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Russian Gas: There Is No Alternative For Europe
Russian Gas: There Is No Alternative For Europe
The sanctions are now in their second year; the ruble is still not quite itself; and national champions Gazprom and Rosneft are both bracing for what can generously be called a down year. Still, while Russia’s political relationship with the west continues to be redefined, the broader element of codependence remains relatively unchanged – though its worth is hotly disputed. Nowhere is that dispute more pronounced than in the energy sector.
To be sure, Gazprom is in trouble. Last year, the gas giant saw its profits fall 70 percent to $3.3 billion. Through the first three quarters of 2014, Gazpromdeliveries fell 3 percent, 13 percent, and 8 percent to Europe, former Soviet republics, and domestic consumers respectively. Its debt burden is up and opportunities for long-term credit are few. Moreover, its legal woes are growing by the day. Recent antitrust filings from Poland and Ukraine join the European Commission’s (EC) April charges that could cost the company up to 10 percent of its global turnover.
For its part, Europe – more specifically, the European Union – is still attempting to define the terms of its own energy security. Plans for the 28-member bloc to unite in an energy union are still a go, though only marginally more clear than when they emerged. In a recent statement at the European Economic and Social Committee’s Plenary Session, Energy Union commissioner Maros Sefcovicdescribed the goals of the union as follows: a fully integrated energy market; energy efficiency above all else; decarbonization; a commitment to R&D; and securing supply through solidarity and trust.
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Ukraine Playing Hardball With Gazprom In New Gas Deal
Ukraine Playing Hardball With Gazprom In New Gas Deal
Ukraine plans to suspend its gas purchases from Russia on April 1, the day after the current contract expires, in an effort to strengthen Kiev’s bargaining position as the two countries negotiate a new deal that could lower the price of the fuel.
Ukraine has been shifting its reliance on gas from Russia to Europe, in large part because of growing tensions between the two countries that have previously led to interruptions in the flow of gas through a Ukrainian pipeline that also serves Western Europe.
Europe has been buying about half of its gas from Russia, and about 30 percent of its flows through Ukraine. Moscow has interrupted that flow three times in the past decade because of pricing disputes with Ukraine. Both Europe and Ukraine hope to end most or all Russian gas shipments by shifting to alternate sources of energy.
Related: Natural Gas Prices To Crash Unless Rig Count Falls Fast
Ukraine believes gas it buys under the current contract with Russia’s state-owned Gazprom is too expensive and has been negotiating with Russia for a lower price for the fuel as well as higher transit fees for Russian gas to European customers.
The expiration of the current contract also coincides with the end of winter, when Ukraine needs to buy less gas for heating.
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Russia Is Not Bluffing With Turkish Stream Project
Russia Is Not Bluffing With Turkish Stream Project
During his visit to Ankara in December 2014, Vladimir Putin announced that South Stream—a large pipeline that would have carried Europe-bound Russian gas under the Black Sea and across Southeastern Europe—had been terminated. A major reason for South Stream’s cancellation was attributed to the exit from the project of Bulgaria, one of the key countries through which this pipeline would pass. Instead, Russia and its regional partners, including Turkey, are now discussing a new pipeline project—Turkish Stream, sometimes referred to as Turk Stream.
It is becoming increasingly evident that Russia and Turkey want to ensure that the Turkish Stream project has a solid economic foundation. During his most recent visit to Ankara, Aleksei Miller, the CEO of Russia’s Gazprom, met with Turkish Energy Minister Taner Yildiz. In the course of their meeting, further technical details of Turkish Stream were revealed: the pipeline will have a capacity of 63 billion cubic meters (bcm) of gas, 15.75 bcm of which will be marketed in Turkey and the other 47.25 bcm is to be marketed to Europe through Greece. This gas pipeline is scheduled to be incorporated into an inter-governmental agreement during the second quarter of this year, and the first transmission of gas is planned to take place in December 2016. According to Miller, this is a fairly realistic timeline.
