Week 2 Overview
The wrap up for this week would have been focused on the on-going bickering between Brussels and Moscow. But the United Kingdom finally managed to outshine those tensions with some major achievements made public during the weekend. That was the major news of the week.
On Saturday, France’s Total was reported to become the first major oil company to join the British shale gas industry.
The company postponed any formal announcement to Monday, but it seems clear that the French group will invest 30 million pounds to test unconventional gas reserves in Lincolnshire, in central England.
Total follows GDF Suez’s footsteps. In October, GDF said to be confident about the potential of shale gas in the UK, committing to a $39 million investment for a 25% interest in 13 licences in Cheshire and the East Midlands.
But what’s the reason for the new momentum?
These ‘successes’ stem from the strong stance of the British government. Prime Minister David Cameron thrown its weight behind shale gas exploration despite long protests of environmentalists and local groups.
According to several publications, the British government also won a related campaign.
A first draft of the EU regulation underlined the risks and suggested measures to adopt to minimize the impact on the environment. But these measures should not be binding, which is exactly what Cameron has been lobbying for.
The draft should be published on 22 January 2014, as part of the 2030 package. The legislative process is expected to take at least two years.
BRITAIN'S PROSPECTS: BRIGHT OR GRIM?
The growing interest about British shale gas clearly emerged on Monday, when Breitling Energy’s Chris Faulkner reprimanded Cuadrilla for its ‘soft response to the protesters’ in West Sussex.
Moreover, good signals were not confined to shale gas. Britain also registered some positive signals from the conventional industry. Another good news for UK-focused investors did indeed come on Tuesday, when GDF announced initial gas from Juliet field in the UK’s North Sea.
All these news are reassuring. Nevertheless, pundits keep underlining the difficult energy position of the United Kingdom.
“In harsh political terms [blackouts] would be the best possible thing that could happen because this country is extremely good in a crisis,” Sir John Armitt recently said to the Guardian.
Armitt, the Labour adviser that masterminded London’s Olympic Games, said that “we are very close to being in a crisis when it comes to energy.”
All in all, in the face of the heavy rain and the strong winds battering Britain, London has undeniably made the most out of the last week.
THE REST OF THE WEEK: LEVIATHAN & INFRASTRUCTURES…
On the other side of the continent, Israel continues to increase its regional clout, stepping up efforts to increase potential buyers of the gas produced from its Leviathan field.
After the contract with Palestine Power Generation Company signed on Monday, the country unveiled on Tuesday it intends to build a pipeline to Jordan.
For one new pipeline in the Middle East, a pipeline in the Norwegian Sea has been scrapped.
Statoil, Petoro and GdFS decided to terminate the Kristin gas export project (KGEP), in light of unsustainable economics due to increased investments costs and increased risk to volume availability.
Nonetheless, Norway’s industry is finding its way to maintain its predominance in European markets. According to a report by Bloomberg, Statoil could opt for an international expansion, taking advantage of the partial divestment of the government, which was announced in the last months.
In this sense, the mild and stable weather in Norway offsets the difficulties coming from mature fields. Clearly, Oslo has still many cards to play and it comes as no surprise that the country remains the top pick for analysts. Investments are expected to rise to an all-time high in 2014.
Another achievement for Europe came from Bulgaria and Hungary.
On Monday, the Trans Adriatic Pipeline (TAP) signed a Memorandum of Understanding with Interconnector Greece-Bulgaria (ICGB) to increase the scope of their cooperation in the region.
On Wednesday, Romania’s National Agency for Mineral Resources released a note disclosing that consortium constructing the Iasi-Ungheni gas pipeline between Romania and Moldavia is completing building activities as scheduled.
… AND CLEARLY MOSCOW
But there is no play (or drama) about the gas industry without Russia. Moscow has been the clear protagonist of 2013 and it is likely to maintain its centrality also in the next months.
On Thursday, Ukraine’s state energy company Naftogaz and Russia’s Gazprom signed a formal amendment to their gas contract. After suspending gas imports from Brussels, Kiev obtained a 33% discount.
It is worth reminding that the bickering between Brussels and Moscow is not over. But it would be silly not to acknowledge that President Vladimir Putin demonstrated excellent strategic skills. The same abilities that David Cameron needs to solve a looming British energy crisis.
Sergio Matalucci