Pipeliners

MOSCOW, Jan. 29, 2009 (UPI) -- With the Ukrainian-Russian gas dispute putting renewed focus on alternate gas routes, new emphasis should move toward South Stream, a Russian economist says. Russian economist Oleg Mityayev writes in RIA Novosti Thursday that the European Union expects its natural gas demand to increase from about 2.5 billion cubic feet per year to 3.5 billion cubic feet per year by 2030. This trend makes the South Stream project to Italy important, he says. The project would bring natural gas from the Black Sea to Italy and Southern and Central Europe. Russian energy monopoly Gazprom and Italian company Eni S.p.A. (NYSE:E) signed agreements on the project in 2007, with host and supplier nations following suit. Alexander Medvedev, deputy chief of Gazprom, echoed those sentiments, adding South Stream capacity could increase beyond its current 1.1 trillion cubic feet projection. Bulgaria, a host, would be able to meet gas requirements through the project while Serbia, also a host, could gain 100,000 new jobs and bring $2.6 billion in foreign investments. South Stream, Mityayev says, would bring benefits to all involved and bring more diversified gas reserves to Germany and Italy, two of the primary importers in Europe.

MOSCOW, January 28, 2009 (RIA Novosti) - The capacity of a gas pipeline designed to pump gas to the Balkans and other European states is expected to be boosted by 16 billion cubic meters annually, Gazprom Deputy Chairman Alexander Medvedev said on Wednesday. The first deliveries along the South Stream pipeline are scheduled to start in 2013. The project, expected to annually pump 31 billion cubic meters of Central Asian and Russian gas to the Balkans and on to other European countries, involves Bulgaria, Serbia, Hungary, Italy and Greece. "We are not only planning to launch the Nord Stream with a capacity of 55 billion cubic meters and the South Stream with 31 billion cubic meters capacity, but also to increase South Stream's transit capacity by another 16 billion cubic meters," Medvedev said in an interview with the international TV news channel Russia Today. The Nord Stream pipeline, which will pump gas from Siberia to Europe under the Baltic Sea, is being built jointly by Gazprom and Germany's E.ON and BASF and Dutch gas transportation firm, Gasunie, at an estimated cost of $12 billion. The Gazprom official said this move was economically justified. "Demand is available and it is more economical to have a gas pipeline with a capacity of 47 billion cubic meters instead of 31 billion cubic meters," Medvedev said. Gazprom is implementing the projects to build a gas pipeline under the Baltic Sea to pump gas directly to Germany and a gas pipeline under the Black Sea to pump gas to the Balkans and other European states to diversify its gas export routes, especially in the light of the recent gas row between Moscow and Kiev that saw gas transits to Europe suspended for two weeks.

January 26, 2009 - Russia Today - Nations behind the Nabucco pipeline project are gathering in Hungary this week to discuss the 10 Billion euro scheme to reduce Europe's dependence on Russian gas. Just before their meeting, Gazprom's deputy chairman Aleksandr Medvedev visited Budapest to secure support for Russia’s new routes. Gazprom is on tour - around Europe. On the agenda - the aftermath of the gas conflict and new pipelines bypassing troubled Ukraine. Nord Stream running under the Baltic sea is already under construction, the work on South Stream - under the Black sea - kicks-off this year. Hungary says it supports the construction of South Stream and might sign a joint venture in the next two months. Janos Veres, the country's Finance Minister, says they want to diversify -- and not just transit. "Hungary remains committed to the diversification of the routes of gas supplies as well as of sources." On Tuesday Hungary hosts European and Central Asian officials to breathe new life into the Nabucco project. The pipeline bringing Central Asian gas through Turkey to Western Europe, bypassing Russia, is planned to carry up to 30 billion cubic meters of gas annually. But Experts say there might be not enough gas to fill the pipeline and to make the multibillion euro project profitable. Russia says it doesn't consider Nabucco a rival, according to Gazprom Deputy CEO, Aleksandr Medvedev. ”There is a phrase that ‘nature abhors a vacuum,’ but there have been some cases in history when pipelines have remained empty.” Gazprom Board Chariman, and former Russian Prime Minister, Viktor Zubkov was similarly circumspect about the Nabucco Project. “It may become a good monument to ambition and irresponsible decisions.” But experts say there might be not enough gas. Never before has something as mundane as pipelines attracted so much attention from so many politicians. Despite Russia's doubts about plans to bypass its pipelines, this week's meeting of Nabucco participants in Hungary will show whether the project which some dubbed "a dream pipeline" will come a step closer to reality.

