Friday, March 21, 2014

EU options on Russia energy strangehold few and pricey | Reuters


By
updated 3/21/2014 10:22:14 AM ET

LONDON (Reuters) - Russia's seizure of the Crimea and its threat to cut off gas to Ukraine, a transit route to the rest of Europe, have revived calls to reduce the EU's reliance on Moscow for energy, but the blocs options are limited and costly.

The European Union made some progress in improving its energy security after rows over unpaid gas bills between Kiev and Moscow led to the disruption of supplies to western Europe in 2006 and 2009.

By improving its pipeline network, the EU is better prepared for a new supply disruption, but it has not managed to reduce Russia's share of European energy supplies.

Russia today is Europe's biggest supplier of oil, coal and natural gas, meeting around a third of demand for all those fuels, according to Eurostat data, and receiving in return a thumping $250 billion a year.

European leaders said on Friday that the stand-off with Moscow over Crimea made them more determined than ever to end decades of dependence on Russian gas, but they will have to work hard to convince the skeptics.

"The curious feature of the energy policy that emerged from the middle of the last decade is just how little serious effort has been put into security - in particular Eastern security," said Dieter Helm of Oxford University in a research paper this week.

While buyers can switch oil and coal suppliers relatively quickly and easily, Europe receives most of its gas through pipelines that are fed by only one supplier, chief among them Russia's state-controlled Gazprom.

"Gazprom's market share in Europe is increasing (due to decline of European production). So the aim of diversification of our supply is not going to be achieved this side of 2020," said Thierry Bros, gas analyst at French Bank Societe Generale.

"The question of diversification of supply post 2020, what is now in discussion in Brussels, is going to be very difficult to achieve, as with (gas) prices just below $10 per million British thermal units (mmBtu), Russia is making alternative developments for Europe less profitable," he added.


WHAT IS TO BE DONE?

Even so, there are alternatives.


The Baltic states of Estonia, Latvia, Lithuania and Poland, which used to be part of, or dominated by, the Soviet Union but are now EU and NATO members, all rely almost completely on Russian gas supplies.
To reduce Moscow's energy grip, the region is planning to build several small-scale LNG import terminals.
U.S. LNG company Cheniere Energy, which expects to begin exporting gas in the next two years, is one of the companies in talks to supply the Baltic region.

Such terminals offer an alternative should Russia use gas for political leverage, but LNG is too costly to meet the bulk of demand.

U.S. plans to export LNG largely have Asian customers in mind, as prices there are almost twice as high as in Europe, so Europeans would have to match those prices to secure supply.

"European LNG imports have declined steadily since early 2011, reaching a nine-year low in 2013 as Asian and Latin American demand continued to grow," BG Group, a major LNG shipper, said in its global trade summary published this month, adding that it did not see this trend changing soon.

Europe may, however, be able to tap a much bigger and closer gas source.

Almost one trillion cubic meters of recoverable natural gas has been discovered in Israeli and Cypriot waters, enough to supply Europe for more than two years.

Although export projects are at early stages and politically difficult due to the region's instability, increased efforts are being made to make some of its gas available to Europe, and with Cyprus the EU would gain a new and internal supply source.

"With recent events in Europe ... and the aspiration of different countries to diversify their gas supply, that puts another spotlight on our massive resources," said Gideon Tadmor, CEO of Avner Oil, a leading developer of the region's resources, at a conference this month.

But accessing East Mediterranean gas will be expensive. Cost estimates to develop Cyprus's gas export project alone are as high as $10 billion and would be the largest investment in the island's history.

Building gas export facilities in the region will also be politically challenging.

"Someone will have to win a Nobel Peace Prize before getting the region's gas flowing," one source involved in exploration said.

It also might not succeed in cutting out the Russian interest; Gazprom is one of the companies that is interested in developing the region's gas fields for export.


SHALE FAIL?

Though Europe's conventional gas reserves are declining, some still harbor hopes that Europe could repeat the U.S. success in developing shale gas.

While Europe has estimated reserves about three-quarters of the U.S. figure, its geology is more complicated and it will be more costly to extract. The politics also look more fraught, with governments such as France, Bulgaria and Germany already halting exploration in the face of public opposition.

