Pipeliners

MOSCOW, April 29 (RIA Novosti) - Russia and Greece signed on Tuesday an intergovernmental agreement on cooperation in the construction and operation of the Greek section of the South Stream gas pipeline, the Kremlin press service said. The deal was signed by the Russian industry and energy minister and the Greek development minister after negotiations between Russian President Vladimir Putin and Greek Prime Minister Kostas Karamanlis. Putin said the South Stream project was by far the most viable, although its implementation "does not mean that we are fighting against any alternative projects." "Our proposal is the most optimal and the most competitive of all," he said. He added that during his negotiations with Karamanlis, the parties also coordinated further steps in implementing the Burgas-Alexandroupolis oil pipeline. Putin said these projects "will help considerably enhance the energy security not only of the Balkans but also of the entire European continent." The Greek section of South Stream will have an estimated capacity of 10 billion cubic meters of natural gas a year, the Russian industry and energy minister said. "The agreement has set the volume of gas shipments via Greek soil at around 10 billion cubic meters of gas a year," Viktor Khristenko said The South Stream pipeline is expected to pump 30 billion cubic meters of Central Asian gas to Europe per year. Serbia and Hungary joined the project, already involving Italy and Bulgaria, earlier this year. Russia, Bulgaria, and Greece signed a memorandum on the Burgas-Alexandroupolis oil pipeline in April 2005. Once completed, the pipeline will pump 35 million metric tons of oil a year (257.25 million bbl), a volume that could eventually be increased to 50 million metric tons (367.5 million bbl).

ROME / MOSCOW, April 28 (RIA Novosti) - Italy's outgoing premier, Romano Prodi, has formally turned down an offer to head South Stream, a natural gas project by Gazprom and Italy's Eni, an Italian government spokesperson said on Monday. "Romano Prodi said he was flattered, but declined the proposal to head the company," the spokesperson said after a meeting between Prodi and Gazprom's CEO, Alexei Miller. He added that Prodi had drawn attention to progress in trade and political ties between Russia and Italy during the meeting. Earlier on Monday, Prodi's press secretary Silvio Siriana said that the Italian premier, also the former head of the European Commission, had turned down the presidency of South Stream and that it was "highly unlikely that anything will change." Prodi steps down in a few days to give way to media tycoon Silvio Berlusconi after his defeat in Italy's general election in mid-April. Gazprom said in a statement that Miller had also met with Eni president, Paolo Scaroni, to discuss ongoing cooperation in the South Stream project - a pipeline expected to pump 30 billion cu m of Russian gas to Europe annually from 2012 with an estimated cost of $14 billion - and joint oil and gas projects in third countries, including Libya. "The companies reaffirmed an interest in mutually beneficial, strategic cooperation in the energy sphere," the Russian monopoly said in a statement. "We are satisfied with the talks with Gazprom," an Eni spokesman said, without giving further details. The 900-km South Stream pipeline will run from Russia across the Black Sea to Europe. The Balkan nations Serbia and Bulgaria, as well as Hungary, have recently joined the project, seen as a rival to the EU and U.S.-backed Nabucco pipeline. Italy is Europe's second largest importer of Russian gas. It also buys gas from Algeria. In November 2006, Gazprom and the Eni group signed a deal allowing the Russian company to provide direct supplies to the Italian market. Supplies are expected to rise by 3 billion cu m a year by 2010. In 2007, the Russian monopoly supplied some 21.9 billion cu m of gas to Italy. Gazprom also plans to launch operations in Libya with Eni after it closed a deal with the African state's National Oil Corporation to engage in upstream and downstream oil and gas production. The deal was finalized during Russian President Vladimir Putin's visit to the country earlier this month.

