The Week in Review (October 05 – 09)

The Monitoring Team: Lina Nagell, Fatma Babayeva

Due to speculation that demand is picking up, oil surged to above $50 a barrel in NY.

OPEC Secretary-General Abdalla Salem El-Badri stated that demand would increase by 1.5 million barrels a day this year, more than previously projected, amid cheaper fuel prices. El-Badri continued to talk up demand and predicting significant drop in production growth. Change is credited “new capital discipline” in the industry, which will allow demand to catch up with supplies, boosting prices. At the same time it is projected that it will take U.S. shale industry nine months, at the least, to ramp up production and boost output, as prices reach new profitable levels. Gains also accelerated on reports that Russian cruise missiles meant for Syria landed in Iran. Related is the technical meeting amongst OPEC and non-OPEC crude-producing countries set for Oct. 21st. it is believed that the meeting is a result of worries related an increase in oil supply from Iran.

Mark Shenk, 2015. Oil Resumes Climb as OPEC Demand Outlook Counters Rising Supply. Bloomberg Business, 08 October 2015. http://www.bloomberg.com/news/articles/2015-10-07/oil-resumes-climb-as-opec-demand-outlook-counters-rising-supply

Gazprom halves planned capacity of Turkish Stream gas pipeline amidst deteriorating Russia-Turkey relations.

Gazprom halved planned capacity of Turkish Stream gas pipeline project to 32 billion cubic meters per year, from original 63 billion cubic meters per year. Turkish Stream has long been held up as an alternative to Russia’s South Stream Pipeline Project to bring gas to Europe without crossing Ukraine, which were dropped last year after the European Commission objected. At the same time, Gazprom plans to expand Nord Stream gas pipeline. These developments come amidst rising tensions between Russia and Turkey due to Russian involvement in Syria and Turkish President’s statement on 6th of October, making it clear that: “there are other places Turkey could get gas and other countries that could build its first nuclear plant”.

Hurriyet Daily News, 2015. Russias Gazprom Declines Turkeys Request for 3 bcml of Gas via Blue Stream Pipeline. OilPrice, 09 October 2015. http://www.hurriyetdailynews.com/russias-gazprom-declines-turkeys-request-for-3-bcm-of-gas-via-blue-stream-pipeline-ceo.aspx?pageID=238&nID=89624&NewsCatID=348

US House votes to lift crude oil export ban, ignore White House Opposition.

The House of Representatives voted (261 – 159) to lift the 40 year old ban on crude-oil export on Friday. Export ban was set in place during Arab oil embargo of the 1970s and marks the second time the Republican-controlled Congress seeks a showdown over energy with the countries executive power, the first one being a vote to fast track the Keystone XL pipeline earlier this year. Proponents of lifting the ban argue that it will now be easier for American producers to compete on a level playing field with countries like Iran and Russia, and that the ban is a relic from another era. Opponents, on the other hand, states that lifting the ban amounts to a giveaway for oil companies, and will lead to job losses in the refinery sector. The bill will now move to the Senate, where its prospects are uncertain due to White House threats of veto.

Suzanne Goldenberg, 2015. House votes to lift crude oil export ban despite opposition from White House. The Guardian 09 October 2015. http://www.theguardian.com/business/2015/oct/09/us-crude-oil-exports-house-of-representatives-vote-obama

South Africa makes energy pledge for Africa

South Africa has committed itself to help bring clean power to 100 million African households and double its capacity of cross-border electricity across the continent and into Europe. South Africa’s Energy Minister delivered the news while attending the South African International Renewable Energy Conference this week. Taking on a leading role on the global transition to renewable energy, a joint project with DR Congo was also launched: creating 10 000MW of new hydropowered facilities before 2030. In response to this news IEA leader Adnan Amin stated: “We have the chance to create an Africa where economic growth and increased prosperity comes in tandem with improved energy availability and security, and within a world that remains safe from the most devastating consequences of climate change”.

Lisa Isaacs, 2015. SA makes energy pledge for Africa. IOL 06 October 2015. http://beta.iol.co.za/business/news/sa-makes-energy-pledge-for-africa-1925540

Indian Oil Company (IOC) not to enter into long-term price contracts with LNG suppliers. 

Drawing on lessons from state-run Petronet LNG, forced to purchase expensive LNG to honor old contract (with Qatari RasGas) while struggling to sell it further to consumers, IOC has decided not to make the same mistake. Company will have long-term agreement only for quantity of gas, not for price. Director Ak Sharma stated that these steps are taken to ensure a stable price for consumers. Hoping that gas business will help the firm defend market share in fuel business, amidst environmental concerns and public rage against air pollution accelerating shift towards cleaner fuel, the company is betting big on gas. IOC is planning to strengthen its presence in the gas business by setting up LNG import terminal near Chennai, laying 1 167 km pipeline to carry gas.

