Tom Kirkman

Russia loses its chance to capture the EU gas market

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Some interesting bits highlighted below in bold.

Russia loses its chance to capture the EU gas market

... Russia is the world’s largest gas supplier, and accounts for 40 per cent of the EU’s total annual gas imports. Moscow would like to increase that percentage. In 2015, Russia’s Gazprom and a number of European energy companies agreed to construct the Nord Stream 2 gas pipeline on the seabed from Russia to Germany. It may allow Russia to supply additional 55 billion cubic metres to Europe annually and it may change the geopolitical map of Europe.

First of all, it would allow the Kremlin to further destabilise Ukraine without major consequences. Moscow currently exports around 90 billion cubic metres through the Ukrainian land transmission system and if that stops working for any reason, Russia loses tens of billions of US dollars. Should Russia’s president, Vladimir Putin, find another way to export these 90 billion cubic meters of gas, Kyiv will squander a lead against a rapid Russian military invasion. It also endangers the EU’s east. That’s why such countries as Poland have taken a stand against the Nord Stream 2 project.

Secondly, Nord Stream 2 increases Europe’s reliance on imported gas as European countries themselves produce less gas. It means a far bigger role for Russia and for its main gas partner in Europe – Germany. After the United States (the largest natural gas producer in the world) announced that it would impose sanctions on any company or person involved in the Nord Stream 2 construction, Berlin only intensified its attempts to complete the pipeline.  ...

 

... However, there is some good news. On May 15, Germany’s energy regulator declined to grant an exemption of rules governing the EU’s internal gas market to the operators of the Nord Stream 2 pipeline to carry gas from Russia to Germany under the Baltic Sea. On May 20, the German court reconfirmed its decision but stated that Nord Stream 1 can still operate with a waiver from such regulations. In plain language, 50 per cent of the Nord Stream 2 pipeline must be reserved for alternative suppliers, excluding Russian state company of Gazprom. That means that a pipeline costing 11 billion US dollars becomes far less useful, both through the lens of economics and in a political sense. Moscow has already stated that it will complete the installation of the pipeline, but the future of the project is unclear. Nevertheless, it has won a battle for Nord Stream 1, which remains 100 per cent functional.

It’s worth mentioning that Moscow’s experience of installing pipelines with other countries is very unsuccessful. For instance, the 20 billion US-dollar TurkStream project, which was scheduled to be completely launched on January 1 this year, is regularly closed for repairs and Russia can’t provide the expected supplies.

Russia’s Gazprom is predicted to suffer losses worth 10 billion US dollars this year. Its capital expenditures including gas transportation infrastructure are only growing and revenue is falling every year. If the lockdown continues, the EU will fill its gas storage capacity within the next three months and gas prices will fall. As such, Gazprom will see a huge drop in profit.

It would no longer be a question of merely losing the EU gas market but may even threaten Russia’s largest company with bankruptcy. Remember: Gazprom is a state-owned company which receives billions of dollars from the Russian budget to keep its operations running.  ...

 

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(edited)

Tom, each imperial overreach of US directly against its largest ally is weakening your country.

Why EU is reluctant to join Trump anti-China and anti-Russia crusade and hedge their bets ?

Cause we know we could be next if US becomes too strong, just vassals.

If we do not have Russian pipelines , US or China can disrupt our supply of LNG next year or in 20 years.

For EU bi-polar or tri-polar world ( with EU ) is more positive, we can gain more from Both superpowers.

And remember one thing: Russia will supply natural gas to EU for next 100 years No matter what is US view. You cannot change geography even sole superpower is not God.
Pipelines are the most stable way to transport natural gas.

Russian and North Sea fields are only that can be served by pipelines.

Russia does not have enough natural gas to monopolize EU market. Chinese market becomes more important each year.

Edited by Marcin2
Typo
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54 minutes ago, Marcin2 said:

Tom, each imperial overreach of US directly against its largest ally is weakening your country.

Marcin, despite that I shared this article (for information and assorted viewpoints) I have stated repeatedly that I am generally in favor of increasing oil & gas pipeline infrastructure anywhere in the world, regardless of the country or the politics.  That includes Nord Stream 2.

