Blue Fuel #20 | June 2013 | Vol. 6 | Issue 3 by Gazprom Export

BLUE FUEL June 2013 | Vol. 6 | Issue 3

BLUE FUEL

Gazprom Export Global Newsletter June 2013 | Vol. 6 | Issue 3

Alexander Medvedev: Coal Dust Sets Down on Europe Page 5

Gazprom Group Companies Meet to Discuss Natural Gas Vehicles Page 7

Gazprom Germania, Volvo and Alba Group Test the First Methane-diesel Truck on German Roads Page 8

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BLUE FUEL Gazprom Export Global Newsletter

In this issue June 2013 | Vol. 6 | Issue 3 To Our Readers: The importance of Not Being Perfect (NBP)............................Pg. 4 Alexander Medvedev: Coal Dust Sets Down on Europe .............................................Pg. 5 Gazprom Group Companies Meet to Discuss Natural Gas Vehicles...............................................Pg. 7 Gazprom Germania, Volvo and Alba Group Test the First Methane-diesel Truck on German Roads..................Pg. 8 Successful Start to the Gas-Powered Scirocco Cup in Hockenheim...................................................Pg. 9 Why Should Gas Producers Subsidize Renewables?.............Pg. 11 Working with Gazprom Energy – Feedback from an End User Malcolm Lee, Energy and Commercial Manager at Sheffield Forgemasters.............Pg. 14 Europe Provides an Enormous Opportunity for WINGAS..............................................................................Pg. 15 Enel’s Experience in the Russian Market.................................Pg. 18 Russia’s Contribution to EU Energy Security..........................Pg. 20 World Press Photo-2013 in Laureates in Amsterdam.....................................................Pg. 21 Yuri Bashmet: Open Soul in Seoul and Tokyo........................Pg. 23

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To Our Readers: The importance of Not Being Perfect (NBP) There is a tendency to make the NBP trading platform in the UK an emerging pricing standard for the whole European gas market. Some top EU officials claim that NBP is the best benchmark that is adequately reflecting the market realities. Some even suggest that Gazprom Export should forget about oil indexation and peg its contracted pipeline gas to NBP prices. How justified is this glorification of NBP? Indeed, compared to hubs in continental Europe NBP looks more mature and liquid. Churn rates on continental hubs hardly exceed four which means they are not liquid enough and cannot be used to hedge price risks. In order to produce sustainable price signals, the churn rate should be over 15. NBP with a churn rate of 20 in 2012 meets this requirement. Besides, the NBP price is closely aligned with continental hub prices. That makes it, as some assert, a pan-European proxy for hub-priced gas. But is NBP price a true indicator for total supply and demand in Europe? Our answer to this question is no. Our analysis shows that NBP and continental hub prices are not only reasonably aligned with each other but that they also have a strong positive correlation with Gazprom’s oil indexed prices, with coefficients of 0.75 and 0.79, respectively. In fact, this means that the baseline curve for spot prices is determined not by supply and demand dynamics in Europe but by the oil-indexation. After 2009, despite the downturn of gas demand in Europe and inflow of Qatari LNG, NBP prices displayed a mysterious non-market behavior from a conventional standpoint: they were steadily rising. In real life terms, the higher the contract prices due to oil price escalation are — the higher are the hub prices. It would be correct to say that existing NBP prices are a double derivative. While Gazprom Export’s contracts are derivatives of oil products’ price, UK prices, in turn, are derivatives of that derivative. The self-contained validity of a price signal originating on NBP is highly doubtful. The baseline trend of NBP pricing is set by oil-indexation although formally this hub is disconnected from a commodity such as oil. At the same time, there is no denying that NBP is impacted by supply and demand as well, and thus has all the negative properties of gasindexed markets from an end-user’s point of view: it is highly volatile. The British would hardly forget the dramatic hike on 22 March this year when the spot price went up to $804 per 1000 cubic meters. NBP should not be seen through rose-tinted glasses. At present, this hub is a sub-system, subordinate to and dependent on long-term contracts which provide the bulk of gas supplies to Europe. European hubs, including NBP, should be treated fairly and for what they really are: a complementary platform to ensure stable and balanced gas supplies.

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Alexander Medvedev: Coal Dust Sets Down on Europe Excerpts from the pre-AGM press conference by Deputy Chairman of Gazprom Management Committee, Director General of Gazprom Export over others. The critical mass for the implementation of such projects has already accumulated. Producers of both trucks and passenger cars already have their own original models and are ready to release them into the market.

Coal dust sets down on Europe

Gas demand shows a forward upward curve Starting from 2020, Europe will need additional 80 billion cubic meters of imported gas even by conservative estimates taking into account the need to compensate for the falling domestic production. This figure will reach 145 billion by 2025, which is also around the corner. By 2035, Europe will have to import additionally some 200 billion cubic meters. Moreover, let me highlight that, first, this is a conservative forecast of the upcoming economic and energy developments in Europe, and second, even for this volume of import supplies, there are no transport capacities.

Apparent advantages of gas as motor fuel We believe that our share in the European market will not shrink but, on the contrary, will grow and by 2030 will reach about 3032%. This is without taking into account an increase in demand in new areas of gas use – as a motor fuel both for land and for water transport. The potential for growth is remarkably high in this area. The United States is making tremendous progress in this direction, and I think Europe will follow suit. Calculating, at the 2012 price level, not to mention that of 2013, the gap between costs in transport powered by diesel fuel, gasoline and gas shows that gas has obvious advantages

Gas business is a long-term project subject not only to economic environment, such as the dynamics of industrial production and pricing system, but also to weather conditions. If you check the Internet, there are very few links on such topics as “protecting the environment”, “carbon dioxide emissions” and “global warming”. I think this is no accident. This means that in hard times, self interest comes first no matter what. I am referring to the strange situation when carbon dioxide emissions in Europe are for the third consecutive year increasing along with emissions in the People’s Republic of China, while the United States and Russia are reducing CO2 emissions, primarily due to wide use of natural gas. Economic tools in the form of ETS regarding CO2 are not effective yet. Moreover, the European Parliament recently voted down a proposal for higher “carbon allowances” price. What is the end result? Dozens of obsolete, ineffective and non-eco friendly power plants are already being returned into operation. It seems that more than 2 GW of coal generation has been restored in Europe, and there are plans to extend it. About 75 million tons of coal were supplied to Europe from the United States. Curious enough, the European Union took no regulatory actions in response to this development.

