GO EAST(WARDS)!

Russia expanded its foothold on the Asian energy market with the click of a mouse Monday [28th December].

Prime Minister Vladimir Putin pressed a button to get Siberian oil flowing into the first tanker for delivery to an Asian customer, in Hong Kong, from Russia’s Pacific coast. In addition to China, supplies will also target Japan and South Korea.

The ceremony completed four years of work to construct the East Siberia-Pacific Ocean pipeline and the Kozmino port, worth a combined 420 billion rubles ($14 billion) to ease the industry’s reliance on the European market.

“It’s a strategic project because it allows us to enter the completely new, growing and promising markets of the Asian-Pacific region,” Putin said at the launch. “It’s a great present to Russia for the New Year.”

The foray into the Asian oil market follows Russia’s arrival as a major supplier of liquefied natural gas, or LNG, for its eastern neighbors earlier this year. The Gazprom-led Sakhalin-2 project — with Shell, Mitsui and Mitsubishi as partners — started shipping the gas, chilled to a liquid for loading into tankers, from Russia’s offshore fields in the Pacific in February.

As it expands into new markets, Russia is keeping abreast of the global trend of diversification among both energy buyers and sellers, which will make the business more competitive worldwide, said Elena Shadrina, a visiting energy researcher at the Norwegian Institute for Defense Studies.

“No supplier or consumer will have a dominant position,” she said by telephone from Oslo.

Europe is trying to offset its dependence on gas imports from Russia by looking to buy more from Africa, while Turkmenistan began exporting its gas to China earlier this month, ending Russia’s role as its only major buyer. Asia, in turn, has been seeking alternatives to supplies from the Middle East.

Russia’s progress in eastward expansion has been spectacular, defying doubts that the country has sufficient oil reserves and investment, Shadrina said.

“As little as five years ago, I heard skeptical attitudes from Japanese officials and analysts,” she said. “The tone has really changed now.”

The Kozmino port, near Vladivostok, cost $2 billion to build and has the capacity to handle 300,000 barrels of crude per day (15 million tons per year), with oil quality comparable to that of Middle Eastern blends now dominating the market.

Transneft, the state pipeline monopoly, spent another $12 billion to lay the 2,694-kilometer ESPO pipeline through east Siberian wilderness to connect the area’s greenfields, being developed by oil majors Rosneft, TNK-BP and Surgutneftegaz, to the railway station of Skovorodino. The link has the capacity to carry 30 million tons a year.

Arriving in Skovorodino, the crude is loaded onto trains to travel to the port by rail.

Transneft plans to start building the rest of the pipeline to Kozmino, which requires an estimated investment of $10 billion, next year and complete the work in 2014. The effort will bring the link’s total length to 4,794 kilometers, which is more than the distance from New York to Los Angeles.

When completed, the pipeline will carry eastward an annual 80 million tons of oil from Siberia, including 15 million tons to China through an additional spur. China has loaned $25 billion to Russia in exchange for oil deliveries over the next two decades. Kozmino will increase capacity to 600,000 barrels per day, or 30 million tons per year.

Seeking the huge investment for the remote east Siberian greenfields that are to feed the pipeline, Russia will likely ease access to these resources by foreign oil majors, said Shamil Yenikeyeff, a researcher at the Oxford Institute for Energy Studies. A law enacted last year allows the government to take away a field from a foreign company if it strikes large oil reserves there during exploration, a restriction that put off potential investors, such as Royal Dutch Shell.

Yenikeyeff said Russia’s emergence this year as an Asian energy power — while being a wise policy — displayed the country’s continuing reliance on oil and gas exports for economic prosperity.
“You may call this a new era,” he said, referring to the unlocking of new markets. “The question is: Does this mean that Russia will grow even more affected by the oil curse? If you look at the other industries, nothing is happening there.”

The first tanker’s crude that left Kozmino belongs to state-controlled Rosneft and represents a new oil blend named ESPO, after the pipeline. The low-sulphur, medium-heavy sweet blend ranks higher than Russia’s main export blend, Urals, but its quality is going to be unstable for a while as more producers pump their oil in the pipeline.

