By Roman Kupchinsky
Ukraine’s state-owned oil and gas company Naftohaz met the July 7 deadline and paid Russia’s Gazprom some $280 million for June gas deliveries. As has been the case every month since February 2009, Gazprom officials had been predicting that Ukraine would be unable to come up with the money and were threatening to demand prepayment if the monthly deadline were missed.
Part of the explanation for the relatively low amount paid for June deliveries is that Ukraine imported a record low amount of gas last month – some 33 million cubic meters a day. The previous bill for May 2009 was higher - $475 million, and was paid in full on June 7.
July however, might prove to be more problematic. Naftohaz increased daily deliveries for July to 120 million cubic meters or 3.5 times the June amount. Most July deliveries will go into underground storage for use during the heating season. The price Ukraine paid for gas in the third quarter of 2009 fell to $198 for 1,000 cubic meters from the second quarter price of $271.
Despite the lower price, Ukraine needs to come up with some $675 million by August 7 to pay for July purchases. The perplexing question is where will the money come from?
On June 29, 2009 the Slovak gas monopoly SPP signed a 10 year contract with Germany’s E.ON to buy 500 million cubic meters of gas annually, or 10 percent of Slovakia’s demand. The deal is being touted as the first step towards diversification of gas supplies to Slovakia which is totally dependent on Russian gas. SPP also announced that it intends to sign a similar agreement with France’s GdF according to the Polish Center for Eastern Studies publication Central European Weekly.
The following day, June 30, Poland signed an agreement with Qatar to buy 1 million tons of LNG (1.5 billion cubic meters) annually beginning in 2014. The Polish state-owned gas company PGNiG eventually hopes to import 5 billion cubic meters of LNG.
The growing trend in Central Europe to diversify gas suppliers could eventually have a ripple effect forcing Gazprom to reevaluate or downsize the expensive and controversial Nord Stream and South Stream gas pipeline projects and explore the much cheaper alternative of modernizing the aging Ukrainian pipeline.
Showing posts with label Nord Stream. Show all posts
Showing posts with label Nord Stream. Show all posts
Thursday, July 9, 2009
Thursday, July 2, 2009
As Russian Gas Production Drops Poland Turns to Qatari LNG
by Roman Kupchinsky
In June 2009 gas production by Russia’s Gazprom fell by 35.9 percent compared to June 2008. In May the drop was 34.5 percent. Gazprom officials told the Russian newspaper Vedomosti they remain optimistic and by year’s end the fall of production would only amount to 7-10 percent.
The conventional explanations for this rapid drop in production are both the world-wide economic crisis which has dampened demand for gas in Europe and Gazprom’s failure to invest in the development of new fields. There are, however other factors contributing to lower Russian exports. One example of how EU member states are diversifying suppliers is the recent contract signed by Poland to buy 1.5 billion cubic meters (bcm) of Qatari LNG for 20 years.
Poland currently produces 5 bcm of gas and imports 70 percent of its gas from Russia. Annual Polish consumption of gas is 15.6 bcm and is forecast to rise to 16.4 bcm next year.
Qatari LNG is scheduled to begin arriving in Poland in 2014 once the new LNG import terminal is built on the Baltic coast near the German border. However, liquefied gas will be transported to Poland on the new Q-Flex vessels and concern has risen in Poland that the Nord Stream Russo-German pipeline project could prove an obstacle to the workability of the Poland-Qatar deal. The current plan for Nord Stream imagines the pipeline being laid across the fairway leading to the ports of Szczecin and Swinoujscie. This will reduce its depth to 12.9 meters, while Q-Flex ships require depths of 14.3 meters to pass.
PGNiG, the Polish state-owned gas monopoly, hopes to eventually import 5 Bcm/ of LNG annually.
On June 29, 2009, PGNiG's vice-president in charge of strategic projects, Radoslaw Didzinski, was reported as saying Gaz de France, Spain's Gas Natural and the UK's National Grid are potential partners in the LNG terminal. Meanwhile the company has signed preliminary agreements with Iranian and Algerian companies and held talks with Qatari companies as well as Gaz de France about supplies.