EU should be able to have Nord Stream 1 and 2 and also have the option to import LNG.  Competition and choice are good.

 

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Yes , you always stated that you are for as many connections and thus transport options as possible.

This was Usually in your preamble.

I only noted as i also duly always duly do that US chaotic non-strategy makes it weaker against Germany-Russia duO.

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For technical reasons I don't fully understand major gas pipelines take 4-5 years to reach full nameplate capacity Gazproms pipeline to China Power of Siberia won't transport 38 Billion Cubic Meters per year until 2024 this year it should be 5 BCM will have,  So Gazprom and Germany have about two years after Nord Stream 2 is launched to find a solution.  And with the drop in overall demand because of the economic lockdown there is no great hurry.  

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(edited)

"Over 1.32 billion cubic meters (bcm) of Russian gas was transferred to Europe from Turkey via the TurkStream natural gas pipeline during the first quarter of 2020, according to industry sources Friday."         This would be ahead of scheduled, Gazprom was very clear with investors these pipelines will take 4-5 years to reach Nameplate capacity

 

https://www.dailysabah.com/business/energy/turkstream-transfers-over-132-bcm-of-russian-gas-to-europe-via-turkey-in-q1-2020 

Edited by Gregory Purcell
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8 hours ago, Marcin2 said:

Yes , you always stated that you are for as many connections and thus transport options as possible.

This was Usually in your preamble.

I only noted as i also duly always duly do that US chaotic non-strategy makes it weaker against Germany-Russia duO.

Fair enough response then

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While high stakes geopolitics always play a large role in these affairs, from a strictly economic  perspective (cost/availability), people may continue to be surprised at just how competitive US LNG will  be in the coming decades.

For those who point to, say, North Dome economics vis a vis extraction, liquefaction and transport, or Russian piped to Eastern Europe as 2 examples ... this completely overlooks the needed governmental revenues that are needed from these hydrocarbon resources.

No one ever contests the cheap lifting costs from Ghawar.

But if the House of Saud needs $80+/bbl for governmental expenses, that be the 'real world' benchmark/threshold.

Likewise, the Al Thani regime seems to require $7+/mmbtu for ongoing, stable governance.

When Gazprom sells to the Turkish utility at $7+, when Qatar is vigorously engaged with both Pakistan and India for contracts above the $7 level, spot LNG at ~$5 looks pretty good to the buyer.

 

Appalachian Basin operators are striving to operate at a $2 HH world, and are hedging somewhat aggressively at the $2.50/$2.75  price points.

Associated gas out of the Permian may be willingly sold for far less now that adequate pipe is being emplaced.

The fast, cheap buildout of modular LNG plants bodes for very low cost natty, which is accompanying the global movement of Gas to Power incorporating CCGPs and FSRUs.

El Salvador is getting a re furbbed, ~20 year old LNG tanker to supply its CCGP project. Croatia's FSRU should be onsite in the near future. World's largest FSRU still scheduled for Hong Kong if internal turmoil does not derail.

Pakistan, Bangladesh, Brazil, Poland, Germany and many others are in some stage of getting/already have FSRUs or additions.

All to be supplied with LNG.

Heck, even Port Kembla may be importing LNG in the next 18 months.

Coals to Newcastle, indeed.

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16 hours ago, Marcin2 said:

Tom, each imperial overreach of US directly against its largest ally is weakening your country.

Why EU is reluctant to join Trump anti-China and anti-Russia crusade and hedge their bets ?

Cause we know we could be next if US becomes too strong, just vassals.

If we do not have Russian pipelines , US or China can disrupt our supply of LNG next year or in 20 years.

For EU bi-polar or tri-polar world ( with EU ) is more positive, we can gain more from Both superpowers.

And remember one thing: Russia will supply natural gas to EU for next 100 years No matter what is US view. You cannot change geography even sole superpower is not God.
Pipelines are the most stable way to transport natural gas.

Russian and North Sea fields are only that can be served by pipelines.

Russia does not have enough natural gas to monopolize EU market. Chinese market becomes more important each year.

Natural gas is available from many suppliers not far from Europe. They have pipelines, ships, and rails for LNG. Supply is not a problem at all. Cheapest price is the Russian advantage but they want a monopoly on the business so that they can be assured of a tidy profit. 

