Week 34 Overview
The 34th week somehow reflected the stillness of the summer holiday season. Still, there was news of note: Russia, Ukraine and the European Union could soon get back to the negotiation table to discuss gas supply for the winter season. At the same time, the last days also witnessed informal talks between several entities. First, Gazprom and Eni said they intend to reinforce ties. Second, in the coming weeks, Turkey could publicly voice its intention to buy a stake in TAP. Third, though less likely, Teheran could follow in Ankara’s footsteps.
All in all, it is increasingly clear that Azerbaijan, Iran and Turkey will keep making the headlines along with Russia. They will be more and more the protagonists of the European gas market and geopolitics. Their strategies will intertwine and influence each other.
RUSSIA - UKRAINE - EU: STILL A STRANGE TRIANGLE
Ministerial-level talks between Russia, Ukraine and the European Commission on gas supply for the upcoming winter season are set to commence following a breakdown of discussions in July. Climate and Energy Commissioner Miguel Arias Cañete said that the Commission would meet the Ukrainian side on August 27 and the Russian side in early September.
According to Stratfor, Russia made it clear that it will not abandon its efforts to build a pipeline route that bypasses Ukraine. The American publisher argues that the only way to protect Ukraine from falling prey to Russia's attempts to translate its energy supplies into political power is to fully integrate Ukraine into the European energy market.
While negotiating and speaking with Western partners, the Ukrainian government said that subsidies worth UAH 4.5 million (around €200,000) will be assigned to Ukrainian families before the heating season commences. Ukraine seems to rely on Europe, while remaining highly critical of Russian decisions.
On the other hand, Moscow’s openings about the Third Energy Package would imply that European Union’s position on South Stream project could be adjusted, Professor Atanas Tasev said in a recent interview.
As said, Moscow continues speaking with European partners.
Russian energy company Gazprom's CEO Alexei Miller and Italian Eni's Head Claudio Descalzi pledged to further develop active cooperation on the European gas market during their meeting in Moscow, the Italian company said in a press release on Thursday as reported by Sputnik.
Greek Minister Panagiotis Skourletis spoke with Russian Energy Minister Alexander Novak to re-affirm agreements on both sides for the Greek Stream project. They discussed technicalities such as investment volume, timetable and favoured routes within the country.
Italy and Greece are not the only countries in talks with Gazprom. German newspapers continue focusing on Moscow’s ties with Eastern European countries, trying to explain why Russian President Vladimir Putin is working to strengthen ties with Bulgaria - as he is doing with Germany.
EUROPEAN NEWS: BULGARIA, NORWAY AND SHALE
Bulgaria is gearing up for exploration on the Black Sea shelf, with Prime Minister Boyko Borissov claiming that, if the previous government had not been ousted, operations would had already started. Similarly, on Monday, France-based Total told Reuters it was on track to start drilling for oil and gas at an exploration site off Bulgaria's Black Sea coast early next year.
Meanwhile, the Oil & Gas Authority (OGA) announced on Tuesday that 27 onshore blocks from the 14th Onshore Oil and Gas Licensing Round will be formally offered to companies. According to the British government, a second group of 132 further blocks has been subjected to detailed assessment under the Conservation of Habitats and Species Regulations 2010, the findings of which are now out for consultation.
Norway’s gas industry reported some progress, with the Norwegian Petroleum Directorate (NPD) granting Wintershall Norge AS a new drilling permit, while Sevan Marine said it is considering its opportunities in the Arctic and in the FPSO/FSO market. The Norwegian company also reported a decline in revenues only partially compensated by improved efficiency in the Floating business.
Another Scandinavian country - Denmark - is struggling to increase gas production. France-headquartered Total said that it will close its site in Dybvad, Denmark, adding that it will not perform hydraulic fracturing in the area because of technical reasons related to the geology of the site. ‘The results of the drilling at Vendsyssel-1 showed that the shale layer encountered by the well was too thin for economically feasible gas production. The site will now be closed’ reads a note released on Tuesday.
AZERBAIJAN - IRAN - TURKEY: WHO IS BLUFFING?
Turkey is reportedly mulling an investment in Trans-Adriatic Pipeline (TAP), eyeing Statoil’s 20% stake in the final pipeline of the project connecting Azerbaijan with Italy. In July, Snam’s CEO Carlo Malacarne confirmed that there are TAP’s stakeholders willing to sell their shares, adding that a 20% interest would cost around 400 million euros.
Iran’s media confirm Azerbaijan has officially proposed to Iran to join a key project to export natural gas to Europe. Fars News Agency reportedly quoted an unnamed official as saying that the proposal was discussed during a recent visit to Iran by an Azeri oil delegation.
An Iranian official reportedly confirmed that the Islamic Republic and Azerbaijan have been discussing the option, Trend wrote.
But, not everybody agreed on the news. No discussion was conducted on Iran’s joining to Trans Adriatic Pipeline (TAP) and no proposal was put forward in this regard, TAP’s Managing Director Ian Bradshaw reportedly told Anadolu agency.
Who is bluffing? Why is that?
While Iran is preparing to boost its raw gas production capacity from the current 700 million cubic meters per day (mcm/d) to 1,100 mcm/d by 2018, the country's plans indicate a new wave of gas consumption growth in coming years, a fact that casts a shadow on its export might. Currently Iran supplies the petrochemical units with 35 mcm/d of gas to produce about 45 million tons of petrochemical products annually, but Iran has projects worth $70 billion to increase this volume to 120 million tons by 2020 and 180 million tons by 2025, which will lead to more gas consumption growth.
Finally, the gas storage facility under Lake Tuz in Central Anatolia will become fully operational by 2019, according to sources from the Energy Ministry, Hurriyet Daily News reported.
ISRAEL - TUNISIA
Israel's cabinet approved by a great majority (17-1) a deal with a Delek Group and Noble Energy for the Leviathan natural gas field off Israel's Mediterranean coast, with Prime Minister Benjamin Netanyahu praising Energy Minister Yuval Steinitz for his efforts that “has led to a very significant reduction in the price the state will pay for gas.”
Meanwhile, Ireland-headquartered Circle Oil announced that the Tunisian Authority approved its application to renew the exploration permit on the Mahdia block. The Mahdia permit offshore Tunisia covers an area of 3,024km2, and contains the El Mediouni structure which was drilled by Circle's EMD-1 well in August 2014. According to Circle Oil, several companies already voiced their intention to take a stake in the project.
INTERVIEWS, AND SPEECHES
Sergio Matalucci is an Associate Partner at Natural Gas Europe. He holds a BSc and MSc in Economics and Econometrics from Bocconi University, and a MA in Journalism from Aarhus University and City University London. He worked as a journalist in Italy, Denmark, the United Kingdom, and Belgium. Follow him on Twitter: @SergioMatalucci