Polish Chamber of Commerce president Andrzej Arendarski summed up his country's interest in LNG: "We would like to have other suppliers too, so that there is no over-dependence on Russian producers."
In June 2009 gas production by Russia’s Gazprom fell by 35.9 percent compared to June 2008. In May the drop was 34.5 percent. Gazprom officials told the Russian newspaper Vedomosti they remain optimistic and by year’s end the fall of production would only amount to 7-10 percent.
The conventional explanations for this rapid drop in production are both the world-wide economic crisis which has dampened demand for gas in Europe and Gazprom’s failure to invest in the development of new fields. There are, however other factors contributing to lower Russian exports. One example of how EU member states are diversifying suppliers is the recent contract signed by Poland to buy 1.5 billion cubic meters (bcm) of Qatari LNG for 20 years.
Poland currently produces 5 bcm of gas and imports 70 percent of its gas from Russia. Annual Polish consumption of gas is 15.6 bcm and is forecast to rise to 16.4 bcm next year.
Qatari LNG is scheduled to begin arriving in Poland in 2014 once the new LNG import terminal is built on the Baltic coast near the German border. However, liquefied gas will be transported to Poland on the new Q-Flex vessels and concern has risen in Poland that the Nord Stream Russo-German pipeline project could prove an obstacle to the workability of the Poland-Qatar deal. The current plan for Nord Stream imagines the pipeline being laid across the fairway leading to the ports of Szczecin and Swinoujscie. This will reduce its depth to 12.9 meters, while Q-Flex ships require depths of 14.3 meters to pass.
PGNiG, the Polish state-owned gas monopoly, hopes to eventually import 5 Bcm/ of LNG annually.
On June 29, 2009, PGNiG's vice-president in charge of strategic projects, Radoslaw Didzinski, was reported as saying Gaz de France, Spain's Gas Natural and the UK's National Grid are potential partners in the LNG terminal. Meanwhile the company has signed preliminary agreements with Iranian and Algerian companies and held talks with Qatari companies as well as Gaz de France about supplies.
Polish Chamber of Commerce president Andrzej Arendarski summed up his country's interest in LNG: "We would like to have other suppliers too, so that there is no over-dependence on Russian producers."
Thursday, June 11, 2009
New Obstacles for the Nord Stream Pipeline
by Roman Kupchinsky
The German Ministry of Defense has once again voiced its opposition to the proposed route of Gazprom’s major gas pipeline project- the Nord Stream pipeline. The Bundeswehr reservations were recently presented to the German parliament’s committee on national defense, in which the Defense Ministry stated that the route was too close to the island of Rugen where large scale German naval maneuvers are held.
The news of this renewed opposition to Nord Stream came on the same day that German Foreign Minister Frank-Walter Steinmeyer arrived in Moscow for talks with Russian President Dmitry Medvedev and Prime Minister Vladimir Putin.
In the past Steinmeyer had been a firm supporter of Nord Stream. According to Jamestown senior fellow Vlad Socor, “The Russo-German pipeline is not a European project in any sense. Interested parties ranging from the Kremlin and Gazprom to German business groups and elements in the German government portray this project as a European one. German Minister of Foreign Affairs Frank-Walter Steinmeyer used this argument when visiting Estonia.”
However this month, Steinmeyer is challenging German Chancellor Angela Merkel in the upcoming election and is reluctant to whitewash Nord Stream which has become a controversial issue for many German voters. As the candidate from the SPD, once headed by former chancellor Gerhard Schroeder, a key executive in the Nord Stream consortium, Steinmeyer is now caught in a vicious political battle. The Bundeswehr report tempered his support of Nord Stream to the great displeasure of the Russian leadership. Steinmeyer’s position is also weakened by the fact that the head of the Nord Stream Consortium office in Switzerland is Mathias Warnig, a former intelligence officer for the East German security service, the hated Stasi.
Responding to the German military report, the deputy CEO of Gazprom, Alexander Medvedev stated: “Europe must decide how to resolve this situation. If Europe does not want our gas, we will find the means to sell it elsewhere.”