The speed at which Turkish Stream is being brought to life and the way in which it appears to be taking priority in Ankara over the Azerbaijani-sponsored Trans-Anatolian Gas Pipeline (TANAP) project have both been received negatively by Baku-based media channels. TANAP is a key link in the planned Southern Gas Corridor, which aims to export non-Russian, Caspian-basin natural gas to European markets while bypassing Russian pipelines.
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Is The EU Finally Breaking Free Of Russia’s Energy Grip?
Is The EU Finally Breaking Free Of Russia’s Energy Grip?
Gazprom’s dominance over European energy supplies may be beginning to slip.
The collapse of oil prices has punished Gazprom’s revenues, but in a new development that is further damaging to the Russian state-owned company, the European Union is also beginning to shake itself of Russian gas.
Russian exports of natural gas through the Nord Stream pipeline – which runs from Russia to Germany across the Baltic Sea – have dropped by more than half in February from the same period last year, according to Reuters. Average daily deliveries have declined from 98 million cubic meters to 45 million cubic meters.
For 2014 on the whole, the European Union reduced Russian gas imports by 9 percent, the fourth consecutive year of declines.
There are several reasons for this. First, the European economy is growing slowly, if at all. That keeps a lid on natural gas consumption. Second, the 28-member bloc is actually making substantial progress on energy efficiency. Third, Europe has experienced a mild winter, lessening demand for natural gas supplies.
Related: Moscow Slings Insults Following Canadian Sanctions
But the EU is also finding other sources of energy. Last year Lithuania began importing liquefied natural gas (LNG) from Norway, a development that has diminished Gazprom’s grip over the small Baltic country. Lithuania has even been willing to pay a 10 percent premium for Norwegian gas – a rate that Lithuanian officials noted was still less than what they paid for Russian gas in the past. “From now until forever, our access to LNG puts a cap on what Gazprom can charge us,” Lithuania’s energy minister Rokas Masiulis said in a Reuters interview in November 2014.
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As IMF Extends $17.5 Billion Credit To Kiev, Gazprom Demands Debt Repayment
As IMF Extends $17.5 Billion Credit To Kiev, Gazprom Demands Debt Repayment
No sooner had the International Monetary Fund (IMF) extended $17.5 billion over four years in new credit to Ukraine, Russia’s private gas giant Gazprom was claiming $2.4 billion of it to settle Kiev’s gas debt.
That’s not exactly what the IMF had in mind. The international lender’s mission chief for Ukraine, Nikolay Gueorguiev, issued a statement on Feb. 13 saying the credit was meant to address “immediate macroeconomic stabilization as well as broad and deep structural reforms to provide the basis for strong and sustainable economic growth over the medium term.”
At the same time, Gazprom sent a letter to its Ukrainian counterpart, state-owned Naftogaz, seeking a payment of more than $2.4 billion, to cover $2.2 billion in debt, plus a penalty fee of about $200 million. The debt, which Kiev doesn’t acknowledge, will be the subject of hearings at the Stockholm Arbitration Institute in early 2016.
Discussing Gazprom’s demand on the Russian television station LifeNew, Kremlin Energy Minister Alexander Novak dismissed Ukraine’s stand on the status of the debt, saying, “Gazprom has every right to claim the funds” because the gas deliveries to Naftogaz are listed on invoices according to an active contract between the two gas companies.
So far, Naftogaz has been paying the $2 billion debt in installments. Now that Ukraine has received the IMF loan, Gazprom wants the entire debt paid now.
Ever since the autumn of 2013, when many Ukrainians were demanding closer ties with the European Union at the expense of Russia, its gross domestic product (GDP) has shrunk by about 7 percent, the IMF says. In February 2014, faced with a popular uprising, the country’s president, Viktor Yanukovich, fled to Russia, which responded by annexing Ukraine’s Crimean peninsula.
