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REVENGES OF THE EUROPEAN COMMISSION.
Searches at Gazprom offices is the European reaction to South Stream and poor prospects of Nabucco

REVENGES OF THE EUROPEAN COMMISSION. Searches at Gazprom offices is the European reaction to South Stream and poor prospects of Nabucco

The searches at German and Czech Gazprom subsidiaries that took place in the end of September are seemingly the revenge of the European Commission for South Stream and poor prospects of Nabucco. In reality the EU should have better consolidated partnership with Russia as long as our country has the largest gas deposits in the world — the cleanest kind of fuel.

Last year European gas consumption went 7% up, while gas import increased by 13%. Statistics indicates that gas, being the cleanest fuel of all, rapidly improves its positions at all markets, which is non-surprising.

According to the majority of expert forecasts, the 21st century will be the age of gas (just like the 19th century was the age of coal and the 20th century was the age of oil). This June International Energy Agency published a report, stating that for at least 25 years more the natural gas will remain the key to satisfying the global demand for energy resources. The report marked out that by 2035 the demand can make up 5.1 trillion cubic meters, which is 1.8 trillion more than in 2010, thus the growth is 50%. This is a brilliant opening for Russia, having the largest proven gas deposits. It’s quite characteristic too as long gas ousts the oil products even from its home field — vehicles. Since 2000 to 2010 natural gas consumption as an engine fuel has gone up 12.5 times.

BP officials forecast that in the nearest 20 years the gas consumption in the Middle East will increase drastically, where it will oust oil from the energy balance. This will considerably injure the export potential of the Middle Eastern countries at the gas market. As for the «shale revolution», BP believes that it will take place in the USA too. As a result, by 2030 more than 50% of American production will fall for shale and coal gas. In Europe share of their production will remain insignificant due to the ecological risks. We have to comprehend, though, that American authorities won’t be able to brush the substantial ecological risks aside. Right now several lawsuits against the U.S. shale gas-producing companies are processed. Farmers accuse gas industry officials of polluting water intakes and spoiling the water supply system because of the hydraulic fractures between layers. If these facts are proved, plans for drastic increase of shale gas production would be left hanging up in the air.

Pace of gas consumption rise will be the swiftest in Asia (especially in the PRC). Today China satisfies about 70% of its energy needs producing its own coal. Yet, that has already caused ecological catastrophes in the major Chinese cities. According to the WTO and World Bank estimates, 20 out of 30 most polluted cities are situated in China. At that, among the rest of these top-polluters cars are considered to be the main contributors. In China the number of cars per capita is 25 times less than in the USA and it is exactly the coal power plants that are considered the main cause of pollution. Steady economic growth gave birth to the Chinese middle class, which also triggered the car sales. Today Chinese customers buy more cars than anyone else in the world, which means that soon enough there will be literally nothing to breath in the Chinese cities. This problem may be solved by switching the coal power plants to a considerably «greener» natural gas and cars — to a gas fuel.

Not a long time ago the leading Chinese company PetroChina forecasted that by 2020 Chinese gas consumption will make up 300 billion cubic meters (in 2010 it was les than 109 billion). The bugbear is that there are not enough gas fields in China in order to satisfy its needs. Recently the information that China is going to apply American technologies of shale gas production has been leaked. Yet, quite a number of specialists paid their attention to the fact that a great amount of water is necessary to create the hydraulic fractures and produce the gas from the shale rock and Russia is somewhat short of water sources. Half of the national water resources were polluted with industrial wastes, which makes it undrinkable, and a quarter of them are unfit even for industrial use. Many rivers have just vanished from the face of earth. It is commonly known that special chemical solutions are added into the water for hydraulic fractures.

In Europe and North America natural gas will start ousting coal from the energy balance, which is provided with the plans of carbon dioxide emission reduction. By the way, BO believes that bio-fuel consumption will ratchet up quickly enough (especially in Brazil and the USA). Everybody knows that food prices break all the records these days and this trend will hardly change, as long as the planet population inevitably increases. In conditions like that wasting the food resources for engine fuel is barely reasonable. Most likely bio-fuel will lose the competition for the car engines to gas.

