Just Gazpromming along
Posted by Heading Out on March 25, 2007 - 8:10pm
Some measure of the importance of Gazprom to Russia can be estimated by the BBC story which notes that the company provides half of Russia’s energy, and 15% of its hard currency earnings. Of equal importance to those who would buy some of that energy Gazprom will likely send it to you through it’s pipeline company, Tyumenstransgaz.
Over the past couple of years we have seen a decline in the speed with which Russia is developing its major gas reserves. Shtokman is now considerably delayed, as is the anticipated development of the Kovykta field. These make it less likely that the US will see much of this gas production, which seems increasingly intended for domestic and European consumption. But that may also be a concern for the Chinese and Asian markets, whose increasing needs were supposed to be met, in part, by increased exports from Russia.
The Chinese President is sufficiently concerned that he is making another trip to Moscow on Monday to strengthen their claims. Russia now, apparently, will more overtly play China off against Europe as competitive customers for their oil, and is not rushing to establish the pipelines for the Eastern transport of fuel.
On his trip to China last year, Putin also announced plans for building a pair of natural gas pipelines to China within five years. Some experts voiced skepticism, saying that western Siberian gas reserves are already stretched thin and used for gas delivered to European Union countries. While Russian officials said the EU would remain the main export market for Russia's gas, the Kremlin warned that it could shift some of the supplies to China as part of its hard bargaining with the EU over energy issues. "China and Europe are becoming rivals for Russian gas," Kosachev said.
And it might be noted that, while plans are going ahead for the pipelines, environmental issues are already being raised just in case they are needed, further down the line.
It also appears that the Chinese are willing to pay the higher prices that the Russians have been holding out for, in order to ensure the supply. The influence that Gazprom is having on gas supplies from Turkmenistan is causing some concern
Most energy experts believe Gazprom will act aggressively in the coming months to expand its already considerable leverage over the Central Asian natural gas market, said David A. Merkel, who from June 2005 until last month served as the director for Aegean, Caucasus and Central Asian affairs on the National Security Council in the White House.
"The question is, for Gazprom to do what it wants to do - improve market share in Europe over the next several years - it needs to do one of three things: either make a lot of investments in its infrastructure three years ago, drastically change the domestic market of its gas, or have a stranglehold on Central Asian gas," he said at a March 15 event, "Engaging Post-Turkmenbashi Turkmenistan," hosted by the Central Asia Caucasus Institute in Washington.
The Chinese continue their diplomatic efforts elsewhere, now seeking additional ties with Venezuela
he China National Petroleum Corp. will look to develop heavy crude oil production in the Orinoco Belt and cooperate with Venezuela in building three refineries in China and a "super-fleet" of crude tankers, the Information Ministry said.
"The United States as a power is on the way down, China is on the way up. China is the market of the future," Chavez was quoted as saying by an Information Ministry statement after meeting CNPC President Jiang Jiemin in Caracas.
China's economic expansion has turned it into the world's second-biggest oil consumer. OPEC member Venezuela was the fifth-biggest oil exporter to the United States in January. Analysts reckon it pumps about 2.7 million barrels per day.
Chavez has ambitious plans to lift oil exports to China to lessen its dependence on its arch-foe the United States, saying it hopes to send 1 million barrels per day to China by 2012.
This optimistic target follows an earlier goal of more than tripling oil exports to China of 160,000 bpd by 2009.
However, as with the Russian promises, it is going to take a lot of effort to ensure that product finally arrives in Beijing.
As a result the US, seeking additional supply sources, continues to seek resources from around the Caspian Sea. The United States has just signed an additional agreement with Azerbaijan hoping, though this route, and the links to Turkey, to be able to secure additional supplies. Armenia, meanwhile, is starting to receive some gas from Iran but it would appear that our old friends might have a hand in the distribution
To achieve the planned volumes of Iranian gas supplies to Armenia, the Armenian-Russian ArmRosgazprom Company will construct further 197 km of the pipeline into the Armenian territory. The first stage of the project is estimated at $33mln, of which 75% are lent to the Armenian side by the Export Development Bank of IRAN, and the rest is to be funded from Armenian budget. The construction’s prime contractor at this stage of the project is the Iranian Sanir Company.
