Aletho News

ΑΛΗΘΩΣ

Hungary to start South Stream construction in 2015 despite western pressure

RT | November 19, 2014

Hungary plans to break ground next year on its stretch of the South Stream pipeline to send natural gas from Russia to Europe. It is in defiance of EU and US calls to halt the project over frosty relations with Moscow.

One major reason Hungary has thrown its support into South Stream is the lack of a better option since the EU-backed Nabucco pipeline, which was supposed to deliver gas from Azerbaijan to Europe, failed.

“Nabucco will not be built and after nearly 10 years of hesitation, and especially in light of the Ukraine situation, we need to act. This is a necessity,” Hungarian Energy Minister Andras Aradszki told Reuters.

Earlier Hungarian Prime Minister Viktor Orban said that Washington is putting pressure on Budapest for cooperating with Russia over energy.

Gazprom’s $45 billion South Stream project will deliver about 64 billion cubic meters of gas to Europe, Russia’s biggest client, without unreliable passage through Ukraine.

Russia is Hungary’s biggest source of natural gas, and in 2013 the country bought 6 billion cubic meters. Hungary hopes the pipeline will be complete by 2017.

Ministers from Russia also confirmed construction will begin in 2015.

“Today the sides confirmed all their commitments signed under the South Stream project,” Russian Foreign Minister Sergey Lavrov said Wednesday after talks with his Hungarian counterpart Peter Szijjarto.

Hungary, along with Slovenia, Bulgaria, and Austria, still support the project despite EU attempts to stall it due to the political rift with Moscow, said Energy Minister Aradszki.

Proponents inside the EU argue the project is critical for EU energy security as it will provide a direct and reliable pipeline to Russia. Opponents argue that it is a step backwards for EU energy independence, as it deepens reliance on neighboring Russia.

On November 4, the Hungarian parliament approved the construction of the South Stream pipeline without European Union agreement.

The EU says South Stream will violate its Third Energy Package, which doesn’t allow one single company to both produce and transport oil and gas.

In September Hungary indefinitely halted gas shipments to Ukraine after securing a new deal with Russian gas major Gazprom, which the West saw as a move towards Russia’s orbit.

In 2013, Russia sold 162.7 billion cubic meters of gas to Europe and expects to sell at least 155 billion cubic meters this year.

READ MORE: Hungary under ‘great pressure’ from US over its energy deals with Russia

November 19, 2014 Posted by | Economics | , , , | 2 Comments

Putin, Xi Jinping sign second mega gas deal on new gas supply route

RT | November 9, 2014

President Vladimir Putin and Chinese leader Xi Jinping have signed a memorandum of understanding on the so-called “western” gas supplies route to China. The agreement paves the way for a contract that would make China the biggest consumer of Russian gas.

Russia’s so-called “western” or “Altay” route would supply 30 billion cubic meters (bcm) of gas a year to China.

The new supply line comes in addition to the “eastern” route, through the “Power of Siberia” pipeline, which will annually deliver 38 bcm of gas to China. Work on that pipeline route has already begun after a $400 billion deal was clinched in May.

“After we have launched supplies via the “western route,” the volume of gas deliveries to China can exceed the current volumes of export to Europe,” Gazprom CEO Aleksey Miller told reporters, commenting on the deal.

Speaking to journalists on the eve of his visit to Beijing, Putin was optimistic about prospects for the new gas deal with China.

“We have reached an understanding in principle concerning the opening of the western route,” Putin said. “We have already agreed on many technical and commercial aspects of this project, laying a good basis for reaching final arrangements.”

The “western” route deal is one of the 17 agreements signed at the Sunday meeting between Putin and Xi.

They also included a framework agreement between Gazprom and China’s CNPC on gas deliveries and a memorandum of understanding between Gazprom and another Chinese energy giant, CNOOC.

Gazprom and CNPC have also signed a preliminary agreement for China National Oil and Gas Exploration and Development to take a 10 percent stake in Russia’s Vancorneft.

Among the business issues discussed by Putin and Xi at their fifth meeting this year was the possibility of payment in Chinese yuan, including for defense deals military, Russian presidential spokesman Dmitry Peskov was cited as saying by RIA Novosti.

November 9, 2014 Posted by | Economics | , , | Leave a comment

Ukraine and Russia agree on $385 gas price for 5 months

RT | October 20, 2014

Moscow and Kiev have confirmed the price of Russian gas to Ukraine until the end of March at $385 per 1,000 cubic meters, according to both Ukrainian President Petro Poroshenko and Russian Foreign Minister Sergey Lavrov.