24 January, 2009 - Interfax-Ukraine - Budapest - The global financial crisis will not lead to either the scrapping or the delay of the South Stream pipeline project, a plan to transport Russian natural gas along the Black Sea to the Balkans and further to Italy, said Alexander Medvedev deputy chief executive of Gazprom. This year "is dedicated to preparing a feasibility study for all routes of the pipeline, [and] as soon as the feasibility study is finished it will lead to an investment decision," Medvedev told reports in Budapest on Saturday. "We have no major reason to put back the deadline for the implementation of the project," he said. South Stream is one of several pipeline projects designed to bypass Ukraine. Nord Stream, another Russian back project, envisions building a pipeline along the Baltic Sea from Russia to Germany and further to the United Kingdom. Russia's devastating financial crisis of 1998 did not stop another Gazprom project, Blue Stream, from coming into being, Medvedev said. "Blue Stream was put into practice at the peak of the crisis of 1998. Nothing can make a good project be canceled or put off," he said. Medvedev was speaking after he attended a meeting in Budapest of a Russian-Hungarian economic cooperation commission.

1/22/09 - Eurasianet - The European Union is to expand relations with Turkmenistan by opening a diplomatic mission in Ashgabat, a source in the Turkmen government has told Trend.az. According to the Azeri news agency, the aim is to "extend mutually beneficial cooperation" between energy rich Turkmenistan and Brussels. "Hydrocarbon potential in combination with European investments and modern technologies will ensure mutually beneficial partnership," the news agency quoted the source as saying, adding that the Turkmen government viewed "the European trend as the most important aspect of foreign political and foreign economic strategy." According to an earlier statement from the Turkmen Ministry of Foreign Affairs, a permanent EU outpost would be opened "in the future." The EU is hoping to secure Turkmen gas exports and have them pumped directly through the proposed trans-Caspian/Nabucco pipeline network. [For background see the Eurasia Insight archive]. Turkmen gas already reaches Europe, but only after it has been sold to Russia's Gazprom and piped through Ukrainian infrastructure. Turkmenistan is currently locked into a 25-year contract with Gazprom signed in 2003. Initially Gazprom paid $44 per thousand cubic meters (tcm) of Turkmen gas. According to RosBusinessConsulting, the export price for the first quarter of 2009 has reached $301/tcm.

21.01.2009 EUObserver by Philippa Runner - BRUSSELS - A major new gas pipe connecting Russia to Germany will be up and running by 2011 Russia predicts, with Paris expected to join Berlin in giving the scheme political backing inside the EU. "The need to diversify routes of supplying gas from my country to EU member states has been underlined by this crisis," Russia's EU ambassador, Vladimir Chizhov, told EUobserver on Tuesday (20 January), as Russia's transit deadlock with Ukraine came to an end. "The Nord Stream project will now be expedited and I believe that in early 2011 it will able to provide gas," he added. "The land sections of this pipeline are already built and pipes are being produced on a daily basis for the underwater section. There are special ships needed to lay those pipes and they will start doing that as Spring comes." Nord Stream is to bring gas from the Shtokman, Yuzhno-Russkoye and Prirazlomnoye fields in Russia to Greifswald in Germany, from where it will branch out west. German firms E.ON and BASF are major shareholders in the venture. But Germany alone has failed to overcome political objections from eastern EU states, such as Poland and Lithuania, which fear Nord Stream will enable Russia to cut off their gas in the event of a bilateral dispute. "It's a key Russian objective to bring France on board, to have a broad political coalition in Europe, not just Germany," European Council on Foreign Relations (ECFR) expert Pierre Noel said. "I don't know if they escalated this [Ukraine transit] crisis intentionally, but they want to solidify links with key partners in France, Germany and Italy and I think this crisis will achieve this." French diplomats declined to comment on the favourability of Nord Stream, beyond saying the Ukraine crunch "might speed up" construction. But the prospect of French firms with strong ties to the Elysee Palace joining the project makes political backing more likely. "We [are] interested in participation in Nord Stream under the condition we would be a partner and there would be contracts for extra gas supply in addition to whatever percentage we would have in the pipeline," a spokeswoman for Gaz de France told this website. French oil firm Total is already a major shareholder in the Gazprom-led consortium to develop the Shtokman field.
Russian circle closing -- Russia believes the Ukraine crisis will also increase backing for its South Stream project to bring gas via the Black Sea to Bulgaria, Greece, Austria, Hungary, Slovenia and Italy. The South Stream countries, together with Germany, have become known as the "Friends of Russia Club" in Brussels diplomatic circles, for their track record of backing Russian interests inside the EU, by - for example - blocking previous EU conflict resolution schemes for Georgia. "South Stream, when completed, together with Nord Stream, will provide a circle, a donut of energy security," Russia's Mr Chizhov said. "If the circle is broken at one point for whatever reason, be it political, technical, natural disaster or even terrorist attack - God forbid - the rest of the circle will work." Meanwhile, the EU's plan to pump Caspian Sea basin gas directly to Europe via Turkey - the Nabucco project - is fraught with political problems despite support from the Czech EU presidency.
Caspian black hole -- Nabucco is not commercially viable unless Turkmenistan joins EU-friendly dictatorship Azerbaijan to put gas into the pipe. But EU-Turkmenistan relations are in a black hole, with Russian influence pervasive in Ashgabat. The European Parliament remains unwilling to approve a basic EU trade agreement due to the country's egregious human rights record. The European Commission does not know if shootings in the country's capital last September, which killed around 40 people, were mafia-related or a failed coup. In this context, EU companies are happier to brave the Russian investment climate than to sign multibillion contracts to get Turkmen gas out of the ground. "Turkmenistan is nowhere near building a commercial gas relationship with the EU," the ECFR's Mr Noel said.

