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Thursday, April 21, 2011

Russia openning (gas) industry and market? Well, kind of. 2011

Today:
  1. Russia, ExxonMobil seal $1bn Black Sea oil deal
  2. Russia-Belarus dispute cuts EU diesel supplies
  3. East Europe nuclear plants struggle to find investors
  4. Brussels weighs legal action on internal energy market
  5. Shale gas drilling likely to be banned in France
Quote of the day: ROFL! Not a single member-state has passed the energy-liberalization directive. NOT ONE! And on top of everything, the Commissionaire is actually optimist it would happen. Oh, well. This is Europe people, the land of the unlimited absurd! :)  

Russia, ExxonMobil seal $1bn Black Sea oil deal

28 January 2011
US-based ExxonMobil, the biggest privately-controlled oil company in the world, will make a new investment in Russia for the first time in over a decade as Moscow seeks to thaw its frosty investor climate and keep its oil flowing.
Russian state oil company Rosneft will develop over a billion tonnes of Black Sea oil using a $1 billion investment by ExxonMobil, whose relationship with the world's top oil producing country has been poor in the 21st Century.
The deal was announced on 27 January in Davos and came just days after Rosneft unveiled an Arctic tie-up and share swap with Britain's BP.
Rosneft officials said Exxon would invest $1 billion, and the deep-sea venture would be split 50/50 at the exploration stage, then 66/33 in favour of Rosneft at the development stage.ExxonMobil has in recent years clashed with Russian authorities over the budget for the Pacific Sakhalin-1 project.
Even before its Sakhalin battles, Exxon had a rough ride in Russia. Tillerson's predecessor, Lee Raymond, tried to buy in to now-bankrupt YUKOS, which was then Russia's largest oil producer.
But Raymond failed to win the Kremlin's blessing and, instead of announcing a deal, Raymond rattled off a list of barriers to investment in Russia to a hotel ballroom full of reporters as YUKOS owner Mikhail Khodorkovsky listened silently.
Khodorkovsky was later arrested for tax fraud. Rosneft acquired the main YUKOS production unit after a bankruptcy auction.
Russia also approved on Thursday PepsiCo's purchase of the country's largest food processor, juice and dairy group Wimm Bill Dann.
Russia wants reciprocity from the West. Russian companies are especially keen for downstream assets in Europe.
BP and Rosneft already have a refinery joint venture in Germany, and have now agreed on three projects in the Kara Sea as well as a share swap which will make Russia a shareholder in BP.In a reminder of the continuing complexities of investing in Russia, BP's new deal has drawn protests from its existing partners there, the co-owners of its eight-year-old joint venture, TNK-BP. The Alfa-Access-Renova (AAR) consortium is now suing over breaches of the shareholder agreement with BP.
Exxon is the second US major to pledge $1 billion for a junior role on the Black Sea, where no major oil reserves have been found in the past 100 years.Chevron pledged over $1 billion to fund exploration and development of the Val Shatskogo project in the same region.
source
My comment: I read that the deal with the BP is now on hold, but anyway, it's interesting development. They obviously expect something big to come out of the Black Sea. I kind of hope it won't, because that will mean even more pollution in it, but still, obviously that was the price for Russia to go out and buy big. Very big and very much. However, is this a step towards the free market or a step away from it? More likely, it's another way to secure the major players after the disaster in the Mexican gulf. If they all swap shares, it will be much easier to pay for damages. And probably, much harder to sue them afterwards. If they manage to drop the charges in the Amazon case, that is. 

Environmentalists blast UK-Russia 'Bolshoi Petroleum' deal - BP agreed on 14 January to form a joint venture with Rosneft to develop three massive offshore exploration blocks that Rosneft owns in the Arctic territory of Russia. US lawmakers, the UK's opposition Labour party and environmentalists blasted the deal, which has been dubbed 'Bolshoi Petroleum'.

Russia-Belarus dispute cuts EU diesel supplies

18 January 2011
Russia will not restart oil supplies to Belarus, halted due to a pricing row, until at least 20 January, when the heads of both governments are scheduled to meet, official sources announced today (18 January).
The standoff has already resulted in Minsk suspending diesel exports to Europe, though Russian crude oil supply to Poland and Germany via Belarus along the Druzhba pipeline remains intact.

The disagreement over prices came to the fore after Minsk entered a free-trade zone with Russia and Kazakhstan, and Russia subsequently dropped export duties for its oil supplies to Belarus.Russian companies are still in talks with Belarus on prices of oil destined for Belarus refineries, which have a daily capacity of 360,000 barrels.
The Russian firms are asking for a $45 rise per tonne as Belarus will increase transit tariffs by 12.5 percent from 1 February and crude oil prices on international markets have shot to two-year highs.Russia had been scheduled to deliver 1.5 million tonnes of oil to Belarus in January.
In December Russia and Belarus agreed that Moscow would drop duties on crude oil exports to Belarus from next year if Minsk hands Moscow all the duties it gets from exporting products made from Russian oil. source
My comment: And there is even more: Russia obviously wants to join Ukraine in the club. I don't exactly get the idea of exchanging duties, but there probably is some. The important part is that once again, Russia manages to unite its ex-satellites in an economic union. Interesting, huh?