ArmRosgazprom on its behalf plans to invest 52bn drams (about $144.5mln) in increasing the carrying capacity of the Armenian gas-transporting system at the section Kajaran-Ararat. Increasing the system’s carrying capacity will let import to Armenia about 2.3bn cubic meters of Iranian natural gas annually, starting as early as in 2008. Today, the system allows import of about 300-400mln cubic meters of Iranian gas.
. It is sad to note that this happened just before the Armenian Prime Minister died.
Maybe, if Gazprom takes a hand, the pipeline to carry Iranian gas to India may finally happen.
"No country can debar India from this project. We are committed to this," Deora said during a visit to India's financial capital Mumbai.
His comments follow reports that US Energy Secretary Samuel Bodman, during a visit here this week, had urged India to drop plans to construct the pipeline saying it would help Iran build nuclear weapons.
Deora did not give any timeframe for completion of the pipeline though last month he said an agreement on the pipeline could be signed by June.
But don't hold your breath about the near-term prospects for the pipeline. And, unfortunately for India, Myanmar is also refusing to sell gas to them, even though they are close.
Myanmar last week told an Indian delegation that it wants to sell gas from off-shore block A-1 and potential discoveries in A-3 block to China, highly placed sources said.
India's ONGC Videsh Limited and GAIL have 30 per cent stake in A-1 and A-3 blocks, while South Korea's Daewoo is the operator with 60 per cent stake.
South Korea's KoGas has the remaining 10 per cent interest.
China has told Myanmar that it will lay about 900 km pipeline in Myanmar to transport the gas from the off-shore area to Myanmar-China border.
The distance from the gas field to India-Myanmar border is just 290 kilometres, making it the most economical export option but Myanmar's military leadership preferred to go with China.
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US imports of natural gas from Canada are expected to decline in the next few years. I understand the hope is to import LNG to make up for this shortfall. Additional LNG will also be needed to offset the growing gap between US demand and declining US production.
What kinds of overseas arrangements is the US making to assure that sufficient LNG will be available? You mention the US trying to seek resources around the Caspian, including an agreement with Azerbaijan. This appears only to be pipeline natural gas. Is there anything "in the works" to assure that there will be more LNG on the world market?
For LNG systems to work there are four things that have to be in place. The first is a reliable supply of natural gas (ensuring an adequate return on the investment required for the remaining three); then there must be a liquefaction facility; an adequate supply of LNG tankers, and a regasification facility at the far end. One cannot create domestic acceptance of a regasification facility, and there has been some considerable debate as to where the additional facilities will ultimately end up I gave some information here , Glenn has written about the one on Long Island Sound, bunyonhead has written about the coming plants in the UK, and Dave has an excellent primer on the topic.
I was trying to ask about the first of the first two of the things listed - the reliable supply and the liquefaction facilities. If we can't get that far, the LNG tankers and the regasification facilities at our end don't matter.
The article sounds like we are working at least somewhat on the reliable supply issue - but is this going to actually lead to a significant increase in the amount of LNG on the world market?
Qatar is probably the largest producer . Nigeria also has several trains working, the Angolan LNG site has a really cool intro that makes it worth a visit just for that, and Algeria has been doing it the longest . There is a more comprehensive list here
Oops, I also missed Australia , Yemen which all of a sudden is having some problems, and Iran . At one time Indonesia was very prominent, but it has been having problems and has not been fulfilling some contracts, as well as having domestic use issues.
Here's some factors which could undercut Australia's LNG exports when present contracts have expired;
1) a northwest to southeast transcontinental pipeline
2) large truck fleets switching from diesel to CNG
3) fear of future carbon taxation leading to more combined cycle gas fired generation and backup for renewables.