19 January 2009 - The Moscow Times-Reuters by Pavel Baev - BRUSSELS — Politics and cost mean the EU is unlikely to diversify energy supplies away from Russia for many years, despite a gas crisis that has idled
factories in southeast Europe and left thousands of homes without heat. The price dispute between Russia and Ukraine is a wake-up call to a continent that has been talking about reducing reliance on Russian gas since a similar dispute in 2006. But turning words into action is proving tough.
"The Russian-Ukrainian crisis has made it clearer than ever that filling in the gaps in our energy infrastructure is to the strategic benefit of all Europe," European Commission President Jose Manuel Barroso told EU lawmakers last week.
Barroso said 5 billion euros ($6.6 billion) of European Union cash had been earmarked for the most pressing short-term issue — linking up the entire European network with gas interconnections. Such links would help countries like Bulgaria, which depends entirely on Russian gas and has found itself technically unable to accept help from its neighbors, or could remove the bottleneck that prevents Algerian gas flowing into northern Europe from the Iberian Peninsula.
"We are living through one of the most serious energy crises yet — comparable with the 1970s oil crisis," European Energy Commissioner Andris Piebalgs said. The EU gets a quarter of its gas from Russia and 80 percent of that via Ukraine.
Russia's war with Georgia in August raised energy security issues because Georgia hosts the only pipelines pumping oil and gas from the Caspian Sea to world markets without crossing Russia.
Since then, Piebalgs has been promoting plans for pipelines from Africa, Central Asia and the Middle East and arguing for more projects to harness energy from the wind, tides and the sun.
The EU is also focused on increasing the number of ports capable of receiving ships carrying liquefied natural gas from places as far afield as Qatar and Nigeria. "Greece used LNG to get them through the current crisis," said analyst Susanne Nies at France's IFRI think tank.
"In today's situation, LNG has to be increased," she added, singling out Germany, Poland and the Balkans as prime new sites.
But while political support has increased for long-distance pipelines into Europe like Nabucco, Nord Stream and South Stream, they still face the perennial problem of huge costs made worse by a punishing economic crisis.
The 7.4 billion euro ($9.8 billion) Nord Stream project, which would pass from Russia beneath the Baltic Sea to Germany, faces numerous challenges over its environmental impact. It must also overcome political hostility from neighboring Poland, which would see its role as a gas transit state reduced.
"The easiest is South Stream, but the problem is financing, so that could be delayed," Nies said.
While the South Stream pipeline under the Black Sea would eliminate the problem of crossing Ukraine, it would not reduce the EU's dependency on Russian gas. To limit Moscow's stranglehold on gas, the West is backing the $12 billion Nabucco pipeline, which is one day expected to carry 30 billion cubic meters of Caspian or Middle Eastern gas annually to an Austrian hub. But economic doubts remain. "Nabucco will only be built if 15 bcm can be agreed, but for the time being we only have 3 bcm from Azerbaijan, and even that hasn't been signed," Nies said.
Given the vulnerability of Nabucco, the EU is also looking south toward Africa and a Trans-Saharan pipeline carrying Nigerian gas north across the Sahara. Analysts highlight concerns about the threat of sabotage in the lawless Sahara as well as the costs.
Jorgen Henningsen, energy adviser to the European Policy Centre, said for now the EU would do better to concentrate on the basics of energy security — interconnections and gas storage — rather than ambitious pipelines. "We need sufficient storage to cope with accidents, with terror attacks or with political blackmail, and this can be dealt with at a relatively low cost," he said.

