Weekly analytical report October 14 – 20, 2013
1. The EU forms priority infrastructure projects. The European Commission approved the list of "projects of common interest", and the Energy Community will adopt a similar list by the end of the month. The priorities are the projects to diversify gas and electricity supplies: the Nabucco project remained, Poland will receive 600 mln EUR for modernization of energy capacities, and Greece – 134 mln EUR to strengthen gas networks. In Romania, meanwhile, works started on the interconnector to Moldova. Ukraine is trying to broaden its participation in the EU projects. The oil pipeline BrodyAdamowo was among the projects approved by the EU, and it could double oil transportation to Poland, although the companies involved doubt that the EU will guarantee allocation of funds. Some Ukrainian experts believe that the approved projects are harmful for Ukraine in terms of increasing cooperation with Turkey, namely using the GTS and underground storages to transport and store Caspian gas.
2. Ahead of the Vilnius summit, Russia shifts from pressure to compromise in its relations with Ukraine. Negotiations between D.Medvedev and M.Azarov were held in Kaluga – the birthplace of Ukrainian prime minister. As a result, Azarov declared the "reset" of bilateral relations and the Russian party resumed the issue of creating the gas consortium, confirming its interest in the Ukrainian GTS. The EU has also confirmed its interest in the Ukrainian gas infrastructure. The Commissioner G.Oettinger announced the readiness to provide funds for the modernization of the GTS and the possibility of storing from 35 to 60 bcm of gas in the underground storage facilities. Ukrainian diplomats predict further deepening of energy cooperation with the EU, which would require Ukraine to be more active in reforming the sector and to fulfill the obligations regarding the Third Energy Package. Meanwhile, Gazprom still uses all opportunities to maintain its strategic role for the EU. The company injects record amounts of gas into storages, resumes negotiations with Lithuania and continues negotiations with China, aiming to reach an agreement which could increase its position for European partners. The situation of reverse gas flow to Ukraine via Slovakia remains to be in favor of Gazprom.
3. Support for shale gas globally increases, but there is also an increased need for transparency of companies and their cooperation with communities. The African Development Bank has published a list of seven countries in Africa with shale gas potential. The NATO Parliamentary Assembly and the Visegrad Group countries supported shale gas DiXi Group, 2013 Energy information ● Analysis ● Consulting www.ua-energy.org/en author@dixigroup.org
production, a similar statement was made by the French company GDF. Aiming to speed up the strengthening of energy security, Czech Republic and Hungary urged the U.S. to export gas to Central Europe, Poland requires a more dynamic exploration of gas reserves, and in Turkey, the companies will start the search for shale gas already this month. The development of unconventional gas in Lithuania is undecided – although Chevron has refused to participate in the new competition, the Lithuanian government hopes to continue negotiations with the company on the issue. Shale gas development strengthens the role of open dialogue with communities. In Romania, which puts new fields for tender and attracts companies to develop shale gas, Chevron suspended exploration works because of public protests in the capital and regions. In Canada, protests against shale gas in the aboriginal hunting areas escalated into clashes. Demonstrations against unconventional gas were also helt in Ukraine (Lviv region) and in Russia – in the regions which border Ukraine. Ukraine expands the opportunities for growth in gas production. In Ukraine, there is an increasing rate of gas production in the Black and Azov Seas. Attention of foreign investors to offshore development also grows – the government considered a joint application from Eni, EDF, Chornomornaftohaz and Vody Ukrayiny, and a draft PSA is expected in the nearest time. Ukraine also received Candidate Country status in the Extractive Industries Transparency Initiative (EITI), which means businesses and government disclosing payments in the field of production and transit of oil and gas.
4. The world prepares for growth of oil prices. Despite the global prices decreased against the backdrop of the U.S. government debt solution, they slightly increased at the end of the week. According to the World Energy Council, proven oil reserves will last for 56 years, which encourages countries like the U.S. and Turkey to increase production. In the CIS region, on the background of lower export duty for Russian oil, Moldova is trying to settle the price situation on the market, and Belarus is preparing for a gradual price increase in 4 years. Ukraine could face a shortage of raw materials for oil products, despite a temporary improvement. At the filling stations, the prices of LPG increased, and the wholesale prices for diesel and petroleum also grew, but later stabilized. On the background of reduced by 13% oil production in September, volume of supplies to the refineries increased by 9.8%. In particular, another batch of crude arrived for the Odessa refinery. At the same time, experts stress that Ukraine will be able to produce only 25% of the required volumes of bioethanol, although the Ukrspyrt concern declared it will launch 14 plants by mid-2014.