Measures to increase the share of renewables also haven't helped to address Russia's gas supply dominance.
Since their output varies strongly depending on weather conditions, renewables still require back-up by conventional power stations such as coal, nuclear or natural gas.

Coal is unpopular, given Europe's emissions reduction targets, and the prospects of increasing use of atomic power have been undermined by Germany and others' decision to give up on nuclear.

History shows limited success in loosening Russia's grip.

Europe's biggest recent effort was the Nabucco pipeline, which was supposed to meet 5 percent of Europe's gas demand from producers in Central Asia and break Russia's almost complete supply monopoly in Central and Southeast Europe.


But cost overruns, a lack of available gas, as well as Russian lobbying meant that the alternative, smaller Trans Adriatic Pipeline project was chosen, which will meet around 2 percent of EU demand by pumping Azeri gas via Albania, Greece and into Italy, which is already a well diversified gas market.

"On Nabucco, it has been game, set and match to the Russians," said Oxford's Helm.

Nabucco's failure has left the field open for Gazprom to build its huge South Stream gas pipeline, which plans to meet 10 percent of Europe's demand by pumping gas via the Black Sea into Southeast Europe towards the end of the decade, cementing its dominant role in the region.

(Additional reporting by Barbara Lewis in Brussels and Oleg Vukmanovic in London; Editing by Will Waterman)

(c) Copyright Thomson Reuters 2014. Check for restrictions at: http://about.reuters.com/fulllegal.asp

Link to source: http://www.nbcnews.com/id/54738835/ns/business-stocks_and_economy/

Tuesday, March 18, 2014

Op-Ed: An Alternative Approach for Israel's Energy Exports | Israel National News

Op-Ed: An Alternative Approach for Israel's Energy Exports

Published: Tuesday, March 18, 2014 7:16 AM
The decisions Israel makes on how to export gas to Europe from the Leviathan field will have a positive geopolitical impact on Israel if conducted in a manner that takes into account the complex geopolitics of the region.


Since April 2013, Israel has transformed itself from a country almost completely dependent on foreign energy, to one that is energy self sufficient. The offshore Tamar gas field is already operating at full production capacity and is supplying Israel’s domestic requirements. Adjacent to this field is the largest natural gas discovery of the past decade, the giant 19 trillion cubic feet (tcf) leviathan field which has been earmarked for exports. In recent months, Israel has signed export agreements with her regional Arab neighbors, the Palestinians and Jordanians, to supply natural gas which will transform Israel into a net exporter of energy for the first time in its history.

The founding fathers of Israel are surely pleased with how events have unfolded for the young Jewish State. As Israel fought numerous wars against energy rich Arab neighbors, the “oil weapon” was systematically used against it and the U.S. on countless occasions especially after the Yom Kippur War. Ironically, it was during peace times that Israel’s treaty partner, Egypt, decided to cut all gas flows to Israel. By fate’s caprice and what is now acknowledged were Moses’ excellent navigational skills, Israel will not only be a larger natural gas producer than her Arab neighbors in the eastern Mediterranean for the foreseeable future, but also a net exporter to them. While these developments are an unprecedented political and commercial success for Israel and the operators developing the offshore gas fields, the Palestinian and Jordanian markets are small, and pipeline exports to both do not constitute the same political risk as Israel’s far larger and more dangerous neighbor to the north, Turkey.

The decisions Israel makes along with the operators developing the Leviathan field on how to export energy to Europe will have a profound and positive geopolitical impact on Israel if conducted in a prudent manner that takes into account the complex geopolitics of the region.

Recently, there have been commercially driven proposals to construct a pipeline from Israel’s giant leviathan field to Turkey as the cheapest and fastest way to export Leviathan’s energy to both Turkey and Europe. While this may be true from a pipeline cost standpoint, the question that Israel and Europe should be asking is, is this route in both Israel’s and Europe’s interest? The answer is no. The idea is bereft of the political realities in the region and does not take into account the potentially devastating impact this option can have on Israel’s strategic relations with EU member Cyprus, and by extension, all of Europe.

