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They see it here, they see it there, they see that Gazprom everywhere*
Posted by Heading Out on April 13, 2006 - 12:23am
My discussion with Russian officials has clearly suggested that while there is no formal connection" between WTO accession and participation of U.S. companies in Shtokman, "there is an informal understanding that if Russian membership in WTO is blocked, it would be considerably more difficult for American companies to win participation in Shtokman and other major Russian energy projects," said Dmitry Simes, head of the Nixon Center, a Washington-based think tank.And that is the more positive of the two comments in the report. Once again there are up's and down's in the question as to whether we can rely on Russia to fill the gaps between supply and demand.
The IEA now expects production from outside OPEC to rise by 1.15 million bpd this year, less than previously thought, and it nudged down an estimate for growth in Russia, the world's second-largest exporter, to 2.8 percent.Oh, yes it's them again!Colder-than-usual weather in western Siberia trimmed Russian production this year and the IEA lowered its forecast of supply from oil firm Sibneft, which has been bought by Gazprom
Now, on a positive note, Gazprom has just delivered the first LNG tankerload to the UK. While this underlies the tenuous nature of UK supplies these days, it is also interesting to note where the gas came from.
Gazprom, which currently does not produce its own LNG, acquired the shipment from Gaz de France and sold it to BP PLC, said a statement released late Tuesday.Wonder if that was the shipment used to get France more gas this past winter?The volume of Tuesday's shipment was 140,000 cubic meters (4.9 million cubic feet) of gas, equivalent to 85 million cubic meters of natural gas, it said.
This follows shipments of LNG to the US, which began last September, after Katrina.
The first shipment of liquefied natural gas produced by the Russian natural gas monopoly Gazprom has made it across the Atlantic Ocean to dock in Cove Point, Maryland. The tanker Castillo de Vellalba is carrying 60,000 tons of LNG which is equivalent to 80 million cubic meters of gas.
Access to the Shtokman field is likely fairly important to future supplies of natural gas from Russia, given that their deposits in Western Siberia are reported as falling by 20-25 billion cubic meters each year.
Reserves of Shtokmanovskoye field are estimated at 3.2 trillion cubic meters of gas and 31 million tons of condensate. The plan is that a gas pipeline would be built from Shtokmanovskoye gas field to the coast of Murmansk Region, where a gas liquefaction plant will be built. It is planned that at the first stage extraction will amount to 30 bcm, of which 25-27 bcm will be liquefied and exported. The total project cost amounts to estimated $10-15 billion.
But the choice of who will partner Gazprom in the development of the field continues to drag out. And, as noted, it is no longer just an economic choice (if it ever was) but increasingly is becoming tied into geo-politics. And in that regard, Gazprom is still very aggressively looking after its own interests, and future.
Even for its allies, for example, Gazprom willingness to go along with lower prices can only go so far. It plans on now raising the natural gas price for Belarus unless a deal can be negotiated for Gazprom control of the entire Belarusan gas transportation network. (Similar to those it is "negotiating" with other countries, such as Armenia, that have been noted here in earlier posts).
However, I have also to grin a bit, since I was debating with Jerome earlier about the likelihood of a gas pipeline from Turkmenistan to India and Pakistan. Well (courtesy of Rigzone) guess what?
Gazprom chairman Alexei Miller met with Iranian ambassador Gholamreza Ansari in Moscow yesterday to discuss a possible role for Gazprom in the development of the Iranian gas sector, the company said in a statement.Of course, if I were cynical, I might wonder at the timing . . . .Gazprom identified two main projects for Russian-Iranian cooperation, namely the construction of a pipeline linking Iran, Pakistan and India, as well as Gazprom's involvement in developing South Pars.
Gazprom is also working with Canada, for example who is negotiating to build an LNG plant near St. Petersburg that would supply the Canadian re-gassification plant in Gros-Cacouna, Quebec.
In terms of alternate sources of supply, Oman is planning on doubling gas production to 70 - 80 million cu.m/day by 2011, at a cost of $10 billion. And there is similar investment commitment around the Middle East, but how much of it will be carried out by folks with a Russian accent?
*With apologies to the Baroness Emmuska Orczy.