Ukraine: contract price and reverse flow Dura lex, sed lex. Some people in Ukraine might feel that the contract is bad, but it is a contract which was signed in 2009 with an agreed price formula. At that time, the contract price was below the European average. However, indexation principle incorporated into the contract (pricing formula with indexation varies in each contract) and agreed upon by our Ukrainian colleagues and us has led to a certain price movement. It could have moved differently if oil prices moved in the other direction. By the way, the prices of oil and oil products are currently falling, and this is reflected more significantly in the Ukrainian contract than in many other contracts. Our position is simple: do not write down in the contract what you dare not sign. Continues on page 6

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Alexander Medvedev: Coal Dust Sets Down on Europe Continued from page 5

There are different types of reverse supplies. There are physical reverse supplies, and there are virtual. Virtual reverse supplies without the involvement of the supplier cannot be carried out faultlessly from a legal point of view. This is called voluntarism because the contract provides for certain rules of gas acceptance in a particular point of delivery. One should not forget also that we are dealing with a complex technical system of gas pipelines going from Russia through Ukraine and further to Europe. We accept that reverse supplies are quite common in continental Europe. But all contractual terms and technical specifications of such operations are coordinated and observed by the operator. You cannot unilaterally declare that you introduce a reverse flow. This is not only incorrect but also not safe from all points of view. We will analyze what is really going on. Nevertheless, it is necessary to keep in mind one obligatory condition which is: reverse operations require the involvement of all the stakeholders – supplier, buyer, transport operator, and the owner of the transport system.

Pricing mechanism (LTC versus spot) Our Gazprom delegation recently met with the team of executives and experts of the European Commission dealing with the competition issues. One of the topics of the discussion was: “Why prices are different in different countries”. Let us then ask, “Why is the price of oranges in Madrid lower than in Moscow?”, although oranges can be grown in the south of Russia too. Prices differ in the gas business because the cost of infrastructure is reflected in the price; besides the energy consumption structure is also different in each country. By definition, there cannot be a unified gas price for the entire Europe. The spot indexation theme arises. It seems that economic recession and surplus of gas would have lowered the price on the spot market if we are dealing with real liquid markets. Actually, the prices went up. This 6

means only one thing – the markets are not liquid. This has been confirmed by serious investigations carried out by independent experts. The liquidity of the European market as a whole does not exceed 25% of the current gas consumption. Here is a simple question: how can 25% of the volume be a benchmark for all of Europe or at least for a particular geographic region? I would like to note that in a number of our contracts, spot prices and forward prices are already higher than our prices in long-term contracts (LTCs) pegged to oil products. I would like to see the reaction of a client if he learns that he is being offered prices above oil product prices. I think the client does not bother much on how the product he/she consumes is indexed. What matters, is to have a comfortable and predictable price. In the meantime, the level of correlation between oil product price and spot prices, although it has declined slightly, remains very high at 75-80%. You can easily check up this correlation. I hope that the three factors – predictability, reliability and safety – will work perfectly based on an increase in gas consumption in transport, where it competes directly with oil products, and on consumption growth. There is an obvious competition between different types of fuel. After all, we are consuming energy, whether oil, oil products, wind, or sun – there are still conversion factors. Actually, I think it would be fair if gas was traded at parity with oil. I do not exclude that this will happen in the short-distance future.

EU anti-trust investigation or Gazprom as champion of competition As a company operating in Europe, we have always respected and will respect the EU laws and legal system. We have an established dialogue between us and we have nothing to hide. We will continue to explain our position. However, I would once again like to remind that Gazprom should be nominated

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for the rank of not only a pioneer, but also of the best promoter of competition in Europe. The reason is that, first, we have a product to compete on the market, and that is gas. Secondly, we know how to do it. I think we can be proud of what we have achieved over the last 10 years in Europe in the field of marketing and trading. But now we are faced with a number of restrictions preventing us from selling more gas to Europe. In particular, it relates to access to transport capacities. If you wish, try to reserve input capacities in any of the largest countries in Europe. Just try it and see what you get — not inside but at the entrance or exit point. Unfortunately, the system is not functioning now.

BLUE FUEL As for the potential of the U.S. exports of liquefied natural gas, I think this volume is unlikely to exceed 20-25 billion cubic meters in the next 15-20 years. Check for yourself whether this can fundamentally affect the market, even if all of this volume comes to Europe because of its high demand for imported gas. Today, the fall in Europe’s domestic production is a key factor in the development of the European gas market. These American LNG volumes may not cross the ocean, if “Sunset of Europe-2” occurs due to deindustrialization so much discussed today due to the lack of industrial and energy policy in the EU. Nevertheless, this is a different scenario.

How can you create competition artificially? A good example is that of Enron, which was once one of the largest and fastestgrowing U.S. corporations and has operated all over the world. It went so far as to have production and transportation capacities, having realized that you cannot compete without assets. The company eventually went bankrupt. Hundreds of thousands of people were affected. Tens if not hundreds of the so-called market operators who wanted to earn money were ruined. The desire was laudable but engaging in trade transactions without having a product in one’s hands is what you call speculation in the bad sense of the word. We are ready to compete. We created this competition in the market, starting from Germany. We are ready to work by these rules; we know how to do it and will continue to do it.

US shale revolution and Europe’s choice The effect of shale gas can now be evaluated, as well as the direct and indirect impact of the U.S. coal imports to Europe. All the LNG that could have been redirected has already been redirected mostly to South-East Asia, where demand is growing drastically and where prices are, say, appropriate.

Leipzig, June 6, 2013. Celebrating 40 Years of Russian Gas Supplies to Germany and Verbundnetz Gas AG. From left to right: Dr Philipp Rösler, Federal Minister of Economics and Technology and Deputy Federal Chancellor; Dr Karsten Heuchert, Chairman of the Executive Board, Verbundnetz Gas AG; Alexander Medvedev, Deputy Chairman of Gazprom’s Management Committee, Director General of Gazprom Export; Sven Morlok, Saxon State Minister for Economic Affairs, Labour and Transport and Deputy Prime Minister.

Gazprom Group Companies Meet to Discuss Natural Gas Vehicles Localization of the fueling network, ideally following the major trans-European transport routes, was recognized as a challenge but also as a promising opportunity for cooperation. However, specific local conditions are very important. There is not yet a unified standard or measuring system for gas as a motor fuel across Europe; regulations vary and so does the taxation, ranging from zero or close-to-zero excise tax on fuel methane in Italy, France and Belgium, to special tax and VAT together making up over half of the gas industry’s costs

in Turkey. This is further reflected in different prices of single fuels and attractiveness of gas for consumers and producers. Such differences in national taxation, technical regulations for construction and operation of NGV-related infrastructure, admission and registration of NGVs, measuring units, incentives, and other factors can slow down the development of NGV markets.

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Gazprom Group Companies Meet to Discuss Natural Gas Vehicles Continued from page 7

LNG-fueled transportation is another promising area. Fuel sources are either being localized around LNG terminals (though work has yet to be done to adapt a number of existing terminals for offloading of smaller volumes), or are based on small-scale LNG production. Such an SSLNG plant, if built, could safely serve LNG consumption in transport for distances up to 600 kilometers, or the typical delivery area of a logistics company, for example.