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Turkey becomes second-biggest Russian gas importer in 2014, Germany keeps leading position
Turkey becomes second-biggest Russian gas importer in 2014, Germany keeps leading position
Gazprom’s exports to Italy ammount to 21.6 billion cubic meters which makes it the third-biggest importer
MOSCOW, February 13. /TASS/. Russian Gazprom increased gas exports to Turkey by 2.3% in 2014 compared with the previous year, while cutting supplies to its two biggest European customers – Germany and Italy, the gas giant reported on Friday.
In 2014, Gazprom exported 27.3 billion cubic meters of gas to Turkey, the report said. Germany kept its position of the biggest importer of Russian gas last year, though Gazprom cut its gas supplies to Europe’s biggest economy by 3.7% to 38.7 billion cubic meters.
Gazprom’s exports to Italy dropped by 14.4% in 2014 to 21.6 billion cubic meters of gas.
The other Gazprom’s customers in Western Europe also cut the volume of purchased gas last year. Russia’s gas exports to France totaled 7 billion cubic meters, to Finland – 3.1 billion cubic meters, to Austria – 3.9 billion cubic meters, to Greece – 1.7 billion cubic meters, to the Netherland – 3.5 billion cubic meters, to Switzerland – 0.3 billion cubic meters, to Denmark – 0.4 billion cubic meters and to Britain – 10 billion cubic meters.
The total volume of Russian gas exports to Western Europe dropped by 3.7% in 2014 to 117.92 billion cubic meters.
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Could Turkey Become the New Ukraine?
Could Turkey Become the New Ukraine?
The deepening crisis in Ukraine is boosting Turkey’s decade-long efforts to establish itself as the lynchpin in energy flows from eastern providers to European customers.
On February 8, Turkish Energy Minister Taner Y?ld?z and Gazprom Chief Executive Officer Alexei Miller surveyed possible routes for the so-called “Turkish Stream” gas pipeline, a multi-billion-dollar project that could funnel up to 63 billion cubic meters of natural gas under the Black Sea from Russia to Turkey, and on to Greece and the European Union.
The project, announced by Russian President Vladimir Putin during a December 2014 state visit to Turkey, shook the energy world. It would supersede the partially built Russia-to-Bulgaria “South Stream” pipeline.In mid-January, Moscow announced Turkish Stream would replace its existing pipelines crossing Ukraine to European markets.
Construction of the Turkish Stream’s first section should be completed by December 2016, according to Gazprom.
The pipeline’s cost and size leave lots of room for doubt about whether the project will ever be realized. Skeptics suggest it is a mere bargaining chip for Moscow in ongoing maneuvering with Brussels over Ukraine-related sanctions.
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Global Conflict Intensity Spikes To 7-Year High
Global Conflict Intensity Spikes To 7-Year High
If it’s not one geopolitical concern these days it’s invariably another. If today’s story isn’t weak-handed Greece escalating the rhetoric in its hopeless game of chicken with eurozone creditors, it’s ISIS ratcheting up the shock factor in a campaign to scare U.S. coalition partners away from an increasingly ineffectual bombing campaign in Syria and Iraq. If it’s not an escalation of tensions between Russia and Ukraine, it’s logrollingbetween the U.S. and Saudi Arabia with the fate of the Assad regime, Gazprom, and the Russian economy at stake. As we’ve seen over the past several months (e.g. crude in a veritable tailspin) and over the past several days (e.g. hourly news out of Greece raining on the BLS’s non-farm revision parade), markets are becoming increasingly tethered to the vagaries of geopolitics — and don’t expect that trend to abate any time soon.
Fortunately, BBVA is on the case, noting that “geopolitical analysis is becoming a key element on the agenda for 2015.” Indeed. That’s why the bank has just launched their first ever “BBVA Research conflict & social unrest monthly update.”
