Asian Buyers Say Prices, Demand To Trump Politics As Lure For U.S. LNG

Reuters

Asian natural gas buyers are counting on higher prices and growing demand to lure most North American gas shipments their way, even as U.S. lawmakers consider speeding up export approvals to cut Europe's dependence on Russia for the fuel.

Russia's seizure of Crimea from Ukraine has revived European worries about energy supply security. EU leaders are eager to end decades of reliance on Russian gas, and later on Wednesday will press the United States for clear commitments on a new source of supply.

U.S. lawmakers are already weighing changes to energy policy that would allow natural gas exports to any country that belongs to the World Trade Organization, and a key senator said on Tuesday that U.S. shale gas should be used to counter Russian influence in Europe.

Asian buyers, who have been counting on the fresh supply source to meet rising demand, said that Europe's option of increasing imports of liquefied natural gas (LNG) at the expense of Russian piped gas is a long-term, costly solution that may never happen.

"That is not going to happen overnight. You have to build up receiving terminals, which will take millions in investments and five or maybe ten years," chairman of Taiwan's CPC, Sheng-Chung Lin told Reuters at a gas conference in South Korea.

"Unless European countries show such determination, it won't happen," Lin said.

UK To Start Buying Gas From Russia Despite Threats Of Sanctions Over Crimea

The Huffington Post UK 

Britain is set to start buying gas directly from Russia this year despite EU politicians threatening to bring in further sanctions against Moscow amid tensions over the crisis in Ukraine.

Centrica, the UK's largest energy firm that owns British Gas, will start importing Russian gas directly from this October in a deal signed back in 2012, Reuters reported.

Centrica's plan is still on track, despite diplomatic tensions over Ukraine pushing EU politicians to consider energy sources that make them less reliant on Russia.

David Cameron recently warned that sanctions could hit Russian oligarchs like Chelsea football club owner Roman Abramovich and tensions have seen Russian spending at UK shops plummet.

UK domestic gas production is falling by around 7% annually. The UK has so far not imported gas directly from Russia, as Russian supplies come to Britain through Germany and other European pipelines.

In 2012, Britain produced nearly half of the 91 billion cubic meters of gas it used domestically, with 29% coming from Norway, around 7% from the Netherlands, 3% from Belgium and nearly 15% from Qatar.

Tory politicians have been bullish about how the UK could cope if further sanctions are brought against Moscow. 

Conservative MP Brooks Newmark, a member of parliament’s influential Treasury Select Committee, told HuffPostUK: "We can economically hurt Putin and his cronies as well, we can put a huge amount of economic pressure on them. They have enormous business interests in the UK and bank accounts here, too."

"Russia recognises that they are no longer one of the great global powers anymore so the only way they can reassert themselves domestically is by going into countries like Georgia and Ukraine."

Russia's state-run energy giant Gazprom sells between 11 billion and 12 billion cubic metres of gas to the UK, which fulfills around 15% of the country's total need, as well as providing around a third of Europe's demand for gas.

Source: http://www.huffingtonpost.co.uk/2014/03/25/uk-gas-russia-ukraine_n_5026247.html?utm_hp_ref=uk

East Mediterranean Eyes EU And Global LNG Markets For Gas Sales

Reuters

Europe's efforts to reduce its reliance on Russian energy supplies and booming demand for shipped gas are pushing ahead the development of the East Mediterranean's gas reserves, which have so far been marred by the region's instability.

Israel and Cyprus are both well placed to help diversify Europe's Russian-dominated market by pipeline, while sending liquefied natural gas (LNG) tankers to the world's best paying customers in Asia and Latin America.

Russia's seizure of Ukraine's Crimea region has shaken political relations between Russia and the European Union, and Brussels is stepping up efforts to find new suppliers.

"With recent events in Europe... and the aspiration of different countries to diversify their gas supply, that puts another spotlight on our massive resources and transforms our story into a global one," said Gideon Tadmor, CEO of Avner Oil , a leading explorer in the region, at a conference in Tel Aviv on Tuesday.

Almost one trillion cubic metres of recoverable natural gas has already been discovered in the eastern Mediterranean Levant Basin, enough to supply Europe with gas for over two years and worth between $370-$740 billion in current European or Asian market terms respectively.

Israel, which has so far found over 80 percent of all the gas, has said it would allow 40 percent of its reserves to be exported, while Cyprus will sell almost all of its gas abroad.