The major drivers of the NGV market in Europe remain the environmental benefits, along with lower fuel costs and decreasing oil dependence. The European market is estimated to reach 45 bcm per year by 2030, including 15 bcm per year of LNG. Gazprom Group, realizing the potential this segment offers for energy producers, intends to strengthen its position in CNG and LNG for transport, with the joint efforts of the Groupâ&#x20AC;&#x2122;s companies operating in particular countries.

Gazprom Germania, Volvo and Alba Group Test the First Methane-diesel Truck on German Roads In the liquefied form, natural gas fits the heavy duty motors best and can serve the heavy trucks and buses mainly because of the volume efficiency. Cryotanks that contain the cooled down and liquefied gas, although technically more complex, are much smaller than those used for compressed gas. They also lower the overall weight of the car and increase its driving range. For instance, the LNG buses already successfully tested across Europe can carry LNG tanks with 2.5 times more energy in the same space as a CNG-powered bus.

Gazprom Germania continues to make further inroads into expanding the use of natural gas in transportation, focusing now on the heavy industry sector. Since midApril the company, together with industry association erdgas mobil, has been supporting Germanyâ&#x20AC;&#x2122;s first road test of a truck powered by an innovative methanediesel-engine. This technology helps to further promote the use of liquefied natural gas, LNG, in road transport. 8

The LNG used for the truck trial is being delivered by erdgas mobil and Gazprom Germania through a mobile fueling station at the Volvo Truck Center Berlin. ACT Abfall Container Transport, a subsidiary of German environmental services company Alba Group, is running the trial for four weeks, transporting waste paper from Berlin to a recycling facility in the town of Schwedt in northeastern Germany. The truck is the first vehicle with a payload capacity of 40 tons that is operated on the streets of Berlin,

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setting new standards in reducing emissions and noise pollution for a vehicle with a powerful 460 hp engine. The heavy truck can cover distances of up to 1,000 km with one fueling, reducing carbon dioxide emissions by 70% compared to traditional diesel-fueled trucks. Thanks to its dualfuel-technology, the truck can traverse a regional or long haul route on up to 75% gas and 25% diesel. The engine can also be run on diesel fuel alone, increasing its operational flexibility. The results of this trial run will help to create further support arguments for the accelerated and widespread use of LNG in the transportation sector in Germany and the whole Europe. www.erdgas-mobil.de www.gazprom-germania.de

Successful Start to the Gas-Powered Scirocco Cup in Hockenheim Gazprom took a double win at the Volkswagen Scirocco R-Cup opener in Hockenheim: Motorsport legend Nicola Larini confidently sped to victory in his blue race car emblazoned with the GAZPROM logo. But Gazprom’s second triumph came with the 22 drivers and thousands of fans who were thrilled by the natural gaspowered cars with up to 285 horsepower. As of this year, Gazprom is the exclusive motor-fuel supplier for this environmentally friendly sporting spectacle. “They’re great cars, and it was an action-packed race for the spectators,” said winning driver Nicola Larini. The former Ferrari Formula 1 driver and 1993 DTM champion came in ahead of Kasper H. Jensen and Michelle Gatting, both of Denmark. Following the successful start in Hockenheim, this year’s season will continue with eight more races on five different race tracks. Each DTM event will be attended by an average crowd of 70,000 as the sports coupés, fuelled by Russian natural gas, take to the track. Christian Danner, a former Formula 1 driver and now a TV commentator, was enthusiastic about the race series’ forward-thinking concept of using natural gas as a motor fuel. “The Scirocco R-Cup is the best argument to prove that motor sports and environmentally friendly engines aren’t mutually exclusive,” he said. For Gazprom, the CNG market shows considerable potential for the future. The company’s main goal is to make the

sale of Russian natural gas more cost-efficient in foreign countries, particularly in Europe. Gazprom hopes that its involvement in motorsports will demonstrate the benefits of using natural gas as a motor fuel.

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Successful Start to the Gas-Powered Scirocco Cup in Hockenheim Continued from page 9

For example, the CO2 emissions of natural gas-powered vehicles are around 25% lower than those of diesel or petrol-fuelled engines. Drivers can fill up with natural gas at over 900 filling stations throughout Germany. Gazprom Germania is currently investing in expanding the network of natural gas filling stations in Germany and its neighbouring countries to improve the availability of this fuel. The Volkswagen Scirocco R-Cup shows that natural gas is more than just an environmentally-friendly and cost-effective fuel â&#x20AC;&#x201C; it can also make for a spectacular ride.

Background The Volkswagen Scirocco R-Cup is the worldâ&#x20AC;&#x2122;s only single-make race in which all vehicles are powered by natural gas, making it a thoroughly environmentally friendly racing spectacle. The 25-strong starting grid features a mixture of up-and-coming talent and motorsports legends. In 2013, nine races will be held as part of the DTM series.

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Why Should Gas Producers Subsidize Renewables? Rostislav Kazancev, Chief Executive Officer, Promgas The last two decades radically changed the market structure, which has become more dynamic, but at the same time more chaotic – everyone wants to make money without investing in the market. Today, speculative logic prevails over industrial logic. Many rushed recklessly and without reckoning with actual facts to criticize long-term contracts on which the entire market rests. This could eventually lead to dire consequences for the security of energy supply and for the system as a whole. In this difficult context, Promgas is successfully applying its experience accumulated over two decades. The company employs young people showing real enthusiasm for their work.

What are the new areas of business development that seem the most promising to Promgas (things like electric power generation, gas engine, etc)? What are the specifics of the structure and business of Promgas? Promgas was established in 1993 on a parity basis between Gazprom and Italy’s Eni in the early stages of talks on liberalizing the Italian natural gas market, which was officially launched in 2000. The company’s main objectives were trade in Russian natural gas and provision of assistance in implementing joint projects between Gazprom and Italian companies. The Blue Stream project and the 1996 agreement on the supply of an additional 8 bcma of Russian natural gas – of which 2 bcma are supplied by us – are two examples of Promgas activities. Promgas has supplied its customers in the market with about 23 bcm of Russian gas, which was transported through transmission facilities owned by Eni. However, the signing of an agreement in 2012 saw the transfer of these facilities to the ownership of Promgas. At the end of 2011, after the acquisition of Eni’s stake by Gazprom Schweiz AG, Promgas became a company with 100% control from Gazprom, which not only changes the company’s status but will also affect its future development.

How can you assess the expertise accumulated by Promgas during its operations in the Italian market? As I have already noted, Promgas started its activities in a period when the Italian gas market looked quite different than it is today, fully controlled by Eni, which actually created it. I would like to take this opportunity to thank all the representatives of Eni, with whom I was lucky enough to work with at Promgas, and who for almost 20 years of joint activities have contributed to the development of bilateral relations.

