revista presei pe energie 15 februarie – part III

2011/02/15 EU moves to secure Central Asia energy

The European Union’s energy concerns are shaping its dealings with Uzbekistan, Kazakhstan and Turkmenistan — the three energy-rich nations of Central Asia.

The 27-nation EU and its executive arm, the European Commission in Brussels, has started the New Year with legislative and diplomatic initiatives which point to a closer, more sustained and financially important energy relationship with Central Asia’s major hydrocarbon producers.

First, instead of treating Uzbek President Islam Karimov like a pariah for his record on democracy and human rights, EU leaders met with Karimov last month and immediately agreed to open an office in Tashkent.

Second, the European Parliament inched closer in January to a broader energy cooperation deal with Turkmenistan by giving initial approval to putting in motion a 1998 Partnership and Cooperation Agreement (PCA) with Turkmenistan. The Euro-Parliament plans a plenary vote in May to solidify the agreement.

Parliament members gave a nod to the human rights issue in the agreement by proposing a provision that would allow monitoring of democratization in Turkmenistan.

“The agreement would be suspended if the human rights and democratization clauses will not be respected,” Member of the European Parliament (MEP) Norica Nicolai said in a debate on the issue on January 25.

But the concession to open a Tashkent office and efforts to expand its Turkmen energy relationship indicate that, while the EU isn’t turning a blind eye to human rights, it’s giving priority to boosting ties to the region.

Uzbekistan and Turkmenistan are major natural gas producers and exporters. Turkmenistan is expected by European planners to be the main source of natural gas for the proposed $10.8 billion Nabucco pipeline project through pro-Western Azerbaijan, Georgia and Turkey to supply gas to the energy-hungry economies of Western Europe.

As Central Asia Newswire (CAN) noted in the first part of this analysis, Germany’s respected former Foreign Minister Joschka Fischer has warned that the Europeans need to move fast to construct Nabucco before major East Asian and Southern Asian nations led by China and India lock up access to Central Asian hydrocarbons.

EU relations with Kazakhstan, the main oil-producing nation of Central Asia, are also moving forward. On Friday, Kazakh Foreign Minister Kanat Saudabayev held a successful visit to Brussels and pointed out that Kazakhstan’s trade volume with Europe has again exceeded the total combined turnover of the other four Central Asia nations and the three Trans-Caucasian states.

Saudabayev also negotiated a range of issues with EU High Representative for Foreign and Security Policy Catherine Ashton and focused on establishing a new cooperation framework agreement.

The current agreement on partnership and cooperation was signed 19 years ago after Kazakhstan gained independence from the disintegrating Soviet Union. It has just been renewed and extended on an annual basis.

Saudabayev also raised the issue with Ashton of removing the remaining Kazakh airlines from the European Commission’s “black list” of companies whose planes are considered not safe to fly within European airspace. Last year, the EC removed nine Kazakh air companies from its list of banned airlines.

The subjects Saudabayev discussed in Brussels contrasted with those discussed with U.S. leaders and officials on a visit to Washington.

The United States and the European Union were both critical of moves to make Kazakhstan’s President Nursultan Nazarbayev the nation’s leader for life. But EU officials focused their meetings with Saudabayev on trade cooperation, energy issues and business deals.

This difference in focus is in part explained by the fact that Central Asia is a crucial source for Western Europe’s energy. But it also reflects the fact that European leaders, like their Chinese counterparts, see Central Asia in economic terms, whereas the United States sees it primarily in human rights and democratic terms.

Russia has also lagged behind Europe in focusing on business first issues in Central Asia. But Russia, reflecting the passionate priorities of its Prime Minister Vladimir Putin, recognizes that Central Asia’s oil and natural gas — and the pipelines that pump them to the wider world — are power. Russia takes these energy issues more seriously than does the United States.

January 2011 turned out to be the month of Central Asia in Brussels, the effective capital of the European Union. Energy is driving the relationship. Expect the EU’s courting of the three resource-rich Stans to heat up in the months ahead.