Medvedev, in what might be seen as a threat to the EU, once again raised the specter of Gazprom diverting gas from European markets and selling it as LNG to the U.S. and Canadian markets. Bloomberg quoted the Gazprom official on June 10, 2009: “Gazprom is seeking as much as 10 percent of the U.S. gas market by 2020, after two Arctic liquefied natural gas projects start producing, deputy CEO Alexander Medvedev told reporters Tuesday.”
"The volume which we have right now is just 0.5 percent of natural gas consumption of the United States, but with gas out of Shtokman and maybe Yamal LNG our share in the U.S. and Canadian markets would go up between 5 and 10 percent," Medvedev said.
Many U.S. energy analysts view this as an empty threat. LNG is still a tiny source of gas supplies to the U.S. and will remain such for years to come. Besides, Russian LNG will face fierce competition from Qatar and Nigeria, not to mention Trinidad and Tabago, the main supplier of LNG to the U.S.
Is the Nord Stream pipeline doomed? Much will depend on the upcoming German elections and on the continuing opposition to Nord Stream from Poland and the Baltic states. But the end game will take place in the near future and a showdown between Gazprom and Germany is in the works.
The German Ministry of Defense has once again voiced its opposition to the proposed route of Gazprom’s major gas pipeline project- the Nord Stream pipeline. The Bundeswehr reservations were recently presented to the German parliament’s committee on national defense, in which the Defense Ministry stated that the route was too close to the island of Rugen where large scale German naval maneuvers are held.
The news of this renewed opposition to Nord Stream came on the same day that German Foreign Minister Frank-Walter Steinmeyer arrived in Moscow for talks with Russian President Dmitry Medvedev and Prime Minister Vladimir Putin.
In the past Steinmeyer had been a firm supporter of Nord Stream. According to Jamestown senior fellow Vlad Socor, “The Russo-German pipeline is not a European project in any sense. Interested parties ranging from the Kremlin and Gazprom to German business groups and elements in the German government portray this project as a European one. German Minister of Foreign Affairs Frank-Walter Steinmeyer used this argument when visiting Estonia.”
However this month, Steinmeyer is challenging German Chancellor Angela Merkel in the upcoming election and is reluctant to whitewash Nord Stream which has become a controversial issue for many German voters. As the candidate from the SPD, once headed by former chancellor Gerhard Schroeder, a key executive in the Nord Stream consortium, Steinmeyer is now caught in a vicious political battle. The Bundeswehr report tempered his support of Nord Stream to the great displeasure of the Russian leadership. Steinmeyer’s position is also weakened by the fact that the head of the Nord Stream Consortium office in Switzerland is Mathias Warnig, a former intelligence officer for the East German security service, the hated Stasi.
Responding to the German military report, the deputy CEO of Gazprom, Alexander Medvedev stated: “Europe must decide how to resolve this situation. If Europe does not want our gas, we will find the means to sell it elsewhere.”
Medvedev, in what might be seen as a threat to the EU, once again raised the specter of Gazprom diverting gas from European markets and selling it as LNG to the U.S. and Canadian markets. Bloomberg quoted the Gazprom official on June 10, 2009: “Gazprom is seeking as much as 10 percent of the U.S. gas market by 2020, after two Arctic liquefied natural gas projects start producing, deputy CEO Alexander Medvedev told reporters Tuesday.”
"The volume which we have right now is just 0.5 percent of natural gas consumption of the United States, but with gas out of Shtokman and maybe Yamal LNG our share in the U.S. and Canadian markets would go up between 5 and 10 percent," Medvedev said.
Many U.S. energy analysts view this as an empty threat. LNG is still a tiny source of gas supplies to the U.S. and will remain such for years to come. Besides, Russian LNG will face fierce competition from Qatar and Nigeria, not to mention Trinidad and Tabago, the main supplier of LNG to the U.S.
Is the Nord Stream pipeline doomed? Much will depend on the upcoming German elections and on the continuing opposition to Nord Stream from Poland and the Baltic states. But the end game will take place in the near future and a showdown between Gazprom and Germany is in the works.
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