Actually after some more research, I see that Dave Cohen covered the Pars field in his article in (June 2006 http://www.theoildrum.com/story/2006/6/8/155013/7696#comments) -- and provides a link to a Simmons & Co report on the Pars gas field http://www.simmonsco-intl.com/files/Qatar%20Report.pdf
According to the report:
"By 2015, Qatar will account for approximately 1/4th of the world’s LNG liquefaction capacity. Calculated differently, approximately 1/3rd of the expected growth in global LNG supplies from now through 2015 are expected to come from the North field (Pars) alone."
Thus, LNG expansion depends to a large degree on a gas field (Pars) that is not understood fully geologically (from the Simmons report) and could be disputed territorially by Iran and Qatar.
Middle Eastern reserves are mainly in Qatar and Iran. What is interesting is that Qatar's main gas field, Pars, -- and the largest gas field in the world -- is offshore and is split between Iran and Qatar (North Pars lies in Iranian terrority and South Pars in Qatari terrority). http://en.wikipedia.org/wiki/North_Field Whether this slows down development remains to be seen.
Most projections of LNG growth rely heavily on Qatar's contribution. I have yet to see any analysis that takes into account the fact that Pars lies half in Iran and half in Qatar -- whether this could cause delays, considering the tense political situation regarding Iran.
Note that supply is going/is a large problem for LNG, as 56% of the world's known gas reserves are uncommitted, but 84% of the uncommitted reserves are in the Middle East and the FSU.
Russia is not enthusiastic about committing its reserves to LNG (mainly the gas is in Russia with smaller fields in Khazahstan and Turkmenistan). The FSU's gas fields with the exception of Shtokman are far removed from sea lanes.
By the way, there are several very good presentations on LNG supply and other issues at Jensen Associates here: http://www.jai-energy.com/index.php?page=pubs
who's holding their breath waiting for peak natural gas and peak oil?
Sorry if I mis-phrased that, I was trying to voice a little scepticism about the imminence of a pipeline from Iran to India.
Doug,
I don't think the idea of "peak natural gas" will mean anything here in Canada. We are tearing over the flat land in our NG "4 By" and all we can see is a nice flat landscape in front of us. But somewhere, close I think, there is a relativly steep cliff cutting that road and we won't see it until we have lift off. Like our good friend W. Coyote we will flail franticly (drill like mad) trying to prevent the fall but we will go down anyway.
In western Canada there is a place called "Buffalo Jump" where the natives drove bison to harvest them by driving them over a cliff. Our NG production is headed there. There is also another place called "Head Smashed In", .. same purpose. We Canadian NG consumers will head to that one.
Don
HO - Thanks for the world perspective. US's news are hopelessly ratings driven. It appears supplies are tight for Europe and Asia both? Liquification is a lot more expensive that piping it correct? Looks like the US will have to pay a very heavy premium for LNG or am I missing something?
If I understand HO correctly, supplies are tight for Europe and Asia both, and worse, amongst all those currently on the playing field, we have China willing to bid higher than many others, at least so far. This is the ratcheted bidding war for a resource that Westexas talks about, only in this case the commodity is natural gas.
In my opinion, there is going to be tremendous resistance amongst investors towards LNG. Basic supplies appear tight, meaning the market for LNG is going to be small. This fact alone is liable to curtail building of many liquefaction facilitys, of LNG tankers, and of regasification facilities. So HO's 4 part chain is endangered on 3 counts due to the supply question. Why invest billions for a product that may never materialize?
Unfortunately, this means more coal because we have coal and it does not need liquification facilities, tankers, or regasification facilities.
Ghawar Is Dying
The greatest shortcoming of the human race is our inability to understand the exponential function. - Dr. Albert Bartlett
I am afraid you aren't.
