More thoughts about Gazprom
Posted by Heading Out on October 21, 2006 - 12:02pm
Topic: Supply/Production
Tags: europe, gazprom, hungary, korea, natural gas, russia, shtokman [list all tags]
"You know what happens when they get in the same room as Putin. They all drop their trousers and say 'I love you Vladimir'." This is the gloomy and cynical view from a senior EU insider, of the leaders of the European Union's 25 countries. Perhaps it's intended to chivvy rather than insult. But there is no doubt that the EU summit in Finland is a rather odd event.
There has been much debate over the reliability of the Russian oil and gas supplies to the rest of the world, with many commentators noting the historic reliability of the source. But as Gazprom takes over an increasing percentage of the world's delivery system, there are some concerns that perhaps need to be highlighted. This is particularly true for the United States with our "Just in time" philosophy, which (as I noted) James Woolsey worried about in St Louis.
The BBC article notes three concerns with the situation a) the threat of a supply disruption, b) the increasingly monopolistic position of Gazprom as a supplier, and c) the lack of a common resolve among nations as to how to deal with this.
At a time when the EU is trying to persuade reluctant countries to open up their energy markets to the fierce winds of competition and abandon the French idea of "national champions", Gazprom is a very vivid example that such allegedly old-fashioned out-of-date thinking can work dramatically well for the country concerned. Take a little bit of communist-era central control, a little bit of hyper-capitalist ruthlessness, a big dollop of political muscle and... hey presto you have unbeatable competition. The European Union aim is to get an agreement that Gazprom will give up control of its pipelines and let other companies share the routes. The technical term for this is, I believe, a "pipedream".
One might equally well, I guess, now describe the assumption that the US would eventually get 10% of its natural gas, as an LNG supply, from the Shtokman field. However the date of that production is likely to move back, even from 2015 if the negotiations on who is going to do what become as protracted, as the negotiations over who would be partners. The reason for the decision to direct the flow primarily to Europe was
"This decision is a further guarantee of the dependability of Russian gas deliveries to Europe for the long term, and it is proof that the European market has the highest importance to the company," Miller said.
Interestingly the decision that Gazprom would, "go it alone" is now being reported as being because the field is both larger than originally anticipated, (up from 3.7 to 4 trillion cubic meters) and that it would be easier to access than had been estimated earlier. By 2015 the Russian Energy and Industry Minister projects that Russia will be exporting 257 billion meters of gas a year, up by 52% from current levels. For those who have been projecting that oil production would decline, he reports:
The minister also said Russia's annual oil production could increase from 472 million tons (3.47 billion barrels) in 2005 to 542 million tons (3.98 billion barrels) in 2015.??"Oil output growth will be ensured by the development of deposits in East Siberia and the Far East," he said.??That would give an export level of around 10.9 mbd, which is above what others have been projecting, and a growth at a time when they are currently anticipated to peak by the end of this decade.Khristenko also forecasted that Russia will increase exports of Urals crude from 253 million tons (1.86 billion barrels) in 2005 to about 300 million tons (2.2 billion barrels) in 2015.
Gazprom is currently talking to Korea about piping gas down there in the 2012 to 2013 time frame, though the supply might start earlier as an LNG feed. Earlier this week Gazprom started one pipeline to China from Western Siberia that will carry 30 billion cubic meters a year. It anticipates a second of similar or larger size may be installed later. The article suggests that supplies for the second are to come from Sakhalin Island and perhaps Kovykta, with a start date in 2011. Gazprom is considering building the pipeline for Korea (which goes back to point b above).
Going back to the gas supply to Europe, and relating to concerns about gas storage, Gazprom has just purchased an abandoned mine in Germany, to fit into the new Baltic pipeline.
ZMB (a Gazprom subsidiary) said the company would spend €100 million to €300 million, or $125 million to $375 million, over the next five years. Once constructed, ZMB said it would provide storage capacity for the joint German and Russian gas pipeline which is scheduled to be completed in 2010. That pipeline, called the Nord Stream, would for the first time allow Gazprom to send gas directly from Russia to German via a pipe constructed under the Baltic Sea. It will move up to 55 billion cubic meters, or 1.94 trillion cubic feet, of gas a year. The point of entry for Russian gas will be in northeastern Germany, near the planned storage facilities.The article also notes
Last June, Gazprom and Mol, Hungary's oil and gas company, agreed to build natural gas pipelines and underground gas storage facilities in Hungary aimed at reducing Russia's dependence on Ukraine as its main transit country and also having enough reserves of gas to handle any sharp rise in demand.