“We have agreed on a price for the next 5 months, and Ukraine will be able to buy as much gas as it needs, and Gazprom is ready to be flexible on the terms,” Lavrov said Monday at a public lecture.

Russia’s foreign minister dispelled rumors of two separate prices, one for winter and one for summer.

“At the Europe-Asia summit in Milan, there was no talk of summer or winter gas prices, but just about the next 5 months,” the foreign minister said.

Included in the $385 price is a $100 discount by Russia. Ukraine is still insisting on a further discount, asking for $325 for ‘summer prices’ after the 5-month winter period.

“We talked about how there should be two prices, like how the European spot market has two prices, a winter price when demand is high, and summer when demand is low. Our joint proposal with the EU was the following: $325 per thousand cubic meters in the summer and $385 per thousand cubic meters in the winter,“ Poroshenko said in an interview on Ukrainian television Saturday.

President Poroshenko and Russian President Vladimir Putin reached a preliminary agreement in Milan on Friday for the winter period, but Russia won’t deliver any gas to its neighbor without prepayment.

Gas talks are expected to continue Tuesday in Berlin between the energy ministers of Russia, Ukraine, and the EU. On September 26, the three energy ministers agreed to provide 5 billion cubic meters to Ukraine on a “take-or-pay” contract, to help the country survive the winter months.

The so-called winter plan is contingent on Ukraine starting to repay at least $3.1 billion worth of debt to Gazprom.

Ukraine is still looking for funding to pay for the gas supplies as well as its $4.5 billion arrears to Russia’s state-owned gas company. Moscow reduced the debt from $5.5 billion to $4.5 billion, calculating in the discount of gas, Putin said on Friday.

Moscow believes the European Commission or the International Monetary Fund should provide loans for this purpose.

Russia turned off the gas to Europe via Ukraine in 2006 and in 2009, over similar pricing disputes with Kiev. This poses a risk to Europe, which receives 15 percent of its gas through Ukraine.

October 20, 2014 Posted by | Economics | , , , | Leave a comment

Moscow rejects Kiev’s ‘virtual’ gas price, seeks $3.9bn to resume supplies

RT | September 30, 2014

Russia is ready to resume gas deliveries to Ukraine only after it pays $2 billion of its debt and makes a $1.9 billion advance payment for future supplies, Russian Minister of Energy Aleksandr Novak said.

“There will be no new supplies if part of the debt is not paid. Otherwise, it turns out to be a game with only one goal, where we deliver the gas and the debt payment is postponed,” he argued.

Novak said that Ukraine is prepared to pay $3.1 billion of its Russian gas debt.

“They calculated the cost at their own virtual price at $268.5 [per thousand cubic meters of gas],” the Minister said.

However Russia is happy to sell its gas at $385 which amounts to $1.9 billion for the 5 billion cubic meters Ukraine wants to purchase. Together with the debt payment it amounts to $3.9 billion.

Prepayment will likely be made every month, according to the needs of Ukraine. The amount of $3.1 billion has to be paid in two tranches: $2 billion before supplies are resumed, and the remainder – by the end of the year, Novak said.

Russia is ready to fulfill the agreements reached on Friday in Berlin and is waiting for a Ukrainian response, Novak said answering a question concerning the possibility of sealing the deal this week.

All the agreements of the so-called “winter plan” worked out on September 26 were verbal, and the gas price remains an unresolved issue.

The money for this plan has already been provided to Ukraine by the International Monetary Fund (IMF), Novak said.

September 30, 2014 Posted by | Aletho News | , , , | 2 Comments

Russia’s Gazprom to fall under new EU capital ban – sources

RT | September 6, 2014

Russia’s Gazprom Bank and oil producer Gazprom Neft will fall under new sanctions approved by the European Union on Friday, Reuters cited an EU diplomat as saying. The sanctions reportedly include a new ban on raising capital in the 28-nation bloc.

The sanctions were agreed against Russia for its alleged role in the Ukrainian crisis, the diplomatic source said.

According to The Financial Times, which managed to obtain a document outlining the sanctions, all Russian state-controlled companies with assets of more than one trillion rubles (US$27 billion) that receive more than half their revenue from “the sale or transportation of crude oil or petroleum products” will be hit by the ban.

In addition to Gazprom Neft, the oil subsidiary of Russian gas giant Gazprom, Russia’s largest oil group – Rosneft and Transneft pipeline company – would be potentially blacklisted. However, the sanctions will not apply to privately owned Russian oil groups such as Lukoil and Surgutneftegas, the Times said.