U.S. Lawmakers To Weigh Speeding Up LNG Exports To Help Europe, Ukraine

Reuters

U.S. lawmakers will hear testimony on Tuesday from those who favor loosening restrictions on liquefied natural gas exports so that abundant American supplies could help reduce Ukraine and Europe's dependence on Russian gas.

European worries about the security of energy supplies have grown since Russian forces seized control of the Crimean peninsula from Ukraine this month. Moscow has in years past cut gas supplies amid regional disputes.

Currently, the U.S. Department of Energy must give permission to export natural gas to all but a handful of countries with free trade agreements with the United States.

Opponents of unlimited gas exports have argued that shipping too much natural gas abroad could cause U.S. prices to rise, hampering the economy's ability to recover from the recent recession.

Hearings before the House and Senate energy committees come on the heels of the Energy Department's sixth approval of LNG exports from a U.S. plant in the past 10 months.

Europe to find it difficult to wean itself off Russian gas

AFP

Europe will have trouble weaning itself off Russian natural gas, analysts say, as its faces declining production at home and Asian competition for supplies.

Even before the current flare up of tensions with Russia over its de facto occupation and possible annexation of Ukraine's Crimea peninsula, Europe has been trying to reduce its dependence on Russian supplies.

The diversification effort has been bearing fruit: imports of Russian natural gas fell from 45.1 percent of the EU's total to 31.9 percent over a decade to 2012, according to data from the EU's statistics agency, Eurostat.

"Europe has reduced somewhat its dependence on Russian gas, even if Gazprom remains a key actor in Europe," said Pascale Jean, a natural gas specialist at PriceWaterhouseCoopers.

However the Russian gas giant Gazprom has made no secret it aims to claw back its market share, having built a new pipeline to Germany and a second one under construction to southern Europe.

The share of Russian gas in European imports climbed last year, and its share in total consumption has remained relatively stable over the past decade at just under a quarter.

However, EU production which currently covers a third of consumption, is expected to fall by up to 20 percent by 2020 and up to 30 percent by 2030.

European leaders seek ways to curb dependence on Russian gas

Reuters

European leaders will seek ways to cut their multi-billion-dollar dependence on Russian gas at talks in Brussels on Thursday and Friday, while stopping short of severing energy ties with Moscow for now.

Russia's seizure of Ukraine's Crimea region has revived doubts about whether the European Union should continue to rely on Russia for nearly a third of its gas, providing Gazprom with an average of $5 billion per month in revenue. Some 40 percent of that gas is shipped via Ukraine.

EU powerhouse Germany is among those with particularly close energy links to Russia and has echoed comments from Gazprom, Russia's top natural gas producer, that Russia has been a reliable supplier for decades.

Russian supplies of gas to the EU were disrupted in 2006 and 2009, but only because of knock-on effects when Moscow cut off Ukraine for not paying its bills. Although those incidents resulted in EU attempts to diversify its energy sources, contracts to the bloc have always been honoured.

EU officials said the current Ukraine crisis, however, had convinced many in Europe that Russia was no longer reliable and the political will to end its supply dominance had never been greater.

"Everyone recognises a major change of pace is needed on the part of the European Union," one EU official said on condition of anonymity.

"At the back of people's minds, there will always be the doubt that if the relationship goes sour, Russia has that weapon and it's not something it should have," another official said, referring to Russia's option of severing supplies.

Azerbaijan offers Iraq access to Europe gas pipelines

AFP

Azerbaijan has offered Iraq access to the "Southern Gas Corridor" connecting the Caspian Sea to the European Union to help Baghdad sell natural gas to Europe, Baku's foreign minister said Monday.

Elmar Mammadyarov told journalists in the Iraqi capital that officials in Baghdad had already expressed interest in joining the massive project, which is supported by the United States and aims to reduce Europe's dependence on gas from Russia.

"It's a huge project ... and it's open if Iraq is also interested to deliver their own natural gas," Mammadyarov said at a joint news conference with his Iraqi counterpart Hoshyar Zebari.

"The project is there, so if any other countries ... want to join the Southern Gas Corridor, including Iraq, who already expressed some interest for this project, we are ready to start negotiations." Gas pumped from the immense new Shah Deniz II field will travel across Azerbaijan and Georgia and across Turkey through a new Trans-Anatolian Pipeline, which is set to be a key part of the Southern Gas Corridor from the Caspian Sea to Turkey and the EU.