MOSCOW, April 23 (RIA Novosti) - Russian energy giant Gazprom [RTS: GAZP] is concerned over delays in the ratification of the South Stream gas pipeline agreement by Serbia, a Gazprom official said on Wednesday. Russia and Serbia signed an agreement on January 25 as part of the South Stream project to construct a pipeline for the transit of Russian natural gas through Serbia to the Balkans and onto other European countries. The Serb section of the South Stream pipeline will be 400 km (250 mile) long. "There is some concern over this delay but we hope that the agreement will be ratified as early as possible," Alexander Medvedev, deputy chairman of the Gazprom management committee said. The Tanjug news agency reported early in April that Serbia's caretaker government had failed to ratify the January gas deal with Russia. Pro-Western ministers blocked a bid by nationalists to launch the ratification process for the key energy deal, stating that parliament and the government did not have the legal authority to undertake strategic agreements. Only six out of 22 ministers voted in favor of the deal, while others refused to discuss it until after early parliamentary elections due on May 11. In March, pro-Western President Boris Tadic dismissed parliament and urged new elections after former-nationalist premier Vojislav Kostunica refused to govern alongside Tadic's Democratic Party over disagreements on EU integration. The South Stream pipeline is expected to pump 30 billion cubic meters of Central Asian gas to Europe per year. Serbia and Hungary joined the project, already involving Italy and Bulgaria, earlier this year. Greece announced plans to join South stream last summer.

April 17, 2008 - Russia Today - Gazprom is in talks with Nigeria about participating in a multibillion dollar project to pipe Nigerian gas to Europe across the Sahara. Company chief Alexei Miller announced that the talks were ongoing while on a business visit to Libya. The Saharan project, with capital costs estimated at about $US 13 billion, would pump up to 30 billion cubic meters of gas to Europe via Niger and Algeria, starting in 2015. Gazprom says it has the expertise and experience to complete such major projects and is therefore naturally attracted to them. Speaking in Libya, Alexei Miller also said that Gazprom and Libya's national oil company decided to set up a joint venture. This will enable the two majors co-operate in oil and gas exploration, production, transportation and sales in the North African country. Miller has pointed out Gazprom would also like to co-operate with Libya in field of liquefied gas.

April 15, 2008 - Russia Today - Turkmenistan has promised to deliver 10 billion cubic meters of gas to the EU annually from 2009. The deal would allow Europe to buy gas directly from the Central Asian state, skirting Russia, which signed its own gas deal with Turkmenistan last year. The deal could ease Europe’s dependence on Russian gas. Benita Ferrero-Waldner, the EU Commissioner for external relations, told the Financial Times in London that there are three ways to deliver the gas from Turkmenistan to Europe. Firstly, a mini-pipeline could be built connecting Turkmenistan's rigs to Azerbaijan. Alternatively, a pipeline going through Kazakhstan and Azerbaijan could be laid. The third option is to transport the liquefied gas by sea. Experts are at a loss as to how Turkmenistan can meet these new commitments because all the country’s gas exports – up to 50 billion cubic metres - are already accounted for until 2028. At present, Turkmenistan has long-term (25-year) contracts to supply natural gas to Russia and Iran. Moreover, Turkmenistan is building a gas pipeline to China with a capacity of 30 billion cubic meters a year. Even if the Nabucco pipeline is completed however, it would only supply about 5 percent of Europe's needs.