Considering the rather complex situation in the energy sector, we have no plans in the near future for any projects in this area. The use of gas in transportation is, however, one of our priorities. The use of methane is becoming a global trend and our task is to take a major position in Italy’s motor-fuel market. The Italian market is the first in Europe and seventh in the world in terms of volume of gas consumed as a motor fuel and the number of gas-powered cars. It is the most attractive market in Europe. In the coming years, Italy will enter the socalled Emission Controlled Area (ECA), and we expect rapid growth in the use of methane as a fuel for ships. We are talking about billions of cubic meters of gas per year. Today, our activity in this area is to study the market, select partners, cooperate with all authorities both local and at the EU level, as well as exchange technologies and expertise. For many this can be a revelation, yet in the past the Soviet Union had leading positions in the world in the development of technologies for the use of methane as motor fuel. Let us recall that the world’s first aircraft that used liquefied natural gas as fuel was the TU-155, while the first methane liquefaction plant in Europe was built in Moscow in the 1950s. Now we are studying the feasibility of constructing filling stations in Italy with the use of the latest technology and expertise in this area, where vehicles could refuel. Our longterm goal is to enter the market for methane as bunker fuel. The ultimate goal is to bridge the Eastern Europe-Western Europe transport corridors in order to provide continuous opportunities for all modes of transport to be able to refuel on this route using methane.

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Why Should Gas Producers Subsidize Renewables? Continued from page 11

What are the main challenges you face in the Italian market? What has more impact on it – political and ideological factors, economic situation, energy market regulation, climate change, or “features of the Italian character”? Working in Italy has always been associated with high risks caused by both a change in legislation and by the activities of various regulatory bodies. We all remember how in the late 1980s Italy renounced the use of nuclear energy and placed its bet on the use of gas. Today, another alternative is popular — renewable energy sources, the use of which increases the cost of electricity by 20%. In the first case, the costs of transition from one source to another were passed on to final consumers as reflected in the increase in electricity tariffs. The approach today is different, which is that gas producers should pay for the development of renewable sources. The decision by the Italian regulator to change the price mechanism in the sale of gas in low-pressure networks and to create the so-called sector for protected customers is equally a strange one. In its documents, the regulator, denying the adequacy of the gas-pricing model, which is based on the movement of prices of petroleum products, recognizes the lack of both a liquid trading platform and the alternative reliable tool for determining market price for gas in Italy. By the way, this model was devised by Italian regulator and it is in force to date. Moreover, because of its lack of understanding or unwillingness to understand the nature of the problem, the Italian regulator determines the prices under long-term contracts as prices of gas supplied under the “take or pay” principle, while the prices under spot contracts reflect the price of a balancing product as market prices, thereby creating a misconception of the true cost of gas on the market, which is 90% dependent on imports. Besides, Italy and other European countries are trying to create a wrong stereotype regarding Gazprom as a tool in the hands of the Kremlin, seeking to enslave everyone and everything. This is, of course, completely 12

untrue. Any attempt by Gazprom to participate in the acquisition of any assets or increase its presence in the market draws fierce opposition, while the acquisition of Russian oil and gas assets and energy assets by Italian companies is seen as perfectly normal. In fact, like any other company, Gazprom seeks to develop both in traditional areas and in new ones, thereby diversifying its activities and geography.

What are the prospects of the Italian gas market? Today, many in Italy are asking this question and not everyone is sure of the answer. Much will certainly depend on the state of the Italian economy – its ability to provide demand for gas and opportunities for developing energysaving technologies and increasing the share of renewable sources. Besides, it is difficult to imagine the development of any market without creating a suitable environment for investment in its development. The recently made decisions to develop renewable sources through huge government subsidies, which led to a sharp decline in demand for gas in the energy industry, are certainly not conducive to new investments. Potential investors would surely like to be assured that the outcome of their investment will not be crossed out by some new decisions from Italian authorities. Many gas-powered electricity producers, who decided to invest in gas after the decision by the Italian government to phase out nuclear power, are in a difficult position today. This situation is not related to gas prices as many are trying to present, but is a direct result of the policy of providing subsidies for renewable sources. Therefore, the culprit and not the affected party should bear the consequences of this decision. In this situation, the demand by electricity producers to the Italian government for damages through the capacity payment mechanism is quite fair. Another example is the situation around the newly built LNG terminal OLT. The use of this terminal is in doubt given the current pricing

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environment and decline in demand as a result of government support for the development of alternative sources. The question of who should pay for unused capacities arises under this situation. In today’s situation, when the Italian government does not want to create an environment for successful development of the gas market, it is unlikely that there will be investors wishing to take risks with their money. In my view, the energy security policy of a country completely dependent on energy imports should be more balanced and coherent than the one we all are witnessing today in Italy.

What are the development trends of Italy’s energy market and the fuel mix in general (the proportions of certain fuel types, maybe the prospects of renewable energy, trends in the power sector)? What is behind this? This year, the Ministry of Economic Development of Italy issued a document entitled “National Energy Strategy”, which provides for the priority development of renewable energy sources that should account for 20% in the overall mix by 2020. In the electricity sector, the document assumes that its share will be equal or even exceed the proportion of natural gas. Such a position draws fair criticism from many experts expressing doubts about the economic feasibility of such a choice that would increase electricity cost by more than 20% and place energy producers using traditional energy sources in a difficult position. Moreover, this is at odds with the goals of Italy’s National Energy Strategy, which sees lower prices for electricity as a priority to ensure the Italian economy is more competitive. According to the authors, implementing the new energy strategy would increase energy security and reduce dependence on energy imports, especially natural gas, and ensure a reduction in greenhouse gas emissions by about 19%.

BLUE FUEL

As regards the long and very-long term (2030-2050), Italy subscribes to the spirit of the European Roadmap 2050 for withdrawal from the use of coal.

How can Italy’s position on the gas map of Europe change given new pipeline projects and change in gas supply routes (the South Stream, which will come to Tarvisio; the Green Stream, which has dried up; development of LNG terminals, etc.)? One of the key elements of Italy’s National Energy Strategy is to create a gas hub in Italy, which is expected to change Italy’s role in the European gas market. According to the strategy, the new hub would solve the problem of fully integrating Italy with the European market and network, thus enabling Italy to become a transit country; aligning Italian prices with those in northern Europe; guaranteeing the diversification of its supply sources; increasing the system’s security margin in emergency situations of exceptional peaks in demand; and offering high value-added services to other countries (transit, storage, peak, modulation, etc.). However, the document recognizes that Italy currently lacks all the conditions necessary for the implementation of the ideas conceived – weak diversification of energy supplies, inadequate gas storage facilities, lack of trading platform that really reflects supply/demand balance and is able to adequately determine gas market price. These tasks can probably be solved, but only through appropriate policies aimed at developing the gas market and capable of attracting new gas supply sources. At the moment, however, we are witnessing the implementation of a completely different policy aimed not at developing but at destroying the market, driving away potential suppliers to look for alternative markets for their goods. No gas producer can ever imagine that it should pay for an alternative source that displaces its product from the market and agree with

