Nabucco, or is the Great Gas Game turning into a waltz?

It seems as though, whenever things are relatively quiet in the energy world, which they currently seem to be, then all one has to do is type Gazprom into Google search box, and there will be some interesting snippet.

And lo, it appears that Gazprom is looking into a take-over one of the Hungarian gas pipeline networks. Now that is not what the initial part of the post says, where it notes that the Hungarians are switching their gas purchases from a company (RosUkrEnergo) (RUE) that purchased Russian gas through Ukraine, to a company known as Rosgas AG. As part of the fallout from the January dispute between Russia and Ukraine RUE lost that business, and now Hungary has found a new middleman, Rosgas.

The immediate suspicion is that RosGas AG is yet another in a long line of shadowy intermediary companies created by Firtash and Gazprom. However, in the case of RosGas this may mask a possible attempt by Gazprom to cut gas supplies to Firtash's Emfesz, as a precursor to a company takeover - vastly increasing its share of the Hungarian domestic gas distribution network.

This becomes of some importance when one looks at the relative prospects of the two alternate paths for new gas to reach Western Europe – South Stream and Nabucco. South Stream is being increasingly pushed by Gazprom. The pipeline will bring gas under the Black Sea, and pass through Serbia and Slovenia before reaching Austria. However Eni, who is a 50% partner with Gazprom in this stage of its development, is upset that Gazprom is keeping it out of the negotiations with Serbia and Slovenia. Both countries are anticipated to sign agreements with Gazprom in the near future, without Eni, for gas supplies from South Stream.

And this may be where Hungary comes in, since the competing Nabucco pipeline goes through Hungary to get to the Austrian hub. So that if Gazprom controls the Hungarian pipelines, and can stop competitors’ gas flowing through them (a fact they used to get TNK-BP out of the rich Kovytka field after TNK-BP had developed it.) It is yet another couple of nails in the Nabucco coffin.

Earlier this week, with a fanfare celebrating the coming signature of the Nabucco agreement to run gas through the pipeline across Turkey it looked as though the pipeline was moving rather rapidly forward. However, buried within the story is the backing off of European funding

The European Commission is proposing to scale back its support for the Nabucco project to 200 million euros ($268 million) from 250 million euros, Tarradellas said in February. The aid would be channeled through the European Investment Bank.

At the same time, the last paragraph is interesting.

Friday's statement, signed by leaders of the EU, Azerbaijan, Georgia, Turkey and Egypt, also said the EU and Egypt should "agree on specific projects in developing Egypt's gas reserves and export potential for the EU." It said it was signed "in the presence of the representatives of Kazakhstan, Turkmenistan and Uzbekistan."The statement also called for a memorandum of understanding on energy between the EU and Iraq "as soon as possible." Barroso said a preliminary energy accord with Iraq was "imminent."

There are nuggets in that paragraph – first the pipeline cannot be effective without the gas from Kazakhstan, Turkmenistan and Uzbekistan. But none of them signed the document. Further Azerbaijan does not think that the project is feasible without Turkmenistan. The Turks will get paid for their trouble

The Turkish government has been driving a hard bargain, insisting on collecting a "tax" on the gas being pumped and demanding 15 percent of the transit gas at discounted prices. These requests have been rejected by the European Commission, the executive branch of the 27-nation bloc, delaying the 9 billion-euro project. More than half of the pipeline is to be located in Turkey.

But getting them on board helps negate the pressure that Russia (read Gazprom) is applying to discourage the “stans” from selling Nabucco their gas.

So as steps in the Great Game you could say that Europe took the first by planning Nabucco, then Russia took the second by stopping an adequate supply availability through pressure on Turkmenistan etc. Europe now gets the third, since with the pipeline running through Turkey they can (if politics allows) run connections into Iran, Egypt and Iraq. And before the step is completed Russia moves to step on their toes and gain control of the Hungarian section, thereby taking the fourth.

With Austria involved, maybe this part of the game is turning into a waltz – but with constantly changing partners - we shall see.

P52. Pick Points

Half-a-dozen or so stories of interest:

With OPEC coming up on their next meeting this Sunday, I suppose it is time to guess whether or not they will make another production cut. The latest thought seems to be that they won’t. Though not all agree, and prices did dip a little Tuesday, back to $45.71. The EIA have forecast a decline in demand of almost 1.4 mbd, down around 200,000 bd over earlier forecasts. They see global demand dropping to 82.47 mbd, but they also see prices remaining lower, at slightly below today’s prices. They project natural gas at around $4.70 per kcf. We’ll just have to wait for the TWIP tomorrow to give us a little help to make up our minds. But these seem low.

