RETURNING TO OIL. (Tornare al petrolio)

The devastating earthquake and tsunami in Japan will temporarily take pressure off of tightening global oil supplies as the world's third-largest oil consumer works to rebuild its shaken economy, energy analysts said Monday.

But the disaster won't curb its energy appetite for long. Analysts say Japan will likely boost imports of coal, natural gas, diesel and other refined fuels in coming weeks.

"Demand for petroleum products is going to soar," analyst and trader Stephen Schork said.

Benchmark West Texas Intermediate for April delivery added three cents to settle at US$101.19 a barrel Monday on the New York Mercantile Exchange. It had fallen below US$99 earlier in the session.

In London Brent crude lost 17 cents to settle at US$113.67 a barrel on the ICE Futures exchange.

Oil prices had been surging in recent weeks because of events in North Africa, including unrest in Libya forced that country to shut down its oil fields, which had been producing about 1.6 million barrels of crude per day.

The squeeze on world supplies and concern that uprisings could spread across the Middle East have helped push oil prices about 24 per cent higher in the past few weeks.

Friday's earthquake and tsunami in Japan pulled markets in the opposite direction. Japan imports and consumes more than four million barrels of oil a day. Analysts say at least some of that will be reduced as steel plants, auto manufacturers and three of five major oil refineries temporarily shut down.

Some parts of northeastern Japan are still without power, and authorities are trying to stabilize damaged nuclear plants that have been taken off-line.

Japan has increasingly relied on nuclear power as it focused on weaning itself off of petroleum, like other industrialized countries. Of the total 22.3 quadrillion Btu Japan consumed in 2008, 11 per cent was generated by nuclear power plants. The U.S. consumed more than four times as much power, about eight per cent of it from nuclear energy.
Analysts think Japan will compensate for the shutdown of its nuclear reactors by relying more heavily on traditional fossil fuels. It can choose from a variety of sources. Most of Japan's energy is produced by power plants fired by coal, most of it from Australia. It burned 37,500 tons of coal in 2009. Japan also consumed 3.3 trillion cubic feet of liquefied natural gas that year, imported mainly from Indonesia, Malaysia and Australia.

Japan also operates natural gas-burning generators and a number of aging, oil-fired plants that can be cranked up during peak times. The Japanese may favour using more oil instead of natural gas in the short term, according to Michael Lynch, president of Strategic Energy & Economic Research. Lynch said there are more tankers available to deliver crude than LNG and more dedicated facilities in Japan that can accept oil imports.

"Oil is much easier to import," Lynch said. He added that Japan could boost crude imports by about 300,000 barrels per day while its energy infrastructure is hampered by the loss of nuclear power.

Japan's trade minister said Monday that the government will release enough oil from the country's reserves to cover three days of demand, according to Platts, the energy information arm of McGraw-Hill Cos.
Japan imports most of its oil from Saudi Arabia and the United Arab Emirates. Analysts say Japan will try to tap those sources for more oil, and it will look to the U.S. and India for more refined fuels like diesel.

"The U.S. still has a surplus of both gasoline and distillate supplies with which to meet any such upswing in export activity," energy consultant Jim Ritterbusch said.

Natural gas for April delivery gained 2.5 cents to settle at US$3.914 per 1,000 cubic feet. Earlier in the day, it climbed to the highest level in a month at US$4.053.

In other Nymex trading for April contracts, heating oil added 3.48 cents to settle at US$3.0638 a U.S. gallon (3.78 litres) and gasoline futures lost 2.74 cents to settle at US$2.9603 a gallon.
(The Western Canadian Pipeline)

THE ORIGINAL PURPOSE. (Lo scopo originale)

Ukrainian President Viktor Yanukovych clinched energy pacts with Azerbaijan on Jan. 28 and attacked Russia for plans to bypass his country in supplying gas to Europe, reviving market fears of regular spats between Moscow and Kyiv.

Markets were relieved when Yanukovych, perceived as friendlier to the Kremlin than his predecessor, Viktor Yushchenko, was elected Ukraine’s president last year.

That followed five years of disputes between the ex-Soviet neighbors, marked by mid-winter cuts in Russian gas supplies to Europe that represent a quarter of the continent’s total needs.

But Yanukovych has played a much less pro-Moscow role than expected since taking office, saying the European Union was an equally or even more important partner than Russia.

Speaking at the World Economic Forum in Davos, the president lashed out at new Russian pipeline projects and signed oil and gas deals with Azerbaijan to cut Ukraine’s reliance on Russia.

Yanukovych said Ukraine shared Poland’s concerns about political motives behind the Nord Stream pipeline to supply Russian gas to Western Europe along the Baltic Sea floor, bypassing central European nations.

“Another project being discussed today between Russia and Europe is the construction of South Stream. This possibility is directly related to Ukraine and here I share the position of Poland,” he said, referring to a project to pipe gas under the Black Sea to southern Europe.

