Weekly analytical report February 11 – 17, 2013
1. Russia and Gazprom react on the decline of the share of gas sales on European markets. In 2012, the sales of Russian gas in the EU decreased by 7.5%. The main reason for this, according to analysts, is a non-market pricing, and one of the consequences – Gazprom losing almost a third of its market value. This year Gazprom plans a new round of renegotiating contracts with the EU countries, which may result in price discounts and on the domestic market – in introduction of the "ship or pay" principle for independent gas producers. Russian president V.Putin also proposed to consider gradual liberalization of LNG exports. Transforming talks with Russia into a trilateral format with the EU could strengthen the positions of Ukraine. Gazprom does not want to discuss the bill for unused gas with Ukraine. Reacting to the statement of the President V.Yanukovych, the Energy Community Secretariat emphasized that the government has not asked for assistance in the negotiations with Russia. The Minister E.Stavytskyi considers asking the EU for help inappropriate; meanwhile, the Ministry of Foreign Affairs announced the plans to intensify cooperation with the Energy Community. Media discuss the conditions to solve the Ukrainian-Russian conflict. Experts believe that there will be no revision of gas contracts and predict that the conflict will be solved without paying the fine, although the prospectus of Ukrainian eurobonds does not exclude such possibility. One of the versions of the agreement, mentioned in the media, – creation of a bilateral consortium with Russia. The European Commission leaves the final decision on the consortium to Ukraine and confirms its willingness to support the gas transportation infrastructure, including plans to allocate 40 mln EUR of budget support for the energy sector. The President and the government continue the policy of gas supply diversification. The Cabinet of Ministers cancelled the decision to terminate the production sharing agreement with Vanco International. Following the visit of the President V.Yanukovych to Turkmenistan, a memorandum of cooperation was signed between Naftogaz and Turkmengaz, which provides for renewal of gas supply and exploration of gas fields in Turkmenistan. The Minister E.Stavytskyi held talks on reversive gas supplies via the border with Slovakia, since this direction was supported by the EU. Ukraine could also get gas from the LNG-terminal in Poland via the pipeline to be built by the Gaz-System company. As for the Ukrainian LNGterminal, the State Agency for Investment and National Projects continues negotiations with KOGAS, and the Ambassador to Turkey told about a proposal for joint projects. Against this background appear new investigative journalist’s materials on corruption. According to media reports, the 2.5 bln UAH tenders of the Ukrtransgaz company were won by fictitious companies from Donetsk. Journalist investigation revealed that these firms are affiliated with the surroundings of the son of the President V.Yanukovych. The scandal DiXi Group, 2013 Energy information ● Analysis ● Consulting www.ua-energy.org/en author@dixigroup.org
continued when unknown persons attempted to remove the news on the investigation by means of bribery. This happened almost the same time with another scandal – the attempt to bribe media for removing information about "temnyky" (unofficial directives) of the Office of the First Deputy Prime Minister S.Arbuzov.
2. Progress in shale gas production in the U.S. has an active feedback in Europe. According to the PwC report, "shale gas revolution" will increase global GDP by 2.7 trillion USD by 2035. Experts predict that the U.S. will become energy independent in 5-7 years. The company BP signed an agreement to export gas from the United States. Meanwhile, in Germany the ruling coalition aims to speed up the final decision on shale gas production, in particular to change the legislation. In Poland, the state company PGNiG will allocate 1.6 bln USD of investments, including those for gas exploration and production. French company Total is considering the opportunity to develop shale gas in the UK. In Ukraine, there are continued discussions on the conditions of unconventional gas development. According to media reports, people in the Donetsk region are concerned about possible impact on the environment, and a picket against production took place in Kharkiv, which was also caused by the Kharkiv Regional Council’s refusal to publish the text of the production sharing agreement between Shell and Nadra Yuzivska. Politicians recommend to hear the opinion of environmentalists and the position of the National Academy of Sciences, and emphasize that shale gas will contribute to the solution of political problems. Experts point to the risks of unconventional gas development and the need to study the experience of Poland. The Prime Minister M.Azarov promised to minimize environmental risks, the Minister E.Stavytskyi said that modern technologies guarantee safety, and Shell plans to start operations only after the environmental assessment of the project. Against this background, experts warn about a PR-campaign against shale gas, part of which could be a hacked mailbox of the Transparency International local office which was sending provocative messages.
