Weekly analytical report April 22 – 28, 2013
1. The European Commission continues to demand from the EU member states to finalize reforms which have proven their effectiveness in the conditions of Russian pressure. The Commission requires completing liberalization in the energy sector: final warning was sent to 16 countries which have to implement the new rules, and the guidelines on unbundling rules will be published soon. Meanwhile, the rules of the EU show their effectiveness in practice: the Commission will participate in the negotiations of Lithuania and Gazprom on gas prices. The Polish PM D.Tusk said that Russia cannot buy out strategic energy companies, and as a result of the conflict on "Yamal-Europe 2" project, the new finance minister was appointed, changes are expected in PGNiG, as well as scheduled meeting of the Security Council on energy issues. At the same time, Russia - which predicts a decline in gas export prices to 329 USD by 2016 - tries to interest Europeans with new gas transportation projects.
2. European countries continue to openly compete for access to new routes of energy supply. Greece, Italy and Albania have set up a committee to support the Trans-Adriatic Pipeline (TAP), while the foreign ministers of Austria, Bulgaria, Hungary, Romania and Estonia supported Nabucco West. Countries involved in the Southern Gas Corridor are also trying to strengthen their status: the Prime Minister of Georgia declared interest to play a greater role in the supply of Caspian gas, and Statoil negotiates on its interest in the TANAP project with Azerbaijan and Turkey. European countries are also looking for new ways of diversification: Bulgaria and Romania plan to fill the gas interconnector, and Ukraine signed an agreement with Excelerate Energy to place a floating LNG-platform. These topics will be particularly relevant in the second half of the year, because Lithuania - which will hold the Presidency in the EU Council - called energy security as its priority.
3. Reverse gas supply from the EU is a test of the willingness of both parties to include Ukraine in the single European market. The buyer of gas imported from Hungary remains unknown: the Prime Minister M.Azarov considers the Naftogaz NJSC as such, and the SEPEK holding claimed the gas was imported by its structures. Preparations to the round table on the Ukrainian gas transportation system continue, and Russia’s refusal to participate in it indicates that the option of the trilateral consortium is unrealistic. Meanwhile, Naftogaz is not going to increase purchases of Russian gas in April and May, which adds tension to bilateral relations. Despite Y.Boyko meeting with Gazprom’s CEO A.Miller, Russia emotionally reacts on the rapproachement of the EU and Ukraine: Gazprom has started the investigation on gas reexports to Ukraine from Europe, and A.Miller reiterated the thesis of reverse operations being illegal and resented the absence of response to his previous statements. However, the Vice Prime Minister Y.Boyko confirmed physical nature of the operations. DiXi Group, 2013 Energy information ● Analysis ● Consulting www.ua-energy.org/en author@dixigroup.org
4. New initiatives of the government may provoke criticism from the European partners. The Cabinet of Ministers registered a draft law which provides for lifting the ban on privatization of the Naftogaz NJSC subsidiaries and allows leasing gas pipelines. Such an initiative can be considered as an attempt to strengthen manual regulation of the energy market. Simultaneously, the government plans to complete the reform of Naftogaz by 2014, and the Ministry of Energy and Coal Industry has undergone personnel changes: the Deputy Minister V.Makukha has resigned, the head of the Ukrenergo A.Khodakivskyi was replaced by P.Omelyanovskyi. At the same time, Y.Bakulin retained his position as the head of Naftogaz and V.Franchuk and D.Mormul, according to media reports, became his new deputies.
5. Countries of the world are looking for ways to intensify own energy production. Because of shale gas, the United States became leader in reducing CO2 emissions and is exploring sales markets. Despite forecasts of unconventional gas production becoming slower in other countries, in France and Lithuania politicians urge to allow exploration of these resources. Iran plans to search for oil and gas in the Persian Gulf, while Russia allowed production in its part of the Azov Sea and plans to use hydraulic fracturing to increase oil production. Ukrainian government, following this trend, renewed the license of Vanco Prykerchenska and plans to sign the agreement on the Skifska field by September. According to experts, the Black Sea shelf is studied only by 3-4%. At the same time, the Donetsk Regional Court confirmed the PSA on the Yuzivska area, and Ukrainian scientists work on the production and transportation of gas hydrates.
6. In Europe, on the background of discussions on electricity prices and future of the networks, the importance of building new NPPs grows. The issue of electricity prices is being discussed in the European Union: Poland will prioritize their decreasing, while in Bulgaria they could increase again. Against this background, other states turn to building nuclear generating capacities: Lithuania will resume negotiations, and Turkey called debates on the risks of nuclear energy as "political games". Meanwhile, Ukraine marks another anniversary of the Chernobyl accident: calculated losses reached 180 bln USD, the New Safe Confinement continues to be constructed, and its safety was confirmed by the State Nuclear Regulatory Inspectorate. At the same time, the media talk about the risks of the Khmelnytskyi NPP completion and environmentalists insist on cancelling nuclear programs, while the Ministry of Energy and Coal Industry plans to increase production of uranium.
7. The government focuses on own production of oil products. Last week, global oil prices began to increase slightly due to statistics from the U.S., where an accident happened during fuel transportation. Meanwhile, trade relations are increasingly dependent on political factors: the EU resumed purchases of Syrian oil from the rebels, and Iran plans to export oil to North Korea. In Ukraine, fuel prices are still stable, although the Ministry of Energy and Coal Industry reached agreement on their reduction. Seasonal sales growth in March totaled 10.2%. The government plans to continue reviving domestic fuel production, particularly on the Kremenchug refinery. Similar plans were announced by the owners of the Kherson refinery. Instead, the owner of the Lysychansk refinery – Russian "RosNeft" – has not yet decided on the future of the asset. The Interdepartmental Commission on International Trade, according to DiXi Group, 2013 Energy information ● Analysis ● Consulting www.ua-energy.org/en author@dixigroup.org
media reports, has decided to stop the anti-subsidiary investigation on oil imports from Belarus, and the Ministry of Agricultural Policy has agreed to cooperate with Finland in the field of biofuels.
8. Ukraine restructures the internal market of coking coal. After Ukraine introduced quotas on imports of coking coal, both Poland and Russia which could lose one of its largest sales markets, have expressed their concern. Although the coal industry develops – JSW considers investments in Ukraine and the first coal gasification installation was launched in the Lugansk region – there is still an issue of its non-transparency.
9. The government lacks vision for reforms in the housing and utilities sector. The President V.Yanukovych instructed to reduce gas consumption by 50%. At the same time, gas supply was stopped for municipal heating enterprises in Khmelnytskyi and in the Kyiv region because of debts. The appeal to the Prime Minister was made to restore supply, and heating companies indicate non-constructive position of the Naftogaz NJSC. Instead, M.Azarov said that the government will not increase gas tariffs for households until Russia does not reduce its price, and the National Commission for the Regulation of Utility Services postponed the increase in heating tariffs.
DiXi Group, 2013 Energy information ● Analysis ● Consulting www.ua-energy.org/en author@dixigroup.org