5. The international community and financial sector supported Japan to overcome the negative consequences of the Fukushima-Daiichi disaster. Earlier last week, the IAEA has offered new means of soil decontamination, and financial institutions agreed on the extension of TEPCO credit obligations, additionally providing a 3 bln USD loan. At the same time, after the passage of a strong typhoon and statements of Japanese authorities about taking control of the situation, another water leakage happened at the NPP, leading to increased radiation levels in the samples of groundwater. DiXi Group, 2013 Energy information ● Analysis ● Consulting www.ua-energy.org/en author@dixigroup.org
Meanwhile, European countries – although with different success – are pushing forward projects to build new NPPs. Chinese CGNPG received permission from the UK government for the construction of an NPP in Somerset. French EDF is also close to get a deal. At the same time, Poland delays active steps: Energia Jądrowa plans to decide on the construction site in the next two years. Also, according to media reports, Turkey might delay the launch of its first NPP which is constructed by Russian Rosatom, due to delays in schedule. Despite that, Russia has expressed its wish to build next NPPs in Turkey.
6. There is a growing popularity of energy efficiency in the world. The IEA published a study on the success of energy efficicency policy in 11 countries, which allowed to limit the growth of energy demand to 20%, and forecasted for the U.S., where the stereotype of expensive energy efficient construction was disproved, the role of the most energy efficient nation by the end of the decade. Meanwhile, the EU increases pressure on its member states not implementing the requirements for energy efficiency in buildings and offers, also to Ukraine, a new mechanism for reducing emissions in aviation. There is also an increased number of companies and analysts demanding from the EU to be more prudent while forming the energy balance. While renewable energy projects do develop in Ukraine, emergence of fully-fledged markets is still to come. Ukraine entered the top five countries in Europe by the dynamics of "green" energy sector. Development of the projects in this field continues: land plots were allocated for a wind power plant in Lviv region, a wind farm in Zaporizhzhia region will triple its capacity, 4 solar power plants received feed-in tariff, and 20 charging stations for electric vehicles will be built in Kyiv. At the same time, experts noted the lack of biomass market in Ukraine and the need for its creation. Despite significant regional efforts to strenghthen energy efficiency, the state policy did not become consistent and did not receive adequate financial incentives. The National Energy Efficiency Action Plan will be presented in the beginning of November. Meanwhile, the energy efficiency rating of Ukrainian regions was published, and Zakarpattya, Chernigiv and Vinnytsia regions were announced as the leaders. Lviv region is going to attract foreign funds for energy efficiency projects, and Zhytomyr still cannot receive the loan for thermal insulation of hospitals and schools.
7. Having started the heating season, the government is trying to restore order in payments. According to the Ministry of Regional Development, 100% of the residence sector is connected to heating. At the same time, the debts for gas consumption reached 10 bln UAH year-to-date, and the NJSC Naftogaz returned only 52 mln UAH of debts due to the prosecutor's office. The government has determined the limit of possible promissory note payments for the difference in tariffs for heat at 2.8 bln UAH, and the Ministry of Regional Development confirmed the information in the media that it will return to the issue of increasing gas prices after winter. Meanwhile, a draft law on a single heat supplier based on the company "Gaz of Ukraine" was registered the Verkhovna Rada. The government also approved the program for modernization of heat supply systems worth 28 bln UAH, aimed at increasing their efficiency and reliability. For example, according to the National Commission for State Regulation of Utility Services, 2.3 bln UAH are needed to install heat meters in all buildings. DiXi Group, 2013 Energy information ● Analysis ● Consulting www.ua-energy.org/en author@dixigroup.org
The difficult situation forces local authorities to reform heat supply schemes. The city of Vilnogirsk (Dnipropetrovsk region) and the Ivano-Frankivsk National Technical University of Oil and Gas refused from district heating. Leadership of Zakarpattya region shared the positive experience of optimization. The minucipality of Sumy plans to provide incentives for insulation of apartments, and Kyiv considers the issue of season tariffs for heating.
DiXi Group, 2013 Energy information â—? Analysis â—? Consulting www.ua-energy.org/en author@dixigroup.org