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http://www.times.spb.ru/index.php?action_id=2&story_id=17285
Gazprom's Looming Crisis
By Nadejda M. Victor
Excerpt:
Russia controls more than a quarter of the world's gas reserves -- more than any other country. Most of the known Russian reserves (about 80 percent) are in west Siberia and concentrated in a handful of giant and super-giant gas fields. Since the early 1970s the rate of discovery for these new fields has been declining. Moreover, output from the country's mainstay super-giant fields is also steadily falling.
Huge investments are needed to replace this dwindling supply, and all the options for new production will prove costly and difficult. New fields in the far north and east of the country are distant from most of Russia's people and export markets, requiring wholly new transport systems such as pipelines. Moreover, most of these fields are found in extremely harsh environments where it is technically and financially difficult to operate.
So far Gazprom has been able to forestall crisis. Economic stagnation across the former Soviet Union and Eastern Europe since 1990 dampened gas demand. Russia, which had a surplus at the time, sharply increased its gas exports and made contractual commitments that will remain in force for many years.
But following the long stagnation, Russia's internal gas consumption is rising again as the economy expands. And new Russian policies to promote development of the country's eastern regions will, in the next few years, require large new commitments to supply gas to that region (along with spending on railroads, airports and other infrastructure).
Even when the Russian economy was in the doldrums the country was notable as a large gas consumer because of its extremely inefficient energy system. Today Russia is the world's second-largest gas user after the United States, although its economy is only one-twentieth the size of the U.S. economy.
Thxs for posting this article. I, too, claim little expertise in Eurasian energy affairs, but the phrase: "because of its extremely inefficient energy system" caught my eye.
Is this because the housing, factories, and offices are so poorly built and weather-insulated that huge quantities of natgas are required to try and maintain a comfortable working temperature against a typical Russian winter? Or is most of the inefficiency due to using old natgas electrical generators, the mentioned 33% to make electricity and heavy powerline distribution losses? The fact that most of Russia is NOT gas-metered is simply mind-blowing to me.
If I was Putin, I would be brutally honest to his public on the looming crisis, and immediately start a crash program of super-insulating homes and offices in exchange for gas-metering the structure. I think this program would achieve vital conservation results faster than the too-short required time to expand internal Russian gasfields and related piping infrastructure.
IF this insulation and conservation program can be done, then export quantities will not diminish much; it might even increase providing vital foreign earnings to help the Russian people. The success of this program will make foreign investors more willing to then ante up the required cash to expand the exploration and exports of the new gasfields.
The former Soviet republics need a crash super-insulation program of their own too. To not do this will leave them ever more prostrate as the EU can afford to outbid them for at least the next few years. Stealing gas meant for EU countries can setoff widespread violence if people are freezing to death.
To not do this first setups a vicious future example of yours & Khehab's accelerated export depletion scenario. The continued waste of inefficient natgas burning then sets off the spiraling dilemna of the last paragraph:
"The gas shortage is likely to become most acute over the next few years. If there is an unusually cold winter in 2008, the year of Russia's presidential election, then Gazprom will face a politically unpleasant choice: whether to cut off internal customers (voters) or the Western customers who are the firm's main source of hard cash."
Gazprom's mngt has very little time to be seen as a 'reliable supplier' to not only Europe, but also to the Russian proles themselves. This is my definition of being caught between a rock and a hard place-- conservation seems like the best way out, but I fear the Gazprom corporate structure is too inept and corrupt to take this path.
Bob Shaw in Phx,AZ Are Humans Smarter than Yeast?
Regarding the Russian societal energy use you can study many details on this site. http://www.cenef.ru/indexen.htm
As all other nations Russia has to conserve- and has to be more energy efficient.
At this point I suggest that the TOD have a regular look at conservation. We have to spend much less and more efficient. The "C" word must be made mainstream.
Citation from the site mentioned:
Russia's Energy Spending Is Almost Eight Times Higher Than Europe's
Vladimir Troyan, Pro-Rector for Science Research, St Petersburg State University
For each thousand dollars worth of her gross product, Russia spends 70 Giga-Joules of power. To compare with, the U.S. spends 14 GJ, and European countries, 9 GJ. This means that Russia's energy spending is almost eight times higher than Europe's. Of 100% of energy resources produced in Russia every year, we sell 35% to overseas, and we just lose 30%. All this is despite energy resources being an assurance of autonomous and stable development of the country, and energy industry issues are intrinsically related to foreign and domestic policies.
The problem is that Russia has no single strategic line for energy saving. If such a line were available, it would not be too hard to build up arrangements for interaction between state power and business.