Russia plays gas card to keep Ukraine in its club - Russian gas export monopoly Gazprom said yesterday (7 April) it would treat Ukraine as a domestic consumer, cutting its gas bills by $8 billion (€5.59 billion) per year, if it joined Russia, Belarus and Kazakhstan in a customs union. Almost simultaneously, Ukrainian President Viktor Yanukovich made clear that his country did not want to join a Russia-led customs union, suggesting a free-trade deal with the country instead.

East Europe nuclear plants struggle to find investors

28 January 2011
Cash shortages and uncertainty over energy prices are delaying or cutting back nuclear power projects across Central and South-Eastern Europe, threatening energy supply and a push to abandon polluting coal.
Investors are retreating, worried that future energy prices might not give them a good return.
Many countries in the region have looked to increasing atomic power to provide a stable energy supply and to help meet tough new EU emissions targets.
But high capital costs, dwindling interest from power firms, uncertainty about future carbon emissions prices and tangled planning permission are all slowing plans.
Romania, Poland and the Czech Republic are some of the European Union's least energy-dependent states, but the delays put them at risk of boosting imports in a decade or so as ageing coal-fired plants are shut or become too expensive to run.
Last week power groups GDF Suez, RWE and Iberdrola quit plans in Romania to add two more units to its only nuclear power plant by 2017. Czech CEZ's left the project in 2010.
Romania is left with just two foreign partners and will be casting for new investors, a search that will likely delay the project.
Bulgaria, the Czech Republic and Poland have also hit delays in their plans to build or expand nuclear generation.
After a tender failed to attract investors for a new nuclear plant in Lithuania, its president said it needed to rethink its alternativesIn the Czech Republic, state-controlled power group CEZ, Central Europe's biggest utility, postponed a tender in 2010 to expand its Temelin nuclear plant. Slovenia was expected to approve a decision to build a second plant by 2020 last year, but the decision has yet to come.
Croatia will likely not decide before 2012 on whether to partner Slovenia or Hungary for a plant or build a second one on its own territory.
Poland, which generates most of its power from coal, wants to build a nuclear power plant but has struggled to find skilled workers and clear legislation needed to move the project along.
Romania, where energy production is largely in state hands, estimates it will need to shut down and replace a third of its power plants by 2020. It sees demand rising by 2% on average each year until then. But with the exception of some small scale new hydro power units, it last built a new power unit in 2007, when its second 706 megawatt nuclear reactor went on stream.The economy ministry is now waiting to see if remaining partners Enel and a local unit of ArcelorMittal would like more shares in the future two units.
 source
My comment: This is so interesting, because some international reports try to convince Bulgarian government that there won't be market for the electrcity of the second nuclear power plant in Belene. But if the situation in Romania is so desperate, then there is an obvious market. So we are victims of careful manipulations once again. It's such a fun to read the news. :)

Commission reads sermon No. 8 to Romania, Bulgaria - For the eighth time since the accession of Romania and Bulgaria to the EU on 1 January 2007, the European Commission today (18 February) unveiled its regular six-month assessment of the two countries' progress on judicial reform, the fight against corruption and organised crime. The overarching demand remains that Sofia and Bucharest must do more.

Brussels weighs legal action on internal energy market

02 March 2011
EU Energy Commissioner Günther Oettinger yesterday (28 February) gave governments more breathing space to pass energy liberalisation directives into national law as a 3 March deadline approaches. A month ago, not a single country had yet done so.
Speaking after a meeting of EU energy ministers in Brussels, Oettinger said that the European Commission was scanning legislation put forward by member states to incorporate the third energy package of legislation into national law.
"Once that process has been completed, we will start thinking about treaty infringement proceedings," he said.
But he added that the formal cut-off date of 3 March was "not an absolute deadline".
If the Commission were to enforce the deadline, it might in fact require extensive infringement proceedings. According to an internal report from the EU executive, "on 1 February 2011, not a single member state had yet notified its transposition measures to the Commission".
The directives concerned propose several measures on which consensus was reached among the EU's member countries in 2009 after two years of heated debate.They establish common rules for the generation, transmission and distribution of electricity and set rules for market access and sectoral tenders.
They also proffer guidelines for energy security, regularity, quality and price, including environmental protection, and energy efficiency.
For households and businesses, they ensure rights of access to electricity supply and the protection of vulnerable customers from disconnection too.
source
My comment: ROFL! Not a single member-state has passed the energy-liberalization directive. NOT ONE! And on top of everything, the Commissionaire is actually optimist it would happen. Oh, well. This is Europe people, the land of the unlimited absurd! :)

