejected in 2007.

In June 2007, OMV launched an unsolicited bid on MOL, which was rejected by the Hungarian company. The European Commission also objected to the hostile takeover, citing competition concerns.

The failed takeover attempt later prompted OMV to sell its remaining 21% stake in MOL to Russia's Surgutneftgas. The deal, signed in March this year, was described by MOL as "unfriendly".

But the Austrian company denies accusations that it was being manipulated by Moscow.

Surgutneft is now the largest shareholder in MOL, but has not yet obtained the formal approval of the Hungarian authorities to be registered as a shareholder. A shareholders' meeting held immediately after the takeover took measures "to preserve their independence".

But the experts said Surgutneftgas is now likely to apply pressure to oust MOL's Hungarian management and replace it with a Russian-friendly team.

The strategy, they said, is clearly aimed at obstructing the construction of the Nabucco gas pipeline project.

Speaking to the Moscow press, Russian Energy Minister Sergei Shmatko denied that Surgutneftgas was aiming to block Nabucco. source

My comment: I wonder if obstruction of Nabucco is the real reason behind the take-over, or participation in it is the more likely reason. I don't try to be more positive than needed on the issue, but after all, Nabucco gets backing from a very major power-USA, it's hard to stop it, obviously-even the lack of gas for it cannot stop it, and one would think this is more than enough in capitalist world for a project not to be developed. So, if it cannot be stopped, I guess, the next best thing is to be controlled. Another brilliant move from the Russian side. And I kind of doubt they'll try actively to kill Nabucco -after all, if MOL decides to pull over, someone else will replace it. More likely they'll just join the fun and wait for Nabucco do die peacefuly for other reasons. After all, there are so many difficult problems to be solved in order for that pipe to function, they don't even have to kill it-it'll die alone. Note, I don't mind Nabucco, I want to see Nabucco filled with Iranian gas. But in view of recent Iranian elections and the over-all relations between Iran and the West world, it's unlikly that could happen. And I don't see a reason to support a Nabucco only to make the pleasure of US administration. I'm sure they are more than capable of having fun on their own.

Putin and Berlusconi seal ‘South Stream’ pipeline deal

18 May 2009

Italy's Eni and Russian state-owned firm Gazprom signed agreements on the South Stream gas pipeline project on 15 May, just days ahead an EU-Russia summit later this week where Europe will attempt to speak with a single voice on foreign energy relations.

Russian Prime Minister Vladimir Putin hosted his Italian counterpart Silvio Berlusconi at the Black Sea resort of Sotchi to mark the event.

Both oversaw the signing of the agreement between Gazprom and Italy's Eni, which will more than double the capacity of South Stream, from 31 billion cubic metres per year (bcm/y) to 63bcm.

Commenting on the forthcoming EU-Russia summit in Khabarovsk on 21-22 May (EurActiv 14/05/09), Putin, who has excellent personal relations with Berlusconi, said he would like to have as good relations with the EU as with his Italian guest.

In return, Berlusconi stated that Russia was a "friendly" country that kept its promises as a gas supplier. The Italian leader also advised the EU to cultivate the same kind of good relations that Rome enjoys with Moscow.

On the sidelines, Gazprom signed deals with Eni of Italy, DESFA of Greece, Serbija Gaz and a Bulgarian energy holding. Gazprom chief Alexei Miller said that the decision to boost the capacity of South Stream was taken following a request from the Italian side.

South Stream has now entered the construction phase, Miller indicated, adding that the project would be completed by the end of 2015 at the latest. The cost of the pipeline will be 8.5 billion euros, he specified.

In the meantime, the press reported that Russia is ready to buy all the gas from a large offshore development in Azerbaijan, known as Shah Deniz II.

Europe's hopes of securing gas from Azerbaijan via Nabucco were recently further dampened (EurActiv 20/04/09) when the country's president, Ilham Aliev, said he wanted Russia to serve as a transit route for selling gas to Europe. source

My comment: Read the article for some interesting additional information. As for the "excellent personal relations" between Putin and Beluskoni-any surprised people here? Not me. And as we remember, mr. Berluskoni made some very successful jokes about president Medvedev and president Obama, so :) Anyway, obviously South Stream is going well. That's not bad. Though, I wonder when there's no more Ukraine to play the bad guy, how Russia will play it with Europe. It's naive to think there will never be any problem between the two sides-that's just normal. Until now, they blamed Ukraine and indirectly punished Europe. If they by-pass Ukraine, then they'll have to directly deal with Europe. I hope we're ready for that. Meaning, that we'll manage to leave the feeling on the commercial level. After all, it's all about the money. No hard feeling for the casualties.

