 Gazprom Signs South
Stream Deal with Serbia
by Jacob Gronholt-Pedersen Dow Jones Newswires 12/24/2008 MOSCOW
Russia and Serbia Wednesday finalized a major energy deal, which
includes building the controversial South Stream gas pipeline across
the Central European country en route to Western Europe undermining the
European Union-backed Nabucco gas pipeline. The deal, which was
signed by Russian President Dmitry Medvedev and his Serbian counterpart
Boris Tadic in Moscow on Wednesday, also involves Russia taking control
of Serbia's state oil company Naftna Industrija Srbije, or NIS, and
envisions building gas storage facilities in Serbia.
The South Stream pipeline, which is to be developed by Russia's
state-controlled gas giant OAO Gazprom and Italy's Eni SpA, is to
become a major artery bringing gas from Russia to southern Europe. The
pipeline has raised concerns in Europe over energy security. Critics
say it is designed to undermine the E.U.-backed Nabucco pipeline
intended to help the E.U. diversify its natural-gas supply by bringing
gas from Azerbaijan and Central Asia to the heart of Europe.
Russia already supplies a quarter of Europe's gas demand, and the South
Stream will carry another 31 billion cubic meters of gas a year to
European customers, once it is finished. Deliveries are scheduled to
start by 2013, but Gazprom said last month that it may revise its South
Stream pipeline project due to the global financial crisis.
The pipeline will run from under the Black Sea to Bulgaria and then
branch into two stretches. The first stretch is expected to run to the
southwest via Bulgaria and Greece to Italy. The second stretch is
expected to run to the northwest via Bulgaria, Serbia, Slovenia, and
Austria. The energy deal between Russia and Serbia had been
long-awaited. The two sides signed a memorandum of understanding in
January this year, but the deal had been delayed due criticism from
sections of the Serbian government that NIS, the state oil company, was
being sold too cheaply.
Under the deal, OAO Gazprom Neft, the oil arm of Gazprom, will buy a
51% stake in NIS for EUR400 million and invest EUR500 million in
upgrading its facilities before 2012, Gazprom Neft said. NIS is one of
the biggest oil companies in Central Europe. Apart from refining
capacity of 7.3 million tons a year, the company owns 500 retail petrol
stations and produces 1 million tons of crude oil a year, or around
20,000 barrels a day, in Serbia and Angola.
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Gazprom increases gas
exports by 6 %
Source: http://en.rian.ru 14-11-08
Gazprom increased gas exports in January-September 2008 by 6 % year on
year to 182 bn cm, the Russian energy giant said.
In the third quarter, the average price for gas sold to Europe was $
473 per 1,000 cm, an almost 13 % growth on the second quarter, and a 70
% growth on last year's third quarter.
Gazprom gas supplies to Western Europe grew 15 % to 90.6 bn cm, and 25
% to 32.3 bn cm to Central and Eastern Europe.
Gas supplies to the Russian market grew 4 % to 239 bn cm.
Gas supplies to former
Soviet Union countries decreased by 4 % to 59.2 bn cm.
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Russia receives
conflicting signals from Europe on gas import
Source: http://capital.trendaz.com 18-11-08
Russia receives extremely conflicting signals from the European
partners concerning whether Europe needs the Russian gas, Alexander
Medvedev, general director of Gazpromeksport Open Joint Stock Company
(OJSC), said at the sixth international forum Russian Gaz-2008 in
Moscow on 18 November.
"The European Union's (EU) action plan on energy security and
solidarity… is one more evidence of such uncertainty, said Medvedev.
"Russia is one of major gas and coal providers of the EU ad the second
oil provider after OPEC. We are surprised that import of energy
resources are not regarded important at priority system of new energy
policy," the general director of Gazpromeksport said.
In accordance with forecasts of the European Commission, the whole gas
import of the EU will drop by 14 bn cm to 284 bn cm in 2020 as compared
to 298 bn cm in 2005 with nominal oil price at $ 100 per barrel (under
forecasts of the International Energy Agency, this price will be in
power at least in two years).