RIA Novosti: European consumers demand lower prices from Russia’s Gazprom

Italian, Czech and Slovakian consumers sent requests to Russian energy giant Gazprom in 2010 asking it to lower its gas prices, the company said.

European leaders have voiced concerns over the EU’s dependence on Russia’s state-owned natural gas monopoly, which supplies the region with a quarter of its gas.

“In 2010 [Italian companies] EGL, Sinergie Italiane and ERG exercised their contractual right for an extraordinary revision of prices and turned to Gazprom Export to demand the revision of contracted prices for the supply of gas to Italy,” Gazprom said in its fourth quarter 2010 report.

The company said it had entered negotiations on a possible revision of prices to remain in the European market.

Gazprom’s supplies to Italy dropped by 31% to 13,054 billion cubic meters in 2010. In the fourth quarter they increased 12% to 5,92 billion cubic meters.

The report said that Czech RWE Transgas and Slovak SPP also requested that Gazprom reduce its supply prices. LNG Projects In Latvia And Lithuania Can BE Mutually Compatible

Poland, Lithuania, and Latvia are each planning to build a liquefied natural gas (LNG) reception terminal with a re-gasification plant on their Baltic littorals at Swinoujscie, Klaipeda, and near Riga, respectively. These projects can break Gazprom’s monopoly in the three Baltic States and Poland, creating a competitive regional market through supply diversification and mutual interconnection. The desired time-frame for commissioning is 2014-2015.

However, the three projects’ aggregate capacities, as presently envisaged, far exceed Lithuania’s, Latvia’s, and Estonia’s aggregate gas consumption requirements. This dilemma is probably inevitable. LNG projects are generally considered commercially viable at no less than 4 billion cubic meters (bcm) per year in re-gasification capacity. Thus, the projects may end up competing against each other over investment funding and over political support in the Baltic capitals and in Brussels. Perceptions of mutually inflicted redundancy can doom these projects before they ever start.

The European Commission considers a partial solution to this dilemma. It supports construction of interconnector pipelines for re-gasified LNG, from the Baltic terminals to other parts of an evolving European energy market. This would allow the imported gas to flow southward into Central Europe, alleviating the inlands’ dependence on Gazprom. The link to Central Europe can also ensure commercial viability of the three LNG projects in the Baltic region, avoiding redundancies there. The European Union’s first-ever energy summit, held in Brussels on February 4, endorsed construction of such North-South interconnectors. Financing has yet to be found, however; and EU political support seems more focused on Poland’s Swinoujscie LNG project (and a North-South interconnector from Poland), than on the Lithuanian or Latvian LNG projects (Euractiv, February 7).

As a more immediate concern, Latvia’s current government (firmly pro-Western and battling corruption) needs to make clear that it has abandoned the idea of inviting Russia’s Gazprom or its affiliate, Itera, to build the LNG terminal in Latvia. Some Latvian politicians and interest groups had discussed this project in Moscow, along with a proposed gas storage site in Latvia. These proposals continue to distort the debates in public opinion and business circles in the Baltic region.

On February 10, Latvian President, Valdis Zatlers, declared that the state-owned electricity company Latvenergo (i.e, not a Russian company) would be commissioned to build the proposed LNG terminal near Riga; and that the terminal would be linked with the pipeline systems of neighboring Baltic countries and the European market at large. Zatlers spoke while visiting with Lithuanian President, Dalia Grybauskaite, in Vilnius. The Lithuanian side welcomed these assurances, which it had awaited for some time (BNS, Delfi, February 7-10).

The Lithuanian government had recently expressed serious concerns about a possible Russian-controlled LNG terminal in Latvia. Such a project (or its serious consideration) could doom Lithuania’s LNG project to redundancy, while aggravating dependency on Gazprom in the Baltic region. The Latvian government will now be expected to substantiate President Zatler’s position that Latvia would pursue a European solution to gas supply security.