Russia, meanwhile, backs a new pipeline under construction known as South Stream that aims to transport 63 billion cubic metres under the Black Sea to Europe.

Shah Deniz 2 awaits TANAP FID for project commencement

 

Hürriyet Daily News

Al Cook, the Vice President of Shah Deniz Development, emphasizes the importance for TANAP’s key shareholders, Turkey and Azerbaijan, to finalize their decision on investment plans to carry gas.

The Shah Deniz 2 consortium is awaiting the partnership heading the Trans Anatolian Natural Gas Pipeline project to make their FID prior to making their own, with the FID required to trigger the execution of plans to develop Azerbaijani gas fields, according to a high level BP executive.

The TANAP oil pipeline will be carrying gas from Azerbaijan through Georgia and Turkey to European markets the year. Talking yesterday at the Atlantic Council summit in Istanbul, Al Cook, the Vice President of Shah Deniz Development, emphasized the importance for TANAP’s key shareholders, Turkey and Azerbaijan, to finalize their decision on investment plans in order for the FID required for the Shah Deniz 2 project to be made.Yet the reverse is also true for TANAP, according to energy experts, who said TANAP is also waiting for the Shah Deniz 2 consortium to make its final investment decision in order for the project to receive the green light.

“Shah Deniz 2 needs to make the FID before the end of the year because they can no longer delay it,” John Roberts, an energy security specialist, told the Daily News. Al Cook expressed confidence that the Shah Deniz 2’s final investment decision will be made before the end of the year, although admitting that “there will be few very busy weeks ahead.”

EU Diplomats: "Failed Nabucco West plan still on EU priority list"

REUTERS

The Nabucco West pipeline, which lost a contest to ship Azeri gas to Europe, is still on a list of projects eligible for EU cash, implying the European Commission still believes it could be built, EU diplomats said.

The Commission, the EU executive, next month is expected to publish a final list of projects judged significant to more than one EU nation and entitled to accelerated planning approval as well as consideration for money from the EU budget.

Commission officials declined to disclose the content of the list before publication.

But the diplomats, speaking on condition of anonymity, said it included the Nabucco West scheme, led by OMV, as well as the Trans Atlantic Pipeline (TAP), which was selected to by the Shah Deniz gas consortium to carry gas to Europe.

TAP includes Norway's Statoil, BP, SOCAR, Fluyxs, Total, E.ON Ruhrgas of Germany and Swiss company.
Commission officials have repeatedly said Nabucco West is not dead and could one day be built if more Caspian gas becomes available.

Other schemes on the list of roughly 200 Projects of Common Interest include a Baltic energy grid, aimed at ending the isolation of Baltic states and curbing their reliance on Russia.

A feasibility study for a gas link from Cyprus to Crete and then Greece or Italy is also on the list.
Cyprus has high hopes of rapidly developing its gas reserves to revive its broken economy, but export routes are complicated by its long-standing rift with Turkey.

No easy to break gas dominance of Russia

Reuters         Henning Gloystein


* Russia's EU market share to stay around 30 pct
* New supplies seen, mainly from overseas LNG

The European Union aims to diversify away from Russian natural gas supplies, yet Reuters research indicates the EU's biggest provider a decade from now could easily still be Russia.

Billions are to be spent on piping gas from Azerbaijan while new finds in Africa and eastern Mediterranean also promise new supply for the EU, which currently buys mostly from Russia and Norway.

Europe also gets liquefied natural gas (LNG), mostly from Qatar, and the U.S. shale boom could free up LNG exports from there in coming years, too.

But growth in Europe's demand for gas will eat up much of the new potential supply, and the Russians show little willingness to fade away as they gear up to defend their position through massive projects, such as the $35 billion South Stream pipeline to Italy.

"Russia will continue to remain Europe's primary energy supplier, including natural gas supplies, for many years and possibly decades," a U.S. congressional research paper on Europe's energy security said in March.

Reuters' own research indicates that in 2023 Russia will likely remain the dominant supplier, as it boosts exports while EU and Norwegian output declines.

TAP outgunned Nabucco for Azeri gas on most fronts

 Reuters

* TAP beat Nabucco on 7 of 8 criteria

* The reason was not high gas prices in Italy, Greece
* Government continues to support South Stream
* GALSI pipeline important for Italy

The Trans-Adriatic Pipeline (TAP) project outscored rival Nabucco West on virtually all fronts to win the race to carry Azeri gas into Europe, a junior minister at Italy's Industry ministry told Reuters.