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47 minutes ago, ronwagn said:

Supply is not a problem at all

It is all about safety of natural gas supply.

US routinely sanctions its adversaries so that they cannot export their hydrocarbons, We all know that it is lawless but US is strong enough to do it.

There is nothing in this world, that can prevent Russian exports of hydrocarbons by Russian pipelines.

Even US cannot do it, so safety of supply.

I understand that US has geopolitical goals, but in Europe we have winter.

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(edited)

4 hours ago, Marcin2 said:

It is all about safety of natural gas supply.

I understand that US has geopolitical goals, but in Europe we have winter.

*** but in EASTERN Europe we have winter. 

I do not believe the pie in the sky utopians in western Europe believes winter exists judging by their renewables policy.  Then again, because of their renewables policy, they require GOBS and GOBS of NG. 

Nordstream 2 will be used.  It is only a matter of when and Russia has the gas for the next 100 years easily.  Until a line from Algeria, Lybia, Egypt, Israel, Qatar, Iran, Turkmenistan gets run and competes.  Truth is, Europe is SURROUNDED by the worlds largest NG fields.  Just not IN Europe.  Those pipelines will get run, because the countries stated above all want to EAT and Europe produces a surplus of food as their geography is supurb and the surrounding countries Geography... sucks or is mediocre at best. 

EDIT: Why do they want to eat?  Because they are having tons of babies(not Russia), just everyone else.  Ah, Islam and its Harems...

Edited by footeab@yahoo.com
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5 hours ago, ronwagn said:

Natural gas is available from many suppliers not far from Europe. They have pipelines, ships, and rails for LNG. Supply is not a problem at all. Cheapest price is the Russian advantage but they want a monopoly on the business so that they can be assured of a tidy profit. 

Yes.  Russians have kaboshed Turkmenistan by invading Georgia and taking the pipeline route from them.

Russia actively is supporting Syria(but that was a given) and they must be leaning massively on IRAN to NOT run or propose a pipeline through Syria/Iraq to the Med which Qatar/S. Arabia want.  Now that Israel/Egypt have their shared NG field they can supply but are not going to be all inclined to allow S. Arabia, Qatar passage, but then again, strange bed fellows and the Prince may be able to overcome their Islam deficiencies by putting it through the Red Sea, Sinai past their paid off Bedouin nomad ISIS friends and to the Mediterranean, or GASP*** through Israel/Sinai.  Of course this assumes Egypt would go for it.  Hrmm....

It is quite understandable why everyone was moving in on Libya... it is effectively unpopulated other than one city on its far edge by Tunisia and this city is ~1000km from the gas fields and not a single soul lives between said city and said gas fields.  Benghazi has almost no population other than it existing on a map.  If one were truly brutal like the English imperial Empire when they grabbed the choicest bits of the world for different resources, Libya, specifically EASTERN Libya looks like one of the worlds easiest juiciest prizes.  Next easiest target?  Western Australia.  Without the USA looming from afar(assuming USA pulls back massively) Western Australia has to be #1 target for India, Indonesia, China, Japan, and anyone else with a navy large enough to set sail with a BB gun, and a sparkler to scare the Aussies who have no guns or any other way of protecting themselves.  All the worlds resources ready to be exploited and only ~2 million people all in one city without any hospitibale land nearby from which to operate Guerilla tactics.  To be mean, cut off their water, and W. Aus falls in a day.  Brutal, but easy to effect.

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21 hours ago, Marcin2 said:

Tom, each imperial overreach of US directly against its largest ally is weakening your country.

Why EU is reluctant to join Trump anti-China and anti-Russia crusade and hedge their bets ?

Cause we know we could be next if US becomes too strong, just vassals.

If we do not have Russian pipelines , US or China can disrupt our supply of LNG next year or in 20 years.

For EU bi-polar or tri-polar world ( with EU ) is more positive, we can gain more from Both superpowers.

And remember one thing: Russia will supply natural gas to EU for next 100 years No matter what is US view. You cannot change geography even sole superpower is not God.
Pipelines are the most stable way to transport natural gas.