To try and encourage demand Russia is dropping their export duty from $15.73 per barrel to $14.73 or more (depending on grade). Troubles in their oil patch are such, however, that the head of the oil-rich Bashkortostan region may be in trouble, and soon out of a job. The do have an agreement to run the Hungarian section of the South Stream pipeline, with a gas storage facility also being provided by the time it comes on line in 2015. (That date keeps slipping). Croatia is hoping to put a pipeline in place that would allow it to get its supplies through Hungary. Croatia uses 113 billion cu.ft. a year, but produces 60% of that in country. The rest comes from Russia.

There is talk of an LNG terminal in the Adriatic to help, and it is on the list that Exxon Mobil is anticipating for this year. The other is at South Hook in West Wales, and that is within weeks of completion. Meanwhile the new terminal in Rio de Janeiro will receive its first cargo today (March 11). It is coming from Trinidad and Tobago. The roughly 5 million cu ft tanker is on a test run to ensure that everything works well, before settling into production later in the year. While the terminal can produce up to 700 mcf of natural gas a day, the current thought is that may not be needed as much this year, as the water levels are relatively high, and Brazil uses a lot of hydro power. GDF Suez just brought one new plant at 241 MW on line last month. Brazil is one of more dependent countries on hydro-electricity with over 600 dams. and is pressing ahead with two more projects. Having seen power cuts in 2001, the government is determined that won’t happen again.

It isn’t quite that moist in the Middle East, where sandstorms have shut down ports in Kuwait and Saudi Arabia, they should end today. Not that this helps Japan, since Saudi Aramco continue to cut the volumes that will be shipped there in April. Because of sluggish demand, there was some thought that there might be another 15% cut in supply, but the Japanese think this unlikely.

There has been a bit of talk about coal reserves over at The Oil Drum, and Euan has just put up a post on Carbon Capture and Storage (that’s CO2). Some of the past debate has been about reserves and resources, and that was part of the reason for my Sunday post, since technology can change resource to reserve. Well so, apparently can state government. Some W. Va. Landowners got a shock in January when the coal under their property was reclassified from resource to reserve. This added some 3.7 million acres of reserve over last year, and with a tax bill of $100 an acre, both appeared to give the state a windfall, and unsuspecting homeowners sticker shock. The reassessments are being reviewed.

Well while the rest of the world waits to see how demand for more conventional fuel is going, up in Alaska the Iditarod is underway. And our trees are in bud, and crocuses came up in the year last week. Spring is a coming!!

More stories can be found at The Energy Bulletin and Drumbeat at The Oil Drum.

P43. Pick Points

Half-a-dozen or so stories of interest:

I wrote earlier today about the pickup in gasoline demand that EIA had reported, and this was also noted by other folk, and the resurgence has led to a rise in the price of crude to $42 a barrel. . EIA aren’t the only ones trying to explain the situation, the Canadians also have some words on gas prices. Then there is the Rolling Stone interpretation. But rather that the technical explanation others are just blaming the rise on inflation.
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U.S. production of crude has slightly increased in the recent past, and industry are urging Congress and the Obama administration to expand drilling offshore, because although renewable energy sources will provide some future volume, at present we still need to grow basic oil production to meet the existing need. However that argument is not strong enough to stop Interior Secretary Ken Salazar from withdrawing leases for oil shale production on federal land, while he works out a plan for higher royalty rates. The Administration is however offering a second round of leases but there is opposition from local mayors near the operations. The techniques used in getting gas out of shale in the US has proved quite successful in generating production from shales that were thought impractical, and so now the Europeans are considering using them over there . Gas from shale is still only 5% of production in the USA though it is expected to reach levels of up to 50% before too long. The Canadians are now trying it, and proving along the way that just because the technique works doesn’t means it will make money. On the other side of the country, however, shale production is already making money .

It does appear that the Shotkman field is finally going to start development, with the initial engineering work being awarded to Aker Solutions who with Technip France and SBM Offshore been awarded a 25 million EUR contract on the development of a concept definition and engineering design for the project floating production unit. Recognizing that a business opportunity lies out there Russian authorities are now ready to elaborate a new EU-Russia energy agreement, to regulate relations and help speed up progress in projects like Shtokman, the Russians say. Royal Dutch Shell however remain to be convinced. They need to be sure that they will receive production rights after exploration and development, and in Russia this is no safe bet even with a local partner.

