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28 comments on Toughness is so manly--and so effective at grabbing gas--just ask Russia
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GAIA Host Collective
Jerome,
Your essential point is correct however, the EU as GAZP's second largest customer and most profitable customer, has a right as customer to seek some changes to the way that GAZP does business.
You have written (ad infinitum?) that GAZP has plenty of gas in the ground. Which is not entirely useful when it sits on the wrong side of 30 year-old (5 year over design life) pipeline bottlenecks. Despite a number of price liberalization steps at the end of 2006 the key to ensuring a supply / demand balance to around 2015, when Shtockman will be just around the corner, will be ensuring that it is worthwhile for non-GAZP gas producers to put their gas in to UGSS - hopefully on the right (western) side of the bottlenecks.
Posturing from the likes of Smith, or indeed Piebalgs at Davos, clearly does not help. But neither does supine acceptance of the status quo. Quite what the correct route to the needed undoing of the current status quo is not entirely clear. It would be good if TOD contributors and readers could add positively to the debate rather than always pointing out the idiocy of our masters voice.
There's a number of issues here:
- one is the talk in the West about Gazprom's inability in the medium term (say, to 2015 or 2020) to bring gas on stream when needed (hint: let our boys in bog oil do it): that's bunk
- another is the issue of long term availability of gas, between the possible peak of their production and their increasing domestic demand: that's a real issue, which requires that we work on our side on demand
- another one you raise is that of pipeline capacity: on this I disagree with you: there are enough pipelines to carry over all the gas we're willing (or we need) to buy from Russia, and they are actualyl building those that will be needed in the next 10-15 years (with Nordpipe). The pipeline network is in good condition, it's the only thing where Gazprom never stopped investing during the 90s
As to the EU being Russia's largest customer, and having "rights" to see changes in Gazprom, I have to say: "huh?". Why? We have a right to see contractual obligations fulfilled. We have a right to try to negociate better terms, but currently, the balance of power is not really on our side, especially not with all the bluster around.
Of my three points I would say that 1 and 3 are absolute givens.
- The supply / demand balance is marginally in balance
- The entry points to the Russian pipe system in and around Nadym are at maximum capacity. Nordpipe and Bluestream don't address the key bottlenecks, they address the ex-FSU transit issue.
The rights to see a contract obligations fulfilled are precisely the rights to which I refer. If the supply / demand equation looks tight then within the terms of contract negotiation with GAZP you have a reasonable right to understand that GAZP is addressing a. production and b. transportation. Long term (though I hesitate to believe that Europe thinks this way) take or pay contracts have to supply won't suddenly be siphoned off for energy inefficient Severstal or RusAl because the producer got his sums wrong. That is the right that purchasers have. The seller has the right to know, and for that to be enshrined in a contract, that having developed a field 800km from landfall in inhospitable terrain that the buyer will still be buying gas. If these two rights were mutually acknowledged, without histrionics, then there is half a chance that there could be a reasonable debate over Russia and Europe's future energy co-operation.
On the subject of getting sums wrong - I have no reason to believe, and a certain amount of empirical evidence against, that any of "our boys" will be any better at getting big, difficult projects executed on time and anywhere close to budget.
Excellent points, excellent comment. Thanks for the insight on the Nadym side, although I admit that it surprises me, with Urengoi and Yamburg in slow decline, that this would be a problem.
Do you have more info on this that you can post or email? Thanks!