Week 9 Overview
The 9th week of the year demonstrated that the European Union has a vision, while Russia has a plan.
In a nutshell, over the last days, the EU presented its Energy Union package to promote a European energy strategy in the next years, while Russia showed it is moving fast to achieving its goal, through a mix of increased focus on domestic know-how, cooperation with Turkey, new investments in Sakhalin, and a fresh threat to Ukraine.
Against this backdrop, Lithuania has been the only European country able to keep the pace of the Kremlin. Vilnius is indeed increasing its energy clout in a fashion that would have been impossible to foresee some years ago. Through stronger ties with the US, the Baltic country could soon become a gas hub.
Over the last days, also the French gas market showed it also has some potentials to develop fast.
OVER THE LAST DAYS, WE PUBLISHED THE FOLLOWING INTERVIEWS:
Interview with Lithuanian Environment Minister Kestutis Treciokas, about a new hydrocarbons exploration and mining tender.
Interview with BP’s Vice President, Joe Murphy, about the Southern Gas Corridor.
Interview with Volkan Özdemir, Chairman of EPPEN, about the future of the “Turk” Stream.
Interview with Tim Boersma, acting director in the Energy Security and Climate Initiative of the Foreign Policy Program at Brookings, about the future of Eastern Med Gas.
Interview with Baptiste Desbois, Energy Procurement Consultant at E&C bvba, about the time needed to witness significant changes in Europe.
Interviews with Thierry Deschuyteneer, Executive Secretary at Gas Infrastructure Europe (GIE), about the uncertainties TSOs, Storage System Operators, LNG Terminal Operators are experiencing at the moment.
ENERGY UNION, INVESTIGATION ON GAZPROM
The conundrum for the European gas players has been that they have been asked to be ready for a decreased gas consumption, while being expected to invest to secure future energy supply. But it is clear that, without additional incentives, private companies would not live up to regulators’ expectations.
The Energy Union should be the instruments to overcome such a mismatch.
The European Commission unveiled its Energy Union package on Wednesday, announcing that the EU will reduce its dependence on fossil fuels, putting forward a regional approach to energy issues through stronger flows of energy across the continent. This strategy also envisages an attempt to broaden energy policy, solidarity, and stronger powers at European level.
Reactions so far suggest the Energy Union has only been partially successful. Several organisations see a lack of clear rules, and some confusion on delivery priorities.
So we asked to five experts a comment on the new European package. According to several voices, another challenge for the Energy Union is to win the support of key Member States.
In this sense, the Energy Union Package is simply a framework of policy objectives, not a piece of enforceable legislation. The Europeans will probably spend the next year or two exploring and drafting specific pieces of legislation before presenting them to the European Parliament.
Meanwhile, energy diplomacy should fill the gap. European authorities are aware they have to throw their political weight to help energy security in Europe. The only doubt remains whether they will do so.
European Commission Vice President for the Energy Union Maroš Šefčovič said that the results of the investigation on Gazprom could be presented in “a matter of weeks”. The announcement came a few hours after the military agreement signed by Cyprus’ Anastasiades and Russia’s Vladimir Putin.
Europe will also try to overcome Russian resistance to projects bringing Caspian gas to Europe, Brussels intends to sign gas agreements with Turkmenistan.
FIRST STEP AHEAD IN EUROPE: LITHUANIA
Lithuania’s LITGAS obtained the green light to trade in the Estonian gas market without additional licence by Estonian Competition Authority. This is great facilitation to us and means that we can move forward faster, Dominykas Tuckus, General Manager of LITGAS, commented.
Lithuanian Minister of Energy Rokas Masiulis met with the US Secretary of Energy Ernest Moniz on Tuesday, saying that Vilnius is ready to buy LNG cargoes from the US. The parts are negotiating terms and conditions of US LNG.
As a result, LITGAS signed a non-binding Memorandum of Understanding with Delfin LNG for gas supplies from the first offshore floating liquefaction project in the US from 2019. The memorandum does not constitute an obligation to sell or purchase LNG, but it will provide a base for the development of cooperation with Delfin LNG.
SECOND STEP AHEAD IN EUROPE: FRANCE
Gas transmission operator GRTgaz expects that the common market area in southern France will increase the attractiveness of the French gas market. The common market area in southern France will be launched on 1 April.
