The Week in Review (October 12 – 17)

The Monitoring Team: Jason Corbin, Henrik Vorloeper

ISIS is still making money out of oil sales

The ISIS regime and its infrastructure has been a target of Western and now Russian airstrikes, but yet ISIS still produces about 34,000-40,000 barrels per day, sold for USD 20 to USD 40 per barrel, which brings the militants an earning of USD 1.5 million a day. The dilemma of US air strikes is that attacks on critical infrastructure could destabilize the life of 10 million people living in areas under ISIS control. “Everyone here needs diesel: for water, for farming, for hospitals, for offices. If diesel is cut off, there is no life here,” says a businessman who works near Aleppo. “Isis knows this [oil] is a winning card.”

Erika Solomon, Guy Chazan and Sam Jones, 2015. Isis Inc: how oil fuels the jihadi terrorists. Financial Times, 14 October 2015. http://www.ft.com/cms/s/2/b8234932-719b-11e5-ad6d-f4ed76f0900a.html#axzz3pC6kqdCY

Inside Isis Inc: The journey of a barrel of oil

Most of ISIS oil is being produced in the Deir Ezzor province in the East of Syria at 34,000- 40,000 barrels per day. The price of the oil varies between 25 and 45 USD per barrel and is being sold to independent buyers from Iraq and Syria, who line up with their oil tankers, sometime waiting for weeks at the entrance of the oil fields. At refineries, traders can make a profit of about USD 10 a barrel and then return quickly to the oil fields to buy more. Some even try taking the tankers of oil to other refineries in hopes of it making to the international market. There is even evidence that ISIS has been purchasing oil refineries and leaving the original owners in charge as a front man and splitting the profits with them. There are three markets at which oil is typically sold; ISIS controlled markets, where traders must prove they have paid zakat in order to purchase tax-free this oil, in ISIS controlled cities such as Mosul where the oil is sold at small petrol stations, and finally in rebel markets. In recent months, smuggling of ISIS has been declining because of low oil prices. When the prices were higher, smugglers used boats, makeshift pipelines made of rubber tubing and 25-50 liter jerry cans carried on horseback.

Erika Solomon, Robin Kwong and Steven Bernard, 2015. Inside Isis Inc: The journey of a barrel of oil. Financial Times, 14 October 2015. http://ig.ft.com/sites/2015/isis-oil/

 Africa in the News

Tanzania is in the news in the past weeks: it is developing its natural gas market and an emerging transit state for Uganda’s oil. Geopolitics of energy in East Africa evolves with financing that comes from China.

Fumbuka Ng’wanakilala, 2015. Tanzania launches project to pipe natural gas to capital. Reuters, 11 October 2015. http://www.reuters.com/article/2015/10/11/tanzania-natgas-idUSL1N12B0EX20151011

Paul Burkhardt, 2015. Uganda Looks at Tanzania in Search for Cheapest Oil Pipeline. Bloomberg Business, 13 October 2015. http://www.bloomberg.com/news/articles/2015-10-13/uganda-looks-at-tanzania-in-search-for-cheapest-oil-pipeline

 Solar and Wind Catch Up With Coal, Natural Gas Across the Globe

A recent study done by the Rocky Mountain Institute, claims that in some parts of the United States, the price of utility-scale solar is actually lower than natural gas-fuelled plants. Bloomberg New Energy Finance expects in the US that after 2030, solar power will be able to compete with gas across the entire country. They also suggest that in other parts of the globe we may even see solar competitive with gas by 2020; examples are India, China and Europe.

Katherine Tweed, 2015. Solar and Wind Catch Up With Coal, Natural Gas Across the Globe. Greentechmedia, 15 October 2015. http://www.greentechmedia.com/articles/read/solar-and-wind-catch-up-with-coal-natural-gas-across-the-globe

 Russia to Build Gas Pipeline in Pakistan

Russia and Pakistan recently signed a contract for RT Global Resources to build a 1,100 km pipeline that would supply 12.4 BCM annually which will connect the LNG terminals in Karachi with Lahore in the northeast of the country. Planned completion date for the pipeline is 2018 and will be commissioned by 2020. The pipeline will be owned and operated by RT Global Resources for 25 years and then be given to the Pakistani government.

Russia Today, 2015. Russia to build gas pipeline in Pakistan. 16 October 2015. https://www.rt.com/business/318840-russia-pakistan-gas-pipeline/

 Japan to take inroad into Iran’s nuclear energy

The foreign ministers of Japan, Fumio Kishida, and Iran, Mohammad Javad Zarif, agreed that Japan provides personnel and expertise to Tehran to help it develop nuclear energy sector. Japan has know-how on earthquake-preparedness at nuclear facilities based on its experience of the Fukushima nuclear disaster in 2011 and is willing to share this with Iran. According to a joint statement released after the ministerial meeting, Japan will dispatch nuclear experts to help it map out strategies to cope with a nuclear accident. The two ministers also signed a bilateral investment pact to entice Japanese companies to make inroads into the Iranian market.