Source: Kommersant, # 197 (# 3281), October 19, 2005 http://www.kommersant.ru/content.html?IssueId=23538
I can also recommend this presentation that has very useful data for the discussion of Russian energy spending.
http://www.cenef.ru/bulletin/HeatPaper.pdf
Thxs for responding. Could you please give us more information on the 30% of Natgas that is just LOST? Lost to theft? Lost to old leaking pipelines? Lost to flaring off? Lost to terror attacks on infrastructure? Lost to brutally cold weather fracturing welds and equipment?
Just imagine how many billions of dollars could be saved if you could stop this 30% loss!
Bob Shaw in Phx,AZ Are Humans Smarter than Yeast?
The Tragedy of the Commons is why Russia won't retrofit.
There is no immediate gain to be had.
The choice is Prevention/Redundancy v Growth.
If Russia picks P/R, it falls behind.
James
I fully understand your point, but if the Russians only have a two or three year window before their civilization degrades down to the next energy level, even Putin is at great risk from the potential social upheaval.
Maybe that is why Dubai is growing so fast: the world's wealthy see this as a safety haven to retreat to while their native countries decline.
Bob Shaw in Phx,AZ Are Humans Smarter than YEast?
I am not a petro-expert, thus the following question. Why is any flaring occurring anywhere? You would think that any natgas is worth sending to market, or else repumping underground to be sold later. Can someone explain to me why this is still occuring? It seems like such a huge waste!
Bob Shaw in Phx,AZ Are Humans Smarter than Yeast?
Sometimes, not enough natural gas is flared to be worth it. East Africa is probably the only area where significant amounts are still flared.
If we help Africa have an industrial revolution too we will be competing with them for energy resources.
If you don't flare off natural gas it's probably worse for the greenhouse effects since methane are worse than those of carbon dioxide.
I find such assertions extremely irritating. Actually this is a typical example of double standards the West has been successfully used against 3rd world countries, mostly to manipulate its own public.
How can you even think of comparing Russian and Western countries by their official GDP and then pronouncing one of them "inefficient" on that basis? How much is the GDP/capita in Russia and Great Britain for example? How much of the GDP of Western countries (USA comes first to mind) is made out of overinflated services? How about comparing energy use per capita for a change? For those idiots writing such stuff I recommend living just one winter in West Siberia on $200 per month - this may change their perceptions. Or not.
That indicates a very simple thing: an official Russia's GDP is significantly underestimated.
At least a half of russian companies pay their workers illegal screw (black money in envelop) to avoid taxes.
Many self-employed don't pay taxes at all hence they are not accounted for in official statistics.
And russian ruble is still undervalued.
But the situation changes. During the last six years the nominal russian GDP in US dollar terms grows by around 25% per year therefore the energy spending decreases by the same figure.
My guess is that the truth is (as always) in between - Russian energy use in the economy is inefficient, but nowhere near as inefficient as they are trying to present it. And there are reasons for that - the economy is weak (aside from the energy sector) and the money for efficiency invesments are simply nowhere to be found. Simply bashing Russian economy as "inefficient" is not helping at all.
For residential use, considering what Russians use the energy primary for (not freezing in the winter), and how we in the West use it (driving our cars) - the simple comparison of numbers poses some evident ethical questions.
To Heading Out's discussion re linking Shtokman gas field partner choice (American or . . . ??) to Russian accession to the WTO. My view (I have worked in renewable energy for 35 years, at one point for Exxon)
The Moscow Times (www.themoscowtimes.com) is a little English language newspaper published in Moscow. I first became aware of it when I was handed it on a Delta Air Lines flight back from Moscow in 2000. I found surprising and good information in it over 6 years. Incredibly enough, put out by the publishers of Cosmopolitan. Feisty--at least it bashes Putin as well as Bush. It gives local news, gossip, entertainment and sometimes incredibly important insights into events in Russia. (I gotta say the Asia Times, www.atimes.com is in the same vein of discussing things outside the bubble of USA MSM).
One of the earlier important Moscow Times energy-related insights and articles presaged the downfall of Yukos petroleum. Pre-Yukos events, the widespread Russian view and public opinion was that Russia assets had been bought for 5 cents on the dollar and looted by an oligarchy. Further this was seen, right or wrong, as consequent to bad and perhaps malevolent advice from American Economists under Bush I. Simultaneously the dollar's value was seen inflated and unjustifiably overvalued as the reserve currency of the world. And Yukos, working with US dollars and American oil folks was going to drain Russian oilfields in the same way that Texas was drained.