Marco Alvera, Chief Midstream Officer, Eni said that four physical interconnectors could have a major impact if achieved quickly. He mentioned two projects involving France: the France-Spain interconnector, a north-south link in France.
If the renewed interest for interconnections should increase the attractiveness of the French gas infrastructures, some early indications suggest that it will. Snam, GIC and EDF Invest finalised the entry of Crédit Agricole Assurances into the share capital of TIGF on Thursday.
THIRD STEP AHEAD IN EUROPE: ALBANIA
Azerbaijan and Albania will set up a special working group for preparation of the feasibility study for the master plan for developing Albania’s gas market. The financing of feasibility study for Albania’s gasification and master plan will be compiled by using European Union funds.
FOURTH STEP AHEAD IN EUROPE: PORTUGAL
The European Union will support Portugal in its plans to promote LNG in road transportation, selecting the project for EU funding under the the TEN-T Annual Call 2013. Portugal is expected to set out a national policy framework to stimulate a transition to LNG in the freight transport sector by the end of the year.
SERBIA: BETWEEN RUSSIA AND THE EU
On the other hand, Russia could soon increase its clout in Europe, betting on stronger ties with Belgrade. According to Jelica Putnikovic of the Balkan magazin, the best option for Serbian officials is to ask Russia for help in connecting Serbia to the Turkish Stream.
Meanwhile, the European Energy Community and the Serbian Ministry of Mining and Energy have agreed on an action plan for restructuring Srbijagas. The deal lifts an obstacle to Serbia's progress toward the EU in the energy sphere.
RUSSIA GOES ON: TURKEY, SAKHALIN, UKRAINE
It is becoming increasingly evident that Russia and Turkey want to ensure that the Turkish Stream project has a solid economic foundation. The speed at which Turkish Stream is being brought to life and the way in which it appears to be taking priority in Ankara are two indications that this is the case.
Gazprom Board of Directors confirmed the company’s intention to diversify export routes and increase the competitiveness of Russian gas. The company also considers a possibility of constructing a new process train within the Sakhalin II project.
Meanwhile, Russian companies further proved their resolve to focus on domestic know-how to strengthen the oil and gas industry. For instance, Sakhalin Energy signed a strategic partnership agreement with Sakhalin State University.
Moscow threatened to turn off the gas supply to Ukraine, sparking fears of a potential fuel shortage across the whole of Europe. Ukraine and Russia traded accusations.
The Ukrainian national oil and gas company has requested an explanation from Gazprom regarding its assertion that the Russian company failed to supply prepaid gas volumes on February 22. Naftogaz said that it considers this failure to deliver prepaid gas a violation of the Binding Protocol signed on October 30, 2014.
Gazprom responded that supplies to the EU were at a “serious risk,” saying that Ukraine had failed to make a payment for new shipments. Gazprom said that the remaining volumes that have already been prepaid would last for just two days.
The CEO of Ukraine's Naftogaz did then write to his counterpart at Gazprom, detailing recent contract violations.
SHALE GAS IN THE UK
Member States continue to adopt national and divergent rules on hydraulic fracturing across Europe. The United Kingdom, which facilitated hydraulic fracturing operations by adopting its Infrastructure 2015 Act, remains the trailblazer in Europe.
Nonetheless, the UK government has "agreed in principle" not to award licences for unconventional oil and gas exploration in Scotland as part of the 14th licensing round. It added that it would consult with companies which have already applied for licences "before making a final decision."
Finally, Lancashire County Council has turned down a request by Cuadrilla Resources for a extension of a planning permit at its Grangehill site. In making the ruling, County Council went against the recommendation of its planning department to approve the plans.
WE ALSO PUBLISHED:
Gaza Marine: natural gas extraction in tumultuous times?
EBRD supports Serinus’ efforts in Romania
San Leon announces first commercial gas discovery in Poland
Repsol seeks higher diversification at lower cost
Lime Petroleum Norway increases stake in Norwegian Sea
Technip awarded subsea contract for Glenlivet field
Scientific consensus on shale gas could take 10 years
Sergio Matalucci
Sergio Matalucci is an Associate Partner at Natural Gas Europe. Follow him on Twitter: @SergioMatalucci