Message from: http://www.investorvillage.com/smbd.asp?mb=2234&mn=49929&pt=msg&mid=1707482
Cantarell down 18% yoy in February
February production statistics now available on SIE (http://sie.energia.gob.mx/)...
in bpd........................................... Feb 06 ................. Jan 07 .................... Feb 07
Total Cantarell fields .............. 1,911,880 ............. 1,591,381 ............. 1,566,721
Total KMZ (incl "otros") .............. 391,745 ................. 462,247 ................ 495,206
Total Mexico ........................... 3,310,861 ............. 3,142,744 ............. 3,147,628
The bad news is that both Cantarell and total production are down from year-ago levels (by 18% and 5% respectively). In testimony before the Energy Committee of the Mexican Senate in November 2006, PEMEX CEO Luis Ramirez Corzo said that production at Cantarell would decline by an average of 14% per year between 2007 and 2015.
The good news is that there is now a more-than-one-month recovery from the levels of last December, when total Mexican production dropped below 3 million bpd. The new PB-KU platform has allowed substantial production increase from KMZ, which is expected to produce at a rate of 800,000bpd in 2011.
-------------------------------------------
Regards
Secratary of Energy Bodman has, I've heard, stated that we'll soon be importing 20% of our natural gas consumption from Russia. I assume that means LNG.
Most of this LNG will go to fuel electric generating plants. In other words, if we stopped burning natural gas for electricity, we wouldn't need to be dependent on Putin's good graces for energy.
What are the odds that Putin or his successors will NOT use our dependence on their LNG to their political advantage and our disadvantage?
I think you might be referring to this article . However the 20% of US supply would not come about until 2030
. However since the initial intent was that we would get some of the LNG from Shtokman, and this has now, likely, just been set aside for European use, our optimistic assumptions that we will get significant amounts from Russia may, in the end, turn out to be only the sort of happy ending that one sees in movies
Heading Out, you say...
"our optimistic assumptions that we will get significant amounts from Russia may, in the end, turn out to be only the sort of happy ending that one sees in movies"
Help me out on this one, how would the U.S. becoming dependent on Russia for it's heat and power be a happy ending?
This is the same problem I have with the Saudi peaking issue, in which we hope and pray that Saudi Arabia is not near peak, but can provide lots and lots more oil for decades to come! Oh happy day.....but how does it help us to be bled to death decade after decade, buying crude oil, and soon, natural gas, from nations that we will call, and this is putting it politely....of "questionable" affection for the U.S. and the Western way of life we know and love?
This devotion to oil at any and all costs, and willingness to accept any level of slavery to avoid change is starting to border on a cultural disorder.
Roger Conner Jr.
Remember, we are only one cubic mile from freedom
Roger,
Your question (how does it help us to be bled to death decade after decade, buying crude oil and natural gas from nations that we will call of "questionable" affection for the U.S. and the Western way of life) is an excellent one.
The question of how the US can live without imports of foreign oil and gas is more complex though....
Of course, those of us that spend time on this (and other) sites know a lot of partial answers, and we also know that the sum of the parts of the partial answers goes a long way in providing the total answer.
However, the great unanswered question remains: which politician or political body has the guts (stupidity?) to try to sell these solutions to the American people, and how are they going to do it?
Roger - at the end of the movie "Oil Storm" (my reference through the click) the short term supplies of the US, devastated by a hurricane in the Gulf and a terrorist attack on Ras Tanura, are reassured by a tanker fleet bringing oil from Russia. Given the devastation that the oil shortage was portrayed as causing (and the sorts of problems we had back in the 70's), the problems were assumed resolved by a couple of tankers arriving - hiding any longer term issues.
As we wrote at the time the movie came out this was very unrealistic, but the question that I was sort of asking was - if not Russia, then who? Getting 10% or so of our supply from them at least gives us more time for alternate sources to be brought up to speed. If, as most of us anticipate, we have a whole lot less than 20 years (the Hirsch period) then we are going to need just about everything we can bring along, and if this includes the Russians then that gets us some more breathing room.