Russia ships about 80 percent of its gas exports to Europe through Ukraine now and the remaining 20 percent via Belarus and says it needs the new projects to boost Europe’s energy security after disruptions in previous years.

Yanukovych said South Stream would cost $25 billion while it would cost much less to upgrade Ukraine’s pipeline system.

“Why are our partners today pretending that there is no alternative? A year ago we proposed a project that would cost five times less – not more than $5 billion, it would come to the same destination points to which South Stream would go.”

“That’s why we ask the same question, speaking eye-to-eye with our partners, and we are still waiting for an answer.”

“If this is a way to exert pressure, not a commercial project, then of course serious questions arise about how we should build our relations today, let alone in the future.”

Yanukovych used the Davos platform to sign a deal with Azeri President Ilham Aliyev to import liquefied natural gas to a planned Ukrainian terminal aimed at reducing the country’s heavy dependence on Russian gas. The memorandum did not specify volumes for the terminal to be opened in 2015. He also signed a memorandum on cooperation in shipping Azeri oil across Ukraine.

Yanukovych said Ukraine would ship the first million tons of Caspian Sea oil to Europe via the pipeline this year, thus ending its use to export Russian crude to the Mediterranean.

“The Odessa-Brody pipeline has been used in various directions. Very soon we will start working according to the original idea, delivering oil from Odessa to European countries,” he said.

Interfax news agency quoted Ukrainian officials as saying the deal covered deliveries of up to 4 million tons a year.

Aliyev, who spoke at the same panel, said he was under no pressure from Russia to shun the Nabucco pipeline, seen as a key European Union’s attempt to reduce reliance on Russian.
(Therearenosunglasses's weblogs)

SERBIA WILL PROBABLY MANTAIN OIL MONOPOLY. (Probabilmente la Serbia manterrà il monopolio petrolifero)

Private oil traders want to conclude an agreement with Naftna industrija Srbije for the period of three years, according to which they would buy oil products exclusively from NIS. Those who are going to import oil products are going to face problems and limitations in terms of the necessary infrastructure and fuel storage space. It therefore seems that some sort of monopoly is going to continue after 2011 as well, because NIS and small private oil traders own in total almost 1000 filling stations, out of 1200 stations in Serbia.

The only encouraging news is that both sides, provided that they conclude this agreement, will have to report it to the Commission for the Protection of Competition and obtain its consent. Dijana Markovic‐Bajalovic, the President of the Commission, said that it all depends on whether or not this agreement could have negative impact on the competition.

“We would have to look into the matter, because at the moment we are not familiar with the details and we don’t know whether NIS and the small private oil traders actually represent 80 percent of the market or not. The Commission is competent to decide whether to approve or disapprove this agreement,” said Dijana Markovic‐Bajalovic.

The regulation of the Serbian Government, banning the import of oil derivatives, has been introduced to protect NIS from the competition and to give the refineries in Pancevo and Novi Sad time to carry out the maintenance, repair and modernisation works and to introduce the European standards in their fuel production. This regulation expires on 1 January 2011.
(Energetika.net)

TOO MANY PIPELINES. (Troppe pipeline)

Europe may not be able to sustain all its proposed gas supply pipelines but will need to build at least some soon to ensure security of supply in the latter half of this decade.

Scarred by the Russia-Ukraine gas row of 2009, which cut about a fifth of Europe's supply in mid winter, major European gas consumers plan many pipelines to promising producing regions in central Asia, North Africa and the Middle East.

With China competing to woo producers, Europe will likely struggle to secure enough gas to fill all the new connections and would be unable to use it all if they do get filled.

"If every project that is discussed is built then there will be way too much supply, so I think the best projects will be developed and marginal ones delayed, or not built," said Graham Freedman, a senior analyst at UK consultancy Wood Mackenzie.

"But I don't think anybody doubts the fact that Europe is going to need more gas because domestic production is falling. It is going to be an importer for many years to come," he said.

Wood Mackenzie forecasts that gas demand in the European Union, Turkey and former Yugoslav states could rise from 551 bcm in 2010 to 653 billion cubic metres in 2020.

Under what it says is a bullish demand scenario, this would leave a supply shortfall of 125 bcm by the end of the decade unless far more is produced at home or brought in from overseas.

But if all major new pipelines were built and filled to capacity, gas flows to Europe by 2020 could far outstrip demand.

Since the Russia crisis, Europe has been comfortably supplied with gas for power generation, heating and industry through existing pipelines and an increasing number of liquefied natural gas (LNG) tankers. The Medgaz link from Algeria to Spain could further increase supplies into the Iberian Peninisula by 8 bcm/year, if the repeatedly delayed pipeline opens this winter.

The 55 bcm/year Nord Stream pipeline under the Baltic Sea is expected to bring more Russian gas to western Europe, bypassing Ukraine by the end of next year.

Russia is pushing on with its South Stream project to bring up to another 63 bcm under the Black Sea via the Balkans.

The European Union is also championing the 31 bcm alternative Nabucco plan that would bring Caspian and Middle East gas via Turkey, excluding Russia.

