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Friday, 10 April 2015 11:00

The Caspian: energy outlooks

The oil and gas resources-rich Caspian Sea countries are redrawing the global energy map. Azerbaijan and Saudi Arabia have discussed opportunities for energy cooperation. This week the Azerbaijani gas has become the matter of negotiations in Budapest, involving foreign ministers of Greece, Serbia, the Former Yugoslav Republic of Macedonia and Hungary and Minister for EU Affairs of Turkey. Turkmenistan has summed up the outcomes of development of the fuel and energy sector in the first quarter and reaffirmed its commitment to continue work on organization of gas supplies to Europe. Russia has discussed the possibilities of the Turkish Stream with Greece and reduced the gas price for Ukraine. Turkey has reaffirmed it needs Iranian gas and discussed natural gas prices with Iran.

 

AZERBAIJAN

 

Azerbaijan and Saudi Arabia have discussed opportunities and prospects of expanding the energy dialogue.

At the meeting on April 5 in Riyadh President of the Republic of Azerbaijan Ilham Aliyev and Custodian of the Two Holy Mosques King of Saudi Arabia Salman bin Abdulaziz Al Saud praised the current level of relations between Azerbaijan and Saudi Arabia. At the meeting they stressed the importance of mutual understanding and mutually beneficial cooperation between the Islamic countries. The counterparts noted the two countries actively cooperate and support each other within international organizations and discussed prospects to expand cooperation in economy, in particular, in such sectors as oil and gas, tourism, agriculture, cooperation between the business community and mutual investment-related issues.

During the visit the Head of State of Azerbaijan met with Minister of Petroleum and Mineral Resources of the Kingdom of Saudi Arabia Ali Al-Naimi.

The sides exchanged views on oil prices on global markets. It was noted that there were good opportunities for the activity of Saudi Arabian companies in Azerbaijan both as contractors and investors. The parties discussed the implementation of experience and information exchange on various issues, as well as Southern Gas Corridor project.

The aspects of energy outlooks for Azerbaijan were discussed at the18th Eurasian Economic Summit (Istanbul, April 7-9, 2015).

“Energy is the main component of Azerbaijan's economy”, Minister of Energy of the Republic of Azerbaijan Natig Aliyev said. According to Natig Aliyev, the country produced 2 billion barrels of crude oil in 2014. “Azerbaijan will continue to increase natural gas and oil production”, he added.

“The EU's energy demand is expected to increase 27 percent by 2030, Azerbaijan is building strategic partnership with the EU to transport natural gas to Europe”, Natig Aliyev told.

The minister announced the total cost of Southern Gas Corridor would be around $45 billion. Commenting on the matter of competition between the Trans Anatolian Natural Gas Pipeline (TANAP) and the Turkish Stream, the energy minister said the volumes transported from Azerbaijan to Europe are small. “Delivery of 10 bcm to Europe will not affect supplies of Russian gas either in terms of quantity or price. TANAP is not a competitor to Russian gas. TANAP is only means. We do not see here any competitive environment”.

“26 new wells are to be drilled during the Shah Deniz Stage II. They will bring the production up to 5 million cubic meters of gas per day”, the energy minister of Azerbaijan said. In his words, the projected gas supplies will amount to 25 billion cubic meters per year.

“Pipeline projects are critical not just for energy security but also for economic development”, Natig Aliyev said. “We will finish TANAP by 2019 as we promised”, he added.

The Southern Gas Corridor will create 30,000 new jobs, said Minister of Energy of Azerbaijan Natig Aliyev.

According to him, the lion's share of “blue fuel” in Azerbaijan belongs to the Shah Deniz field. However, the Absheron field discovered by Total is also very important. The first gas from this field is expected in 2021.

Speaking about the development of strategic cooperation in the energy sector between Azerbaijan and Europe, Natig Aliyev said the situation in the energy sector of the EU had become uncertain after the events in Ukraine.

“According to the latest forecasts, the EU’s demand for energy by 2030 will increase by 27%. However, the domestic production across the EU meets only half of its demand for oil and gas. At the same time, the EU countries’ spending on energy imports account for 1 billion euros per day”, the minister said.

The minister said in 2014 Azerbaijan produced 2 billion barrels of oil. At that, Azerbaijan pays special attention to ensuring stable oil and gas supply.