In a speech to the British Parliament on the importance of assuring dependable supplies of energy at reasonable prices for the British Admiralty, in 1913 Winston Churchill famously said: “On no one quality, on no one process, on no one country, on no one route and on no one field must we be dependent. Safety and certainty in oil lie in variety and variety alone”. In response to the third potential gas crisis between Ukraine and Russia since 2006, and by extension, Europe, Israeli and European statesmen should take heed of Churchill’s words and look towards Israel and Cyprus’ energy to diversify both supplies and routes from Russian state owned monopoly, Gazprom, and Turkey as a transit country for Europe’s market.

Historically, Europe imports approximately two-thirds of its natural gas demand from three sources: Russia, North Africa/Qatar, and the North Sea. In 2013, as a result of political instability in North Africa, Qatari preference to ship LNG to the premium Asian markets where prices fetch double what they do in Europe, and depleting indigenous production in the North Sea, this permitted Russia to obtain an unprecedented 30% of the 538bcm European market share, and an increase of 16% year-over-year when including Turkey.

Imports to Germany and Italy spiked 20% and 60% respectively. Declining Norwegian production and exports to Europe via the North Sea, which had achieved a larger percentage of the European market than Gazprom in 2012, fell 5% in 2013. Consequently, this permitted Russia to supply approximately 30% more gas than Norway did in 2013 to Europe. Perhaps more worrisome is that declining European production is a long-term phenomenon. Declining indigenous European gas production can be most identified with the depleting reserves in the North Sea. Currently, the largest gas field in Europe, the giant Groningen natural gas field, was initially drilled in 1952. In February 2014, the Dutch government noted that it will cut production from this field by 25% in 2014.

Brussels has expedited plans to create additional energy corridors to Europe. In the summer of 2013, the “Southern Energy Corridor” was decided upon which will channel energy from the Caspian Sea to Europe through Turkey and Greece. Europe’s predominant dependence on supply and route from Russia and Turkey is a harbinger of instability and increases energy risk for the European market. If history is a guide to understanding the present and charting the future, both Israel and Europe should be weary of depending on Turkey to be the primary transit state of Leviathan’s riches to Europe.

The recent crisis between Ukraine and Russia belies the notion that “peace pipelines” can be constructed to improve relations between neighbors. At a time of heightened energy vulnerability in Europe, is it wise for both Europe and Israel to depend on Turkey to channel the only autonomous western energy reserves in the entire region to energy hungry Europe while relations between Turkey and Europe and Israel are at an all-time low?  If Turkey’s secular minority and western-oriented opposition were able to retake the country from the iron grip of the Islamists the answer may be yes. However, as Turkey continues to abandon the kemalist enterprise, and eviscerates the remnants of the secular republic modern day Turkey was founded on, Turkey will become as unpredictable a transit route as Russia has been as a supplier to Europe. This is a risk that neither Europe nor Israel can afford. Turkey’s ability to cut Israeli gas to Europe can become a calculated provocation that stokes unrest for Israel and particularly susceptible European countries which are already vulnerable to politically-driven natural gas blackmail by Russia.

Fortunately for Israel, and Europe, there are more politically suitable export options to Europe from Leviathan than the pipeline route to Turkey. Israel and Europe have an opportunity to mitigate the risks listed above by supporting and promoting further energy cooperation between Cyprus and Israel for the construction of the proposed LNG facility at Vassilikos that will have the capacity to accommodate Leviathan’s gas. The construction of this facility can also leverage Cyprus’ strong ties with Lebanon to help facilitate a binding resolution to the long lasting maritime dispute between Israel and Lebanon by also inviting Lebanon to export its gas to this facility. This will virtually transform the eastern Mediterranean into an integrated energy zone.

Gas can then be exported from this facility to Turkey’s regassification terminals as an incentive to promote the reunification of Cyprus and repair relations with Israel. A pipeline to Turkey can then be constructed when political circumstances permit, not before. This would include full normalization of relations with both Israel and Cyprus. This option would in effect export Israeli, Cypriot, and potentially Lebanese gas to the Turkish and European market without the risk premium involved that the pipeline option would currently have. Under present circumstances, for the pipeline to be constructed from Leviathan to Turkey, it would have to cross Cyprus’ exclusive economic zone. This is political infeasible for the medium , and potentially long-term. Cyprus has stated that it will not permit a pipeline to Turkey through its exclusive economic zone without a political settlement to the Cyprus problem.