A coalition of Russian government and Russian nationalists (but excluding the "Pirates" like Boris Berezhovsky, Anatoliy Chubais, Abramov etc. etc. who had looted) was of the view that such cheap acquisition of Russian assets should not recur and that Russia should, like any good capitalist country, get good deals and quid pro quos in future commerce with the West. A sort of eminent domain was invoked that had wide support. But in Russia "eminent domain for the public good" has in history had a wider definition than in the West -- as we should know very well. Hence eminent domain turned into acqusition and liqudation of Yukos, Khodorkovsky behind bars and America executives of Yukos here helpless to do anything.
A few conclusions
Russian internal affairs and opinions are important and will become more so as regards energy
You can find these things in the English language Russian press and such media as www.themoscowtimes.com
You can pay attention. Or Heading Out, who also reads the Moscow Times, can relay this information.
I read today's information on Shtokman in the Moscow Times first and then was pleased to see that Heading out brought it up. Thanks Heading Out.
Also on the "lost Russian gas". I work on climate change. It has been suspectd that the total world atmospheric methane rise was due to the total of Russian natural gas pipeline leaks. And the rise halted as the Russians fixed their pipelines.
Don Augenstein
Gazprom DOES NOT NEED to produce more gas. It IS selling all it can in Western Europe (it's growing steadily, under existing contracts plus every new extention, addendum, etc...) and could not sell more there even if it wanted to. Gas deliveries inside Russia are not profitable, and thus are limited as much as they can (with the corresponding lobbying to increase prices, and to lower taxes to "spur investment"). The "near abroad" (FSU) is a bit special, but it's profitable for select Gazprom managers, not for Gazprom, and they always find the gas for that.
Now Gazprom and LNG is another topic. They feel the need to be present in a market they vaguely feel is important; they's like to be a supplier to the USA for the symbolism of it- but they DO NOT CONTROL the technology, and they are not used to sharing control with anyone on big project - and yet they will need to on LNG. That's the real cause of delay: not the choice of a partner, but accepting the loss of absolute control over the gas chain.
Their presence in Iran is the same: symbolic, and a way to know what's going on. remember that they are a partner in South Pars 2&3, with Total and Petronas. Their presence helped to make a mockery of ILSA (Iran Lybia Sanctions Act - which was waived for European companies for this project, thanks to joint Russian-French/European-Malaysian lobbying.
Thxs for posting more info. Your Quote: "That's the real cause of delay: not the choice of a partner, but accepting the loss of absolute control over the gas chain."
Then I suggest Putin and Gazprom get over this control-freak monopoly hangup REAL FAST if they want profitable LNG exports. Futzing around until the potential importers lack the investment wealth to partner with Gazprom on building the expensive LNG infrastructure is suboptimal as the world goes postPeak.
Bob Shaw in Phx,AZ Are Humans Smarter than Yeast?
It's not just the technology, it's also the ability to negotiate and structure ALL the contracts in the LNG chain.
All I can say is the future newsvideo of the upcoming G8 Energy Security Conference, hosted by Putin in July, holds a strong possibility of angry shouting matches if oil & natgas continue their current skyrocketing trajectory and world geo-politics get worse. It will put the current Auto-Oil executive cross-sniping to shame.
Must see TV! SAD. =(
Bob Shaw in Phx,AZ Are Humans Smarter than Yeast?
Could you elaborate on your "selling gas internally is not profitable" comment for GAZP.
My take is that it is profitable just not as profitable as exporting. Which is why local producers, LUK etc, are being allowed to sell in to the domestic market especially during the winter. I guess its the analogy of Turkmen gas going to Ukraine.
FYI - Stephen O'Sullivan from UFG/Deutsche unearthed some interesting stats on pipeline capacity as GAZP and everyone else went in to full production during the two very cold periods this winter.
Also, that Russia/Iranian connection in financing a pipeline to Pakistan and India should have been a no-brainer. I missed that in all my earlier posts on these issues. Jerome--even if it's not Turkmen gas in this case, some pipelines are going to happen from Western/Central Asia (where the gas is) to Eastern/Southern Asia (where the demand is). Still, I agree with you that the investments are huge, the supply is uncertain over time and the geopolitics are a nightmare.