Russia alarmed by Ukraine's 'empty' gas stocks

27 May 2009

Current stocks in the Ukraine will be too low to ensure normal flows of Russian gas to Europe this coming winter, Moscow warned yesterday (26 May), saying disruptions could occur if Kiev does not find the money to replenish reserves.

In a statement released on Tuesday, Gazprom officials called the situation "very, very serious" and warned that "the reliability of gas supply from Russia and Europe's energy security are at stake".

Russia insists that Ukraine should prepay some five billion US dollars to replenish its underground gas reserves with 20 billion cubic metres of gas. However, Ukraine is in a difficult financial situation, and Gazprom says it may have to cut supplies unless "EU bodies assume some responsibility".

Following a working meeting in Moscow with Oleg Dubina, CEO of Naftogaz Ukrainy, Gazprom CEO Alexei Miller said the information presented by his counterpart had revealed "the dire financial state of the Ukrainian company".

Reacting from Tripoli, in Lybia, Yuriy Prodan, Ukraine's energy minister, said that his country would continue to pay for gas supplies.

Ukraine usually stores Russian gas during the summer period when consumption is lower in order to guarantee stable supplies to the West throughout the winter.

But Russia insists that the reserves need to be refilled right away, as they were almost completely emptied during the gas crisis. According to international experts, restocking can also take place during the autumn.

Gazprom pays Ukraine in advance for the transit of its natural gas to Europe, and claims it has already prepaid for 2009 in full. As Ukraine needs to pay Russia for its own gas consumption, the same money appears to be going back to Moscow, but Gazprom says the amount is not sufficient to cover Ukraine's gas bill.

According to the Russian press, Moscow is suggesting that the EU co-credits Ukraine for the gas storage. However, European Commission spokesperson Ferran Tarradellas was categorical that the EU had not received any such proposal, and repeated that the EU executive expected contractors' obligations on gas supplies to be respected. source

My comment: For more of the joy, click here. The crisis was quickly sorted out after Gazprom received its money. But the drama found a use in reminding Europe why we have to build Nord Stream and South Stream ASAP. We simply need them. Though I can't stop wondering what would happen with Ukraine after Russia no longer is bound by international anger to supply it with gas. And notice how absurd is the whole money circling between Russia and Ukraine. Gazprom pays to Ukraine for transit, Ukraine pays for the gas and in the end they are both miserable. It sounds so...We so need renewables and pan-European gas and electricity grids. Otherwise, sooner or later, we'll become part of this misery and that will suck!

Turkey to help push Nabucco ahead of rival pipeline

29 May 2009

Turkey is likely to give up problematic claims to the Nabucco gas pipeline project, the only way forward for the European Union-backed plan trying to push ahead of Russia's rival 'South Stream' project.

Turkey is seeking to use 15% of all natural gas flowing through the nearly $11 billion Nabucco pipeline in exchange for letting nearly half of the pipe pass through Turkish territory.

Nabucco, conceived as a way to lessen Europe's dependence on Russian gas, which accounts for a quarter of the continent's consumption, received crucial support from gas producers in northern Iraq earlier this month in the form of an $8 billion supply plan that would get the pipeline started.

But Turkey's transit demand has come to be seen as a deal breaker for the Nabucco consortium, also made up of Austria, Germany, Bulgaria, Romania and Hungary. "The 15% has to be off the table. It's not only something that we cannot accept; it's something the producing countries cannot accept," said European Commission energy spokesman Ferran Tarradellas Espuny.

If Turkey drops its demand, final transit agreements can be signed between the EU's five Nabucco consortium members and its sixth non-EU member, Turkey, which is keen to use its clout to become a regional energy hub.