Azerbaijan's state energy company SOCAR and its partners in the Shah Deniz II gas field, including BP and Statoil , said on Friday they had selected TAP.

The project, linking a Turkish pipeline to southern Italy via Greece and Albania, plans to deliver 10 billion cubic metres (bcm) of Azeri gas to Europe each year beginning in 2019.

BP said there was a "substantial" commercial difference between the two competing pipeline projects, including the cost of shipping the Azeri gas and gas prices in the respective markets.

The head of Austria's OMV, part of the rival Nabucco project, said last week the TAP project had been chosen because of high gas prices in Italy and Greece.

"It was not for high gas prices in Italy and Greece," Claudio De Vincenti said in an interview.

Russian gas pipeline could doom Europe's Nabucco plan

Reuters


* Europe, U.S. support for Nabucco weakened
* Azeri consortium expected to pick winner in June
* Gas due to flow to European Union from 2019

Europe's grand plan for a gas pipeline from the Caspian Sea that would make its eastern states less reliant on Russia may have been fatally undermined by Russia's even bigger project.

As Azerbaijan nears a decision on which pipeline to choose for its future exports, the Nabucco plan that was long the European Union favourite could lose out to the more modest Trans Adriatic Pipeline (TAP) across Greece to southern Italy.

In a complex equation based on politics as much as economics, TAP is in the ascendancy over the Nabucco pipeline to Austria in the face of Russia's $39 billion South Stream plan.

"The question is: 'Is Nabucco viable if South Stream is built?'" said Andrew Neff, Moscow-based principal energy analyst with research firm IHS.

The decision between TAP and Nabucco is expected in June from partners in the Shah Deniz consortium, led by gas field operator BP and Azeri state energy company Socar.

The European Union won't have a direct say in the choice, but its recent switch to "project neutrality" from support for Nabucco could make a big difference. It now says it would be happy with either pipeline or even both.

"There has been a dramatic shift," TAP's External Affairs Director Michael Hoffmann told Reuters.

Nabucco spokesman Christian Dolezal, however, said his project retained strong political support.

Nabucco West and TAP: Going head to head

Amanda Paul     Today's Zaman


At the end of June, the long-awaited decision regarding which pipeline will be selected to transport natural gas from Azerbaijan’s Shah Deniz II field across Turkey to the EU market will be made.
 

This decision will be followed by the final investment decision in late 2013. Production is expected to begin in 2018 at some 16 billion cubic meters (bcm) per year: 10 bcm for Europe and 6 bcm for Turkey.

Last year the field of runners was narrowed to two: Nabucco West and the Trans-Adriatic Pipeline (TAP). The available gas is only enough to fill one of them. Both projects not only have economic but also political implications.

Officials from both Nabucco West and TAP are currently engaged in major lobbying campaigns to promote their respective projects to the Shah Deniz partners, the Azerbaijani government and the developers of the proposed TANAP pipeline across Turkey that would feed into their projects. While the Shah Deniz II Consortium will present their opinion to Azerbaijan over which pipe should be chosen, Azerbaijan is not obliged to follow this advice.

Nabucco West has always been labeled a geostrategic project. It would ship gas from Turkey’s western border via Bulgaria, Romania and Hungary and into the Baumgarten hub in Austria and into Central and Eastern Europe where it is badly needed with many of the countries heavily, or in some cases fully dependent, on Russian gas.

Turkey’s Role in European Energy Security

Dr. Mehmet Efe Biresselioglu*   Natural Gas for Europe      

Ankara’s geography can help boost European energy security

An expert in European geopolitics in the Department of International Relations and the EU at Turkey’s Izmir University of Economics, Dr. Mehmet Efe Biresselioglu contended that there were some basic problems with European energy policy.

“The political reality of the European Union changes when it is faced with energy issues,” he explained. “The EU is divided into two different poles: there are the national decision making centers on one hand, and the EU institutions with powerful transnational political resources on the other. So basically in spite of the liberal inter-governmental setting, and fully integrated political policies, these two different poles mean that the EU is divided over a common energy policy.

“The main obstacle to progress in energy policy is basically the various preferences of the member states, all of which have their different domestic energy resources, different energy requirements and large, state-owned, monopolistic energy industries. All the states have different preferences.”