The minister said, according to the website Al Jazeera, the cheap oil has not affected Azerbaijan. According to him, from the economic point of view currently there are no difficulties associated with the oil price. The minister explained this by the low oil price. “We do not feel the crisis because the cost of oil production in Azerbaijani is small. But in general, our revenues have decreased. We used to benefit approximately $20 billion per annum from oil sales”.

 

 

Natig Aliyev said no increase in the oil price is expected in the short-term run. The minister believes that over time political issues as well as the relations between Iran and the West will have an impact on the oil price.

This week Greece, Serbia, the Former Yugoslav Republic of Macedonia, Hungary and Turkey expressed support for the diversification of routes and sources for transportation of natural gas to Europe via Turkey as stated in the Declaration on Strengthening Energy Cooperation signed by the Ministers of Foreign Affairs of the four countries and the Minister for EU Affairs of Turkey on Tuesday after the talks in Budapest.

“We have expressed our support to creation of a commercially viable option to diversify routes and sources for transportation of natural gas from Turkey through the territories of our countries to the countries of Central and South-Eastern Europe and other countries”, runs the text of the document released by the press office of the Greece’s MFA.

According to the Declaration, several infrastructure gas projects that seek to improve supplies at the national and regional level have been already either implemented or planned.

According to the authors of the Declaration, it will enable the partnering states to support the energy markets of Turkey and the EU through the Southern Gas Corridor as well as open up new opportunities for economic development of the region through the connection of the gas infrastructure of the five countries with the financial support of the EU. The parties intend to improve the performance of gas storage facilities in order to facilitate the seasonal balance and enhance energy security in case any gas supply shortage occurs.

The Declaration states only a political goal, further discussion and dialogue are required on specific issues between the States Parties and interested companies, the document says.

After Russia dropped the construction of the South Stream gas pipeline, Serbia is ready to look for new supply sources, and the priority according to Serbian officials, will be the interconnection with Bulgaria.

Speaking at a meeting titled Regional Energy Prospects recently held in Belgrade, Serbian Minister of Mining and Energy Aleksandar Antic said that the Serbian government would try to be part of all projects that may provide new gas supply sources and routes. According to Minister Antic, the first priority is the connection of Serbia and Bulgaria by a two-way pipeline, with the money already earmarked in the 2015 budget for the making of a spatial plan. The interconnection with Bulgaria could give Serbia access to gas supplies from Azerbaijan via the Trans-Anatolian Natural Gas Pipeline (TANAP), the construction of which began in March. Serbia started considering gas supply alternatives after Russia abandoned the South Stream pipeline project.

”We must no longer be enamored of any energy project or rely on just one supply source. That will be the Serbian government policy,” said Antic, adding that the government will favor projects enabling Serbia to become a transit country for fuel supply.

Turkey also attaches great importance to the diversification of energy routes and source countries, Minister for EU Affairs of Turkey Volkan Bozkir said on Tuesday in Hungary.

“Being at the crossroads between the main market of energy production and consumption, Turkey is not only the end-market, but has proved itself as a reliable transit country, providing a short, safe and sustainable route for energy supplies from energy-rich neighboring countries”, Minister of Turkey for EU Affairs Volkan Bozkir said at the press conference after the meeting of foreign ministers in Budapest on April 7.

He said the Trans Anatolian Natural Gas Pipeline is the strategically important project, which ensures security of energy supply for both Turkey and Europe.

It stands to mention that Head of the EU Delegation to Azerbaijan Malena Mard said on April 9 in Baku that Azerbaijan is one of the important partners of the European Union. “We are looking forward to expanding this cooperation”. The Ambassador added that in the future the EU hopes to expand gas cooperation with such countries as Turkmenistan. “The EU is very interested in expanding energy cooperation with energy-rich Turkmenistan, which can supply gas to the European markets. Currently, negotiations are underway between the EU, Azerbaijan and Turkmenistan. The matter concerns the project to build a Trans-Caspian pipeline, which will enable to connect Turkmen gas to the infrastructure to be established within the framework of the Southern Gas Corridor”, Malena Mard said. She added that the Southern Gas Corridor would enable Europe to diversify sources of hydrocarbons supply and enhance energy security, while Azerbaijan is to benefit a new market in the face of Europe.