// of Russia’s natural gas policy
Apr. 15, 2008 Kommersant by Natalia Grib, Oleg Gavrish, Vladimir Soloviev - The European Union has reached its first success in negotiations with Central Asia states on natural gas supplies. Turkmenistan agreed to reserve 10 billion cubic meters of gas for the EU since 2009. That gas had been already promised to Russia and China. Even if Europe manages to obtain it, transporting it to the EU will be extremely difficult. However, Europe regards it as a significant achievement, and is going to reach same agreements with Uzbekistan and Kazakhstan, so as to reduce the energy dependence on Russia. Late last week, EU representatives held a number of meetings with the authorities of Central Asia states in Ashgabat. After the talks, EU External Relations/European Neighborhood Policy Commissioner Benita Ferrero-Waldner said in her interview to the Financial Times that there now are first specific agreements on Central Asian gas supplies to Europe. “Turkmenistan’s leader assured us that 10 billion cubic meters of gas annually will be reserved for the EU in 2009. Moreover, there are opportunities for the EU to take part in the tenders for developing new deposits,” said Ferrero-Waldner. In total, the EU imports 300 billion cubic meters of gas annually. So, Turkmenistan will secure just a little over 3 percent of it. However, Ferrero-Waldner underlined that it is “an important first step towards finding alternative gas suppliers” which will help reduce Europe’s energy dependence on Russia. “Turkmenistan is ready for a most broad and close dialogue with the EU on equal and mutually profitable basis,” Turkmenistan.ru news agency quoted President Berdymuhammed as saying. However, the way to transport gas to Europe has not been found yet. Russia declines providing transit. “All transport capacities of Central Asian countries were contracted for the gas purchased by us until 2010. We do not know what Ferrero-Waldner means by reserving 10 billion cubic meters for 2009 in Turkmenistan,” said Gazprom’s spokesman Sergei Kupriyanov. Ferrero-Waldner said there are three possible ways for transporting Turkmen gas to Europe. First, to build a submarine pipeline between Turkmenistan and Azerbaijan along the Caspian seabed. Second, to build a surface pipeline to Azerbaijan. Third, to liquefy gas and carry it by sea in tankers. There are no acting gas pipelines between Turkmenistan and Azerbaijan. Yet, if European energy companies manage to contract small LNG tankers (there is a number of small gas-liquefying factories in Turkmenistan) and to transport it to the Caspian Sea’s other coast, then the small amount can be further transported through the Baku-Tbilisi-Erzurum pipeline with the capacity of 8 billion cubic meters annually. In part, the pipeline is filled with gas sold by Azerbaijan to Greece. However, there is a number of difficulties around this pipeline built in 2005. Initially, the plan was to fill it with Azerbaijani gas by 50 percent, and Turkmen gas by the other 50 percent. However, already at the draft stage, a conflict arose between the parties, settled only in 2006. Turkmenistan and Azerbaijan now declare themselves ready to discuss the project. If the EU-Turkmenistan agreement is fixated by long-term contracts, the country may become one of the resource bases for the future Nabucco gas pipeline from Turkey to Europe. Mikhail Korchemkin, director of the East European Gas Analysis agency, believes that Nabucco plus a submarine gas pipeline between Turkmenistan and Azerbaijan (200 kilometers long and