Prospects of alternative energy (wind and solar energy) remain dubious. First of all, these project develop thanks to state grants (in Europe mostly). Yet in the nearest years to come European countries are to face the need to considerably pump the retirement payments up. Since 2010 to 2020 the number of retired Europeans will increase almost 3% a year, while the number able-bodied population on the contrary, will be 1% less each year. Given the budget deficit, politicians are to have a hard time convincing population of the need to waste the taxpayers’ money on upholding the inefficient alternative-energy projects. Mind that there’s a cheaper way of reducing the harmful emissions — by switching the coal power plants to gas and switching car engines to the gas fuel. That’s why there’s nothing surprising in the fact the European governments have already started closing the alternative energy subsidizing projects. This happened in Spain, for example.

Accidents at the Japanese nuclear power plants have made this country buy more gas abroad. Besides, many countries have reconsidered their attitude to nuclear energy. Germany in particular has shut down 7 power plants and scheduled shutting the rest of them down by 2022. They’re to be substituted with the gas mostly.

Year after year European own gas production inevitably decreases. This trend will remain further on. Therefore, import of natural gas will be increasing furthermore. Where will it come from if not Russia? Middle Eastern consumption itself will grow — besides, it is still one of the most unstable regions in the world. The same thing is applied to Africa. Might it be that Nabucco project saves Europe?

Council of Europe has approved the EU mandate for holding negotiations with Azerbaijan and Turkmenistan regarding the construction of Trans-Caspian gas pipeline. At the same time Europe keeps fighting for the right to conclude international contracts for energy carriers’ supply. For now only the EU state leaders managed to defend this right of theirs. Yet, the European Union leadership keeps trying to lay its hands on the international «gas» policy-making. And on the 12th of September Euro Commission managed to get a mandate for the negotiations with Azerbaijan and Turkmenistan on the subject of Trans-Caspian gas pipeline construction — it is to become a substantial part of Nabucco project. However, joy of the EU leaders hasn’t lasted long. As soon as on the 16th of September leaders of Gazprom, ENI (Italy), BASF (Germany) and EDF (France) have signed a treaty on the joint construction of South Stream gas pipeline — the direct competitor of Nabucco. Now European Commission will have to compete with the leading EU countries: Germany, France and Italy.

It seems that the EU leaders have deliberately authorized the European Commission to negotiate about the Trans-Caspian gas pipeline, disbelieving into its prospects. The matter is that this project is discussed for about 20 years, although there’s little progress still. Only Russia, Kazakhstan and Azerbaijan have signed the treaty on the division of the Caspian Sea, while Turkmenistan and Iran refused to do so. Turkmenistan and Azerbaijan keep arguing about a number of Caspian shelf deposits — back in the beginning of 2000s it even triggered several clashes of their military ships. In conditions like that we may hardly expect reaching a quick agreement on the construction of Trans-Caspian gas pipeline. All the more, Russian and Iranian authorities have already voiced up their objections against this gas main.

We also have to understand what will be Trans-Caspian gas pipeline filled with it’s ever built. Today Turkmenistan sells its gas to Russia, Iran and China. At that, it plans to quickly build up the volumes of the PRC supplies. So where do they get some spare gas for Europe from? Recently discovered South Oilton gas field (which deposits allegedly exceed 10 trillion cubic meters of gas) is named as the resource base for the Trans-Caspian gas pipeline. This, however, is a very complicated deposit to develop — similar to the Astrakhan one that Gazprom works with.

Volume of the Astrakhan deposit makes up approximately 2.5 trillion cubic meters, allowing to produce about 100 billion cubic meters annually. Now, however, merely 15 billion are produces. Why is that so? As a matter of fact, this gas is very expensive, due to lying at great depths (more than 4 kilometers) and containing plenty of harmful admixtures (hydrogen sulfide and acid gases). In order to bring Astrakhan gas to a market-approved state it has to be purified from the admixtures at a gas-refining factory. In the Soviet era, when the development of Astrakhan deposit has just started, sulfur (rather than natural gas) was considered the key product here. Therefore, prior to developing the South Iolotan gas field, Turkmenistan has to build a large gas-refining complex. According to McKinsey estimate, production costs at South Iolotan will be one of the largest in the world (considerably more expensive than the indices for poorly-accessible Shtokman deposit, situated at the Barents Sea shelf). Thus, we may state that the goal of the EU — to beat down the price for Russian gas via securing the supplies from Turkmenistan — is unachievable (new Turkmen gas cannot be cheap by definition).