The sanctions will also include an expansion of the EU travel ban list against certain individuals, as well as asset freezes, credit restrictions against Russian companies, and export bans on dual use goods, the EU diplomat told the agency.

Chiefs of Russian companies will be added to the list, along with oligarchs and local authorities of Donbass and Crimea.

Moscow has already promised it will respond to the new round of sanctions if they are approved and imposed, according to a press release issued by the Russian Foreign Ministry on Saturday

“Instead of feverishly looking for ways of hitting harder the economies of its member-states and Russia, the EU would do better to start supporting the economic revival of the Donbass region and restoring normal life there,” the press release reads.

The EU’s implementation of the new sanctions was delayed until Monday, Itar-Tass quoted an EU source as saying. Although the sanctions are ready, “some touch up work will be completed during the weekend.”

European Council President Herman Van Rompuy and European Commission President Jose Manuel Barroso confirmed that the new sanctions will be revealed on Monday.

US President Barack Obama said on Friday that Washington and the European Union were prepared to impose sanctions against Russia if the crisis in Ukraine continues to escalate following the signing of a ceasefire agreement.

Obama said the ceasefire in eastern Ukraine – agreed upon only hours earlier – was a result of “both the sanctions that have already been applied and the threat of further sanctions, which are having a real impact on the Russian economy and have isolated Russia in a way we have not seen in a very long time.”

Kiev officials and representatives of the two self-proclaimed republics in southeastern Ukraine agreed to a ceasefire after the contact group met behind closed doors in Belarus.

READ MORE:

US, EU preparing new round of economic sanctions against Russia

Kiev, E. Ukraine militia agree on ceasefire starting 1500 GMT Friday

Obama: We are readying new sanctions on Russia despite peace agreement in Ukraine

September 6, 2014 Posted by | Economics, Malthusian Ideology, Phony Scarcity | , , , , , , | Leave a comment

Russian gas sector should not be sanctioned – EU energy chief

RT | August 28, 2014

Russian gas sector should not be subjected to EU sanctions despite the situation in Ukraine, EU Energy Commissioner Gunther Oettinger said Thursday.

“Gas is not a suitable sector for sanctions, as in this case everyone will lose – Russia, Ukraine and the European Union,” RIA Novosti cites Oettinger as saying.

EU Energy Commissioner insisted on a quick resolution of the gas dispute between Russia and Ukraine.

“We need a solution that prevents an escalation between Ukraine and Russia,” he told German broadcaster ARD. “We need Ukraine as a transit country. Ukraine needs gas in winter. In a long and cold winter, Ukraine will not have enough stored gas of its own.”

He also acknowledged that in case Ukraine is left without gas supplies in winter it may steal Russian transit gas on its way to the West.

According to Oettinger by the end of October the European Union should develop a concept that provides each bloc member with warm homes, financing of infrastructure and maintenance of industry for the period from November to March.

On Friday, Oettinger is expected to meet with Russian Energy Minister Aleksander Novak to discuss future Russian gas deliveries to Europe.

The agenda includes talks about safe transit of Russian gas to Europe via Ukraine, legal and technical aspects of the South Stream project, Gazprom’s access to the full capacity of the OPAL pipeline and issues related to the continuation of the Russia-EU Energy Dialogue, the Russian Energy Ministry said in a statement Monday.

August 28, 2014 Posted by | Economics | , , , , | Leave a comment

How sanctions will affect the West’s $35bn invested in Russian oil

RT | July 30, 2014

The US and EU have banned the export to Russia of hi-tech oil equipment needed in Arctic, deep sea, and shale extraction projects. This will leave Western companies, which have an estimated $35 billion invested in Russian oil, in a bind.

New stage three sanctions won’t immediately slash Russian oil production, which at 10.55 million barrels per day is the world’s largest, but could derail future foreign investment in Russia’s oil industry. Russia is home to the largest combined oil and gas reserves in the world.

The US and the 28 EU countries hope to influence Moscow’s foreign policy in eastern Ukraine.

New restrictions “will make it more difficult for Russia to develop its oil resources over the long term,” President Barack Obama said as he unveiled the new tough regime.

The sanctions will hit the heart of Russia’s economy- oil, but not touch the gas sector. Together, the two make up more than 50 percent of revenues for the Russian state. Russia has an estimated $7.5 trillion in oil and gas resources, many of which require Western oil technology to extract.