And in regard to point c above, it is worth noting the various government positions going into the Energy Summit in Finland
EU countries differ on whether the bloc should treat Moscow more as a strategic partner and supplier of a quarter of its gas, or as a bully in its ex-Soviet backyard and using energy as a political weapon.Former Soviet satellites in the Baltic states and central Europe want a tougher EU line. Diplomats said Polish Prime Minister Lech Kaczynski urged other EU leaders at the talks to maintain a united front at the dinner with Putin later on.
However they said French President Jacques Chirac took another tone, stressing the need for the EU and Russia to understand that their interests were broadly complementary.
European Parliament President Josep Borrell said the EU would lose face unless it raised its concerns with Putin, and insisted the huge European market for Russian energy was a bargaining chip in its favour.
"There is gas flow and there is cashflow," the Spanish Socialist said. "Russia needs cashflow, you can't eat gas."
Hmmm! Well the Energy Dinner is now over, and somehow I can't help but get the feeling that, in certain parts of Europe, folks are starting to look for their belt buckles
What is so gut-churning about this? Times change. Russia has the goods. Putin is a Machiavellian genius, Russia's modern-day Bismark, perhaps. And Russia has never been a weak country.
Let the giants of Europe unite. This Russophobic stuff is not only hypocritical, but downright stupid. As a famous Frenchman apparently said, 'It is not just a crime - it is a mistake!'
Variously ascribed to Fouche, Tallyrand and to one Antoine Boulay de la Meurthe - whoever that was. It descibed tke killing of the Duc d'Egene by Napoleon.
What is so gut-churning about this? Times change. Russia has the goods. Putin is a Machiavellian genius, Russia's modern-day Bismark, perhaps. And Russia has never been a weak country.
Let the giants of Europe unite. This Russophobic stuff is not only hypocritical, but downright stupid. As a famous Frenchman apparently said, 'It is not just a crime - it is a mistake!'
Putin is the current faceman for a group of ex-KGB trying to refight the cold war via their energy supplies. Times, it turns out, don't change terribly much.
I don't know where you live, but would you like your version of the KGB running your country? Where opponents are put in jail or shot?
Modern-day Bismark? You've got to be joking. Smacks more of Stalin to me.
Try thinking critically for a change instead of just believing any old rubbish you read in Newsweek, Time or the WSJ.
As for the local version of the KGB running my country ... why don't you look closer to home (the US, right?) if you want to complain about stuff like that?
Russia did not start the Cold War, and Russia is not seeking to expand some latter-day Warsaw Pact throughout North America. If the KGB wants to 're-fight' the Cold War, why might that be? Huh? 'Communism' is gone, but NATO lives on and seeks to expand East as far as possible.
Be reasonable.
If however, you meant to say that Stalin did not really mean engage in an insane arms race (he just wanted to grab as much as he could without one), then you might have an interesting point.
And further, if you wanted to argue that the Russians, with their experience of what a cities became in terms which resembled nuclear war, were not really able to convince themselves that better dead than anything else was a grand strategic option, it would also be interesting.
It isn't 'idiocy' at all to point out that the policy of the USSR was always essentially reactive. The West really did start the Cold War. Why would the USSR have given up anything when faced with a hostile Western bloc and a re-armed West Germany?
If you prefer the fairy tales you have grown up with, it's not my problem. It's a pity to see such an intelligent person sticking to the bog-standard (and false) version of events, but then that's life.
The USSR used murder of a Head of State to overturn neutral Czechoslovkia (and their Yalta commitments)
The USSR made sgreements at Yalta regarding Poland (and more) and then ignored them.
Your "poor reactive USSR" is some of the worst BS I have seen on this forum.
In the Cold War, the US was on the Good Guys side. The USSR had no good redeeming features at all. Evil Empire was an apt and accurate description.