worth $900 million) will be much more economically profitable for Turkmenistan than participating in the Pre-Caspian Gas Pipeline project (with Gazprom). In the first case, European companies undertake all expenditures. In the second case, each country made commitment to build the pipeline on its territory. The expert believes it is pointless to build a large LNG factory by the Caspian Sea, because the pipeline is much more cost-effective at short distances. Russia, Kazakhstan, and Turkmenistan signed the agreement on building the Pre-Caspian gas pipeline in December 2007. It is to be laid along the Caspian shore from Turkmenistan via Kazakhstan to Russia. By 2012, its capacity is to make up 20 billion cubic meters of natural gas. Nabucco is Europe’s alternative to Russia’s South Stream. It will lead from Turkey to Bulgaria and further on to Romania. Germany’s RWE, Austria’s OMV, Hungary’s MOL, Romania’s Transgaz, Bulgaria’s Bulgargaz, and Turkey’s Botas take part in the project. The capacity is 30 billion cubic meters of natural gas annually. Supplying gas via Iran might become one more alternative. The pipeline in that direction has a capacity of 14 billion cubic meters, but only 8 billion of it are extracted. Moreover, the supplies were stopped this year due to Iran’s disagreement to raise the price from $75 to $140 for 1,000 cubic meters. However, the pipeline is not a transit one, and gas supplies to Turkey are possible only on the basis of swap. However, the total amount of gas in Turkmenistan poses difficulty as well. In 2007, the country sold to Gazprom nearly 40 billion cubic meters, consumed around 10 billion cubic meters, and supplied to Iran almost as much. The extraction plan for this year is 80 billion cubic meters, but Turkmenistan has never ever extracted over 65 billion cubic meters annually so far. Meanwhile, according to a framework agreement with China, Turkmenistan is to sell 30 billion cubic meters annually to China beginning from 2009. Gazprom hopes to increase the amount of its contracts. The Russian monopoly has a contract with Turkmenistan for 60 billion cubic meters annually. Sources say off-the-record that gas for the EU will be withdrawn from Chinese contracts. A source in Turkmengaz explained that the idea of an agreement with the EU appeared after the fruitless negotiations with China. “The agreement with them has not been signed so far. China is trying to dictate the price to us, because it is a monopolistic buyer just like Russia. We wanted to sell gas to Beijing for $195 for 1,000 cubic meters. However, while Russia agrees to smooth price growth, China refuses altogether to pay more than $100 for 1,000 cubic meters. So, if we sign an agreement with the EU, we will make China see that we already have international prices,” said the source. The EU regards preliminary agreements with Turkmenistan as a significant victory, and plans to expand it to other Central Asian states. Ferrero-Waldner said she is going to visit Tashkent soon to carry out energy negotiations there. The EU has been discussing the projects for building a trans-Caspian gas pipeline from Uzbekistan and Kazakhstan for a few years running. Gazprom believes these actions of the EU have already made Central Asian gas more expensive for Ukraine, from $130 per 1,000 cubic meters in 2007 to $179.5 in 2008, and the prognosis for 2009 is up to $240. Maxim Shein of BrokerKreditServis estimated the average gas price for European consumers under long-term contracts at $360 for 1,000 cubic meters by the year-end, and Gazprom spoke of $354.