Not only would that help boost investor sentiment towards Nabucco, which has yet to see the necessary financing commitments, but it would also help the project, seen as crucial for European energy security, move ahead of competing Russian-backed pipeline South Stream, which Moscow intends to finish before Nabucco.

With the resolution of Nabucco transit agreements, the consortium could start work on the open-season agreements, when firms buy up portions of the capacity of the 31 billion cubic metre pipeline.

Nabucco rests on securing gas supplies in Azerbaijan and Turkmenistan and, possibly, Iraq and Egypt, but no contracts have yet been signed.

Some analysts say Turkey may use the issue of the 15% transit share to strengthen its hand at the bargaining table with Europe on other issues, including Ankara's protracted EU accession talks.

Both Europe and potential pipeline supplier countries have tried to soften Ankara's stance, saying they would pay attention to Turkey's fast-rising gas needs.

But analysts say that Turkey's 15% is less about meeting its domestic market and more about becoming a gas-trading country through the Nabucco pipeline. source

My comment: Sorry, but I cannot be sympathetic toward the stance of Turkey. It's understandable that Turkey wants to make the most out of the deal. But there must be some common sense in such demands. Obviously nobody will give them 15% for free-that's a lot of gas. I'm not sure how much they will make out of the transit tolls, but if they get tolls+15% for free that makes a lot of money. Money that they do not deserve-after all they will only allow the pipes on their territory, they won't fund the construction or anything else! I cannot call this fair. What if every country that will allow Nanucco trough it gets 15%? I doubt anything will be left for the final consummers. As for the accession of Turkey and the black mail they are trying to do- isn't it obvious they are doomed? It is to me!

Russia adds final pieces to 'South Stream' puzzle

25 May 2009

By signing agreements with Austria and Slovenia, Russia has edged closer to finalising the legal framework for its 'South Stream' gas pipeline to Europe, a rival to the European Union-backed Nabucco project.

Slovenia will sign the deal in June, Slovenian Economy Minister Matej Lahovnik announced in Ljubljana on 22 May. Austria's economy ministry also confirmed talks were ongoing, but declined to say at which stage the talks were.

Despite the Nabucco rivalry, Russia also said it wants the European Union to make South Stream one of its 10 "priority projects" in energy policy, Russian Energy Minister Sergei Shmatko told reporters following an EU-Russia summit in the far eastern city of Khabarovsk on 22 May.

Austria and Slovenia would join Italy, Bulgaria, Greece and Serbia, from whom Russia last week secured support for South Stream in its bid to outpace the EU-backed Nabucco pipeline, which would supply gas from sources other than Russia.

Shmatko said Russia and its European partners in the project would request that Brussels grant it priority status.

Priority projects receive EU funding and are those that its executive thinks will diversify the bloc's energy sources or help energy flow more freely between member states.

Slovania's Lahovnik said Nabucco remained an important project for the EU, but added the question was whether there would be enough gas supply available for it.

The Austrian economy ministry said that it did not view South Stream as a Nabucco rival: "Both pipelines are an amendment to the existing routes via Russia and Ukraine," a ministry spokesman said.

A spokesman for the Nabucco consortium, which is led by Austria's OMV, also reiterated that the pipelines were not rivals and that every gas supply extension was welcome. South Stream is a joint venture of Russia's Gazprom and Italy's ENI.

Speaking in Khabarovsk, EU External Relations Commissioner Benita Ferraro-Waldner admitted that EU-Russia relations had been damaged by last year's war in Georgia and the Ukrainian gas dispute.

EU leaders, however, struggled to convince Medvedev that a new Eastern Partnership was not intended to turn Belarus, Ukraine, Moldova, Georgia, Armenia and Azerbaijan against Russia.

Trade was high on the agenda, and a Kremlin foreign policy adviser warned that Russia was losing patience over its WTO bid after more than a decade of attempts to join the 153-member body.

EU Trade Commissioner Catherine Ashton ruled out finalising a strategic pact with Russia before it joins the WTO, and warned Moscow against introducing protectionist measures.source

My comment: I wonder what's the deal in being a member of WTO. But then, I guess there is some kind of benefit from it. As for the article, I can say only that obviously, South Stream goes well. That's not bad. Rival or not, the more pipes, the better.

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