Obama said he wanted the sanctions “to bite.”

The sanctions won’t only bite at Russia, but Western oil companies like BP and ExxonMobil, and equipment suppliers may fall victim to the oil technology ban.

Introduction of EU sanctions against the Russian energy sector will drive up European energy prices, the Russian Foreign Ministry warned on Wednesday.

BP

BP is one of the most exposed to the Russian market, after the UK-based company bought a 19.75 percent stake in the state oil company Rosneft, a company already on Obama’s sanctions list.

Previously, BP insisted it was “business as usual” with Russia, but the sectoral sanctions could derail the company’s strategy in Russia, where it sources nearly one-third of its global oil production.

“Any future erosion of our relationship with Rosneft, or the impact of further economic sanctions, could adversely impact our business and strategic objectives in Russia, the level of our income, production and reserves, our investment in Rosneft and our reputation,” BP said on Wednesday, before the heavy-handed sanctions were announced.

The same day, the British energy company reported a big bump in second quarter profits, which rose 25.3 percent to $3.23 billion.

In June, Rosneft agreed to supply BP with up to 12 million tons of oil and oil products over 5 years. The deal assumes a prepayment of at least $1.5 billion.

ExxonMobil

ExxonMobil has been present in the Russian market for over 20 years. In partnership with Rosneft, the Texas-based oil major has many projects in Russia underway- including the $500 billion exploration of the Bazhenov oil field in Western Siberia, and a $15 billion liquefied natural gas terminal in Russia’s Far East.

If forced to quit Russia, Exxon could pull out as much as $1 billion in funds intended to go to offshore Arctic and fracking projects in Siberia, Bloomberg News reported.

After the sanctions were announced, Rosneft Chairman Alexander Nekipelov said ExxonMobil may suspend cooperation with Rosneft, but only in an extreme situation.

“As far as we know, Exxon does not have plans to stop cooperation with Rosneft, and we hope the situation will not go that far,” Nekipelov said.

“We are assessing the impact of the sanctions,” Alan Jeffers, an Exxon spokesman, told Bloomberg News via email.

Nekipelov said the American company doesn’t want to give up its joint projects with Rosneft- it has already invested too much.

In May, the two companies agreed on four Arctic exploration projects. Additionally, ExxonMobil and Rosneft will operate a new joint offshore drilling rig in the Kara Sea, where the two companies have rights to over 11.3 million acres of Russia’s Pacific Ocean waters. The company also has a substantial stake in the Far East Sakhalin oil project, which covers 85,000 acres.

Exxon CEO Rex Tillerson hasn’t made any official comment on the new sanctions.

Total

France’ oil major and largest company, Total, has huge operations in Russia, its fourth largest market. The morning after the sanctions, the group’s stock dipped 2.66 percent in Paris. On Wednesday, the company reported an estimated second quarter net profit drop of 12 percent

Total owns about 18 percent of Novatek, Russia’s second largest gas producer, which was affected in the previous round of US sanctions.

“We stopped buying shares in Novatek the day of the airplane accident after considering all the uncertainty that it created,” the French company’s CEO said in the earnings call on Wednesday.

Novatek leads the $27 billion Yamal LNG project with Total, along with China’s CNPC. The South-Tambeyskoye field has an estimated 492 billion cubic meters of proven gas reserves.

Russia is “a great oil and gas country and we’ll have to wait and see the nature of these new sanctions first,” the CEO said on Wednesday, adding it was a “crucial” market.

The project is highly dependent on US technology and will experience serious difficulties if sanctions are imposed.

Total expects its hydrocarbon production in Russia to rise to 400,000 barrels a day from 207,000 barrels in 2013.

Halliburton and Schlumberger

Blocking the exports of specific goods and technology to Russia is going to squeeze the world’s largest oil service and equipment companies- both US-based- which depend on Russia for sales.

Halliburton relies on Russia for 4-5 percent of global sales, and Schlumberger generates 5-6 percent, according to an estimate by RBC Capital Markets.

Both oilfield service groups, which provide Russia with horizontal drilling and hydraulic fracturing technology, could lose sales because of sanctions, but they won’t be driven out all together.

The stock price has dropped for both companies after the sanctions were announced- Halliburton is down 1.95 percent, and Schlumberger dipped 0.70 percent.

Dick Cheney, former US Vice President, and avid Russia critic, served as Halliburton’s CEO through 2000.