April 15, 2008 - Russia Today - Turkmenistan has promised to deliver 10 billion cubic meters of gas to the EU annually from 2009. The deal would allow Europe to buy gas directly from the Central Asian state, skirting Russia, which signed its own gas deal with Turkmenistan last year. The deal could ease Europe’s dependence on Russian gas. Benita Ferrero-Waldner, the EU Commissioner for external relations, told the Financial Times in London that there are three ways to deliver the gas from Turkmenistan to Europe. Firstly, a mini-pipeline could be built connecting Turkmenistan's rigs to Azerbaijan. Alternatively, a pipeline going through Kazakhstan and Azerbaijan could be laid. The third option is to transport the liquefied gas by sea. Experts are at a loss as to how Turkmenistan can meet these new commitments because all the country’s gas exports – up to 50 billion cubic metres - are already accounted for until 2028. At present, Turkmenistan has long-term (25-year) contracts to supply natural gas to Russia and Iran. Moreover, Turkmenistan is building a gas pipeline to China with a capacity of 30 billion cubic meters a year. Even if the Nabucco pipeline is completed however, it would only supply about 5 percent of Europe's needs.

// Gazprom can get to Italy through Slovenia
Apr. 14, 2008 - Kommersant by Natalia Grib -  Gazprom is discussing a new route for the South Stream natural gas pipeline from Russia to the European Union, across the Black Sea, from Serbia to Slovenia and then into northern Italy. Gazprom head Alexey Miller has already received the support of Slovenian President Danilo Turk and Prime Minister Janez Jansa. The public announcement of those negotiations was meant to show Austria, with which Gazprom's relations had become tense, that South Stream could go around it. On Friday, Gazprom announced that its CEO, Alexey Miller, had been in talks with the president and prime minister of Slovenia in Ljubljana on the implementation of the South Stream project. The prospects for long-term cooperation between the countries in the sphere of natural gas were discussed at the negotiations. Slovenia, which is the chairman of the European Union at the moment, has been received a small supply of gas from Russia since 1978. Gazprom Export supplied the country with 590 million cu. m. of gas in 2007. Gazprom and Slovenian government spokesmen declined to comment on the negotiations in more detail. The possibility of Slovenia's inclusion in South Stream seems unexpected. It had been thought that the land route for the pipeline was decided” emerging from the Black Sea in Bulgaria, it was to cross Serbia into Hungary, then lead into Austria and from there to the north of Italy. Another branch was to cross Greece to the south of Italy. (That agreement is to be signed by the end of the month.) Mikhail Shein of BrokerCreditService, thinks Miller's announcement is a warning to Austria. The essence of the announcement is that the South Stream pipeline will change its course and go from Russia to Bulgaria, Serbia and Hungary, but them not to Austria, but to Slovenia and from there to northern Italy. According to East European Gas Analysis director Mikhail Korchemkin, relations between Gazprom and the Austrian OMV company soured in January just after they signed a cooperation agreement. According to their agreement, Gazprom should receive 50 percent of the Central European Gas Hub (the Austrian trading platform) in Baumgarten, and build an underground gas reservoir with OMV in Austria and neighboring countries. Within a few days, it became known that the monopoly was refusing to sell gas to traders who had reserved capacity on the Trans-Austrian gas pipeline, Korchemkin said. He repeated the words of Gazprom Export department head Vladimir Khandokhin that the company “won't sell gas to owners of pipeline capacity because it contradicts Gazprom's strategy of increasing direct sales to the final consumer.” Korchemkin said that Gazprom and OMV “simply didn't divide up the Austrian domestic market.” The South Stream pipeline project has a capacity of 30 billion cu. m. of natural gas per year. It is being implemented by Gazprom and the Italian Eni as equal partners. The pipeline is to go from Russia, across the Black Sea into Bulgaria and then in two branch into northern and southern Italy. It is due to be completed in 2013. Thus the final transit country for the northern branch of South Stream is in question. Neither Austria nor Slovenia has signed an agreement on entry the project, and Kommersant sources at Gazprom and Russian government agencies say that there may be more than one choice. Natalia Grib