An LNG terminal built and controlled by Gazprom (or its affiliate Itera) would strengthen Gazprom’s position in the Baltic region. The Russian side wants a dual-capable terminal, not only for import, but also for exporting Gazprom’s own gas in the form of LNG in the future. It would integrate the LNG terminal with the pipeline operator, Latvijas Gaze, which is jointly owned by Gazprom/Itera and its German ally E.ON Ruhrgas. Such arrangements would enable Gazprom to block, or shape, decisions regarding gas export-import operations, prices, and the transmission of gas, in its own interest.

To facilitate such arrangements, the Russian side has proposed to build a massive underground site in Latvia for storage and for the re-export of Russian gas. Some have argued that the storage would improve the country’s supply security, earn revenue for Latvia, and provide gas for planned construction of power and heating plants. More likely, however, it would undermine Latvia’s and the region’s supply security by reinforcing Gazprom’s monopoly position, pre-empting the Baltic States’ markets, and discouraging diversification efforts.

Latvia’s geology is uniquely suited for underground gas storage. This could become an incentive for building an LNG terminal in Latvia with European investors and enlisting the European Commission’s support for the project. To qualify for such support it needs the status of a regional or common European project, which would be ruled out if Gazprom gets involved in the project. Moreover, (as Zatlers noted while in Vilnius) Latvenergo itself is interested in gas supply diversification and competitive prices through access to LNG. This electricity company is Latvia’s largest gas consumer by far.

The gas-trading and pipeline-operating company, Latvijas Gaze, is controlled by Gazprom and its Itera affilate with a combined 50 percent of the shares; E.ON Ruhrgas holds another 47 percent. Gas market reform through “unbundling” (separating supply from transportation) is mandated by EU law, and would make the LNG project substantially more credible. Estonia and Lithuania are now taking steps in that direction. Lithuania has requested assistance from the European Commission for unbundling and de-monopolization of the gas market (Postimees, January 27; EDM, February 10).

In Vilnius, Presidents Grybauskaite and Zatlers agreed that the respective LNG projects can be compatible with each other if pursued as elements of an interconnected regional market, with a regional commodity exchange for gas, and linked via Poland with the wider European market (BNS, Delfi, February 10). This political consensus at the presidential level is expected to be followed up by governmental decisions. The Latvian government in particular needs to substantiate Zatlers’s assurances about Latvia’s choice. This should rule out Gazprom’s or its proxy’s involvement in the project, guarantee the terminal’s use for imports only (not exports), and exclude linkage with a Gazprom-proposed storage site. This approach, along with energy market reform through unbundling, could facilitate EU support and European investments for both projects. Rosneft Discovers Two New Oil Fields In Siberia

Russian oil producer OAO Rosneft (ROSN.RS) has discovered two new oil and gas fields in Siberia with recoverable reserves of around 80 million metric tons each, the company said Monday.

The Sanarsky and Lisovksy deposits are located in the Irkutsk region 130 kilometers and 70 kilometers, respectively, west of the company’s Verkhnechonsky field, which is already in production, Rosneft said. Pakistan wants equal pricing on TAPI gas

Pakistan wants all partners of the proposed Turkmenistan-Afghanistan-Pakistan-India (TAPI) pipeline to pay the same price for gas, Pakistan officials told a Turkmen delegation visiting Pakistan this week.

“Pakistan wants that gas price on Turkmenistan border should be equal for all countries in the GSPA (Gas Sales Purchase Agreement),” the Islamabad-based Business Recorder news agency reported sources close to the negotiations as saying during a high-level meeting on Thursday.

The current gas pricing proposal would have Pakistan and India pay higher prices than other partners to account for security and transport fees from the Turkmen border through volatile Afghanistan.

Pakistan strongly disagrees with this approach, the source told Business Recorder.

“In this proposed mechanism, gas will be costlier for all countries, even Afghanistan that is near to the Turkmen border,” the source said.