Assuming that the Trans-Caspian gas pipeline is built and at least 20 billion cubic meters are pumped through it annually, combining it with 10 billion cubic meters of Azerbaijani gas it would allow to fill Nabucco up. Europe then will end up with an independent (from Russia) source of supply. However, this main will go through an utterly unstable territory with a number of smoldering conflicts (Nagorno-Karabakh in Azerbaijan, South Ossetia and Abkhazia in Georgia, Kurdish separatists in Turkey). It’s hardly a secret that terrorists regularly blow the gas pipeline, connecting Iran and Turkey. European Commission assumed an unbearable burden and if it succeeds in settling all the contradictions and actually bringing the Nabucco project to life, its leader will be free to set monuments in their own honor. The chances for this, though, are diminutively small.

The searches at German and Czech Gazprom subsidiaries that took place in the end of September are seemingly the revenge of the European Commission for South Stream and poor prospects of Nabucco. In reality the EU should have better consolidated partnership with Russia as long as our country has the largest gas deposits in the world — the cleanest kind of fuel.

In order secure the supply of this energy carrier it’d be only wise of European Companies to create the joint ventures with Gazprom. They strive for that indeed. First of all, we may name the largest buyer of Russian gas — Germany. Gazprom and BASF subsidiary Wintershall have organized a joint venture called WINGAS, which constructs the gas transit infrastructure and sells the gas to end customers. Thanks to that today WINGAS is one of the leading players at the German gas market. Besides, it acts at the foreign markets too: in Great Britain, Belgium, Holland, France, Denmark, Czech Republic. Gazprom in its turn granted Wintershall shares in the development projects at the South-Russian deposit and Achim deposits of the Urengoi gas field. Another German concern (E. ON) will also take part in its development.
In cooperation with Italian ENI and ENEL Novatek and Gazprom explore the Samburg, Evo-Nohin, Yaro-Yahin and Severo-Chasel deposits. French Total and Norwegian Statoil got an access to the giant Shtokman deposit. Besides, Shell Corporation will take an active participation in the Sahalin-2 venture.

New gas pipelines Nord Stream and South Stream are also the joint enterprises of Gazprom and European companies. It turns out that Europe and Russia shouldn’t seek for casus belli but rather deal with the matters of energy security together. Mind that Russia is interested in uninterrupted gas supplies no less than Europe itself.

By Sergey Pravosudov

 

 

 

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In this section

THE BRICS NATIONS CHALLENGE THE WEST?
The fourth BRICS summit getting together Brazil, Russia, India, China and South Africa was held on March 28-29 in New Delhi. No matter it didn’t last long one can say with confidence it has resulted in substantial achievements. In any case it’s obvious the leaders of the member countries had no intention to confine themselves to purely symbolic resolutions, so the outcome of event looks quite telling.

 

AGGRAVATION GAME: WHY US WINS IN CASE IRAN BLOCKADES HORMUZ STRAIT?
The Hormuz Strait closure by Iran will mainly benefit US oil companies and defense industry. The action will spark a crisis that would make easier to find a solution to the US economic woes and even create an opportunity to curtail its huge external debt.

 

US WILL PUNISH ITS NATO ALLIES, NOT IRAN. Will the economies of Greece and Italy finally collapse without Iranian oil?
It will be rather difficult to forge a solid economic blockade of Iran. The geopolitical opponents of the US and Israel see little point in helping them pursue their own interest, while many American allies are scared of sanctions even more than Tehran itself.

 

LIKELY SCENARIO: Greek crisis — euro crisis — German political crisis — collapse of the EU
Today few people doubt that the Greek crisis will turn into the euro crisis. The wish to write off Greek debts in order to avoid the future increase of debts and depreciation of loans seems to gain popularity in business and political circles. Yet the resistance of German voters, discontent with the realization of host plans will keep building up with each passing day, which means the only thing — crisis of euro may easily transform into a pan-European political crisis, which will question the very existence of the EU.

 

YUAN TROUBLES AND THE CHINESE GLOBAL ECONOMIC LEADERSHIP
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THE EUROPEAN CRISIS AND THE SALVATION OF EURO. Will the USA profiteer on the financial collapse of the EU?
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REVENGES OF THE EUROPEAN COMMISSION. Searches at Gazprom offices is the European reaction to South Stream and poor prospects of Nabucco
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IS EURO BECOMING "CONTAGEOUS"? Possible scenarios for the euro-crisis
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