Sanjeev Choudhary , 2015. IOC will not ink long-term LNG price deals. The Economic Times, 08 October 2015. http://economictimes.indiatimes.com/industry/energy/oil-gas/ioc-will-not-ink-long-term-lng-price-deals/articleshow/49265236.cms

Germany furthers nuclear stress tests for nuclear power exit.

After the Fukushima disaster in Japan in 2011, German Chancellor Angela Merkel announced Germany would phase out atomic energy by 2022, taking nuclear utilities by surprise. Federal Ministry of Economic Affairs and Energy appointed auditors to conduct stress tests in order to determine whether utilities reserves are adequate for country’s planned exit from nuclear power. Operators have to set aside 39 billion euros for decommissioning reactors and nuclear waste disposal. Further tests were conducted by auditing firm Warth & Klein Grant Thornton after Germany’s big four nuclear operators- E.ON, RWE, EnBW and Vattenfall’s reports of last month showed that a funding gap may be up to 30 billion euros (USD 34 billion).

Editing by David Clarke and Adrian Croft, 2015. EU regulators wave through UK nuclear waste clean-up price plan. Reuters 09 October 2015. http://www.reuters.com/article/2015/10/09/eu-britain-nuclear-idUSL8N1293NN20151009

Italian company SNAM could pay price of EU-Azerbaijan strained ties.

Italy has recently offered the use of its existing infrastructure for transporting Azeri gas to the Europe, and memorandum of understanding was signed between Azeri SOCAR and Italian natural gas infrastructure company SNAM last month. However, this deal may not happen due to tensions between Baku and Brussels. In December 2013, Azerbaijan’s state owned oil and gas producer SOCAR won the tender but continues having problems about acquisition of 66% stake in Greek gas transmission system operator DESFA. In late 2014, European Commission commenced investigation to determine whether the acquisition of DESFA SOCAR is in line with the EU Merger Regulation. As a result, Baku may lose interest in major investments in TAP and DESFA. Moreover, Turkey also may increase consumption of gas delivered via TANAP pipeline if Moscow decides to cut supply of natural gas to Turkey via Ukraine from 2019.

Natural Gas Europe, 2015. SNAM could pay price of EU-Azerbaijan strained ties. Natural Gas Europe 05 October 2015. http://www.naturalgaseurope.com/snam-could-pay-price-of-eu-azerbaijan-strained-ties-25744

Another alternative to Russian gas for EU: Midcat gas pipeline from Spain to Central Europe by 2020.

During the “Natural gas and energy security of Europe” seminar held last Monday by Gas Natural Fenosa, Miguel Arias Cañete, EU Commissioner for Energy and Climate Action, stated that there is a 470 million euros budget already assigned for Midcat gas pipeline project which aims to reduce EU’s dependence on Russian gas by 40%. Midcat gas pipeline, which will be built through Catalan Pyrenees and connect Spain with Central European networks, will be operative by 2020. Nonetheless, there were French and German barriers for the realization of this project; things have changed after Ukrainian crises in EU.

Catalan News Agency, 2015. CNA: Strategic gas pipeline Midcat will be ready by 2020, Natural Gas Europe, 06 October 2015. http://www.naturalgaseurope.com/canete-spains-gas-pipeline-midcat-completion-date-25763
Sara Prim, 2015. Strategic gas pipeline Midcat will be ready by 2020. Catalan News Agency 05 October 2015. http://www.catalannewsagency.com/business/item/strategic-gas-pipeline-midcat-will-be-ready-by-2020
Natural gas and oil database launched in Tanzania.

Discovery of natural gas reserves in Tanzania added one more country on the world energy map. More than 55 trillion cubic feet (1.5 trillion cubic meter) of natural gas has already discovered in Tanzania, exploration works are ongoing in both onshore and offshore fields. Interestingly, a study by research organization- Twaweza found that 75% of Tanzanian population was not aware about natural gas discoveries around the country. Following that, Friedrich-Ebert-Stiftung (FES), a German organization, has launched a database to provide updates on progress in Tanzania’s oil and natural gas sector. Database will be available both in English and Kishwahili and will assist country to promote transparency and accountability in oil & gas sector. Hopefully, it will disseminate information about Tanzania’s natural gas reserves to the entire populace of the country.

Oil Review Africa, 2015. Natural gas and oil database launched in Tanzania. Oil Review Africa 08 October 2015. http://www.oilreviewafrica.com/technical-focus/technical-focus/natural-gas-and-oil-database-launched-in-tanzania

Iran plans London Oil Conference in February.

Iran announced dates for a three-day oil and gas conference in London to attract foreign investors. “Iran Oil and Gas Summit Post Sanctions” event was scheduled for 22-24 February 2016. It is predicted sanction relief will start from January 2016. Once sanctions are officially lifted, foreign companies and investors can attend event without facing international restrictions. Iran also said it would publish the terms of post sanction oil contracts during Tehran conference which will take place during November 21-22, 2015.

Arab News, 2015. Iran plans London oil conference in February. Arab News 11 October 2015. http://www.arabnews.com/economy/news/818521

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