Weekly analytical report October 22 – 28, 2012
1. Russia continues to lose leverage on the EU member states. Czech RWE Transgas won the court trial against Gazprom, according to which Transgas shall have not pay penalties under "take or pay" clause. According to experts, this victory can cause similar lawsuits from Bulgaria, Estonia, Hungary, Latvia, Lithuania, Poland and Slovakia. Possible litigation forced Rosatom to negotiate with the Bulgarian government on the NPP "Belene" project. The Estonian Minister of Defence U.Reinsalu recommended the government to refuse the proposal of Nord Stream AG to run research on the next line due to security threats. In response, Russia insists gas supplies to the EU are sufficient, especially considering production on the Bovanenkovo field, and again tries to negotiate with China on cooperation in the gas sector. According to the media, the arguments of the EU countries can be used in negotiations of Ukraine and Moldova with Russia to sign new gas contracts. During the visit of the President V.Yanukovych to Russia, the Ukrainian party has announced a package deal in November, but the Russian party has not commented on this statement and expects results of the assessment of the gas transportation system to continue negotiations on the consortium. Nontransparency of the agreements between Ukraine and Russia repeatedly excludes the EU from the process – despite the willingness to invest in modernization of the GTS. According to German politicians, the EU will not allow Russia to gain full ownership of the GTS, and the trilateral consortium is an acceptable option. In contrast to the low interest in Ukrainian underground gas storage facilities by Western companies, Gazprom expressed satisfaction with the volumes of injected gas.
2. EU countries are competing for Caspian gas with different pipeline projects. Lithuanian Ambassador to Azerbaijan A.Yurauskas supported gas supply from the Caspian after the construction of LNG-terminal, gas prices will decrease by 8-10%, the Hungarian Prime Minister V.Orban expressed interest in gas supplies from Azerbaijan and Georgia (AGRI project), the Bulgarian Prime Minister B.Borisov announced the construction of Nabucco will start in January 2013; Ukraine wants to discuss with Azerbaijan joining the TANAP project, looks for sources of gas supply for the LNG-terminal and invites Chinese banks to its construction.
3. Development of unconventional gas is gaining tempo. Australia launched the first commercial shale gas well. In Ukraine, Shell and Ukrgazvydobuvannya started drilling on the first exploratory well, and signing of the PSA on Yuzivska field is expected by 2013. In Lithuania, Chevron became a license to explore for shale gas in the Baltic shore. According to the IHS, unconventional gas production will bring the U.S. 500 bln USD by 2035. At the same DiXi Group, 2012 Energy information ● Analysis ● Consulting www.ua-energy.org/en author@dixigroup.org
time, Russian President V.Putin called Gazprom to review export strategy, adapting it to the increased competition from the shale gas.
4. Political factor can influence the oil market. On the international markets, oil prices demonstrate a mixed trend. The U.S. are actively increasing rates of oil production, petroleum prices in the country fell to a minimum in 3 months, and the same dynamics can be seen at gas filling stations in the EU. The IEA forecasts slower growth in oil demand. However, the price may be affected by conflicts within OPEC and Iran's threats to cut oil exports. In Ukraine, experts recorded increase of diesel prices in the last months, but expect cheaper fuel in November, taking into account the reduction of export duties on Russian oil. Instead, market participants and some experts have warned about the cost of gasoline rising by 0.150.17 UAH, because of suspending imports of oil products on October 19, which resumed on October 23. The State Customs Service officially refuted the allegations of difficulties with the import of petroleum; however, market participants warned of the situation possibly repeating after the elections. According to unofficial information, "cleanings" at the customs cause problems with oil products’ processing. The government started an investigation concerning the introduction of import duties on oil products.
5. Information on the Lysychansk refinery remains unclear. According to the Energy Minister Y.Boyko, maintenance works are being carried out by TNK-BP, as it was agreed with the government. According to unofficial information, major industrial groups of Ukraine are negotiating on the purchase of the plant, and the winner has not yet been defined – one of the reasons for delay in the process, is also the sale of TNK-BP to Rosneft.
6. Against the background of difficulties in cooperation with Western countries, Eastern partners deepen integration in the energy sector. Despite Ukraine's readiness to transport oil to Belarus, Czech Republic and Poland, participation of the Polish party in the completion of the Odessa-Brody pipeline could not be confirmed until mid-November. As a result of the Druzhba pipeline failure, suffered refineries in Czech Republic and Germany. Ukrtransnafta SC denied any involvement in the asccident, and the Belarusian party took the same position. At the same time, integration in the oil sector of the Customs Union countries increases: Kazakhstan will pay for Russian oil products with oil, Russia offers Belarus to exchange energy assets and increase the supply of electricity, which could negatively impact existing electricity trade with Ukraine.
7. The popularity of renewable energy for countries of the world increases. Greenpeace addressed the European Commission with a proposal to set targets for renewables by 2030, Poland aims to increase the use of renewable energy in 2013 as the production exceeds plans, the Bulgarian government plans to promote the development of electric vehicles, which were recognized by the IEA as the best way to reduce carbon footprint. Iran wants to develop "green" energy, Saudi Arabia plans to completely switch to renewables. However, crisis DiXi Group, 2012 Energy information ● Analysis ● Consulting www.ua-energy.org/en author@dixigroup.org
develops in solar energy: Chinese manufacturers of solar panels faced falling demand, and Siemens AG announced plans to leave its solar business, focusing on wind and hydropower. In Ukraine, according to the head of the State Agency for Energy Efficiency and Energy Saving M.Pashkevych, the total capacity of renewable reached 530 MW. This week, the upper reservoir of the Dniester PSP and the solar plant in Khmelnytskyi region were commissioned. Meanwhile, the NERC for the first time approved the FiT with the calculation of "local content" and approved the general FiT rates in November.
8. Nuclear energy restores its positions in the world. Poland calls nuclear energy one of its priorities and is preparing to run a tender on the construction of NPPs. China lifted a moratorium on construction of new nuclear projects. The IAEA together with the government of Japan plans to create a research base on the Fukushima-Daiichi NPP, where also Ukrainian specialists may be involved. At the same time, local communities in Bulgaria and Turkey have expressed concern about the construction of Turkish NPP near the border with Bulgaria. In Ukraine, a statement of the Nuclear Energy Worker’s Union called to stop suspension of the funding for Chernobyl projects, and the Prime Minister M.Azarov gave corresponding instructions to fully finance all the expenses.
9. The circle of those willing to get privileges in electricity grows. According to experts, the incentives for electrometallurgy may encourage other companies to make similar claims. The Association of Coal Enterprises also expressed the need to reduce electricity tariffs for coal mines. Meanwhile, the practice of cross-subsidies, experts believe, does not contribute to the development of electricity market.
10. In the sector of housing and utility services, many issues remain unresolved. According to the Ministry of Regional Development, 80% of buildings are now connected to heat supply, and the agency received total 144 complaints. The government promises not to increase gas tariffs this winter, and hopes to agree with the IMF to receive the loan without such an increase. Meanwhile, government sector has already increased indebtness for utility services 1.5 times, and the Ministry of Regional Development wants to increase the limits of gas supplied for heating the households.
DiXi Group, 2012 Energy information ● Analysis ● Consulting www.ua-energy.org/en author@dixigroup.org