READ MORE: EU and US impose new round of sanctions on Russia over Ukraine

July 30, 2014 Posted by | Economics | , , , , , | Leave a comment

Bulgaria halts Russia’s South Stream gas pipeline project

RT | June 8, 2014

Bulgaria’s prime minister, Plamen Oresharski, has ordered a halt to work on Russia’s South Stream pipeline, on the recommendation of the EU. The decision was announced after his talks with US senators.

“At this time there is a request from the European Commission, after which we’ve suspended the current works, I ordered it,” Oresharski told journalists after meeting with John McCain, Chris Murphy and Ron Johnson during their visit to Bulgaria on Sunday. “Further proceedings will be decided after additional consultations with Brussels.”

McCain, commenting on the situation, said that “Bulgaria should solve the South Stream problems in collaboration with European colleagues,” adding that in the current situation they would want “less Russian involvement” in the project.

Russia’s Energy Ministry said it had not yet received any official notification from Bulgaria on work on the project being suspended.

Earlier this week, EU authorities ordered Bulgaria to suspend construction on its link of the pipeline, which is planned to transport Russian natural gas through the Black Sea to Bulgaria and onward to western Europe. Brussels wants the project frozen, pending a decision on whether it violates the EU competition regulations on a single energy market. It believes South Stream does not comply with the rules prohibiting energy producers from also controlling pipeline access.

The EU is also asking for an investigation into how contracts were awarded for work on the pipeline in Bulgaria. Brussels sent the Bulgarian government a letter of formal notice asking for information, to which Sofia had one month to reply.

Russia’s energy giant Gazprom’s South Stream pipeline requires European approvals as its route would pass through the territory of several EU countries.

In Bulgaria, the ruling Socialists support the South Stream project, while Movement for Rights and Freedom leader Lyutvi Mestan told parliament on June 5 that Bulgaria should defend its strategic interests “in cooperation, not in confrontation” with Europe.

Earlier Serbia has said it has no plans to delay the start of construction of its leg of the South Stream pipeline, scheduled for July. Serbian Energy Minister Aleksandar Antic said that the position was not decisive: “I believe the European Commission and member states will find a solution because this is a European project in the best interests of energy security.”

Hungarian Prime Minister Viktor Orban also said June 5 that the pipeline should be built, as there was no alternative to the project.

June 8, 2014 Posted by | Economics, Malthusian Ideology, Phony Scarcity, Nuclear Power | , , , , , , | Leave a comment

Russia declassifies vast extent of oil, gas reserves

RT | July 12, 2013

According to declassified data Russia holds 17 billion tons of oil and 48 billion cubic meters of gas. Moscow believes revealing the extent of the vast reserves will lead to a surge of investment in the extraction and production of hydrocarbons.

The country’s recoverable oil reserves in the C1 category (proven reserves) totals 17.8 billion tons; category C2 (preliminary estimated reserves) is 10.2 billion tons, according to data collected on January 1, 2012.

Meanwhile, gas reserves were equally bountiful at 48.8 trillion cubic meters C1 category; gas stores of the C2 category is estimated at 19.6 trillion cubic meters.

The Minister of Natural Resources of the Russian Federation Sergey Donskoy said the resource potential for these kinds of mineral resources remains one of the most significant in the world. “I am convinced that the opening of this data will give a powerful impetus to investment in reproduction and production of hydrocarbons,” he said. He also added that Russia’s potential for the mineral resources is one of the most significant in the world.

Russia’s available hydrocarbon potential will be able to provide the nation’s growing economy for 30 years, according to expert estimates put out by the Russian Ministry of Natural Resources and the Federal State Commission on Mineral Reserves.

Meanwhile, increased exploration of mineral resources consistently exceed the level of production, the minister said, noting that last year 49 oil fields were discovered.

Last week, Prime Minister Dmitry Medvedev signed a government decree that removed the lid of secrecy on oil reserve data.

Earlier, President Putin, explained the necessary level of cooperation that exists between the domestic fuel and energy sector and foreign investors, called the former level of secrecy “an obvious anachronism.”

Putin also called on the development and approval of a new classification of Russian oil and gas reserves as close as possible to international standards.

Before the release of the official data Russia was placed second in the world by gas reserves after Iran, with 32.9 trillion cubic meters, and eighth by crude oil reserves, after Venezuela, Saudi Arabia, Canada, Iran, Iraq, Kuwait and UAE, with 11.8 trillion cubic meters of oil.

Related article

July 13, 2013 Posted by | Economics, Malthusian Ideology, Phony Scarcity | , , , , , | Leave a comment