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Thursday, 21 May 2015 17:15

Europe in need of new energy supply sources

Europe needs new gas sources. In this regard, the Southern
Gas Corridor was supported by the final declaration signed by the “Eastern partnership” summit participants. President of Azerbaijan and EU have conducted a preliminary discussion over prospects of cooperation. The draft of the agreement about strategic partnership between Azerbaijan and EU was presented at the summit. Kazakhstan has worked out a program of reorganization of the power industry sector within the framework of “100 steps”. According to the Strategy “Kazakhstan-2050”, Kazakhstan’s GDP will be lowered by 25% by 2020.

Turkmenistan aims at diversification of natural gas export to the world markets. Russian Gazprom increased production by over 800 bcm. Iran has once again confirmed that it is ready for supply of oil to Europe right after lifting of sanctions. The countries of the region are a major priority of Iran in terms of gas export. Up to 1 bcm of gas will have been produced in Iran by 2020.

 

 

Azerbaijan

On the eve of the Eastern partnership summit held in Riga President of the Council of the European Union Donald Tusk gave a call to President of the Republic of Azerbaijan Ilham Aliyev on May 21.

Issues concerning the relations between Azerbaijan and the European Union were discussed during the phone conversation. It was noted with satisfaction that these relations established on firm basis are currently developing successfully in political, economic, energy, transport and other spheres.

President of the Republic of Azerbaijan Ilham Aliyev and President of the Council of the European Union Donald Tusk also exchanged opinions about prospects of cooperation between Azerbaijan and the European Union.

On May 21, Minister of Foreign Affairs of Azerbaijan Elmar Mammadyarov met with the member of the European Commission and EU Commissioner for Neighborhood Policy and Expansion Johannes Hahn. At the meeting Minister Elmar Mammadyarov submitted the draft EU-Azerbaijan Strategic Partnership Agreement to Johannes Hahn.

The draft EU-Azerbaijan Strategic Partnership Agreement has been also submitted together with the note to EU High Representative for Foreign Affairs and Security Policy and Vice-President of the European Union Federica Mogherini.

According to the joint declaration signed at the Eastern Partnership summit (21-22th of May) in Riga, the participants of the Summit confirm their common interest in strengthening of energy security, stability and competitiveness as well as in enhancing diversification of supply.

“They reiterate their intention to deepen further bilateral and multilateral cooperation in the sphere of energy. Participants emphasise the need for well-functioning energy markets with a stable, transparent and investor-friendly regulatory framework, rule of law and a gradual liberalisation of the market, when appropriate, to provide a basis for investments. They will promote an inclusive and open policy on energy security, transportation and supply. They underline the contribution that energy efficiency and renewable energy can make to increased security of supply, and encourage practical cooperation between the EU and Eastern European partners in this respect. They acknowledge the progress made on major energy infrastructure projects and interconnectivity enhancements put in place since the last summit, including opening natural gas reverse flow capacities to Ukraine from Hungary, Poland and Slovakia, the particular role played by Azerbaijan as well as the contribution by others, including Georgia, in the realisation of the Southern Gas Corridor and the ongoing work on the expansion of the South Caucasus Pipeline, and the Trans-Anatolian Pipeline and the TransAdriatic Pipeline, the inauguration of the Iasi-Ungheni gas interconnector, and the preliminary work on Isaccea-Vulcanesti electricity interconnection between Romania and the Republic of Moldova. Participants concerned reaffirm their commitment to facilitate the development, in a result-oriented way, of strategic infrastructure, notably in relation to the Southern Gas Corridor. The Summit participants also encourage and support the continuation of gas and electricity interconnections both inside the EU and between the EU and its Eastern European partners, including through standard Interconnection Agreements between Transmission System Operators. They look forward to continued EU support for the modernisation of the Ukrainian Gas Transmission System as a key part of the European grid network. Participants take note of the progress made on energy sector reform in Ukraine and the Republic of Moldova, in line with EU energy market legislation under the Energy Community and note the importance of further work and implementation in this field. They emphasise the importance of the EU's continued role in facilitating gas talks between Russia and Ukraine that will contribute to underpinning the stable, sufficient and uninterrupted gas flow to Europe and the work to develop an energy contingency plan. The Summit participants welcome the objective of the Energy Union regarding the closer integration of the EU and Energy Community energy markets. They also welcome the progress in the negotiations for Georgia's accession to the Energy Community. They welcome the work towards the inclusion of Energy Community members in the Central and South Eastern Gas Connectivity Steering Group and  the interest of Azerbaijan to participate as an observer in this Group. They welcome the conclusion of the Cooperation Arrangement between the European Commission and Belarus on an Early Warning Mechanism”, the declaration says.

 

Kazakhstan

Kazakhstan has started reorganization of the power industry sector within the framework of “100 steps”. After introduction of a new tariff policy, reorganization of the power industry sector is planned to be carried out in RK in accordance with the Plan of the Nation “100 steps of implementation of five institutional reforms of the head of the state”, says the official website of the Prime Minister of Kazakhstan. 