 

TURKMENISTAN

 

Turkmenistan will spare no efforts to continue work on implementation of the European vector of its gas exports, President of Turkmenistan Gurbanguly Berdymukhamedov said on Tuesday in Ashgabat. Speaking at the press briefing after talks with President Nicolae Timofti, who arrived in Ashgabat for an official visit, President Berdymukhamedov emphasized that Turkmenistan sells gas to Russia, Iran, China, and is working to diversify its gas exports.

According to President Berdymukhamedov, Turkmenistan currently supplies China with 10 billion cubic meters of natural gas per annum, and now work is underway to ensure additional 25 bcma.

“As far as issues of the Caspian Sea are concerned, I would like to tell Media representatives that we have never excluded the European vector from the agenda and will never do it. Now we are holding trilateral negotiations with Azerbaijan and Turkey. I hope we will reach an agreement and it will be another step forward in implementation of the European vector”, G.Berdimuhamedov said.

President of Moldova noted in his turn that the parties paid particular importance to the issue of energy security during the negotiations. “We discussed issues concerning the implementation of energy projects in the Caspian Sea region with participation of Turkmenistan. We agreed that specialists of both states will keep working on it”, President of Moldova Nicolae Timofti resumed. 

Trans-Caspian gas pipeline, connecting Azerbaijan and Turkmenistan, is necessary for having the latter linked to the Southern gas corridor.

At the enlarged meeting of the Cabinet of Ministers hosted on April 3 Chairman of the State Statistical Committee of Turkmenistan A.Mammedov delivered a report on the results of work and economic performance in January-March 2015.

He said in the first quarter of 2015, compared with the same period of 2014, many industries featured high performance. During the period under review, the growth in power generation amounted to 102.9 per cent, natural gas accounted for 105 per cent, oil for 110 per cent, petrol for 100.9 per cent, kerosene for 100.4 per cent, lubricants for 102.5 per cent, liquefied gas or 101,1 per cent, polypropylene for 100.2 per cent, petroleum coke for 100.4 per cent, petroleum bitumen for 118.4 per cent, plastic and fiberglass pipes for 108.7 per cent, fertilizers for 192.5 per cent, iodine for 103.1 per cent, cement for 111.2 per cent, non-metallic building materials for 126.8 per cent, cotton for 109.8 per cent, cotton fabrics for 110.2 per cent, pharmaceutical products for 108.9 per cent.

Deputy Prime Minister of Turkmenistan Baymyrat Hojamuhammedov delivered a report on implementation of the “Program of Oil and Gas Industry until 2030” and economic performance for FEC the first quarter of this year at the enlarged sitting of the Cabinet of Ministers of Turkmenistan on April 3.

According to him, the growth rate of oil and gas condensate production amounted to 110 per cent, natural and associated gas accounted for 105 per cent, while exports of blue fuel to foreign countries made 106.5 per cent. The plan for oil refining was executed at 103.6 per cent. Production of petroleum products, including motor petrol, polypropylene, lubricants, and liquefied gas increased compared with the same period of the last year. Drilling operations increased by 76.8 per cent. Ruhabat Pipe Plant enhanced production of polyethylene and fiberglass pipes, with the growth rate comprising 108.3 per cent.

Information about absorbing of investments in the oil-gas sector and the ongoing work on installation of gas meters at companies, institutions and organizations as well as in the residential sector was provided as well. President Gurbanguly Berdimuhamedov assigned Vice-Premier B.Hojamuhammedov a task to continue the work on technical reequipment of FEC branches, construction of modern plants, construction and commissioning crude hydrocarbon fields.

It is important to accelerate operations on development of the Turkmen sector of the Caspian Sea, diversification of routes of transportation of energy resources, the head of state of Turkmenistan emphasized.

President of Turkmenistan also assigned Deputy Prime Minister Baymyrat Hojamuhammedov and Vice Primer A.Gochyev to work over issues concerning the enhancement of management of the oil-gas complex, reduction of excessive expenditures for maintenance of institutions, FEC enterprises and their workflow management.

 

KAZAKHSTAN

Kazakhstan is planning to update information about raw material stocks. 6 bln tenge is planned to be allocated within the framework of the Nurly Zhol program in support of geological exploration. This sum will help to determine forecasted volumes of mineral resources, including nonferrous metals and gold, First Vice-Minister of National Economy Marat Kusainov said at the briefing of the Central Communications Service.