One example of potential problem comes from the Karachaganak field, where Gazprom and the Kazakhstan Government are thinking of suspending the joint venture Of course not all projects fail for political reasons Chevron has just pulled out of Northern Taiga Neftegaz a venture with Gazprom Neft after reserves in the Pyakutinsky and Aikhettinsky fields in the Yamalo-Nenets Autonomous Area, did not meet the original projections of some 45 million tons of oil.

The latest scheme is for Total to join with Gazprom and fund a pipeline to carry Nigerian gas through the Sahara to Europe, some 2,580 miles away.

As the planting season starts in South Asia the Bangladesh Prime Minister has directed authorities to ensure power to agriculture to protect food production.
The ministry of power, energy and mineral resources has stated that 130 MW of additional electricity has been added to the national grid and 700 MW more will be added by June. However the demand from the people of Bangladesh is that the government should cut the price of fuel oils.
 This year the price is 10% up on the last Boro season when the price was Tk 40. Bangladesh is still trying to find ways to economically exploit its high quality coal reserve . The proven gas resource are widely believed to soon be exhausted. In the absence of a decision the energy deficit is widening. This summer will witness massive load shedding.

Iranian and Russian technicians are conducting a test run of Iran’s first nuclear plant, a major step toward full operations. Work on Bushehr started 34 years ago, during the reign of the shah with the help of the German contractor Siemens but was suspended after the 1979 revolution. Pilot operations at the 1,000-megawatt light-water reactor, built with Russian assistance under a $1 billion contract, have long been delayed and it's unclear when the reactor could be switched on. Wednesday's tests were a computer run to ensure that the reactor's processes work properly. For the tests, technicians loaded a "virtual fuel" of lead into the reactor to imitate the density of enriched uranium, said Iranian nuclear spokesman Mohsen Shirazi.

There is an interest to form strong bilateral relations between Bulgaria and Italy to move forward with the South Stream gas pipeline.

More stories can be found at The Energy Bulletin and Drumbeat at The Oil Drum.

P27. Pick Points

Half-a-dozen or so stories of interest:

Somewhere in Washington they are looking for incentives for us to buy a new car. The Germans have seen it work by providing 2,500 euros to everyone who replaces a car at least nine years old with a new one. The need for this can be seen by the continued decline in sales, even as industry incentives have risen to an average $2,902. Well maybe we should hold-off on a replacement until they decide ?

Having set some of the standards for automobiles that will likely soon impact the rest of the country, it is now California’s turn to go after energy inefficient appliances, such as TV’s, which can account for 10% of a home electricity bill. The Department of Energy is running a campaign to improve residential water heaters. Yet the amount set aside in the stimulus package is relatively quite small. Though that has not stopped some entrepreneurs. There are the standard steps that one can take to save energy but if the economy is to rebound, then the scale of increase that California has achieved needs to be applied, even perhaps in Italy.

One of the features of the Medieval Warming Period was the extensive and long-lasting droughts that hit Southern California. Trees grew where now lakes and rivers run, it was so dry. Now California is again facing severe drought. There are already campaigns to reduce water usage . With the snow pack only 61% of normal this could be the third year in a row where water runs short, and this is beginning to have serious consequences for agriculture . While the snow situation is a little better in Nevada, it too is facing problems. On the other hand Utah’s nine-year drought came to an end last June, and Arizona is seeing a moderate drought in Navajo County.

Following the Russia:Ukraine dispute over natural gas the relatively small volumes that could be sent around Ukraine through the North and South Stream pipelines is getting another look. In the South Gazprom is considering increasing capacity by 50% to 47 bcm. Coming the day after the meeting on the Nabucco pipeline, its major competitor, the response is quite quick. Germany points out that one can support both. But it may be Prime Minister Putin who makes the next move.

MidWestern Senators are urging a reconsideration of the FutureGen project. This plan to build a demonstration coal-fired power plant that would capture and sequester carbon dioxide was “restructured” by the last DOE Administration, and thus killed. This could not, perhaps have had anything to do with it being proposed for Illinois, where the junior Senator at the time had announced his support.

In order to help provide more electricity to Nepal, the price is to be raised and in this way load shedding can drop to 12 hours a day “soon” and to 6 hours a day by the end of February. There is s Singaporean there blogging about the problems.

For more stories see The Energy Bulletin or Drumbeat at The Oil Drum