Week 6 Overview
The sixth week of the year confirmed the British intentions to tap indigenous shale gas resources, but the real surprises came from Continental Europe: the industry in France and Germany is speaking out in favour of shale gas, the Balkans are gaining momentum and Baltic countries could be strengthening their cooperation with Gazprom. Several countries could be interested in giving their green light to two new strings of the Nord Stream project.
FRANCE AND GERMANY
France’s energy strategy could be in for adjustments as the result of three major events that unfolded in the last hours including French Minister for Industrial Renewal Arnaud Montebourg’s intervention in favour of shale gas, renewed attempts from Paris to increase cooperation with Iran, and the rallies in Yemen over an alleged purchase of Yemeni LNG below the international price market. These factors could soon change the cards on the French table.
French industry has been blaming President François Hollande for many months. The same approach seems to be deployed by the German industry. That is something relatively new.
E.ON lamented that low wholesale prices combined with declining profits have prompted companies to limit investments in the internal market, and to close down or mothball an increasing number of existing power plants. Most of them are gas-fired plants.
But this time the industry launched an even more scathing attack.
Germany’s gas industry said on Thursday that the decline in hydrocarbon production is due to political reasons, which also allegedly created artificial hurdles for shale gas developments.
"While shale gas development through hydraulic fracturing is new to Germany, the technique has been used in the country since 1961 to allow gas production from low permeability, or tight sandstone reservoirs," said Ritva Westendorf Lahouse, spokeswoman for ExxonMobil's German operations.
"Currently, there is a decline in domestic production...a major share of planned investments in our industry is stymied politically," said Hartmut Pick, spokesman for the WEG oil and gas industry group.
In the mean time, E.ON keeps selling assets in Europe. After selling E.ON Mitte to a consortium of municipal shareholders in December,s. the company is considering further divestments to complete its €20 billion disposal program.
BALKANS AND EAST EUROPE
Good news from Eastern Europe seems a thing of the past. But this week, Eastern-Europe sceptics had to change tack.
The International Monetary Fund praised Romania for its liberalization program on Wednesday, suggesting that the process of decentralization in the gas market for industrial consumers would be finalized by the middle of 2014.
“Regarding deregulation, Romania observed and respected its commitments. For electrical energy, the market was already liberalized for industrial consumers at January 1, right on schedule. The liberalization for natural gases will be completed by July 1 2014, earlier than we estimated,” head of the IMF mission in Romania Andrea Schaechter told a press conference at the end of the visit to Bucharest.
On Tuesday, the Sarajevo Stock Exchange released a note unveiling an auction for the public stake in Bosnia-Herzegovina’s Energopetrol. The country could soon sell its 22.12% stake in the energy company.
Last but not least, Poland seems well on track to create momentum.
Poland will soon come up with regulations for its nascent shale gas industry, Environment Minister Maciej Grabowski said on Wednesday. He suggested that 30 new shale gas drillings would be carried out this year, as the result of more business-friendly regulations to come within two weeks.
So far only some 50 wells have been drilled, with mixed results. Investors have been awaiting for more than two years a complete regulation on shale gas.
BALTIC COUNTRIES
As written in June, Gazprom is mulling over an expansion of the Nord Stream project.
This week witnessed a step forward towards further investments.
Gazprom's Alexey Miller met Matthias Warnig, Managing Director of Nord Stream A, to discuss the possibility of beefing up the Nord Stream gas transmission system via the Baltic Sea with two additional strings.
'Gazprom reviewed the results of the feasibility study performed by the Nord Stream AG operating company as well as the conclusions made during the consultations with public authorities, non-profit organizations and other stakeholders from the Baltic Sea region,' reads a note uploaded on Gazprom's website on Friday.
Miller also met Algirdas Butkevicius, Prime Minister of the Republic of Lithuania, to discuss bilateral cooperation in the energy sector. According to another press release, the parties discussed 'the reliability of Russian natural gas transit across Lithuania.'
Nord Stream’s expansion would substitute the Yamal II project, which has been shelved after the controversy that the project sparked in Poland.
Sergio Matalucci