“6bln tenge will be allocated from the national fund in order to develop geological exploration and replenish stocks of mineral resources as well as conduct geological survey of prospective subsoil areas. As a result, it will help us to determine forecast volumes of subsoil resources including non-ferrous metals and gold”, he said.

According to Marat Kusainov, a required infrastructure is planned to be built for the Business road map 2020 related projects. The national fund will allocate 10 bln tenge for these purposes.

“According to the program, infrastructure facilities will laid in direction of Aktyubin, Gizil Orda and South-Kazakhstan regions, which will help to supply a much broader group of business entities with the necessary infrastructure”, he said.

Marat Kusainov also noted that the lacking infrastructure would be laid toward business entities, which shall help to launch over 40 facilities of the private business entities, referring to different areas of entrepreneurial activity. 

First Deputy Prime Minister Bakhytjan Sagintayev has this week discussed creation of the common market of oil and oil products with ambassadors of the 18 countries of the EU and the head of the representative office of the EU in RK.

“Issues concerning operation and prospects of development of the Eurasian economic union were discussed at the meeting. In particular, the parties exchanged opinions in the field of development of common markets of electricity, oil and oil products, transit freight transportation, pharmaceuticals and medical products”, the government said. 

 

 

RUSSIA

 

President of the Russian Federation Vladimir Putin met Prime Minister of the Hellenic Republic Alexis Tsipras, who yesterday (April 8) arrived in Russia for a working visit.

They discussed in detail the key aspects of the Russian-Greek cooperation and important international and regional concerns. Particular attention was paid to the expansion of cooperation in trade and economy.

The sides also discussed cooperation in the energy sector. Russia is the largest energy exporter to the Greek market and meets two-thirds of Greece's demand for natural gas.

Also discussed at the meeting were the prospects of the Turkish Stream project, which is a key project, according to the Head of State of Russia, for delivery of Russian gas via Turkey to the Balkans, perhaps to Italy, Central Europe. “The new route will meet the needs of Europeans for fuel and allow Greece to become one of the main power distribution centers on the continent as well as help attract large investments into the Greek economy and create more jobs. Of course, finally it is a matter of our economic structures and the sovereign decision of the Government of Greece”, Vladimir Putin said.

Alexis Tsipras stressed Greece’s interest to explore possibilities of investment initiatives for construction of the Greek natural gas pipeline from the Greek-Turkish border to Greece in order to meet the energy needs of the country and ensure energy security, always respecting the laws and regulations of both the Hellenic Republic and the European Union. He also expressed interest to explore the possibility of funding the Greek pipeline.

At the same time, Russia has reduced the gas price for Ukraine. Russia offered Ukraine a discount for gas only for three months because there are risks of further decline in oil prices, said the Chairman of the Gazprom Management Committee, Alexei Miller at the meeting with President of the Russian Federation Vladimir Putin. Vladimir Putin, in turn, said the 2009 gas contract with Ukraine should be strictly implemented.

As for the discount, it, according to the President of the Russian Federation, should be used in a way the price of Russian gas for Ukraine could be comparable to the price for the neighboring countries.

Vladimir Putin also supported Miller’s proposal to prolong the mode of non-imposing penalties for Ukraine for failing to take gas volumes according to the “take-or-pay principle” to the second quarter.

The next round of talks between Russia, Ukraine and the European Commission for the supply of Russian gas to Ukraine will be held on April 14 in Berlin, said Anna-Kaisa Itkonen, Spokesperson of the European Commission.

“I confirm that the next round of the tripartite talks between the European Commission, Russia and Ukraine will take place on Tuesday April 14 in Berlin, Spokesperson Itkonen said.

Meanwhile, Ukraine has reduced daily imports of Hungarian natural gas by more than 80% under a new agreement between Naftogaz and Gazprom, with the price of Russian gas staying at $20-30 US down than in Europe.

According to the Hungarian gas transmission network operator, FGSZ, the daily volume of gas supplies to Ukraine in late March 2015 ranged from 4.6 million cubic metres to 7.2 million cubic meters.

On April 2, 2015, imports fell to 1.90 million cubic metres and in the period from April to April 5 was nearly 0.7 million cubic metres.

It stands to mention that in total Ukraine raised gas imports from Hungary by 33% in 2015, with the imports from the EU countries accounting to 3.649 billion cubic metres.