The European Commission forecasts that need in additional import will
slightly rise by 39 bn cm a year with nominal cost at $ 51 per barrel
and the whole import will amount to 337 bn cm a year in 2020.
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Georgia and Azerbaijan
sign gas deal
17-11-08 Source: http://www.upi.com
Georgian Energy Minister Alexander Khetaguri signed an
agreement with Azeri oil officials to establish a mechanism for gas
imports from 2009, officials said.
Rovnag Abdullayev, president of the State Oil Co. of Azerbaijan, and
the Georgian energy minister signed a memorandum of understanding for
gas supplies through a variety of subsidiaries.
The agreement has SOCAR selling gas to Georgia under a mechanism pegged
to existing gas deliveries from the Shah Deniz gas field in Azerbaijan.
The MoU also gives SOCAR access to gas distribution arteries in Georgia.
Georgian President Mikheil Saakashvili said the agreement will secure
energy supplies to his country as well as create employment
opportunities amid the possibility of a global recession.
"Within the framework of the 50-month program the government will be
able to keep its promise and ensure 80 % of gas supplies for the
population," he said. "Regular gas supply will also allow opening of
new enterprises and tackling of the unemployment problem."
Azerbaijan is a primary natural gas supplier to Georgia, with
deliveries approaching 53 mm cfpd from SOCAR alone.
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Turkmenistan cuts
2008 gas output target
20-11-08 Source: http://www.upstreamonline.com
Turkmenistan, central Asia's largest natural gas
producer, will cut gas output to 50 bn cm this year from last year's
72.3 bn cm, Oil and Gas Minister Annaguly Deryaev said. "We plan to
produce 50 bn cm (this year)," Deryaev told an energy conference in
Ashgabat.
The government had previously said Turkmenistan would produce 81.5 bn
cm this year, but the country halted supplies to neighbouring Iran in
the first quarter amid a pricing row which led to a cut in output.
Turkmenistan and Iran are due to sign a new supply agreement in
December.
Turkmenistan sells most of its gas to Russia's Gazprom, but seeks to
develop new fields and diversify exports.
Deryaev also said Turkmen oil output would be 10 mm tons this year, the
same as last year.
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Russia approves Caspian gas pipeline accord for
ratification
12-11-08 Source: http://pipeliners.blogspot.com
Russian Prime Minister Vladimir Putin has signed a
ruling to submit an agreement on the construction of a natural gas
pipeline along the Caspian Sea coast to the parliament for ratification.
The governments of Russia, Kazakhstan, and Turkmenistan signed the
agreement in December 2007.
The pipeline will run from Turkmenistan through Kazakhstan and link up
with Russia's pipeline system. It will be built parallel to an existing
gas pipeline and will transport up to 20 bn cm of Central Asian gas
annually once completed.
Russia's Energy Ministry expects construction of the pipeline to start
sometime in July-December 2009, Deputy Energy Minister Anatoly Yanovsky
said earlier this month.
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Syria
considers opening its doors
20-11-08 Source: http://www.upi.com
Syria is struggling to meet its domestic energy
demands amid the slumping global economy, prompting the isolated
country to consider opening its doors. British Foreign Secretary David
Miliband was in the capital, Damascus, in an indication of Syria
embracing the broader regional community. The worldwide fiscal
crisis also puts Syria in a position where it is unable to develop its
infrastructure to meet domestic demands.
"Energy is a problem," says economist Nabil Sukkar with the Syrian
Consulting Bureau. "Our energy-generating capacity is below demand, and
our oil reserves are falling, while our gas reserves have not been
developed rapidly enough."
Syria has faced international pressure from the US effort in Iraq,
turmoil in Lebanon and the Israeli-Palestinian conflict. With its
economy dependent on oil revenues and crude prices dipping below $ 50
per barrel, Syria is finding itself considering a change in posture.