January 19, 2009 - AFX News Limited - The European Union has to provide financial support, at least capital guarantees to the Nabucco gas pipeline to get the project going, Zsolt Hernadi, Executive Chairman of oil and gas firm MOL said. "I am convinced that the EU has to provide at least capital side guarantees, it has to put some sort of funding into it," Hernadi told Reuters on the sidelines of a parliamentary committee hearing on Monday. "If there are guarantees, then all the cash the project needs can be raised but (the project) needs to be able to absorb capital side risks," said Hernadi, whose company is part of the Nabucco consortium. When asked how much funding would be desirable from the EU, Hernadi said: "As much as possible." The five-nation, $12 billion Nabucco could transport up to 30 billion cubic meters of gas a year from the Caspian region to Central Europe but it has been extensively delayed as planning issues, including financing, need to be ironed out. The Balkans region has been the hardest hit in the current gas debate between Russia and Ukraine as some countries lost all gas imports. The 3,300 kilometer Nabucco is held by MOL, Austria's OMV , Romania's Transgaz, Bulgaria's Bulgargaz, Turkey's Botas and Germany's RWE. "The EU, as far as I know, has not yet formulated an opinion on (providing financing) but I hope the Nabucco conference will give this a boost," Hernadi said. Hungary will host a conference on the Nabucco next week with European Commission President Jose Manuel Barroso and several EU prime ministers expected to attend. Speaking to the committee, Hernadi said the EU had been insensitive to the current Russian-Ukrainian gas dispute as most nations in the bloc were not affected. "This problem did not reach the threshold needed to get the attention of most members," Hernadi said. "This problem did not have an impact beyond Bavaria ... and the EU's first reaction indicated they did not consider this crisis to be very important." "But no matter what anybody says, the entire Balkans region was left without supplies and that carries political risk," Hernadi said.

January 19, 2009 - Rigzone - A delegation of OAO Gazprom led by Chairman of the Management Committee Alexey Miller arrived on a business visit to the Republic of Slovenia. During the visit Alexey Miller had meetings with President of Slovenia Danilo Turk, Prime Minister Borut Pahor and Minister of Economy Matej Lahovnik. The parties discussed an unprecedented situation evolved because of the obstacles imposed by Ukraine for transportation of the Russian gas to Europe. Within the scope of negotiations it was noted that these actions of the transit state substantiated necessity to develop immediately the mechanisms for prevention of such crises in energy supplies. The Slovenian party confirmed its interest in the South Stream project. Its implementation would allow to avoid risks for the Russian gas transit, and would reinforce energy security of the European continent as a whole. During the negotiations Alexey Miller stated that "if the European partners come to us with a proposal to increase the South Stream capacity, we shall consider it."