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Working with Gazprom Energy – Feedback from an End User Malcolm Lee, Energy and Commercial Manager at Sheffield Forgemasters We have to manufacture products as and when our customers demand them and this often requires advance production, which puts increasing pressure on us to understand the underlying costs of all of our components. Our production processes are becoming more and more energy-intensive as prices for both gas and electricity are becoming increasingly volatile, which puts a great deal of pressure on us as a commercial business. We cannot afford to find ourselves in a situation where a contract that we committed to 18 months ago is no longer commercially viable due to a fixed price stipulation. We need to have contracts with our energy suppliers that reflect and address the needs of our business. We came across Gazprom Energy through a third party consultant in 2008 and now receive all of our gas from this company. As market-leaders in our field we look to find partners and suppliers that are also market-leaders and Gazprom Energy fits this criteria. Our relationship with Gazprom Energy has evolved over the years to take into account new products and services. For instance, we now trade all of our carbon through Gazprom Energy, which helps us track and report the sources of our emissions. We have a very flexible contract with Gazprom Energy that is tailored to the needs of our business. Gas purchasing is all about timing and our contract allows us to offer the best prices on the market for our customers while remaining profitable ourselves. We may not use all of the gas we purchase but we have the flexibility to sell gas back onto the market if we need to. Likewise, if the market price for gas falls and we think that we can secure better pricing for our future production schedule, we can sell and then buy back the gas at the lower price, maximizing our profitability. The flexibility of our contract was particularly valuable a few years ago when gas prices rose to over £1/therm and then tumbled. We 14

sold back much of our future commitments at a loss but did so to secure gas supplies for our future needs.

The relationship between Gazprom Energy and Sheffield Forgemasters has evolved over the years to include new products and services. We try to maximize the benefits of our contracts with Gazprom and value the company’s availability to help us when we need it to. Other suppliers cannot really offer the same calibre of product. Our contacts at Gazprom Energy speak with us daily and act as traders on our behalf. It is really important to us that we maintain this type of close relationship with our supplier. Business is all about interaction and the Gazprom Energy team acts as our eyes and ears to the market, advising us on when to buy and when to sell. The team has great market knowledge and a willingness to communicate and work with us on developing the most effective solutions to our problems.

What’s next for our relationship with Gazprom Energy? For now we are fully satisfied with our relationship with Gazprom Energy because it gives us what we need. We live in an evolving world where commercial arrangements change dramatically from year to year. We chose our energy supplier based on their people, knowledge and transparent business processes. It is not a matter of price but partnership. I am confident we will continue to develop flexible contracts that work for both parties involved.

June 2013 | Vol. 6 | Issue 3

BLUE FUEL

Europe Provides an Enormous Opportunity for WINGAS Interview with the Chairman of WINGAS, Dr. Gerhard König, on 20 years of successful German-Russian cooperation and the development prospects for the European gas market boost the overall sales of all three joint venture companies, WINGAS, WIEH and WIEE, from 42 billion to 47 billion cubic meters. That is a very good result!

BLUE FUEL: What makes the cooperation with Gazprom so successful in your view? DR. KÖNIG: Our anniversary this year is the result of our

successful cooperation and a unique partnership. BASF/ Wintershall and Gazprom set up WINGAS as a joint venture because they had a common goal: to jointly utilize the opportunities provided by natural gas as a secure and environmentally friendly fuel. Meanwhile Wintershall and Gazprom have developed a whole series of further joint ventures and cooperation projects, above all in the upstream sector. As such, over the years a solid partnership has grown that is based on mutual trust. I don’t I am exaggerating when I label this cooperation as a German-Russian success story which is much more than just an investment partnership. We have reasons to be proud that this is a partnership on even ground, which both sides profiting equally.

BLUE FUEL: Which aspect of your cooperation so far are you particularly proud to remember? DR. KÖNIG: I actually find it difficult to choose among the BLUE FUEL: The joint venture between Gazprom and Wintershall, WINGAS, is celebrating its 20th anniversary this year. Congratulations! DR. GERHARD KÖNIG: Thank you very much. I would like to

return these congratulations from the bottom of my heart! After all, Gazprom and Gazprom Export are celebrating an anniversary this year as well: 40 years of natural gas deliveries to Germany. 40 years of supply security. That is a really great achievement. I would like to take this opportunity to wish our partner continued success for the future and good fortune at all times in guiding the business forward. I would also like to wish both our companies continued good relations and successful collaboration.

BLUE FUEL: Many thanks. What does the 20-year anniversary mean for WINGAS? DR. KÖNIG: The anniversary is indeed a big moment for us.

We have achieved a great deal over the years: WINGAS is now one of the leading natural gas trading companies in Germany, with a market share of about 20 percent – and a growing market share in Europe. No-one could have predicted that 20 years ago when the company was founded by BASF/Wintershall and Gazprom. Despite overall lower sales in the German market, last year we were able to increase sales by 10 percent.. In 2012 we managed to

many highlights. However, from my point of view a particularly remarkable aspect is the mutual trust: both partners can always rely on one another! And that applies to all projects: from building pipelines and constructing gas storage facilities to concluding our long-term supply contracts. Perhaps one thing that is especially worthwhile mentioning are the football matches between Gazprom and WINGAS, which really reflect the spirit of our collaboration: fairness, commitment and team play.

BLUE FUEL: Natural gas production in Germany fell last year by around 10 percent, and domestic crude oil production is declining. Production is also decreasing in Europe as the reservoirs are becoming more and more depleted. What is the future for oil and gas? DR. KÖNIG: We believe in the future of oil and gas. If you look at

the goal proclaimed by the global community for reducing CO2 emissions, it becomes clear that renewable energies are going to play an ever greater role. We welcome this development. But renewable energies need a partner in the medium and long term that can balance out the inherent volatility and ensure a reliable and environmentally friendly energy supply at all times – that includes peak load times. This partner can only

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Continues on page 16

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Europe Provides an Enormous Opportunity for WINGAS Continued from page 15

be natural gas. And, of course, crude oil will play a key role for the foreseeable future. The “black gold” is and remains one of the most important base materials of our modern industrial society. Crude oil is indispensible as a raw material for the production of fuel and synthetic materials, in the production of cosmetics and in the pharmaceutical industry. Renewable energies are also inconceivable without crude oil. From the rubber sealing on solar panels to plastic elements and cables on wind turbines - crude oil is everywhere.

BLUE FUEL: What advantages does natural gas offer?