“Reorganization of the power industry sector, introduction of the “single buyer” model will help to smooth the electricity tariff difference between the regions. Enlargement of regional electricity network companies will help to raise reliability of power supply, lower expenditures for electricity transmission in the regions and lower electricity costs for consumers”, says the document. 

It is also planned to introduce a new tariff policy in the field of power industry, which stimulates flow investments into the sector. The tariff will include two components: fixed component for financing capital expenditures and payment of fees for consumed electricity in order to cover variable costs of electricity production”, says the plan.

The new structure is expected to change the current situation when tariffs are established on basis of cost method.

Meanwhile the energy sector proceeds from the national interests highlighted in Kazakhstan President Nursultan Nazarbayev’s address “Kazakhstan-2050”: new political course of the established state. Minister of Energy of Kazakhstan Vladimir Shkolnik stated in his interview with EnergoNews.

According to him, a strategic task on shift to low carbon economy as well as to alternative and renewable types of energy has been determined. “As a strategic goal, the GDP energy intensity is planned to be lowered by no less than 25% by 2020. This figure should be lowered by no less than 10% by 2015”, he said.

Commenting the issue about support of the alternative energy, V.Shkolnik noted that this direction is still priority. “In spite of the fact that Kazakhstan possesses conventional types of fuel, there is a need to develop clean technologies and energy sector in order to lower green house gases and other contaminants”, the minister said.

According to him, 43 facilities producing renewable energy (with total capacity of 177.52 MW have been commissioned in the republic. But the share of renewable energy sources is not great. “At present, there are 73.1% of coal-based operating facilities, 18.3% of them are consuming gas. Hydropower plants (small scale hydro power plants exclusive) account for 8%; Renewable Energy Source (including small scale hydropower plants) account for 0.6%”, he added.

According to the statement of Vladimir Shkolnik, the concept of Kazakhstan’s shift to a “green” economy implies a 3% share of renewable in the overall volume of electricity production by 2020 and 10% by 2030.

“Up to 106 facilities generating renewable energy with the installed capacity of 3054.55 MW are planned to be commissioned by the end of 2020. The plan includes 34 wind power stations, 41 hydro power plants, 28 solar power plants and 3 bio power plants”, Minister of Energy of Kazakhstan resumed.

 

Turkmenistan

Turkmenistan is carrying out a large scale work on diversification of routes of transportation of natural gas to the world markets and finding it one of the key priorities of the implemented energy strategy. It is said in the address of President Gurbanguly Berdimuhamedov to the participants of the 6th international gas congress held in Avaza.

“In this way, the geography is expanding along with the increase of Turkmen gas supplies to neighbor countries and countries of the far abroad”, says the address.

As the head of the Turkmen state says, the country will increase export of its energy resources for economic cooperation, general progress, equal and trust-based relations, mainly for peace.

“Turkmenistan is one of the leading countries in the world abounding in oil, gas reserves and mineral resources. Use of these natural resources, which is mainly aimed at increasing social welfare of people, is a priority direction of the state policy”, G.Berdimuhamedov notes.

The East-West gas pipeline which large-scale construction has been carried out in Turkmenistan is also of big importance at present, says the address. This gas artery taking its rise from Shatlyk field located in the south-east of the country will reach the village of Belek on the Caspian seashore, crossing the territories of Mary, Ahalsk and Balkan provinces. “This project which is designed to combine all gas fields of the country into a single system and create favorable conditions for the export of blue fuel to the world markets along any route will be completed soon”, President of Turkmenistan noted.

According to the report of the British Petroleum (BP), Turkmenistan holds the 4th position after Russia, Iran and Qatar when it comes to natural gas reserves in the world. The largest fields are located in Mary province, in the eastern part of the country – around the Galkynysh source with general resources estimated by local geologists and British GCA at 26.2 trillion cubic meters.

At current stage, Turkmenistan has an opportunity to export natural gas to China, Iran and Russia. Among gas pipelines that are being designed from Turkmenistan are the Trans-Caspian gas pipeline along the Caspian Sea bed toward Azerbaijan and further to Europe and Trans-Afghan gas pipeline to Pakistan and India.

According to the program of development of the country’s oil-gas industry, it is planned to increase production up to 23 bcm by 2030. The majority of this volume will be exported. Previously, it was reported that natural gas production and export in Turkmenistan totaled over 76 bcm and over 45 bcm in 2014 respectively.

 

Russia

Russian companies have this week stated about increase of reserves and acquisition of big assets on the other side of the Atlantic Ocean.

Thus, the Russian Company Gazprom stated that it has increased its reserves by over 800 bcm of gas. It was noted at the press conference that Gazprom possesses a strong resource base. As of December 31, 2014, explored reserves of natural gas in categories А+В+С1 (according to the Russian classification) total 36.07 trillion cubic meters – which makes 72% of Russia’s or about 17% of world reserves.

 The company is consecutively and successfully working on development of the resource base. In particular, the growth of gas reserves totaled 822.5 bcm in 2014. The production volumes replacement ration is 1.86.