Russian and North Sea fields are only that can be served by pipelines.

Russia does not have enough natural gas to monopolize EU market. Chinese market becomes more important each year.

Good, just go ahead and become a vassal state of Russia, I think both Poland and Germany have experience in that arena.

As I have said before, if you want to be a victim - you will be a victim.

You seem to believe that Germany and Poland have no choice but to be a vassal of either the US or Russia, are you telling me that neither country has a will of it’s own?

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(edited)

I suggest reading it carefully - its about Nord Stream II and polish-russian gas relations

https://www.oxfordenergy.org/wpcms/wp-content/uploads/2020/06/Russian-Poland-gas-relationship-risks-and-uncertainties-Insight-70.pdf

Quote

Other suppliers to Europe have higher variable costs of supply, and low gas prices are going to hurt them more, fostering market rebalancing. But before this happens, gas suppliers have to survive the gas glut and rock-bottom prices. By the end of May 2020 gas prices at European hubs had dropped to $1/MMBtu, and the outlook for the remainder of Q2/Q3 2020 is dismal. Gazprom will be under pressure to rationalise its sales channels and cut overall transit costs. Nord Stream has been operating under a ship-or-pay principle, and the key to a lower unit transit tariff is high utilisation – exactly what has been happening. The Ukrainian route – after a deal driven more by politics than economics – can be considered a sunk cost and will be utilised closely to pre-paid levels. The only transit route where Gazprom will not have a long-term ship-or-pay obligation after mid-May 2020 is via Poland, exposing EuRoPol to the risk of lower transit flows in the situation of a possible transit capacity surplus. Obviously, future EuRoPol utilization depends on how commercially advantageous it is for Gazprom to use other routes. Since Poland is an EU country, Gazprom can follow European rules and book capacity as it sees fit. If the Polish regulator sets the tariff high, then Gazprom may decide against using it. If the tariff is competitive, the chances for higher usage of EuRoPol are greater

Quote

As noted above, the Polish state’s transit revenue under the Yamal contract has been relatively small.88 Earlier, Polish officials had expressed their displeasure with the contract terms stipulated in the IGA. Piotr Naimski, a Polish official in charge of energy security, said that Poland was pumping about 30 Bcm of gas to Germany through its section of the gas pipeline every year, and maintaining the transit of such an amount of raw materials is “a matter of business.” In accordance with the IGA, Poland was receiving 21 million zlotys per year ($5.4 million) for the Russian gas transit and such a fee was “actually equal to zero,” the official was quoted as saying. Gazprom should pay the market price for its gas transit, Naimski noted.89 Now that Gazprom has booked capacity for Q3 2020 at “market prices” in an open auction, and that price turned out to be lower than under the old IGA, the Polish officials might need to recognise that market forces are a double-edged sword.

Quote

Poland has been pursuing a policy of diversifying away from Russian gas for many years. This has been driven as much by politics as it has by economics. Nevertheless, it has now developed a portfolio of LNG and alternative pipeline options that might replace all its Russian gas imports by the middle of the 2020s, if the new projects proceed according to plan. There may be a price to pay for this diversification, especially if the global gas market tightens and prices rise, as Poland seems to be cutting off a relatively cheap cost of supply. In addition, Russian gas could offer it a source of energy with lower emissions; however, Poland seems determined to reject this. Poland’s security of gas supply for the period from 2023 is now dependent on two bets – on LNG and on Baltic pipe, each of them with a new set of risks. On the flip side, Russia has decided to adopt a policy of increasing its export transit options. The construction of Nord Stream 2 and the recent deal with Ukraine have left Yamal-Europe as the new swing producer in this strategy. This situation has been exacerbated by the ending of the long-term transit contract and the sharp fall in European gas demand as the result of the COVID-19 crisis. Gazprom now has the option to contract for capacity in Yamal-Europe on a flexible auction basis and will do so if demand for its gas in Europe is high enough and if the tariff for transit is competitive enough. The Polish authorities may therefore have to resign themselves to more volatile and lower transit revenues depending on the outturn of the European gas market in a post COVID-19 world and also on Gazprom’s export strategy.

 

Edited by Tomasz
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