DR. KÖNIG: Natural gas can be used flexibly,

This can’t be the right approach. It is indeed astounding that cutting-edge gas-fired power stations have to be turned off because it’s not worth operating them, and, in contrast, coalfired power stations, which are harmful to the environment, are enjoying a renaissance. I believe natural gas as an alternative low carbon energy source could make a really big contribution to fulfilling the European climate protection targets.

BLUE FUEL: You mentioned the so-called unconventional natural gas production in the USA, which is currently leading to falling energy prices there and an “industrial renaissance”. Can shale gas also become a “game changer” in Europe?

it is available in sufficient quantities and it has the lowest CO2 values when burned out of all the fossil fuels. Despite the enormous progress that has been made in the area of renewables, I still believe that if you want sustainable climate protection, we cannot do without natural gas. And price plays a role too. In Germany consumers are already making the painful discovery that the transformation of the energy system away from nuclear power and towards renewables costs money – for each and every citizen. If Germany and Europe wish to remain competitive, an affordable energy supply is indispensible. Natural gas will therefore continue to play a central role as a cheap and reliable form of energy.

DR. KÖNIG: Europe will not be able to profit

BLUE FUEL: If natural gas has so many

examine the conditions very precisely. At the moment there are no exact estimates of the actual potential of shale gas. There is still a great deal of research to be done in this area. We have to monitor current developments closely and find solutions to open questions. For example, questions regarding environmental and drinking water protection. At the same time, we shouldn’t condemn the production technology outright. Blocking technical innovation per se, for whichever reasons, is not the right answer to the question of what the future energy supply should look like. That harms Europe as an economic region.

advantages, why is coal on the rise in Germany and Europe? And what about Europe’s climate objectives?

DR. KÖNIG: Yes, unfortunately that is an issue. Despite the climate targets announced by the policy-makers, CO2 emissions in Germany have risen. One reason for this is the use of coal to generate electricity. There are even voices warning of a “coal revival”. And, as a matter of fact, the decline in prices in the EU emissions trading scheme and the developments in the USA have created the situation where turning coal into electricity has become attractive again, to the detriment of climate-friendly gas-fired power stations. 16

from shale gas to the same extent as the USA. The situation here is completely different: the density of the population, the geological conditions, the environmental legislation, the suppliers. The sort of shale gas production that is taking place in the USA will not occur in a comparable form in Europe. Nevertheless, the US shale gas is already causing a shift in the global natural gas flows, of course. LNG volumes originally destined for the USA are now being sold in other parts of the world (Europe and Asia).

BLUE FUEL: So you believe that no shale gas will be produced in Germany and Europe in the foreseeable future?

DR. KÖNIG: I believe that we have to

BLUE FUEL

June 2013 | Vol. 6 | Issue 3

BLUE FUEL: You mentioned the energy supply: the global demand

BLUE FUEL: Some changes are still on the agenda at WINGAS –

for energy will continue to rise according to the experts’ prognoses. Europe will also need more energy in the coming years. What role does Russia play as a supplier of raw materials in this context?

the company is supposed to become a wholly owned subsidiary of Gazprom. When will Gazprom and Wintershall complete the asset swap? What open questions still remain?

DR. KÖNIG: Russia’s importance as a reliable energy supplier

DR. KÖNIG: Since the agreement was signed in November

will grow further. In Europe we source 25 percent of our natural gas imports from Russia today. I anticipate that between 2020 and 2025 this share can increase to about 30 percent and beyond. These figures reflect a special energy partnership. We shouldn’t forget in Europe that Russia has been our most reliable energy supplier for decades. And these figures also document the trust that has been built up between Russia and Europe, and especially between Russia and Germany, over decades. This trust is certainly justified: no other producer is prepared, to commit itself to the European markets like Russia, with very long-term agreements.

BLUE FUEL: Since we are talking about Europe’s energy supply – WINGAS has business operations in some European countries. What are your ambitions in Europe?

DR. KÖNIG: We are bringing competition to Europe. In the

Netherlands we have acquired one of the biggest resellers with Eneco including an 18-year agreement. In Belgium we are one of the largest providers to industry customers and resellers. But there are also growth opportunities for Russian gas in Central Europe - not just in Western Europe. The countries we can reach with our gas volumes and storage facilities provide interesting prospects. In Austria, for example, we have the Haidach storage facility, which is the second-largest storage facility in Europe. If gas now arrives via South Stream too, that will enhance supply security for Southern and Central Europe. As a trading company we are responsible for making sure that this gas also reaches our customers.

BLUE FUEL: So you see the developments in the European natural gas market as positive – despite the uncertain political situation?

DR. KÖNIG: Absolutely. Europe continues to provide

enormous opportunities! Last year WINGAS was able to increase its growth in the markets abroad by 35 percent. At the moment we expect this development to be consolidated this year rather than increased further because of the competitive situation, whereby such growth cannot be expected in Western Europe. Nevertheless, the International Energy Agency estimates that the natural gas demand will increase by about 12 percent by 2030. And globally, the growth in demand will be even greater. As a company and with our long-term partners, we are well positioned to meet these challenges.

2012, BASF/Wintershall and Gazprom have been working intensively to hammer out the details of the agreement. An important milestone is reporting the transaction to the merger control body at the EU Commission for examination. Any potential questions will be discussed with the Commission in the course of this process. And I think we can expect a final, concrete answer by the end of the year – and thus conclude the agreement.

BLUE FUEL: What would you like WINGAS to achieve in the next 20 years?

DR. KÖNIG: I would like us to continue to operate

successfully in the German and European marketplace! We have laid the groundwork for this: we have a brilliant team, and we have an even closer relationship with a valued, trustworthy and strong partner we have worked with for 20 years, namely Gazprom. That’s why I believe in the future of WINGAS. The path we have taken will allow us to attain the goals we have set together, to make the most of the opportunities for growth, and to further strengthen our market position overall. I firmly believe in this. About WINGAS: WINGAS is one of the largest suppliers of natural gas in Germany. The energy company is active in natural gas trading in Belgium, Denmark, France, the UK, Austria, the Netherlands and the Czech Republic. Its customers include municipal utilities, regional gas suppliers, industrial firms and power plants. At the end of 2012, the WINGAS shareholders BASF/ Wintershall and Gazprom signed a legally binding basic agreement to swap assets of equivalent value. Through the agreement, the currently jointly operated natural gas trading and storage business, amongst others, will be transferred completely to Gazprom. In return, Wintershall will receive shares in natural gas reservoirs in Siberia. Subject to the approval by the relevant authorities, the transaction is to be completed by the end of 2013 and financially retroactive to 1 April 2013.