Alan
I don't think there were good guys on either side of the Cold War. The United States gave us Hiroshima & Nagasaki, the war in Indochina (over 3 million civilians killed - for what?), and supported some of the most brutal dictatorships (Chile, Indonesia, Iraq, etc.). The USSR gave us the suppression of uprisings in Eastern Europe (Hungary in 1956 and Czechoslovakia in 1968, among others), invasion of Afghanistan, and supported a bunch of communist dictatorships.
But, to say that the country that almost single-handedly defeated the Nazis in Europe, put the first man in space, pioneered women and minority rights well before the US, and created some of the best literature and art of the last century has no redeeming features? Sounds a bit ignorant.
Almost single handily defeated the Nazis in Europe overstates the case. Even Krushchev in is autobiography admits the value of American aid and the value of a two front war. Great Britain stood alone in 1940 and refused to negotiate. The Western front captured 350,000 in 1943. The value of the Allied aerial bombardment can be debated (it certain reduced German war production, kept 1 million soldiers at home, and much of the Luftwaffe and artillery occupied. How decisive was this to the German war effort ?). And the Soviet Union would never have entered Germany were it not for the Western Fronts.
One should also remember the war of aggression against Finland, which convinced Hitler that the Red Army was not a viable army since the Finns fought them to a standstill. And against China as well in the 1930s.
Meanwhile the US supplied the Chinese with enough aid to keep them in the war, and fought an ocean and island war over incrediable distances against the Japanese with their best troops.
Given the tens of millions that died in the Gulag, any talk of "equal rights" is meaningless, as in all had no rights what so ever, so all were equal.
And yes, the Soviets were first into space.
As for 'standard' fairy tales - it was interesting to read at about 13 or so how the U.S. was responsible for every single weapons advance of the Cold War, with the exception of MIRVs (I think - it could have been ICBMs, though I'm pretty sure it was MIRVs). Sure, the Soviets were playing catch up in an insane arms race which ended up impoverishing vast numbers of people.
So what? It wasn't like the Stalin was motivated in his actions by the West in the 1920s or 1930s - and he quite honestly thought Hitler made him a better partner than the 'West.' Again, maybe the Poles can fill you in on the details - they tend to be fairly well informed about what happened to them over the last couple of generations.
Simply because one side in a struggle is bad doesn't mean the other side is good or less bad. I don't think the Poles thought the choice between Hitler and Stalin somehow represented a true choice at all.
I can speak only about the Czech case as part of my family is from Prague. The Commies won the democratic elections after WWII in part because there was a large segment of population leaning towards left politics prior WWII, also Russians did the large chunk of liberation of the country from nazis which wiped out the cream of the population. There was also this experience with Munich of 1938 where both UK and France "allies" betrayed their defense agreement with Czechoslovakia.
It's true when Commies were fully in power after 1948 the regime changed to authoritarian rule and especially the years before Stalin's death were pretty nasty.
Now we have a brand new brainwashed generation of US supporters not unlike the young crazy Stalinists of early 50s. Not a pretty picture given the forthcomming peakoil and increasing Russian influence in EU politics via the energy line..
Basically, current Czech politicians are seen internationally as even more devoted US interest lackeys than Poles or some of the Baltic guys.
Czechs blocked several anti US/Israel policies within the EU foreign policy structure not mentioning various anti Cuban provocations done at the UN and on other venues.
You have to dig deep into the czech psyche and history to understand they have perfected the strategy of giving up on their own program and piggybacking to the currently "winning side" on the int. scene. That's not a critique per se just an observation of the state of affairs.
In fact this might be a good survival strategy in the middle of Europe where always is someone interested in controlling or using that small country for his ends on the larger campaign..
Living in Germany, most of what I read and see is oriented to the fact that the Czechs seem very devoted to retaining their industrial base, and they do not seem to have any foreign policy ambitions on a large scale (unlike Poland, for example).
And this may also be historical - I used to work with someone who was 'German,' but was also 'Czech' (that blood line thinking is not easy for me). According to him, after 1968, the Czechs drew completely into a shell - for example, ca. 1994, he explained why there really weren't any good Czech/English dictionaries available - it was because only a few hundred people a year were allowed to study English at all after 1968.
In part, the brainwashing may have been based on not really knowing anything about the West except what was advertised.
One of his main gigs is that Czech tanks were very good. VERY Good.