Shale gas drilling likely to be banned in France

13 April 2011
The French government has backed a draft bill that would ban shale gas drilling in the country, citing fears that the extraction method is a risk to water quality. However, for other countries like Poland, shale gas has become a national priority to win independence from Russian imports.
MPs from the ruling centre-right UMP party tabled the bill in the National Assembly using an accelerated procedure. As a result, it will only be examined in a single reading in the Assembly and the Senate.
If adopted, the text would suspend drilling permits granted in March 2010 to Total, GDF Suez, and Schuepbach Energy by former Environment Minister Jean-Louis Borloo.
A shale gas drilling ban is also supported by the opposition Socialist Party, which presented its own alternative text with the same aim.
In March, the French government had prolonged a moratorium on shale gas drilling until June.
If the law is passed, the French debate on shale gas should be closed, but the discussion continues at the European level. Last February, European leaders agreed that "Eur ope's potential for sustainable extraction and use of conventional and unconventional (e.g. shale gas, oil shale) fossil fuel resources should be assessed". source
My comment: I'm also against shale gas drilling. I'm not an expert, but I think we should go toward newer technologies and developing newer ways to extract gas is not one of them! Unfortunately, even if they ban it in France, it will continue to happen all over Europe.
A curious side note on European hypocrisy when it comes to gas deals:
EU-Kazakh relations set to deepen, despite critics - The EU's relations with Kazakhstan are set to deepen in the near future despite a controversial election last Sunday (3 April), which saw President Nursultan Nazarbayev extend his two-decade-long rule over the country for another five years. EurActiv reports from Astana. - The guy won with 95.5% and a turnout of 90%. Could this be normal? And yet, Europe is set to have warm relations with him, because of the gas we need. So we can bomb Libya for being undemocratic, but when it comes to Belarus or other places we have strong interests in, we're very very nice and peaceful. Well, I call this shameful!
Germany's Wintershall to join South Stream - Germany's Wintershall, a unit of the world's largest chemical company BASF, is set to join Russia's South Stream pipeline that will carry gas under the Black Sea to Europe, a source close to energy giant Gazprom announced on Friday (18 March).
The source, however, said that Gazprom, which leads the project together with Italy's ENI, is not considering reducing its stake.-
Bosnia joins TAP pipeline Balkan net - The Trans-Adriatic Pipeline (TAP) and Bosnian system operator BH-Gas signed yesterday (7 April) an agreement paving the way for a future extension of the planned gas pipeline to Bosnia and Herzegovina. The development comes shortly after TAP,  found a partner in Croatia, Plinacro Ltd.-  It's good that they will have the reverse-flow capability, since it is important for gas security on the Balkans
Russia, Turkey in South Stream tug of war - Upset by Turkish procrastination over the offshore section of the South Stream pipeline, Russia is warning that it may give up on the project altogether. But experts said Moscow could not afford to lose face over what is seen as the biggest political pipeline project of modern times. -
Russia takes on board Slovenia in South Stream venture - Russia signed a deal with EU member Slovenia yesterday (22 March), paving the way for the construction of the South Stream gas pipeline through the Adriatic country.
Speaking at a press conference in Slovenia after Russian gas giant Gazprom had signed a $1 billion (0.7 billion euro) South Stream joint venture agreement, Russian Prime Minister Vladimir Putin said he saw no threat to the project from Turkey.
Putin said Russia may liquefy gas at a new plant on the Black Sea coast and send it to Bulgaria. He said Russia could also liquefy gas at the planned plant on the Yamal Peninsula in the Arctic, which is controlled by Gazprom rival Novatek.
The proposed alternatives will significantly change the South Stream project, in which Germany's Wintershall (a unit of BASF), Italy's ENI and France's EDF recently became involved. - And fore more on the LNG alternative check here (Russia considers LNG alternative to South Stream) - a very funny transcript of conversation between Putin and Shmatko at the end of the conversation. I think I also like the LNG idea, even if it offers even more options for manipulation of gas deliveries, since they can always reroute a tanker to another harbor.

EU subsidies fuel controversial coal plant in Slovenia - Environmentalists are warning that a new coal plant which has secured €770 million of loans from European financial institutions risks turning the EU's 2050 climate goals into a "laughing stock".
 The proposed 600MW coal plant at Termoelektrarna Sostanj in Slovenia will replace five less-efficient units, which had reached the end of their lifespans. But it will burn lignite – a high-carbon brown coal – in quantities sufficient to use up all the country's permitted carbon emissions quota by 2050, according to Jernej Stritih, director of Slovenia's governmental office for climate change.

Europe votes to ban industrial gas credits - Carbon credits gained by destroying controversial HFC-23 and nitrous oxide industrial gases will be banned from Europe's emissions trading scheme (ETS) after a vote by EU member-state representatives. 
In the year 2008-9, 84% of EU ETS carbon credits were used to finance projects in India and China that destroyed the pollutants, according to environmental think-tank Sandbag.

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