This work will be continued in 2015 as well. Particular attention will be paid to the operations on the continental shelf of Russia. 3D seismic survey is planned to be carried out at the Barents and Kara Seas, at an area comprising about 10,000km2. Two exploration wells are planned to be drilled at South Kirin field (the Sea of Okhotsk). 

Last year Gazprom produced 443.9 bcm of gas. Production of gas is expected to total 450 bcm in 2015. In general, production capacities of the company exceed 600 bcm of gas per year.

“Gazprom” is developing a gas transportation system in Russia. Over the past year, the length of the GTS was increased from 168.9 thou km up to 170.7 thou km. In 2014 Gazprom was actively engaged in increase of underground gas storage capacities of Russia. Their potential capacity was increased up to a record level by autumn-winter of 2014/2015: the maximum daily capacity has been increased up to 770.4 mln cubic meters of gas which is 42.6 mln cubic meters higher than the similar indicators of 2013/2014. 

Another Russian company Rosneft will gain a full control over the project in Brazil.
Rosneft Brasil (a 100% subsidiary of Rosneft) and PetroRio (new brand HRT) signed a deal envisaging provision of 55% of interest to Rosneft Brasil in the Solimoes project.  The deal will be closed after getting an approval from ANP (Agencia Nacional do Petroleo, Gas Natural e Biocombustiveis – National Agency for Oil, Gas and Biofuel of Brazil), which is expected in mid of 2015, the press service of Rosneft reports.

As the result of the completion of the transaction, Rosneft Brasil will gain control over 100% and become an operator of the project on development of hydrocarbons in the basin of Solimoes, the Amazon River area (Brazil).

The volume of transactions totaled $55 mln and does not include acquisition of 4 mobile drilling rigs owned by HRT Netherlands B.V. Following the results of analysis of the scenario of effective development of the Solimoes project, a decision to exclude the mentioned acquisition from the transaction was made by Rosneft Brasil.

Acquisition of 55% stake in Solimoes project will let Rosneft Brasil continue geological survey in order to discover prospective oil deposits and succeed in implementation of the project implemented jointly with Petrobras and aimed at consideration of possibilities of monetization of proven gas reserves. Rosneft Brasil starts planning of operations which shall be commenced by the end of 2015.

Participation in Solimoes project lets Rosneft strengthen its positions in Brazil, the country with promising opportunities for growth in the field of production of hydrocarbons. Apart from this, Solimoes lets gain a synergy effect with the Venezuelan projects of Rosneft.

“Rosneft” possesses a broad experience in management of operations on drilling and conducting seismic survey in hard-to-reach areas. This experience will be issued while implementing the Solimoes project. After conduction of necessary geological survey operations, Rosneft plans to use its best techniques in oil and gas production.

 

 

Iran

Iran is ready to immediately commence supply of crude oil to Europe as soon as western sanctions are lifted, Mohsen Kamsari, Head of the Department for Foreign Affairs of the National Iranian Oil Company (NIOC), said.  “Iran is capable of exporting almost half of the volume of oil which used to be supplied to the European market before the sanctions”, Kamsari said.

According to him, new supplies will be made on basis of swap deals while the European partners are completing their annual contracts (RIA Novosti). As it is expected, in case of reaching an agreement on nuclear program and lifting of western sanctions Iran can increase oil production by 1 mln barrels of oil per day -  up to 2.2 mln barrels.

The agreement on final settlement of the Iranian nuclear problem must be ready by June 30. The parameters of the future document were agreed with 5+1 and Iran early in April in Lausanne. General Director of the Iranian National Company for Gas Export noted that the countries of the region are a major priority for Iran in terms of gas export. Though, considering big reserves of gas that Iran possesses, supplies of Iranian gas certainly will not be limited only with regional markets.

As A.R.Kameli said, the reason for giving priority to gas export to the countries of the region proceeds from high costs of gas transportation to Europe and its relatively low cost in the European countries.

Nowadays, Iran can easily supply gas to its south neighbors. It will need to lay a 200km long pipeline for it. In case of Europe it will need to build a pipeline with the length of about 4,000km.

At present Iranian gas is exported only to Turkey. Supply of gas to Iraq will start soon. Pakistan which wishes to import Iranian gas is the next in the line. Apart from this, there are plans to supply gas to Oman. Preliminary negotiations about export of Iranian gas are held with Kuwait and UAE. However, they have not been completed yet.

Gas production in Iran will grow up to 1 bcm per day by the completion of the 6th 5-year program of the development of the country (by 2020), General Director of the National Iranian Gas Company said at the session of representatives of contractors engaged in gas industry.

As H.R.Araki emphasized, a very large work is planned to be carried out in gas industry in future. In this regard there will be a need to maintain the closest cooperation with contracting entities and companies when implementing numerous projects.

According to H.R.Araki, gas is playing an important role in the country and accounts for about 70% of the fuel basket. There is no such dependence of different economic sectors on gas in any country but Iran. Therefore, all risks, associated with the use of this type of hydrocarbons, should be taken into account.

H.R.Araki noted that the number of implemented projects in gas industry will grow in near future. Along with satisfaction of energy needs inside the country, it will be necessary to create conditions for increasing gas export.

 

 

 

 

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