Syrian Deputy Premier of Economic Affairs Abdullah Dardari said
basingits energy prices on market conditions, for example, may be the
best way forward. "We are developing a private partnership policy
to bring in investments in the energy sector," he said. "The essential
prerequisite for a sustainable energy policy is to have the correct
prices."
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Gazprom to reduce
gas prices for Europe
12-11-08 Source: http://www.energia.gr
Russian state-run energy giant Gazprom will reduce the
price it charges European nations for gas from next year, company head
Alexei Miller said. "It's absolutely clear that prices for gas
from the start of 2009 for European consumers will go down," Gazprom
chief executive Alexei Miller said.
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Turkey invests about
$ 3 bn in Caspian energy transportation
14-11-08 Source: http://capital.trendaz.com
"Turkey has invested about $ 3 bn in realization of
projects on energy resources transportation from the Caspian region,"
Turkish President Abdullah Gul said at the 4th energy summit in Baku on
14 November. "Turkey continues cooperation within the framework
of development and realization of projects, such as Nabucco and TGI,"
Gul said.
The Turkish President expressed his hope that the Caspian oil,
particularly, Turkmen oil, will be transported via these routes.
"Turkey continues cooperation with Iraq in delivery of energy resources
and the Northern African countries, including Algeria and Egypt," Gul
said.
According to Gul, issues on gas transportation to the European markets
are discussed with these countries.
"It is necessary to pay special attention to ecology and social issues
while realization of energy projects. Turkey is seriously interested in
projects, which reduce use of the Turkish straits," Gul said.
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Europe's Growing diesel fuel demand concerns about security
Source: http://online.wsj.com by Guy
Chazan16-11-08
For years, Europe's automobile industry has been betting on
diesel-engine cars. And drivers have lined up to buy them, attracted by
their greater fuel economy and tax incentives that encouraged diesel
use over gasoline.
But now, the rise in demand for diesel that resulted from that bet is
contributing to a supply gap in Europe, highlighting a worrying
imbalance in the region's refining industry.
The supply-demand mismatch is so serious -- diesel-engine cars now
account for about half of new cars sold in Western Europe -- that it is
raising concerns in the upper echelons of the European Union about what
effect the block's reliance on diesel imports might have on prices and
energy security over the long term.
"The growing dependence could become a problem," says Jan Panek, an
official at the European Commission's Energy and Transport Directorate,
"if the situation substantially changes in an unforeseen way."
A big concern is Russia, which supplies the majority of Europe's
imported diesel. Russian oil companies refine much of their crude at
home because of a tax system that levies higher export duties on oil
than on petroleum products. If that were to change, however, Russia
could decide to export more crude oil and fewer products, creating a
big headache for the EU, which doesn't have the capacity to refine all
that crude itself.
Europe currently relies on imports for about 15 % of its diesel needs,
according to the European Petroleum Industry Association, a
Brussels-based lobbying group that represents European refiners. That
figure could grow significantly. A report from Houston-based consulting
firm Purvin & Gertz, commissioned last year by the European
Commission in partnership with OPEC, predicts that Europe's imports of
diesel and gasoil -- a petroleum product used as a diesel fuel and
heating oil -- will almost double by 2020, to 67 mm tpy, or 1.4 mm bpd,
from 34 mm tpy, or 700,000 barrels, now.
Historical anomaly
A growing appetite for dieselexists not only in Europe, but in China,
India and other countries in Asia where it is used widely in industry
and for electricity generation, increased pressure on tight
global-refining capacity, helping push up prices earlier this year.
From January to September, the average price of a litre of diesel in
Europe's biggest economies -- France, Germany, Italy, Spain and the UK
-- rose almost 14 % to about EUR 1.42, compared with a 7.7 % increase
to about EUR 1.40 for a litre of unleaded gasoline, according to the
Automobile Association, a British motoring group. (That is equivalent
to approximately $ 6.94 a gallon for diesel versus about $ 6.84 a
gallon for gasoline.) The average price of both fuels fell in October,
with diesel retreating to about EUR 1.30 a litre and gasoline to about
EUR 1.29.