April 9, 2008 - International Herald Tribune by Judy Dempsey - BERLIN: Gazprom of Russia, the world's largest producer of natural gas, and Eni of Italy are preparing to join forces to pipe natural gas from Libya across the Mediterranean to Southern Europe. The ambitious deal would enable Russia to diversify its energy sources but also further increase Europe's dependence on Gazprom, which is state-controlled. After talks between Gazprom and Eni held last week in the wooded surroundings of Novo-Ogaryovo near Moscow, the official residence of President Vladimir Putin, both sides agreed in principle to work together in Libya. Paolo Scaroni, chief executive of Eni, said the deal with Gazprom would involve "the swap of assets outside of Russia." A statement issued by both sides after the meeting referred to "the realization of upstream joint projects in third countries." Upstream refers to oil exploration and production. Eni officials confirmed that these projects referred specifically to Libya. Some analysts describe Gazprom's moves in North Africa as a "pincer" attack on Europe. They say if Gazprom succeeds in Libya and in Algeria, where it is already competing for contracts, it could end up dominating the supply routes to Southern Europe. That would be in addition to its current ambitions in southeastern Europe and parts of Northern Europe, where Gazprom is planning to build an elaborate network of new natural gas pipelines. "Europe is sleeping as Gazprom makes every effort to become a global player and increase its grip on Europe," said Igor Tomberg, an energy expert at the Institute of World Economy and International Relations in Moscow. "It is very important what Gazprom is doing in Libya and other parts of North Africa," he said. "By diversifying its supplies and gaining even more access to European markets, geopolitically, it is surrounding Europe." The European Commission, the European Union's executive body, says it has been monitoring Gazprom's growing interests in North Africa. Andris Pielbags, the EU's energy commissioner, recently said he was concerned that Gazprom might try to create a natural gas cartel that would involve Algeria, where the Russian company is also seeking to win production contracts. Algeria supplies 13 percent of Europe's total natural gas needs. Russia already supplies more than a quarter of Western Europe's energy needs, and nearly 80 percent of Russia's natural gas exports are sold to Europe. But most current pipelines pass through intermediate countries like Ukraine, Poland and Turkey, which charge transit fees. The new Nord Stream and South Stream pipelines being built on the beds of the Baltic and Black Seas are aimed at reducing Russia's dependence on those transit countries. The South Stream pipeline in particular will compete directly with one backed by the EU, known as the Nabucco pipeline. Nabucco is designed to reduce the EU's dependence on Gazprom and Russia by having natural gas sent from Azerbaijan via Turkey across to Europe. But construction has yet to start and supply contracts to feed the pipeline have yet to be signed. Indeed, as talks over Nabucco drag on, several of the EU's 27 member states, particularly Italy but also Germany, Hungary, Bulgaria and Austria, continue to strike their own separate contracts with Gazprom. Such contracts have only weakened the EU's hand in devising a strategy for diversification or dealing with Russia. "As Nabucco shows, the EU has no serious and united energy policy," said Kevin Rosner, energy analyst at the independent Institute for the Analysis on Global Security in Washington. For some countries, including Italy, and most East European countries, the dependence on Russia for energy supplies can be as high a 90 percent. "Europe has few cards now to play," Tomberg, the energy expert in Moscow, said. "Russia wants to get the markets in Europe, like any big company. That is what it will try to do by establishing itself in Libya as well." Gazprom officials said the company was seeking new sources of energy and was behaving like any other big energy company. Libya has the fourth-largest natural gas reserves in Africa after Algeria, Nigeria and Egypt Gazprom bought exploration and development licenses last year in Libya and has said it plans to invest $300 million in the project over the next year. As it does so, Gazprom is getting help from Eni. Along with German and British energy companies, Eni rushed into Libya soon after Libya abandoned its nuclear, chemical and biological weapons program in 2003 and the United States lifted sanctions. Eni already holds a 50 percent stake in the Greenstream pipeline in Libya, which has an annual capacity of eight billion cubic meters, or 280 billion cubic feet. Eni also holds a stake in a liquefied natural gas plant in Libya, for transporting natural gas by ship, and a 33.3 percent stake in the Elephant oil field. Last year, the company said it had agreed to expand its contracts for the production and export of Libyan oil and natural gas for next 25 years. At the same time, Eni has been developing a close relationship with Gazprom. The two companies in 2006 forged a strategic partnership by agreeing to an asset swap. Eni entered the production, or upstream, business in Russia, a rare privilege for a foreign company, in return for Gazprom's entering the downstream, or retailing, distribution and transportation network in Italy. Eni also holds a 50 percent stake in the Blue Stream pipeline, which Gazprom built under the Black Sea a few years ago, and is involved in Gazprom's new South Stream project.

31 March 2008 - Upstream staff - The BP-led Baku-Tbilisi-Ceyhan pipeline (BTC) is to have its capacity pumped up to 1.2 million barrels per day for 2009. This year the pipeline is to see production boosted from the current 875,000 bpd to 1 million bpd. Meanwhile, production could be pushed further to 1.6 million by 2012-2013, said BTC Turkey manager Can Suphi to Reuters. The lion's share of the pipeline's oil comes from the Azeri-Chirag-Guneshli offshore project in the Caspian Sea, before being routed through Georgia and Turkey. BP owns 30.1% of the BTC, while Socar holds 25%. Other shareholders include Chevron, ConocoPhillips, StatoilHydro, ENI and Total.

March 31, 2008 - Russia Today - The cost of the Nord Stream gas pipeline has risen to $US11.7 BLN, according to Gazprom, which has a controlling stake in the project. The original cost was $US6.3 BLN. The increase comes from added expenses in building two lines of the 1,200-kilometre pipeline. Construction of the onshore segment began in 2005 with an estimated total project cost of $US6.3 BLN. Gazprom revised the cost estimate 6 months ago to $US9.5 BLN. Construction of the underwater segment, which will link Russia and Germany across the Baltic Sea, has yet to begin. Nord Stream shareholders will provide 30% of project cots, with the remaining left to be borrowed.