The price of the crude is tentatively based on the average monthly price of the Middle Eastern benchmark Dubai blend, with the option for traders to offer a discount or premium. Rosneft sold the first shipment to the Finnish trader IPP Oy at a premium of 50 cents.
(The Moscow Times)

AS USUAL. (Come al solito)

Russia has warned the European Union it may cut its crude oil supplies via the Druzhba oil pipeline connecting Siberian oil fields with Europe to Slovakia, the Czech Republic and Hungary due to demands by Ukraine for higher transit fees, Slovak Prime Minister Robert Fico said Monday.

Hungarian oil and gas company MOL Nyrt said it received official notification from Russian oil pipeline operator OAO Transneft its transit spat with Ukraine's state oil pipeline operator Ukrtransnafta could lead to a cut of oil supplies to Eastern Europe Jan. 1.

"According to our knowledge Ukraine has asked for an increase of transit payments by Russia for [crude oil] shipments as of next year," Fico told a news conference.

"Therefore Russia has warned the EU and us about possible disruptions of crude oil shipments from as early as Jan. 1," Fico added.

The possible crude oil supply disruption is "due to [a] payments dispute between these two countries," Fico said, the same as last winter when Russia shut down natural gas shipments to the European Union via Ukraine.

"But unlike the gas crisis of last January, any possible oil shipment disruptions can be covered by [crude oil] supplies via alternative routes," Fico said.

Russian crude oil supplies account for over 90% of Slovakia's domestic demand. The eastern EU country can get alternative oil supplies other than Russian shipments via rail, Slovak industry minister Lubomir Jahnatek said.

Slovakia has crude oil and fuel reserves to cover more than 94 days of its domestic demand.

"These reserves are split about 50%-50% between crude oil and oil products," Fico said.

The Czech Republic has also prepared itself for the risk of an oil supply cut from Russia by maintaining reserves that can cover the local demand for more than 90 days, Czech Industry Ministry spokesman Tomas Bartovsky said.

"We went through similar situations before in 2008 and 2007 and therefore we're prepared," Bartovsky said.

Czechs are less vulnerable than their Slovak neighbors, since Czech oil refineries can be switched fully to crude oil supplies from the country's alternative pipeline, known as IKL. The pipeline connects the Czech Republic with the Adriatic sea port of Trieste in northern Italy and delivers crude oil from the Persian Gulf region. The IKL pipeline covers 30% of local demand.

"IKL is capable of covering the entire local demand if necessary but it would require securing shipment slot contracts in the pipeline system," Bartovsky said, adding that ramping up the IKL oil shipments would take some time.

Hungary's crude reserves are sufficient to supply the country for 90 days of average consumption, MOL said in a release.

"MOL is prepared to handle the situation; following a possible halt of supplies via the Druzhba pipeline, the reverse of flows on the Adriatic pipeline would become our prime task, which would take some 25-30 days," MOL said.

"Even if the row escalated between Russia and the Ukraine, Hungary's crude supply wouldn't be at threat," MOL added.

For several months from late spring through late summer of 2008, Russia disrupted its oil shipments to the Czech Republic and Slovakia over a dispute concerning transit fees between Moscow and Kiev.

"However, unlike last year's natural gas shipment crises, any possible crude oil shipment disruptions are more easily manageable and there is no need for concerns over insufficient fuel supplies on [the Czech] market," Bartovsky said.
(OilAndGasEurasia)

EVERYONE AGAINST EVERYONE. (Tutti contro tutti)

The drive by foreign companies to grab a piece of the action in gas-rich Turkmenistan is reported to be producing some strange bedfellows -- like PetroSaudi, owned by the son of King Abdallah, and Merhav, an Israeli conglomerate run by former intelligence officer Yosef Maiman.

According to Intelligence Online, a Paris-based Web site that covers global security issues, the companies from these longtime Middle Eastern adversaries are negotiating a partnership "through intermediaries" to explore the Serdar field that straddles the border between Turkmenistan and oil-rich Azerbaijan.

It is reported to contain the equivalent of at least 1 billion barrels of recoverable oil.

Turkmenistan is the world's 10th-largest gas producer. The United States, Europe, China, Russia and Iran are all clamoring for access to its vast gas fields.

These contain an estimated 20 trillion cubic meters of natural gas -- enough to supply Europe for 66 years.

Maiman once worked for the Mossad, Israel's foreign intelligence service, and is reputedly linked to a network of companies owned by the agency.