From BBVA, on conflict:
During January, the presence of ISIS in the Middle East continued to be a threat while the Russian-Ukrainian crisis escalated, increasing geopolitical worries in the region. In contrast, territorial disputes and geopolitical tensions eased in South-Eastern Asia. Social unrest related to demands for democracy (North Africa), together with terrorism and economic demands (Europe), have also increased……key hot spots continued to be the Russia-Ukraine and ISIS conflict. The Russian-Ukraine crisis escalated again in January (see our previous hot topic) after a relatively calmer period during October-November. This triggered a new meeting in the EU level to discuss new sanctions. The situation in neighbouring countries (Armenia, Belarus, Georgia…) also remained tense. In the Middle East, the International coalition forces regained some ground in Northern Syria (Kobane) and were able to stop the advance of ISIS in Iraq. However, it will take more time to secure peace in the region. Tensions also increased in Western Europe after the attacks in Paris and in Belgium.
And on protests:
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Expanding Russia Issues Europe An Ultimatum
Expanding Russia Issues Europe An Ultimatum
Don’t tell the West, but Vladimir Putin isn’t changing. The Russian President has skipped their little ‘lesson’ on 21st century politics in favor of his own, unadulterated, version. In what we’ve come to expect, Putin is set to formally absorb South Ossetia – Georgia’s breakaway republic – and Gazprom is prepared to deny Europe up to one-quarter of its annual exports to the continent. What’s more, the conflict continues in Ukraine and allegations of Russian financing are growing louder.
As we remarked earlier, Russia has enjoyed a less than ideal start to 2015. In line with crude prices, the ruble has tumbled nearly 60 percent since its high last June. The country is hemorrhaging its foreign exchange reserves and desperately trying to rein in capital flight, which hit record levels in 2014 and is on track for more of the same this year. On Friday, Moody’s Investors Service slashedRussia’s credit rating to the lowest investment grade, with a cut to junk looming. The ratings cuts – which also targeted oil and gas companies Gazprom, Gazprom Neft, and LUKoil – represent serious stumbling blocks, but Western sanctions remain the primary source of Russia’s financing woes.
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Ukraine Will Have Russian Gas, For Now
Ukraine Will Have Russian Gas, For Now
Kiev’s payment of $150 million to the Russia’s government-owned gas monopoly Gazprom will keep supplies flowing into Ukraine for at least the first quarter of 2015.
Gazprom said Dec. 31 that Ukraine’s gas company, Naftogaz, had paid in advance for 1 billion cubic meters of Russian gas, including 300 million cubic meters fuel it had paid for in December but had not used. That amount is to be shipped in January.
Russia and Gazprom have not been shy about simply cutting off the flow of gas to Ukraine for non-payment. It did so in 2006 and 2009 and again just last June. In doing so it threatened gas supplies to European Union customers, who get about one-third of their gas from Russia, half of it piped through Ukraine.
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Kyrgyzstan Looks to Alternative Fuels Ahead of Looming Winter Shortages
Kyrgyzstan Looks to Alternative Fuels Ahead of Looming Winter Shortages.
Each winter in Kyrgyzstan the energy situation seems to worsen; blackouts last longer, and officials seem less able to do anything to improve conditions. This year is expected to be particularly difficult.
The winter heating season has not even begun and already lots of people are bracing for months of hardship. A video, posted October 12 on YouTube, depicting Kyrgyz doctors having to perform open-heart surgery amid a sudden blackout, is helping to heighten anxiety about the coming winter. In another alarming signal, Bishkek’s local energy-distribution company, Severelectro, sent out advisories with recent utility bills, describing the situation as “critical” and begging customers to conserve electricity and use alternatives to heat their homes.
Southern Kyrgyzstan has been without gas since April, when Russia’s Gazprom took over the country’s gas network, and neighboring Uzbekistan said it would not work with the Russians. That has forced residents in the south to use precious and expensive electricity to cook, or resort to burning dung and sometimes even furniture. On top of that, a drought has hampered operations at Kyrgyzstan’s main hydroelectric plant at the aging Toktogul Dam.
