Weekly analytical report February 18 – 24, 2013
1. Leading countries of the world deal with security issues associated with the use of nuclear energy. After the nuclear test in North Korea, the EU tightened sanctions against the country. According to media reports, the P5+1 negotiating countries on the Iran's nuclear program plan to present a "serious offer" with "new elements" to resolve the issue. At the same time, according to unofficial information, Iran is increasing capacity to enrich uranium. In Ukraine, the incident on the Chernobyl NPP pushed the government to strengthen nuclear security more actively. Despite assurances that the ChNPP Unit 4 Turbine Hall roof collapse is safe, both commissions to investigate the extraordinary incident will work by the end of February. At the site, the works on removing debris are being completed, the contract of insurance against nuclear damage was signed, and it was promised to construct a roof above the Chernobyl- 4 Turbine Hall. French companies working on the New Safe Confinement resumed their work. The Ministry of Energy and Coal Industry plans to agree with the Euratom the draft contract on the 300 mln EUR loan for the NPP safety upgrade programme by April – in order to get financing from the EBRD. Energoatom NNEGC said the Ukrainian NPPs do meet international safety standards.
2. European countries are planning to increase production from new promising sources – shale and continental shelf, and it is already having an impact on regulation. In Poland, PGNiG will present in the coming weeks the results of shale gas fracking in the Baltic Sea basin, and identified with other companies the new deadline for reaching cooperation agreement in the fields of exploration and production. Turkey hopes to find shale gas deposits and referrs to the results of seismic surveys. Instead, the German government does not rule out banning shale gas production in the areas with drinking water, and Russia does not consider the issue of unconventional gas extraction at all. In Romania, the companies plan to invest 400 mln EUR in oil and gas production, including such on the Black Sea sheld. Against this background, the EU introduces new safety standards for offshore oil and gas drilling. The data on hydrocarbon production of different public authorities in Ukraine contradict each other. According to the Ministry of Energy and Coal Industry, in January 2013 gas production increased by 1.1%, oil production – decreased by 7%. However, according to the State Statistics Service, hydrocarbon production decreased by 0.8% (gas) and 8.9% (oil). Also, according to the media, budget revenues from charges for subsoil use fell 23 times. The issue of unconventional gas production in Ukraine remains a subject of political debates. The Prime Minister M.Azarov is confident in Ukrainian shale gas resources. The Minister E.Stavytskyi hopes that local councils will give their approval to the development of the Oleska field – which, according to the Svoboda political party, do not agree on such activity DiXi Group, 2013 Energy information ● Analysis ● Consulting www.ua-energy.org/en author@dixigroup.org
yet. Meanwhile, the company Chevron expects faster moves from the government to sign the PSA and considers the local market profitable for gas sales. In the parliament, the AllUkrainian Union "Fatherland" withdrew the draft law on shale gas moratorium and registered a new draft law, which requires increased environmental safety of unconventional hydrocarbons’ production. Protection of the environment was one of the topics of a press conference held in Kharkiv by the company Shell which plans to drill the second exploratory well in the Kharkiv region.
3. Ahead of the EU-Ukraine summit, the Ukrainian party has no coordinated position on key issues of the agenda. The summit will discuss the issue of the GTS modernization – in this case, the Minister E.Stavytskyi argued that the issue is not a subject of current negotiations with Russia, but the President V.Yanukovych subsequently declared that the agreement with Russia will provide for rental of the GTS. Following the visit to Brussels, the Minister E.Stavytskyi promised to continue the implementation of commitments within the Energy Community, and the President V.Yanukovych questioned the whole sense of Ukraine's membership in this structure. At the same time, the European Commission expresses readiness to promote reforms in Ukraine. The Commissioner G.Oettinger told about significant benefits of membership in the Energy Community and rejected criticism of the EU in the issues of bypassing pipelines, which was expressed by the Ukrainian party. He emphasized the benefits of trilateral consortium and the decision to finance the modernization of the GTS to be made by the end of the year. The Minister E.Stavytskyi also confirmed the readiness of the EU to provide specific help in the gas negotiations with Russia. Meanwhile, the Cabinet of Ministers approved the Plan of proprity measures for Ukraine's integration to the EU.
4. Ukraine accelerates negotiations with certain countries which may contribute to the diversification of gas supply. In 2012, Ukraine imported about 33 bcm of gas, including 52.7 mcm from Germany. The Representative of Ukraine to the EU K.Yeliseyev expressed bitterness over the lack of response from Slovakia to reversive gas supplies. The Ambassador of Ukraine to Turkey S.Korsunskyi spoke about the common ground of Kyiv and Ankara on the LNG-terminal project. At the same time, high expectations are connected with the restoration of gas supplies from Turkmenistan. The Prime Minister M.Azarov expressed confidence that the agreements with Ashgabat will contribute to cooperation with Russia, and the Minister E.Stavytskyi predicted that the supplies of Turkmen gas will start already this year at possible cost of less than 280 USD.
5. Global oil market is being rebuilt in anticipation of new players. Oil prices are falling both in terms of futures and the OPEC Reference Basket. The U.S. Energy Information Administration indicates the growth of oil production by China, which also reached agreement with Russia to increase imports. The IEA says high oil prices are a threat to the growth of global economy. In Ukraine, the market expects the government's decision regarding the possibile introduction of import duties and responds with growing prices at the filling stations. DiXi Group, 2013 Energy information ● Analysis ● Consulting www.ua-energy.org/en author@dixigroup.org
The Prime Minister M.Azarov instructed to take measures restricting the price growth of diesel fuel for farmers, and the Energy Minister E.Stavytskyi said that the introduction of restrictive duties will stimulate Ukrainian refining. According to statistics, in January refining decreased by 64%, and the purchases of oil products from Belarus increased by 44% in 2012. Meanwhile, the Antimonopoly Committee opposed the introduction of duties as it considers fuel prices to be appropriate. Experts believe that the duties will lead to 1-1.3 UAH higher prices for petroleum and are skeptical about the prospects of renewed refining.
6. The government takes first steps towards systematic management of energy efficiency measures. With the support of the EU, a specialized MBA program for the State Agency for Energy Efficiency and Energy Saving was launched. At the same time, the agency seeks to amend the legislation enabling to use the EU funds for energy efficiency, allocated in late 2011. Meanwhile, the Lviv Regional Council adopted a new regional program on energy saving for 2013-2016. Also, energy efficiency projects of Ukrainian schoolchildren and students are quite promising to be implemented. 7. Ukraine prepares for a new wave of energy assets’ privatization. The Cabinet of Ministers approved a decree, which allowed the privatization of six electricty supply companies (oblenergo), and transferred the rights on 60.77% of the Donbasenergo company to the State Property Fund for sale. The latter agency also started preparations for the auction to sell 75% of Volynoblenergo. Analysts say the new investors are not expected among participants of the privatization. At the same time, ignoring the social aspects of energy market reforms can lead to unforeseeable consequences. In Bulgaria, the protests against increase of electricity prices escalated into clashes with police, which raised the issue of cancelling licenses of the supplying companies and have led to the resignation of the government. Meanwhile, in Latvia the government prepares to deregulate electricity prices for households, and the British regulator Ofgem warned about sharp increase of energy bills which counld be caused by the expected deficit.
DiXi Group, 2013 Energy information â—? Analysis â—? Consulting www.ua-energy.org/en author@dixigroup.org