He has been moving into Central Asia for some time, spearheading an Israeli effort to secure influence -- and a significant intelligence presence -- in the energy-rich Caspian Sea basin, the economic center of the five former Soviet republics that make up the Muslim region.

The Merhav Group has been involved in Turkmenistan's natural gas industry for years. In 2004 The Jerusalem Post described Maiman, a familiar figure in the Turkmen capital of Ashgabat, as a "leading figure" in Central Asia's gas sector.

According to some reports, Maiman was made a citizen of Turkmenistan by decree of the country's eccentric and authoritarian president, Saparmurad Niyazov, who died of heart disease Dec. 21, 2006.

According to Intelligence Online, Maiman was behind the appointment of Israel's first ambassador to Turkmenistan, Reuven Dinia, by Foreign Minister Avigdor Lieberman recently. Dinai is another ex-Mossad officer, who once ran its Moscow station until he was expelled in 1996.

Merhav has reportedly dominated foreign business in Turkmenistan, including brokering energy projects in the country.

Turkmenistan and Azerbaijan are closely linked to Israeli commercial interests -- not to mention Israeli intelligence -- and Maiman appears to be well-placed to broker an agreement between them over the disputed Serdar field, which Ashgabat and Baku both claim, and secure a contract.

The German-born entrepreneur, who became an Israeli citizen in 1971 and founded Merhav five years later, also has longstanding business links with Saudi Arabia.

These connections may well expand as Israel and Saudi Arabia both find themselves in confrontation with nuclear-wannabe Iran.

Maiman has traveled to Riyadh several times in recent years on his collection of non-Israeli passports.
PetroSaudi, headed by Turki bin Abdullah bin Abdulaziz, one of the sons of the Saudi monarch, thus may be a front-runner in Turkmenistan if it cements its partnership with Merhav.

They face competition from Total of France, Eni of Italy, Royal Dutch Shell, TNK-BP, Lukoil of Russia and Chevron of the United States.

These companies are being welcomed in Ashgabat because the country was badly hit in April, when Russia suddenly stopped importing Turkmen natural gas.

That slashed Turkmenistan's exports by 84 percent, because Russia was experiencing a gas glut. Without Russia as a customer, Turkmenistan is losing an estimated $1 billion a month.

"Right now Turkmenistan is looking for any energy deal it can make with almost any player, because Russia's sudden halt to natural gas imports has cut off most of Ashgabat's cash flow," according to the U.S.-based security consultancy Stratfor.

Turkmenistan does not have a viable alternative export route and, warns Stratfor, "could go bankrupt if energy revenues do not start coming in from somewhere."

Moscow, which remains the dominant power in Central Asia, is unhappy about Turkmenistan's efforts to bring in new energy partners.

China, with its insatiable appetite for energy to fuel its expanding economy, is likely to take Russia's place. Russia does not want to see any challenge to its influence in Central Asia. Neighboring Iran is another energy-hungry prospect.

"The geography of Central Asia, the competition among its five countries for resources and the increasing competition among outside powers for Central Asian energy seem to indicate that a fight for the region's energy resources in inevitable," according to Stratfor.
(UPI)

MULTI-VECTOR ENERGY POLICY. (Una politica energetica multivettoriale)

Kazakhstan wants to leave politics out of the equation and make a profit when dealing with the transport of hydrocarbons, the country’s foreign minister told five visiting western journalists at his lavish ministry in Astana.

“The fundamental principle from which we are proceeding on exporting our resources is the principle of economic feasibility - no politics there.

We have exported and will be exporting in any direction that is profitable for us,” Kanat Saudabayev said on 23 November. He was responding to a question from New Europe on whether the energy-rich former Soviet republic had any preference over Russian, Chinese or EU-bound projects competing for its rich oil and gas resources.

The relatively new foreign minister reminded that the Turkmenistan-Kazakhstan-China gas pipeline is due to be inaugurated on December 15 and there is already an oil pipeline from western Kazakhstan to western China. Kazakhstan also exports its oil through a whole system of pipelines running through Russia (CPC). Moreover, Kazakhstan ships oil through the Aktau-Tbilisi-Ceyhan pipeline system.