Daisuke Kanda, 2015. Japan to provide expertise on nuclear energy to Iran. The Asahi Shimbun, 13 October 2015. http://ajw.asahi.com/article/behind_news/politics/AJ201510130043

 Ukraine discuss issue of deliveries of Kazakh oil products

At a bilateral meeting of the Presidents of Ukraine, Petro Poroshenko, and Kazakhstan, Nursultan Nazarbayev, discussed a wide range of issues, including trade on fuel and energy. “We agreed on the sort of Kazakh coal to deliver to Ukrainian power stations.” Nazarbayev said afterwards. Ukraine will continue to deliver equipment to Kazakhstan’s power stations. As for supplies of Kazakh oil to the Ukrainian oil refineries, the problem that the pipeline goes through Russia still exists, the Kazakh president said. “Kazakhstan, Russia and Ukraine are the members of the WTO and must comply with the accepted obligations (…). Kazakhstan for Ukraine is window to Asia and Ukraine for Kazakhstan is window to Europe,” President Poroshenko said. According to Nazarbayev, the trade turnover between Kazakhstan and Ukraine decreased more than twice. “Some would say that now it is difficult to develop business in the conditions of Russian aggression, annexation, but I want to assure you, it is not. Today is the best time to work together to start working. A war we will stop,” Poroshenko said.

Kulpash Konyrova, 2015. Astana, Kiev discuss issue of deliveries of Kazakh oil products to Ukraine, The New Europe, 12 October 2015. http://neurope.eu/article/ukrainelookstokazakhstanforsupplyofpowerstations/

 The Russian billionaire Fridman turns to Norway after being blocked by the British government.

The Russian billionaire Mikhail Fridman has agreed to buy E.ON’s oil and gas assets in the Norwegian North Sea for USD 1.6 billion. Fridman’s LetterOne fund attempted to acquire the British fields as part of its takeover of RWE’s DEA oil and gas business in March, but it was blocked by the government, as the West tightened sanctions against Russia. After the following announcement that Fridman had bought E.ON’s Norwegian oil and gas assets, Norway’s oil minister said he welcomed international investment and the application for approval of the deal. Although the reassurances given to Fridman do not signal any major improvement in relations between the West and Moscow, they showed that Russian investments have not been banned entirely. If approved, the deal is another step in Fridman’s plan to create a serious oil and gas player. However, the deal still requires the European Commission approval, which E.On expects by the end of 2015.

Christoph Steitz, 2015. Russia’s Fridman buys E.ON’s Norway oil and gas assets. Reuters, 14 October 2015. http://www.reuters.com/article/2015/10/14/us-eon-m-a-fridman-idUSKCN0S81DA20151014

 Expected Polish election winner urges EU climate deal renegotiation.

The likely winner of Poland’s Oct. 25 parliamentary election wants to renegotiate a climate deal agreed last year by the European Union. This would enable the country to build more coal-based power stations. After the long lasting negotiations, the European Union agreed last year, to cut greenhouse gases by 40 percent by 2030. Poland is likely to meet resistance from its EU partners if it attempts to reopen the climate deal again. “The demand for electricity, if our economy develops fast, should increase at double the pace, so there should be many more power plants,” the party leader Jaroslaw Kaczynski said. Kaczynski also argued that Poland should not have agreed to the deal and vetoed it instead. The party’s energy point man Piotr Naimski told Reuters in August he hoped that any United Nations’ climate deal to emerge later this year would be non-binding, which would enable Warsaw to renegotiate the current EU emissions laws.

Agnieszka Barteczko, 2015. Expected Polish election winner urges EU climate deal. Reuters, 13 October 2015. http://www.reuters.com/article/2015/10/13/climatechange-summit-poland-idUSL8N12D2Z120151013

 US increases oil trade with Africa as low prices have turned shale output down

US oil refineries are turning back to old suppliers in Africa as the growth in shale production slows. The number of barrels of African crude shipped to the US is at its highest level in almost two years. African producers suffered strongly from the shale boom and the lower oil price could now help them to survive. The volumes of US oil imports from Africa are not expected to come to the levels of 2010, when Nigeria and Angola at times sent almost half of their oil exports to the US. However, it may contribute to tightening supplies in other regions. West African producers have often been forced to discount their high quality oil to win new customers in Asia and Europe over the past five years. More West African crude going to the US could mean less making its way to Asian refiners. India, China and others took more of these displaced barrels in recent years as US demand dried up.

Anjli Raval, 2015. US turns to west African oil as shale output slows. Financial Times, 13 October 2015. http://www.ft.com/cms/s/0/e46c2486-6cdd-11e5-8171-ba1968cf791a.html#axzz3op26doIM

 

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