But Italy also hopes that its projects TAP and ITGI for around 10 bcm capacity each can compete for mainly Caspian gas market share with South Stream and Nabucco, giving it more options via the "Southern Corridor" to Europe.

In all, the maximum capacity of these pipelines, some of which were conceived prior to the economic crisis which brought a gas price slump, adds up to 177 bcm to Europe's supply.

Pipeline supplies would also face competition from liquefied natural gas (LNG), which has become much more readily available because of a surge in North American shale gas production, with unconventional gas finds in Europe posing another threat to both types of external supplier.

"Some projects make sense from a security of supply perspective, because of the diversification of gas sources that they would bring," said Nigel Harris of UK consultancy Kingston Energy. "But with plenty of gas available from existing sources, there's no commercial benefit from diversification."

Nord Stream and South Stream are just additional routes for Russian-controlled gas flows, he said, while alternative sources from Azerbaijan, Turkmenistan and Iran remain uncertain.

The International Energy Agency (IEA) thinks global gas demand may recover from 2011, but it still expects supply to outstrip demand until 2020..

Some gas suppliers are more optimistic, pointing to buoyant demand in the Middle East, China and India which could leave less gas for Europe. Phillipe Boisseau, president of France's Total Gas & Power, told the recent European Autumn Gas Conference in Berlin that the "supply bubble will disappear in three years."

Speakers agreed that current gas prices in consuming countries would not support all Europe's proposed supply lines, although they expect demand for power generation to contine to rise as Europe looks to back up its increasing wind power capacity with gas-fired plants.
(FuturesPros.com via Reuters)

BULGARIAN MAJORITY. (Maggioranza bulgara)

Russia and Bulgaria signed on Saturday accords to push ahead with the South Stream natural gas pipeline aimed to deliver gas to central and south Europe and cement Moscow's hold on European energy supplies.

Russian Prime Minister Vladimir Putin and his Bulgarian counterpart Boiko Borisov attended the signing of accords to set up a joint venture for the Bulgarian section of the project aimed at shipping Russian gas under the Black Sea to Europe.

'Today, a shareholder accord and a charter of the joint venture were signed. By doing this, we made one more serious step towards implementation of mutual agreements,' Putin told a news conference in Sofia where he arrived on a working visit.

The South Stream pipeline, controlled by Gazprom and Italy's ENI is planned to transport up to 63 billion cubic meters of gas to central and south Europe, bypassing countries such as Ukraine, at the end of 2015.

The link, in which French EDF is set to get a stake of no less than 10 percent, is a rival to the European Union-backed Nabucco pipeline, designed to bring gas from central Asia and the Middle East and reduce Europe's dependence on Russian deliveries.

Russia, the world's largest energy exporter, supplies Europe with a quarter of its gas needs. Analysts estimate European demand for Russian gas could rise to 30 percent by 2030.

Brussels and Moscow have been competing to sign up potential countries and suppliers for their projects.
The European Union member Bulgaria supports both projects, which are planned to run through its territory and has expressed concerns over delays in the Nabucco pipeline development.

'We are also working on the Nabucco pipeline with the same speed ... Bulgaria's interest is to transit gas through both pipelines,' Borisov told reporters.

His government, which put on review all Russian-backed energy projects last July, pledged to speed up work on South Stream after Gazprom promised to lower gas prices for Bulgaria, almost fully dependent on Russian gas supplies.

The Balkan country agreed to further accelerate work on the project in October, when Gazprom indicated South Stream could bypass it and run through Romania.

South Stream has also secured backing from Austria, Croatia, Greece, Hungary, Serbia and Slovenia.

Gazprom and state-controlled Bulgarian Energy Holding, which will have 50/50 stakes in the new venture, have already opened a tender to seek contractors for a feasibility study for the Bulgarian section, estimated to cost $835 million.

Bulgaria secures about 70 percent of its energy needs through imports. It gets almost all of its gas from Gazprom, its only nuclear power plant Kozloduy is Soviet-made and its only operational oil refinery is owned by Russia's LUKOIL.

Putin said LUKOIL was set to invest up to $2 billion more in its Bourgas-based oil refinery, Lukoil Neftochim.
Bulgaria and Russia also discussed the Belene nuclear power plant project, which Sofia had also put on hold due to a lack of funding and strategic partners.

Sofia has said it will push ahead with the 2,000 megawatt plant, for which it has contracted Russia's state Atomstroyexport, only if backed by strategic European investors.

Borisov has indicated Bulgaria is close to finding a partner in Germany for Belene, estimated to cost over 7 billion euros.

Bulgaria's warming towards the projects has irked Washington and Brussels which are encouraging Bulgaria to lessen its heavy energy dependence on Russia.

Belene froze last November, when German energy giant RWE , which had agreed on a 49 percent stake, pulled out.

Sofia wants to build Belene so as not to lose hundreds of millions of euros it has already invested and to avoid paying hefty compensation to the Russian contractor, Atomstroyexport.
(XE, via Reuters)