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Enel’s Experience in the Russian Market

Marco Fragale Enel is a multinational group headquartered in Italy, a leading integrated player in the power and gas markets of Europe and Latin America, operating in 40 countries across 4 continents. The company oversees power generation from 98 GW of net installed capacity and distributes electricity and gas through a network spanning around 1.9 million km to serve 61 million customers. In Russia, Enel is a vertically integrated player. In upstream gas, the company operates natural gas fields through SeverEnergia (a consortium in which Enel holds 19.6%). In power generation, Enel OGK-5 owns 9 GW of thermal capacity and in the retail sector, Enel owns 49.5% of RusEnergoSbyt, one of the largest independent suppliers in the country. Enel Group subsidiary OJSC “Enel OGK5” is a local power generation company operating in the electric power and capacity wholesale market. The company was established in 2004 as a result of the power market reform, aimed at creating an effective and competitive market. Enel OGK-5 is the key asset of Enel’s vertical structure in Russia with installed capacity amounting to more than 9.0 GW. The production branches of Enel OGK-5 are three gas-fired power 18

plants: Konakovskaya GRES (Tver region), Nevinnomysskaya GRES (Stavropol region), Sredneuralskaya GRES (Sverdlovsk region) and a coal-fired power plant - Reftinskaya GRES (Sverdlovsk region). Enel is dedicated to fostering an efficient and environmentally friendly approach to power generation in Russia, modernizing the country’s equipment and increasing energy efficiency. Alongside with the development of its assets, Enel is bringing into the Russian market international experience and the most prominent technologies, aligning the company’s operations with the world’s best practices. To develop a vertically integrated presence in the Russian market Enel acquired an interest in the gas producer - LLC “SeverEnergia” (formerly LLC “Enineftegaz“), which was founded in 2006. Enel bought 40% of the company’s shares in April 2007. After the change in the shareholding structure, the company participated in an auction to purchase some assets: three oil & gas exploration and production companies located in the Western Siberia (Yamal-Nenets Autonomous District), including Arcticgas, Urengoil Inc., and Neftegastechnologia. In 2009, Enel’s share in the assets was reduced to 19.6% when Gazprom acquired 51% of the shares. Cooperation with Gazprom, one of strongest and most experienced players in the Russian gas industry, became an important milestone for Enel’s presence in the Russian market, supporting the company’s vertical integration strategy. In November 2010, YamalDevelopment (a consortium between Novatek and Gazpromneft) purchased Gazprom’s share in SeverEnergia. SeverEnergia’s shares acquisition by Novatek and Gazpromneft enriched the project by consolidating experience in liquids (both condensate and oil) processing and commercialization. Arcticgas, Urengoil Inc., and Neftegastechnologia now own in total four licenses for the exploration and production of hydrocarbons effective on nine fields,

June 2013 | Vol. 6 | Issue 3

containing, in accordance with international standards, a total of seven billion barrels of oil equivalent (BOE) of proven and probable reserves. When Enel bought the above-mentioned companies, exploration works had been extensively conducted by the Russian Federation and by their former owners. Additional exploration and appraisal activities, however, were required in order to gain a better understanding of the field reserves and to comply with the license commitments. Between 2007 and 2012, more than 2000 square kilometers were investigated applying 3D seismic technology. At the end of 2008, drilling operations began for new production wells in the Samburgsky license area. Enel used advanced drilling technologies, decreasing the drilling time per well from an initial 60 days to approximately 25 days, thereby significantly reducing the drilling cost and improving productivity of each single well. As a result of successful cooperation between Italian and Russian companies, the first gas production was achieved in Samburgskoye field in April 2012. It subsequently ramped up to more than 6 mcm per day. In December 2012, a second production train was successfully installed at the same field, bringing the total capacity to more than 12 mcm per day. Marco Fragale, Head of Upstream Gas for Enel in Russia, commented: “Russia is one of the most important countries for Enel and one of the largest targets of investments of the Group. Enel’s strategy of building an integrated presence in Russia is successfully being implemented: gas production is ramping up at our gas fields, and Enel share of such production is expected to cover an increasing share of the expected gas consumption at its gas-fired power plants. We are extremely pleased about our cooperation with the main Russian players in the gas and power sectors and in particular I would like to spend a few words on our special relationship with Gazprom. Investments by Enel in Russia and by Gazprom in Europe are of paramount importance to strengthen mutual relationships hence benefitting all parties involved: Europe will always be a major customer for Russian gas and Gazprom a major supplier for the European gas market. Therefore, we believe that a close and transparent relationship with Gazprom is key to champion the importance of Russia as a key gas supplier for Europe.” Noticeable is also the support that Enel brought to the region in terms of social programs accomplished by SeverEnergia, as well as direct sponsorships of cultural events. Social programs included the construction of children playgrounds in Novy Urengoy, the purchase of medical equipment for the Novy Urengoy hospital, the construction of countryside ambulatories, and other minor projects. As for the cultural events, on the occasion of the Oil and Gas Man day and the 35th anniversary of Novy Urengoy city, Enel

BLUE FUEL

Roberto D’Agostino together with its partner Eni sponsored a concert of the Italian band “Ricchi e Poveri”. In addition, Enel became a sponsor of the event “Window on Italy: cinema, photography, music” held in Salekhard (Yamal-Nenets Autonomous District). This event is designed to spread the knowledge about Italian music and culture in the Western Siberia area, where Italian companies are significantly expanding their presence. The event also included a concert by the band “Napolicanto” and a photography exhibition “Landscape and beauty”, with pictures by the Italian photographers Elio Ciol and Franco Fontana. Roberto D’Agostino, Head of External Relations for Enel in Russia and the Commonwealth of Independent States commented: “Enel’s operations in the power and gas sector in Russia go hand-in-hand with the development of cultural ties between our two countries. In the recent years, in line with the international expansion of our business, we learned to understand different languages and cultures in order to work abroad successfully. And we believe it is important not only to provide electricity and light homes, but also to put energy into the development of art and culture. These steps alongside with the experience and innovative technologies brought by Enel to the Russian market help to create a solid basis for successful cooperation between Italy and Russia.”

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Russia’s Contribution to EU Energy Security Dr. Constantinos Filis, Director of Research at the Institute of International Relations, Panteion University, Greece. In this context, Gazprom does not stop at simply selling natural gas, but is also interested in investing in the markets it supplies. In this way, it not only establishes an even firmer presence, but also participates in the development of European economies while taking the accompanying risk of losses in the unfavorable economic climate currently prevailing.

Cost savings

In the name of energy security, certain circles within and outside the EU regularly raise the matter of energy diversification, pointing to the need for new European energy sources and corridors that share a common denominator: independence from Russia. I do not question the need to limit dependency, wherever it may lie, because the greater the dependency, the less room there is for negotiation. However, EU-Russia energy relations have reciprocal benefits that cannot be overlooked.