Israel’s strategic relations with Cyprus, and by extension Europe, are rapidly improving while relations with Turkey are at an all-time nadir. Israel is geographically part of the predominantly Muslim Middle East, but this does not mean it has to be vulnerable to extremism and isolation forever. By exporting to Turkey, Israel will be forever connected with the Middle East’s problems. Even as Israel addresses the political and security challenges it faces, Israel has to work on economic interconnectivity in parallel. Regional economic cooperation between Israel and Cyprus should be the guiding principle that anchors Israel economically to Europe.

The physical connectivity—transport, communications, and energy infrastructure—by exporting leviathan’s gas to Vassilikos will link Cyprus and Israel and Europe. Utilized wisely the abundant gas from leviathan can drive employment and investment, while generating billions in public revenue. Israel can shape its own destiny firmly a part of the West by deciding to export to Europe through its European allies, or endure its destiny to be chosen for it, by opting to subject its national treasure to what has now become a regional menace.


Link to article: http://www.israelnationalnews.com/Articles/Article.aspx/14693

ΜΟΝΑΔΙΚΗ ΜΑΣ ΕΠΙΛΟΓΗ ΤΟ ΥΓΡΟΠΟΙΗΜΕΝΟ Φ.Α. ΚΑΙ ΤΟ ΤΕΡΜΑΤΙΚΟ



Link to source: https://www.youtube.com/watch?v=CAXsJbNueQg

Monday, March 17, 2014

Total to Drill Offshore Cyprus in 2015 | Natural Gas Europe


March 17th, 2014 

Total to Drill Offshore Cyprus in 2015



Total is expected to commence its exploration activities off Cyprus’ coast in mid 2015 once all preliminary work is completed. Total owns exploration licences in blocks 10 and 11 of Cyprus’ EEZ. Successful natural gas encounters by the French giant will increase the island’s chances of bringing its onshore LNG project to fruition. An LNG plant in the Vasiliko coastal site of the island would allow Cyprus the flexibility to reach out for potential customers. The project is currently pending additional gas discoveries in Cypriot waters.

Noble Energy announced the first discovery off Cyprus’ coast in late 2011. The discovered Aphrodite field is located 34 kilometres (21 mi) west of Israel's Leviathan gas field in Block 12 of Cyprus’ EEZ. The field was believed to hold enough natural gas to justify the commercial viability of the multi-billion dollar project. However, an official announcement by Noble in October 2013 following its appraisal drilling results revealed a downsized range of natural gas volumes of 3.6 trillion cubic feet (tcf) to 6 tcf with a gross mean of 5 tcf.
Potential customers for Cyprus include a Europe that is very keen to diversify its energy portfolio- even more so now amid the current Ukraine crisis. Asian customers are also of interest given that gas sells at higher prices in the Asian market. Successful gas encounters would allow Cyprus to realise its LNG ambition in its Vasiliko coastal site.

Israel
’s participation in Cyprus’ LNG terminal is uncertain as Israel seems to be still considering all options: a pipeline to Europe, its own LNG or FLNG and/or participating in Cyprus’ onshore LNG project. Israel has also signed gas export deals with its immediate neighbors - including the Palestinian Authority and Jordan given the technical facility of the endeavor and the need for natural gas in its surrounding.
Cyprus' energy ambitions will depend on the results of the further exploratory activities off its shores and on Israel’s export strategy that will soon be revealed. The Eastern Mediterranean has tremendous potential to constitute an additional supply for Europe keen to loosen Russia’s grip. The Eastern Mediterranean must first resolve its various geopolitical conflicts that constitute significant hurdles to exporting the gas.

The most important geopolitical obstacles are the Israeli-Lebanese maritime border conflict and the problem of the division of Cyprus. All attempts to achieve a compromise have failed in the past. Whether the gas factor will this time alter the equation yet remains to be seen.
Karen Ayat is an analyst focused on energy geopolitics in the Eastern Mediterranean.  Email Karen on ayat_karen@hotmail.com. Follow her on Twitter: @karenayat



Link to source: http://www.naturalgaseurope.com/total-to-drill-offshore-cyprus-in-2015?utm_source=Natural+Gas+Europe+Newsletter&utm_campaign=b8bd3e0d24-RSS_EMAIL_CAMPAIGN&utm_medium=email&utm_term=0_c95c702d4c-b8bd3e0d24-307781293