For my part, though in many ways not a superb work, 'Ploesti: The Great Ground-Air Battle of 1 August 1943' by James Dugan, Carroll Stewart is good background for showing just how critical oil was to the basic understanding of warfare in the 1930s and 1940s in the sense of how casually the authors mention things like how every war college/war planner of note looked at the problem of conquering/destroying Ploesti, or how critical oil was to running a modern war - two generations ago.
Of course it was worth the time and effort to send some of America's first heavy bombers to the North African desert to strike at the only facility producing high octane fuel for German fighter planes.
And equally obvious, it was clear that making Ploesti as impossible to take out (both land and air) as possible was a top priority of the defenders.
Look at the level of planning and deception employed by both sides - war is much more than blowing things up, even when all you are trying to do is blow things up.
The first Ploesti low level raid was a massive effort - and the reason for it was oil, the most critical element in industrial warfare. I remain amazed at how many people here talk about having their eyes opened - look at what people were thinking in the decade before WWII to have a good idea of how closed many peoples' eyes are today.
But truly, reading a paragraph or two written around 1930 seems more visionary in terms of the central importance of oil than most of what is written by any 'peak oiler' today - especially in light of how WWII was fought.
Quite honestly, the idea that WWII was mainly about oil does seem a stretch, though it is not easily refuted either. But then, what was WWI all about, apart from Europe being so bored it decided to slaughter itself because its leaders were completely out of touch with how the world had changed since their childhood? Sometimes, wars just seem to happen, and the reasons come later.
Another reason for an older edition is that some of the pictures are incredible - bombing a refinery at chimney height is something hard to imagine, and that someone was taking pictures is even more unimaginable.
But the book does have its moments - such as when the German in charge of defending Ploesti (who was enjoying lunch in the countryside) watches what he imagines is perfectly coordinated waves of bombers coming in from different directions which in truth was actually a colossal mistake of navigation and bad timing - you do not want to be flying over a refinery someone else has just bombed at a level below the black burning columns of smoke.
Good point pointing to a simple solution: get the gas elsewhere! Where? Oops.
It's an incredibly explosive situation involving all the big players: the US, Russia, China, and the EU. Of these only Russia is energy rich. Russia also is the world's second nuclear power, but otherwise weak in many respects. Her energy is needed by all players but she cannot be dealt with in the same way as Iraq because of the nukes. Russia is underpopulated while China is overpopulated. But in the meantime Russia can use Chinese demand against any thought by the EU of haggling too much over price.
Of course outside this circle are all the other oil and gas suppliers. The heats on them to lessen the bargaining power of the Russians. But they can't, not this time.
I don't play chess, geopolitical or otherwise, so this all gives me a headache. But that better than the anxiety I would have if I were smarter could see where it's all heading.
I dunno, sounds pretty close to a banana republic to me.
The Putin/KGB government would love to seize/takeover all of the foreign ventures (TNK-BP, Lukoil-COP, Total's operation and Shell's) but they don't have the capital to develop them all themselves, and if they do another seizure (ala Yukos), they may well trigger massive capital flight from Russia.
Even Gazprom, which has huge resources in the ground, is a conglomerate of all kinds of unassorted businesses that are being subsidized by energy production.
"Jailing of opponents". Let's see a list. Oh, I know its Khodorkovsky. This is your notion of "opponents". One criminal oligarch for the whole country.
"murder of journalists". When you start crying as much about Paul Klebnikov and Lystiev (prime supspect: Berezovsky, another criminal oligarch who is beloved in the west since he is a "Putin oponent") as you are crying over Politkovskaya, then maybe you will have some credibility. So far all you have is a lot of credulity.
peace
In what way is Russia the world's second nuclear power?
Quote: "It must be remembered that there are no detectable efforts being made to seek confirmed reductions of almost 30,000 nuclear weapons worldwide, of which the United States possesses about 12,000, Russia 16,000, China 400, France 350, Israel 200, Britain 185, India and Pakistan 40 each"
And just who do you think Putin has in mind to run this company, to exploit the gargantuan asset base it is in the process of assembling? Who will get the stock options in this publicly traded company that is now, by design, hard to trade but which eventually will be listed on the N.Y.S.E. and, as probably the largest publicly owned company in the world, will be a household name to be owned by every widow, orphan and mutual fund? Who will get this great basket of stock options that will make the holder into a zillionaire? How about the wiliest politician in the world?