The commitments of Naftogaz to Gazprom under the “take-or-pay” rule remains in force as stipulated in the contract and will be valid until its expiration, Minister of Energy of the Russian Federation Alexander Novak said in the interview with Vesti. Alexander Novak said during the second quarter Gazprom would impose a penalty if Ukraine took less gas than in accordance with the “take-or-pay” provisions.

Thus, the Russian minister commented on the words of his Ukrainian counterpart Vladimir Demchishin, who on Wednesday on April 1 said that the “take-or-pay” principle in relations between Naftogaz and Gazprom has been not valid since April 1.

 

IRAN

Turkey has confirmed that it needs Iranian gas. “Turkey needs Iranian gas and is ready to increase its imports, provided at a reasonable price”, President of Turkey Recep Tayyip Erdogan said at the press conference in Tehran during his visit to Iran on Tuesday.

President Erdogan arrived on Tuesday in Iran at the official invitation of the President of this country, Hassan Rouhani. The two leaders discussed bilateral relations and regional and international issues. Turkish President will attend the second meeting of the High Council on Iran-Turkey Strategic Cooperation.

“Turley purchases 90-95% of Iranian gas and this is a very large volume. However, Iranian gas is the most expensive for us. If we agree on a reasonable price, we will increase imports since our country with its developed industry needs gas. In addition, we should sell gas to our citizens at a reasonable price”, the Turkish leader said.

In the meantime, Erdogan sees no obstacles for reaching agreement about gas price. “We are two brother countries and if we cannot come to an agreement with each other it means we will reach an agreement with no party at all”, the head of state of Turkey emphasized.

Iran which has sold its gas to Turkey since 2001 is the second largest supplier of blue fuel to this country after Russia, supplying 10 bcm per year. The price for Iranian gas is not released officially. According to the information of Media, it totals $490 per 1000 cubic meters which is higher than the prices for Russian and Azeri gas supplied to Turkey. In February of this year, the International Arbitral Court began its work on the action brought in against Iran by Turkey which demands reduction of price for Iranian gas by 25%. 

 

President of Iran Hassan Rouhani announced that Iran and Turkey intend to expand the volume of bilateral trade up to $30 bln this year. President Rouhani appreciated the support that the Turkish government lent to Iran at nuclear program related negotiations held between Tehran and 6 world powers, stating that President of Turkey Recep Tayyip Erdogan supported the framework agreement on nuclear program of Iran, which had recently been signed in the Swiss city of Lausanne.

Both sides expressed hope that the nuclear agreement will have a positive impact on the level of cooperation between Tehran and Ankara, Hassan Rouhani said.

President of Turkey Recep Tayyip Erdogan noted in his turn that his country is interested in development of relations with Iran in different areas.

Iran plans to regain its previous position in the oil market after lifting of sanctions. As Deputy Minister of Petroleum for International Affairs Amir Hossein Zamaniniya said in one of his interviews, Iran plans to regain its previous share in the oil market by coordinating its actions with OPEC.

Speaking about the plans that his ministry plans to carry out in 1394 (21.03.15 – 20.03.16), Minister of Petroleum Bijan Namdar Zanganeh stated that further development of South Pars gas field and final commissioning of the 15th, 16th, 17th and 18th phases as well as intensive development of oil-gas fields owned together with neighbor countries and fields located to the west of the Karun River were the important programs of the ministry.

The commissioning of the first stage of the largest gas processing plant “Satariye Khalije Fars” is another important task that the ministry has to deal with. As early as the next year, the commissioning of the second and third stages of the plant will come on stream at an interval of a few months right after the launch of the first one, the minister clarified. 

According to B.N.Zanganeh, stable supply of raw materials to petrochemical plants is planned to be ensured this year. In particular, it will help to increase ethane production by 1.5mln tonnes. Accordingly, the production of polyethylene will grow by 1.5 mln tonnes.

B.H.Zanganeh expressed hope that the lifting of sanctions would ensure further development of the petrochemical industry of the country. Besides, in coming 5-6 years the volume of production of petrochemical products will reach $70 bln per year in money terms.

Later, the minister of petroleum said that expansion of natural gas export was another important program of the ministry in 1394. Thus, export of gas to Iraq, that shall reach the maximum level in coming year, should start this year.

B.N.Zanganeh emphasized that the major task is to ensure previous rate of oil production which used to exist before the imposing of international sanctions on Iran.

 

 

 

 

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