The South Asian country also wants the price of gas to be tied to domestic gas prices, not the price of liquefied natural gas (LPG) or crude oil, the news report said. Pakistan is also rejecting India’s proposal that the price of gas in the pipeline be tied to the price of coal.

Pakistan expects to sign a final GSPA by April 30, the source said. Turkmenistan offers surplus gas, electricity to Pakistan

Turkmenistan can offer surplus gas and excess electricity to help Pakistan get out of the energy crisis that is hampering its growth, a top Turkmen diplomat said this week.

The Central Asian republic also wants to deepen economic and cultural ties with Pakistan, the Ambassador of Turkmenistan to Pakistan Sapar Berdiniyazov told a business meeting in the Pakistani capital Islamabad.

“Apart from surplus gas, we also have excess electricity that can be marketed in Pakistan for mutual benefit,” the Islamabad-based Business Recorder news agency reported Berdiniyazov as saying Tuesday.

Calling the South Asian nation one of the best investment destinations in the region, the diplomat said the Turkmen government in Ashgabat “aims to expand the cooperation between the two countries in various fields including oil, gas, energy, agriculture, science, technology, infrastructure and education.”

Speaking at an event hosted by the Federation of Pakistan Chambers of Commerce and Industry (FPCCI), Berdiniyazov said the proposed Turkmenistan-Afghanistan-Pakistan-India (TAPI) natural gas pipeline would mark a significant step in relations between the two countries.

The 1,043-mile natural gas pipeline would secure gas reserves for Pakistan’s growing economy, sourced from Turkmenistan’s supergiant Dauletabad energy field.

A Turkmen delegation is visiting Pakistan this week as part of a three-nation trip to tie down pricing and supply agreements for the pipeline, from which Pakistan wants 38 billion cubic meters of gas per year.

Meanwhile, the embassy in Islamabad is preparing a series of lectures in educational institutions to raise public awareness of the value of bilateral relations between the two countries.

For their part, Pakistani exporters could explore opportunities in Turkmenistan in diverse sectors as leather garments, detergents, clothes and pharmaceuticals, said Raza Khan, chief of FPCCI’s main office.

Khan also proposed establishing a joint business council with offices in the capital cities of the two countries. Iraq To Sign Akkas Gas Field Deal Feb 22-24

Iraq expects to sign an agreement for the Akkas natural gas field next week after clearing some demands that led to the deal being postponed at the last minute in November, a senior Iraqi Oil Ministry official said Monday.

“We are going to initial the agreement next week between Feb. 22 and 24,” said Abdul Mahdy al-Ameedi, head of the ministry’s Petroleum Contracts and Licensing Directorate.

Iraq originally planned to sign the Akkas agreement Nov. 14 with Korea Gas Corp. (036460.SE), known as Kogas, and its partner KazMunaiGaz EP JSC (RDGZ.KZ), Kazakhstan ‘s state fuel producer. The deal stalled on concerns by local authorities in Anbar province, where the field is located, who feared gas from Akkas would be exported without benefiting nearby communities.

Kogas and KazMunaiGas were awarded the field, with estimated proven reserves of 5.6 trillion cubic feet, at a bidding round held in Baghdad in October.

Kogas and KazMunaigGas have agreed to produce 400 million cubic feet of gas a day from the field, at a price of $5.50 for every barrel of oil equivalent produced.

Authorities in the western Anbar province announced last month their approval of the deal, after the central government in Baghdad agreed to meet some of their demands, such as extending a pipeline to a power station under construction in the province and agreeing to build a 250-megawatt power plant near the field.

Deals for two other smaller gas fields, Mansouriya in the eastern Dialya province and Siba in southern Basra governorate, were initialed in November. However, they are still awaiting government approval before final signatures.

“The cabinet wants to approve the three fields together,” Ameedi said. Final signatures to these three fields would take place after the cabinet approval, he said.

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