Mutual economic benefits On the one hand, Europeans pay well and promptly, contributing substantially to Russia’s GDP, of which natural gas is a key pillar. At the same time, Europe is a steady customer – with increasing needs (despite the recession) and a stable orientation. On the other hand, Russia – with the exception of the two energy crises with Ukraine, in which the latter, breaking every rule of the free market, escalated tensions, ignoring the needs of European consumers, – is a major, long-term and reliable supplier of the European market. What’s more, Russia’s devotion to its energy relations with the EU is clear from the fact that it is moving ahead with or planning projects that are not always in its economic interest but will strengthen Europe’s energy security. The Nord and South Stream projects are salient examples of this: pipelines that will diversify transit routes carrying energy to Europe. 20

In the field of the real economy – at an unstable time when even social cohesion is at stake in a portion of Europe – there is an urgent need to reduce energy costs. With natural gas’s importance growing for a number of reasons (including Germany’s shift away from nuclear energy, the general move towards more environmentally friendly forms of energy and away from oil and coal, and stalled development of costly renewable energy), Gazprom belied allegations of price manipulations, proving itself to be a clientcentered company that heeds the demands of the times and the needs of its customers. In a move that provided much-needed relief, it proceeded to a downward revision of long-term contracts, a move that showed its dedication to its most important energy partner: Europe. In fact, Gazprom has shown over the long term that it adapts to market conditions, revising its pricing policy correspondingly. One example of this can be seen in the liquid markets of Central and Northern Europe. It is worth noting at this point that Gazprom is quite flexible on the long-term contracts it offers, and particularly in comparison to the new sources that are to supply the European market with natural gas. Thus, the insistence on distancing Europe from Russian natural gas – whatever the cost – seems a little absurd, given that it will not necessarily help achieve the goal of improving pricing policies. And it is more than likely that, when gas from new sources arrives in the European market, we will see new price adjustments aimed at keeping Russian gas competitive.

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Safe, uninterrupted supplies It is certainly true that Europe needs to diversify its sources of energy, just as Russia needs to diversify its client list. But the nature of this relationship necessitates systematic dialogue, a search for common denominators – given that there is so much at stake for both sides – and broader, dogma-free understanding so that the relationship can continue to be predictable; so that there are no big surprises. Meanwhile, the new partnerships emerging – regardless of how welcome or unwelcome they may be for either side – will go through a number of stages, be tested, be revised, and adapt to reality. Aspirations will be realized or dashed, and until these new synergies become stable, they will carry a higher degree of risk. At a time when certainties are far outnumbered by uncertainties throughout Europe, European customers need to promote choices that will secure an uninterrupted supply of energy. Given the usefulness of maintaining the energy relationship between Brussels and Moscow – despite the latter’s outsized role in the European energy market – negotiations with Russia can be carried out under better conditions and with a broader understanding of the current and future conditions shaping the relationship. This offers the European markets greater comfort, because they can thus better manage potential changes in a future of fluid conditions. The figures on production potential, particularly in comparison with states currently being promoted as alternative suppliers

BLUE FUEL for Europe, indicate that Brussels, rather than experimenting, should take care to safeguard its relations with Moscow, assuming there is continued flexibility and adaptability. Gazprom’s investments in upstream, with the concurrent flow of capital and know-how out of Russia, create more favorable conditions for the discovery of new gas deposits, a portion of which will be directed to the European market. In fact, the importance to Russia of the European market is also confirmed by the fact that, in order to deal with rising domestic demand (demand that, at least in this degree, was probably not foreseen when contracts were concluded in the past), Russia is purchasing gas at competitive prices from former Soviet republics in order to fully meet its commitments to its European partners. Russia and Gazprom are proving to be a predictable and adaptable partner, with a decisive role in the EU’s security of supply. Their dedication to the European market, provided it is fully in line with national and business interests, is a given. What’s more, Brussels-Moscow interdependency creates conditions of stability and better understanding based on mutual interest, while also offering the potential for greater flexibility due to the long-term nature of the relationship. And despite the fact that one side is seeking new suppliers and the other is seeking new clients, it is hard to envision any spectacular change in the EU-Russian energy relationship in the years to come.

World Press Photo-2013 Laureates in Amsterdam In Amsterdam’s oldest building from 26 April to 23 June, a unique exhibition of photographs will be on display. The XIII century Oude Kerk Cathedral hosts 418 photos by all the Russian and Soviet World Press Photo laureates throughout the contest’s history, from 1955 to 2013. The event is being held under the sponsorship of Gazprom Export. This is the first large-scale and exclusive display of the achievements of Russian photographers in the area of world press photography. The project also was honored to participate in the Awards Days with an exhibition of the winners of the World Press Photo 2013 contest. The main event at Awards Days, the award ceremony of the World Press Photo 2013 contest, was truly majestic: the welcome speech to the participants, the winners and to the Grand Prix owner was delivered by His Royal Highness the Prince of the Netherlands. Continues on page 22

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World Press Photo-2013 Laureates in Amsterdam Continued from page 21

The exhibition of the Russian and Soviet “World Press Photo” winning photographs is part of the official program of cultural events during the Year of the Russian Federation in the Kingdom of the Netherlands. On the opening day of the exhibition, the World Press Photo organizing committee held a reception for the winners, organizers, photo journalists, publishers and editors. Guests of honor included the Russian masters of photography, multiple winners of World Press Photos: RIA Novosti photographers Vladimir Vyatkin, Vladimir Fedorenko and Sergey Guneyev.

To accompany the opening of the exhibition, the “World Press Photo Laureates from Russia and the Soviet Union” album, which has become a collectors’ item, was released. The photography exhibition of Russian and Soviet “World Press Photo” winners in Amsterdam marks the beginning of the European tour for the project. Next, the exhibition will travel to Belgium, Luxembourg, Germany and other European countries to display these works of art.

June 2013 | Vol. 6 | Issue 3

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Yuri Bashmet: Open Soul in Seoul and Tokyo From May 29 to June 8 South Korea and Japan hosted performances by the Soloists of Moscow Chamber Orchestra under the leadership of renowned maestro, Yuri Bashmet, The concerts, which were held with support from Gazprom Export, were part of the orchestra’s Jubilee World Tour organized in celebration of the maestro’s 60th birthday. Several thousand fans gathered to hear the celebrated team perform. The group is the only Grammy Award –winning chamber orchestra in Russia and Yuri Bashmet, who was recently named “the greatest modern viola player” by The New York Times, performed as both a soloist and as conductor.

The concerts were held in Seoul, South Korea and five cities in Japan (Tokyo, Yokosuka, Shizuoka, Kumagaya, and Kobe). The group performed music by Tchaikovsky, Bach, Mozart, Schubert, Paganini and Rossini, with Korean pianist Yeol Eum Son performing Bach in Seoul. The concerts sold-out quickly and Crown Prince of Japan Naruhito attended the concert in Tokyo for the second year in a row. In addition to the performances, free workshops for children and conservatory students were held in Seoul, where Korea’s best young musicians got the opportunity to attend classes conducted by Yuri Bashmet.

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