01-15-09 - Downstreamtoday.com - Russia's dispute with Ukraine over gas payments has stoked fears among Europeans of being left without heat in the dead of winter, yet the European Union's inevitable scramble to seek new supply routes may actually end up increasing its dependence on Russia. The running two-week disruption in Russian gas supply to Europe via Ukraine raises pressure on E.U. governments to push ahead with those proposed gas-pipeline projects that have the highest potential. Although those projects eliminate the transit hurdle by skirting Ukraine, they still source their natural gas supplies from Russia, energy researchers and consultants say. What's more, a recent E.U. push to cut greenhouse gases within the 27-member bloc could encourage coal-dependent countries to switch to Russian gas. The E.U. "will continue to rely heavily on Russia to cover its gas supply, and (Russian) imports to Europe will continue to rise," said Florian Haslauer, vice president for energy at consulting company A.T. Kearney. The E.U. now counts on Russia for roughly a quarter of its overall gas supplies, with 80% of it flowing through Ukraine. Supplies fell in 12 countries when OAO Gazprom (OGZPY) closed the taps earlier this month. Gas still wasn't in transit on Thursday, even after a week of negotiations and a signed agreement on how international observers would be deployed to oversee the flow. While heavier dependence on Russia isn't negative in itself, it will reduce the E.U.'s energy security through an over-reliance on a single large supplier. "We need to have diversity in the portfolio," Haslauer said. Russia's gas may end up accounting for 38% of European consumption by 2020, he said. The pipeline most likely to be built soon is Nord Stream, which would run under the Baltic Sea and bring gas directly to Germany from Russia, said Arno Behrens, research fellow for energy and environment at the Center for European Policy Studies, a Brussels-based think tank. Gazprom holds 51% of the joint venture created to build the Nord Stream pipeline, which is scheduled to start operating in 2011. Another proposed pipeline, known as South Stream, would offer a slight geographic alternative by bringing gas from Russia to Bulgaria - the hardest-hit country in the current spat - under the Black Sea. Italian oil and gas company Eni SpA (E) and Gazprom are jointly developing the project, which is expected to begin operations in 2013. The European Commission considers a third project, the proposed Nabucco pipeline, to be a priority. The 3,300-kilometer connection would bring gas from Central Asia to Austria, bypassing Ukraine and softening Europe's reliance on Russia. Some experts are skeptical about the effective potential the Nabucco project could have in the short to medium term. "Our research suggests that there will not be enough gas available from the Caspian/Middle East region to fill a 30-billion-cubic-meter pipeline before 2020" because it will take time to develop the fields in the region, said Jonathan Stern, director of gas research at the Oxford Institute for Energy Studies in England. Nabucco is bound to compete for scarce gas in Azerbaijan, from which a pipeline known as ITGI has been pumping Azeri gas to Greece via Turkey since 2007. Italian energy company Edison SpA (EDN.MI), ITGI's main partner and a smaller Eni competitor, wants to extend the ITGI pipeline to southern Italy, aiming to supply about 10 billion cubic meters of the Azeri gas a year to southern Europe. The European Commission increased its push to differentiate energy supplies last summer after a conflict between Russia and Georgia broke out, raising questions about the reliability of connections with the region. Energy Commissioner Andris Piebalgs traveled to Africa and showed the commission's political support for the Trans-Saharan Gas Pipeline, a project designed to bring gas from Nigeria to the Mediterranean and eventually to Europe. Africa's role is, however, likely to remain limited, providing about 20 billion cubic meters, mainly from Algeria, in 2020, Haslauer said. Gas from the North Sea, as well as imports from Norway, won't play a big role either, Haslauer said. Norway will be able to increase its supplies only marginally, he said. With both Nord Stream and South Stream in place, an additional 70 billion cubic meters per year would come from Russia in 2020, Haslauer said. Russian gas imports to Europe could increase to 193 billion cubic meters per year from 121 billion per year, he said in a study published Wednesday. The E.U. consumes 505 billion cubic meters per year. Gas use in Eastern Europe may also rise in the future, as countries such as Poland switch to gas from coal to cut emissions, further increasing dependence on Russia, Behrens said. "Gas is an option for countries like Poland as a transition resource," before increasing use of renewables, Behrens said. By 2020, European countries have to cut carbon emissions by 20% on average compared with 1990 levels, according to a recently approved E.U. law. One factor that could gradually reduce the E.U.'s reliance on Russian gas is the commission's focus on boosting the use of renewable energy and increasing energy efficiency. This crisis "is a huge opportunity for the E.U. now to develop substantive domestic clean energy sources such as offshore wind, solar power and clean biomass," said Stephan Singer, international director for energy at environmental organization WWF.

9 January 2009 - Russia Today - As Europe waits for gas supplies to resume, support is growing among leaders to find alternative transit routes. Gazprom says it’s ready to accelerate the construction of the proposed Nord and South Stream pipeline projects. It’s also ready to increase their capacity if Western partners so wish. Industry insiders say the main lesson of the latest gas dispute may be that reliability of supply comes from diversification. Russia is now backing three pipeline projects to pump gas directly to Europe, bypassing Ukraine: Nord Stream running under the Baltic Sea; South Stream via the Black Sea; and the second branch of Blue Stream going through Turkey. Nord Stream, a joint venture with Germany, may be the first to be built. Nord Stream Former German Chancellor and head of Nord Stream’s shareholders’ committee, Gerhard Schroeder, said at a meeting with PM Putin: “All EU member states consented to the Nord Stream project.” He added that “the obligation of each country now is to support it. If all countries follow the agreement, the Nord Stream natural gas pipeline will be commissioned in October 2010.” Analysts say many EU countries fear that although the new pipelines will allow Russian gas to bypass Ukraine, they will give Russia even greater control over supplies to Europe. Head of research at Alfa Bank, Ron Smith, says some EU states “have been hesitating, saying that Nord Stream will make Europe even more dependent on Russian gas.” However, Smith said, they “don’t have much of a choice. There are only a few sources of gas: Europe itself, Norway, North Africa and Russia,” If the gas dispute between Ukraine and Russia continues it may give greater momentum to another project – the EU-backed Nabucco pipeline, planned to run from Turkey to Austria, bypassing Russia.