Before this year, diesel had been cheaper than gasoline at pumps in
Europe, largely because of tax rates: In many European countries,
governments view gasoline as a consumer luxury and tax it heavily.
Diesel, vital to the economy because of its use in transport,
construction and industry, is taxed less.
That, in turn, encouraged car makers in Europe to start manufacturing
diesel-engine cars. At first, engine quality was poor, but as
technology improved, they became more popular. Governments helped by
imposing vehicle and road taxes that favoured diesel's better fuel
economy and lower carbon-dioxide emissions compared with
gasoline-powered cars. The result is that in certain European
countries, like France and Belgium, diesel-powered cars now account for
more than 70 % of new cars sold.
But the switch to diesel in Europe wasn't matched by a corresponding
increase in diesel production, in part because it is more costly for
European refiners to install the equipment to make diesel compared with
the equipment to produce gasoline. As a result, European refiners
produce too much gasoline for the domestic market and not enough
diesel. They compensate by exporting gasoline to the US -- 26 mm tons
in 2006, accordingto the Purvin & Gertz report. But with a
weakening US economy depressing demand for gasoline, fears are growing
about a gasoline glut in Europe.
"People didn't see the coming diesel-demand boom and the diminishing
demand for gasoline," says John Waterlow, an Edinburgh-based analyst
for consulting firm Wood Mackenzie. "They assumed that gasoline demand
would go on growing in Europe as more and more cars were bought. They
underestimated the fact that a lot of the new cars were diesel."
Tougher fuel standards
The tightening market for diesel could get worse when new EU fuel
specifications requiring an ultra-low sulphur content for the fuel come
into force next year. Many Russian refineries won't be able to meet the
new standards, industry observers say.
"There are real quality issues," says Neil Atkinson, an analyst at KBC
Process Technology, a UK-based consulting firm. "The Russians aren't
making the necessary investments and they're not keeping up with
European standards."
In a recent report, KBC said that only about 30 % of Russia's gasoil
production would meet the EU's higher emissions standards by 2015.
Some vital new refining capacity due to come on stream in Asia may
provide short-term relief. Reliance Petroleum's new refinery in
Jamnagar, India, due to begin operations in the next few months, will
substantially boost supplies: Some 40 % of its output of 580,000 bpd
will be diesel. But analysts warn that after Jamnagar, the next wave of
big capacity additions world-wide won't come until 2012.
Brewing changes
The European refinery industry says that any effort on its part to make
up the shortfall with more investment probably won't be enough to
reduce Europe's reliance on imports.
"I don't see how we can add sufficient capacity over the next decade to
handle the increasing demand for diesel in Europe," says Panos
Cavoulacos, president of the European Petroleum Industry Association.
He says that several European refineries have been upgraded over the
last decade orso to produce more diesel, but that few available sites
are left for more upgrades.
The Purvin & Gertz study drew a similar conclusion: "The long-term
outlook is such that the European market will continue to rely heavily
on trade to balance demand," the report says.
To be sure, the high pump price of diesel has started to put a dent in
demand in the developed world, easing the gasoline-diesel imbalance,
according to Wood Mackenzie's Mr Waterlow. And the EU says it is
preparing to change the block's energy-taxation rules to remove the
incentives that encourage diesel use over gasoline.
If diesel prices remain high over the long term, there will be other
responses, says Olivier Abadie, a Paris-based refining expert at
Cambridge Energy Research Associates. Car makers likely will try to
make more energy-efficient gasoline-powered cars. There also will be
more impetus to develop autos powered by alternative fuels like natural
gas or liquefied petroleum gas.
"If people won't be able to afford diesel, they will go to other
fuels," says Mr Abadie.
Mr Chazan is a staff reporter for The Wall Street Journal in London.
Write to Guy Chazan at guy.chazan@wsj.com
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