Week 47 Overview
As Ukraine is drifting away from European Union, Brussels is looking for a way out of the current difficult situation. At the moment the Old Continent is at the mercy of externalities, but it is trying to find solutions to the unexpected market changes occurring in the last few years. Governments are trying to attract foreign investments, companies are looking for new usages for gas.
The 47th week showed a glimmer for European companies and gave new hopes for a revitalization of continental gas markets, despite some major setbacks coming from hesitant investors reconsidering their plans in Europe. The successes of the week were minor, but significant.
SUCCESSES (1) - TECHNOLOGY
On Monday, Eni fired up its new Petaflop class supercomputer to improve the accuracy and resolution of the geophysical and geological studies.
On Tuesday, GDF Suez presented a software platform that pools data relating to energy, waste, water and other urban issues, making the information available to the public and local authorities.
Also on Tuesday, Enel signed a framework agreement for a scientific partnership with the Politecnico di Milano, paving the way to joint national and international projects.
On Wednesday, Skangass entered into a long-term agreement to supply natural gas to Sweden’s SSAB in Borlänge. Natural gas will partially replace fuel oil, with a considerable reduction of CO2 emissions (40,000 tons a year).
Skangass’ achievement is the example of what the gas industry has to do. Alternative usages, other than power generation, can reinforce the idea of gas as a transition fuel. More so if gas-fired power plants became more competitive.
As illustrated by the Minister of Environment of Lithuania, Valentinas Mazuronis, on Wednesday, the EU could soon give the green light to an agreement promoting a recovery of the EU Emissions Trading System (ETS).
SUCCESSES (2) - OPERATIONS
Some good news came also from downstream operations in Poland, the UK and Italy.
On Tuesday, Poland’s PKN Orlen spudded a new vertical exploratory well in the municipality of Stoczek Łukowski, while Dana Petroleum announced it discovered gas in the Pharos Prospect Licence P1566 in the Southern North Sea.
On Wednesday, ConocoPhillips announced the first gas production from the Jasmine field, one of the UK’s largest discoveries in the last 10 years.
On Thursday, Sound Oil said it expects the first gas from Casa Tiberi onshore project in Italy to come in early 2014.
DIFFICULTIES (1) - DISINVESTMENTS
At the moment, the main problem is to fund explorations of large and complicated fields. Recent happening hinted that major projects could be scaled down in coming months.
On Friday, US-based Chevron casted doubts on its $10 billion Rosebank oil project, while Statoil was reported to postpone its investment in the Bressay heavy-oil field. These potential disinvestments could have serious consequences on the UK’s ambitions to foster indigenous oil and gas production. In this sense, it comes as no surprise that the head of the National Grid Steve Holliday said that Great Britain had enjoyed significant investments from foreign investors, but “at the moment people aren’t investing.”
The lack of a bipartisan consensus over energy prices and strategies could hinder British ambitions to foster indigenous production.
Similar considerations can be sketched for Europe. On Wednesday, Total said it did not see any commercial prospects for the Norvarg gas field in the Norwegian Arctic, as the latest resource estimates have been significantly reduced.
The 47th week has been piling up additional difficulties for European governments and companies and some majors are moving forward with their disinvestment plans from Europe to achieve a more diversified assets portfolio.
For instance, GDF Suez confirmed that it is working on the listing of its Gaztransport & Technigaz (GGT) subsidiary, while Italy’s Eni signed a binding agreement with Novatek and Gazprom Neft to sell its stake in Arctic Russia.
DIFFICULTIES (2) - RUSSIA
As Italian companies are stepping out of the Arctic Sea, Russia is increasing its clout in several ways.
Firstly, it stole EU’s bride from the altar and as a consequence Ukraine will not sign the free trade agreement with Brussels. Secondly, Russian billionaire Mikhail Fridman is getting closer to clinching a deal to buy RWE’s DEA. Finally, Russia is on the right path to take advantage of the growth of liquefied natural gas (LNG) markets. The Parliament passed the bill for LNG export liberalization, while Gazprom doubled investments in Vladivostok plant.
All in all, the 47th week of the year witnessed several hindrances for European downstream sectors. But not everything has been bleak. Despite the problems, natural gas can remain a backbone of the European energy mix. Skangass’ achievement is the example the gas industry has to follow.
Sergio Matalucci