TPT March 2009

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Oil & Gas News
Writing in Business Week (‘Lessons from the Russian Gas Dispute,’
21 January), Moscow bureau chief Jason Bush observed that the
long-term impact of the dispute will go far beyond the immediate
implications for relations between Russia and Ukraine. While there
are similarities with a previous such contretemps, in 2006, Western
energy experts emphasized that the recent dispute was more
significant, both in itself and for the European energy market.
Jonathan Stern, director of gas research at the Oxford Institute
for Energy Studies, told Business Week: “This has been the most
serious security event in relation to gas that has ever happened in
Europe. It cannot be allowed to happen again.”
One of Mr Bush’s respondents speculated that the dispute might
galvanize the European Union into taking bolder steps toward
reforming its internal energy market. “The single most effective step
the EU could take would be to integrate its energy markets,” said
Kash Burkett, energy and utilities analyst at Datamonitor, in London.
“If we had a single market, and a single consumer demanding
action from Gazprom, Europe would have far more leverage over
both Gazprom and Kiev.”
The world’s main energy forecaster sees
anaemic growth, if any, in oil consumption
The International Energy Agency has said that oil demand may
recover somewhat this year, although at a slow pace, as the
global economy turns the corner in the second half. The adviser to
industrialized nations sees consumption growing by 0.5 per cent,
or 400,000 barrels a day. But in its last monthly report for 2008 the
Paris-based IEA hedged even on that modest forecast.
“Clearly, if we are now heading for a prolonged and global outright
recession, then the 0.5 per cent global oil demand growth we now
envisage for next year may not materialize,” the report, issued
11 December, read. And other energy forecasters have painted
an even bleaker picture of oil markets in 2009. The US Energy
Department has predicted that global consumption will probably fall
by 450,000 barrels a day. If so, this would mark the first time in over
three decades that demand has declined in two consecutive years.
At the New Year, the world’s idle production capacity stood at its
highest level in six years: nearly 5 million barrels a day.
A joint venture with Dow Chemical
is scrapped by Kuwait
Just days before the scheduled 1 January startup, Kuwait’s
government on 28 December cancelled a $17.4 billion joint venture
with US petrochemical giant Dow Chemical after Kuwaiti lawmakers
raised objections that could have led to a political crisis in the
oil-rich state. In a statement carried by the state-owned Kuwait
News Agency (KUNA), the Cabinet termed the venture, K-Dow
Petrochemicals, ‘very risky’ in light of the global financial crisis
and low oil prices. KUNA said the contract was cancelled by the
Supreme Petroleum Council, the country’s highest oil authority.
Dow (Midland, Michigan), one of the world’s largest chemical
companies, and Kuwait’s Petrochemical Industries Co, a subsidiary
of the Kuwait Petroleum Corp, had conceived the partnership as a
means toward a larger share of the global chemicals market. But
Photo courtesy of Radyne
The heating season may be over,
but the mid-winter suspension of Russian gas
deliveries to Europe still rankles
When, on 21 January, during the bitter European winter, it was
announced that Russian gas supplies had been restored to the
greater part of Eastern and Central Europe, the immediate response
was gratitude. To whom, or what, was as difficult to establish as it
was to positively identify the villain of the piece. Two weeks after
furnaces went cold in the latest edition of a row between Moscow
and Kiev over the price and shipment of fuel, probably the broadest
expression of sentiment was some variant of ‘a pox on both your
houses.’
The judgment of the European Union – which imports about a
quarter of its gas from Russia – is that the episode has damaged
its relations with both countries. The president of the European
Commission, Jose Manuel Barroso, said it was “utterly unacceptable
that European gas consumers were held hostage to this dispute
between Russia and Ukraine.”
If the back story is not easy to comb out, the resolution is clear
enough. When agreement was reached on the prices and methods
whereby Ukraine would buy Russian gas and ship it to Europe, the
suspended flow was resumed to consumers in Austria, the Czech
Republic, Slovenia, Croatia, Serbia, Bosnia, Turkey, Macedonia,
Hungary, Slovakia, Bulgaria, Moldova, and Greece. Short of war,
how many disagreements between two neighbours can have
affected so many others – and at such a remove?
The compromise reached on 20 January enabled both sides to
declare victory. Russia’s Gazprom, the world’s largest extractor of
natural gas, gained its objective of compelling Ukraine pay ‘market
prices’ for its product, which will be linked to the European average.
But Ukraine achieved a 20 per cent discount for the duration
of 2009. Other terms include a one-year freeze on transit fees
charged by Ukraine and the elimination of a controversial trading
intermediary.