3. The world oil market does not demonstrate stable dynamics. The OPEC recorded in 2012 growth of consumption by 0.92%, while the IEA reduced its forecast of global oil consumption in 2013 and reported a reduction of oil production in January. Meanwhile, Shell predicts growth of shale oil production in the U.S., and PwC consulting company said this could decrease prices on the market. Meanwhile, fuel prices grew in almost all the EU countries. In Ukraine, where the prices of oil products also increase, the situation may be affected by import restrictions and exit from the market of one of the players. In January, oil and oil products worth 504 mln USD were imported. At the same time, the government started collecting complaints for the anti-subsidiary investigation against Belarus, which accounted for 61% of oil products’ imports to Ukraine last year. According to media reports, the "Pryvat" group plans to sell its stake in the Ukrnafta company and the case on Ukrtatnafta will be heard in the international arbitration.
DiXi Group, 2013 Energy information ● Analysis ● Consulting www.ua-energy.org/en author@dixigroup.org
4. Defining energy efficiency as a priority, Ukraine should follow the European example. According to the Eurostat, the EU has reduced energy consumption by 6% in 2008-2011. Calculations of the WWF show that by 2030 Europe could use 38% less energy than in 2005. The EU has also approved the British "Green deal" program worth 600 mln GBP. In Ukraine, the State Agency for Energy Efficiency and Energy Saving complained about the lack of budget funding and the inability to use the EU funds, as well as declared the need to allocate 670 bln UAH for energy efficiency projects in housing and utilities sector by 2020. The Ministry of Energy and Coal Industry approved the draft law "On the efficient use of fuel and energy resources" and looks forward to its adoption by the Verkhovna Rada. According to the Head of Operations Section "Energy, Transport and Environment" of the EU Delegation to Ukraine W.Tretton, with energy efficiency Ukraine could save 10 bln EUR annually.
5. The problem of "shadow" coal market comes to the forefront. In January 2013, the State Statistics Service recorded a reduction in the use of coal by 4.5%, while the State Customs Service reports about 1.1 million tons of imported coal. Against this background, the Ministry of Internal Affairs in Donetsk region studies media reports about the illegal mines in Snizhne town. According to experts, the authorities simulate the fight with illegal coal mining, and the opposition says up to 80 mines could close because of that.
6. Global events are pushing Ukraine to pay more attention to the issues of nuclear safety. France started a public discussion on the construction of nuclear waste storage. Russia is ready to negotiate with the U.S. on the reduction of nuclear arsenals. According to media reports, talks between the IAEA and Iran demonstrate progress. International community is deeply concerned about the North Korea nuclear test, which was also condemned by Ukraine. Kyiv will create a joint venture with Slovakia to supply equipment for the nuclear industry as well as will cooperate with the Armenian NPP. The President V.Yanukovych has approved a plan to implement decisions of the Seoul Nuclear Security Summit and instructed to complete the "Vector" complex in the Chernobyl zone, and the Cabinet of Ministers shall approve the plan of interaction among the authorities in case of attacks on nuclear facilities or materials. The need for increased security becomes particularly important after an incident on one of the most secure facilities – the Chernobyl NPP. On February 12, there was a partial collapse of the roof of the Unit 4 turbine hall. According to the State Nuclear Regulatory Inspectorate, the event did not change radiation levels at the site, although the French companies Vinci and Bouygues evacuated about 80 employees. Politicians demand from the management of the Chernobyl NPP to explain the situation, and environmental activists argue that neglecting of control may lead to a new catastrophe. Meanwhile, all works on the New Safe Confinement have been terminated, and two commissions to investigate the cause of the collapse were created.
DiXi Group, 2013 Energy information ● Analysis ● Consulting www.ua-energy.org/en author@dixigroup.org