“Given that we will be producing 170 million tons of oil out of which 130 million tons of oil will be available for exports it is in our deep interests to see the multiple export pipelines realized,” Saudabayev said. The bulk of the new volumes would come from Kashagan’s massive oil field, which plans to start commercial production around 2015. “Kazakhstan is and has been turning into a more significant player on the energy market for the European consumers and we will continue to export oil resources through those means that are profitable for us. Kazakhstan as a partner has always been distinguished by its reliability and predictability,” Saudabayev said.

The question is how this oil will be transported. There are several options, including the expansion of the CPC pipeline to Novorossiysk and also using the route to China.

Regarding the issue of bypassing the crowded Bosporus, the Burgas-Alexandroupolis oil pipeline seems to have stalled. Russia seems to prefer the Samsun-Ceyhan pipeline route through Turkey due to foot-dragging by Bulgaria but also to lure Turkey into supporting the South Stream gas pipeline over Nabucco, Chris Weafer, chief strategist at Uralsib bank, told New Europe from Moscow.

“I assume that both by-pass pipes will eventually be built to cut congestion in the Bosporus. Russia will want to send more shipping with non-oil cargos via the narrow channel as it expands the economy and operations at Novorossiysk port. So it needs to divert as much oil into pipes as possible as quickly as possible,” Weafer said. Kazakh President Nursultan Nazarbayev supported Samsun–Ceyhan during his latest visit to Turkey.

Asked by New Europe if Kazakhstan was economically interested in the Nabucco pipeline, Kazakhstan’s Minister of Economic Affairs and Budget Planning Bakhyt Sultanov said that his country is interested in different ways to export its oil and gas resources. “In the case of Nabucco the main question is resources. If we’ll have resources we can sell through Russia, through Nabucco, though our partners,” he said at the sidelines of a forum to discuss Kazakhstan’s OSCE chairmanship and its priorities.

For now, it seems as if Nabucco has been out-maneuvered by Russia and China and is in real danger of having nowhere to turn to for gas supplies. “The commercial case for South Stream and Nabucco looks increasingly unsound,” Weafer said. “They are both now political projects.”
(Gazeta.kz)

COMRADE NURSULTAN (Il compagno Nursultan)

The Kazakh leader has negotiated to his colleague Giorgio Napolitano. The Presidents have discussed a wide range of issues. In particular, they have talked about the energy security of Europe and the special role of our republic in this issue. In addition, the heads of states have identified key directions of bilateral cooperation both in economic and political spheres. Italy is the third largest trading partner of Kazakhstan and the principal in the European Union. The Presidents have reported they are to sign an agreement on strategic partnership between Kazakhstan and Italy. This is a landmark event in the history of bilateral relations.

Giorgio Napolitano, President of the Italian Republic:
- Kazakhstan is a key state in Central Asia. Your republic is of exceptional importance for Europe, especially in matters of energy security. You will lead the OSCE the next year and it is a very important factor and a new stage in the development and strengthening of OSCE. I think that the status of the OSCE will rise from now on. I completely support the initiative of Nursultan Nazarbayev to convene, the OSCE heads of states for the big summit the next year. This is an excellent idea, because Kazakhstan is an example for the whole world. You have renounced nuclear weapons and you managed to create a tolerant society. It is very important in our time.

Nursultan Nazarbayev, President of the Republic of Kazakhstan:

- The Italian state is a major economic partner in the EU. One third of our trade turnover with Europe accounted for Italy. This is more than 14 billion dollars. Over the years, investments of Italian companies amounted to $4.5 billions, but the Kazakh companies have invested $1,5 billion.

(Khabar)

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Eni SpA (E, ENI.MI) Thursday said it signed a cooperation deal with KazMunaiGas for activities in Kazakhstan, as Italy's biggest energy company by revenue aims to boost its presence in the hydrocarbon-rich Caspian country.

The two companies signed a deal to jointly study the Isatay and Shagala exploration areas in the Caspian Sea, as well as industrial activities in Kazakhstan including a natural-gas sweetening plant, a gas-turbine power plant and the upgrading of the Pavlodar refinery.

Final investment decisions on these projects are expected within two years after the completion of detailed studies, Eni said.

The cooperation accord was signed in Rome in the presence of Italian Prime Minister Silvio Berlusconi and Kazakh President Nursultan Nazarbayev.

Eni is present in Kazakhstan with the large Kashagan oil field, which has been hit by delays and cost overruns. The company is also a cooperator in the Karachaganak field.
(Morningstar)