weekly analytical report: january 21 - 27, 2013
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Weekly analytical report: January 21 - 27, 2013TRANSCRIPT
DiXi Group, 2013
Energy information ● Analysis ● Consulting
www.ua-energy.org/en
Weekly analytical report January 21 – 27, 2013
1. Development of the EU diversification policy increases the discomfort of Russia as gas supplier. Poland plans to launch its LNG-terminal in 2014 and sell 70% of the gas on a special commodity exchange to lower prices and liberalize the market. At the same time, the Russian Prime Minister D.Medvedev said the EU regulations hinder the development of energy market, although he did not ruled out the cancellation of Gazprom monopoly on gas exports. At the same time, Gazprom Export appealed the arbitration decision in favour of RWE. Ukraine maintains uncertainty, trying to combine both European requirements and Russian conditions in the gas sector. Negotiations with Gazprom on gas pricing continue and – according to the head of the Russian MFA S.Lavrov – are conducted in the context of deepening the strategic partnership. These statements give grounds for the media raising the issue of "surrendering" the Ukrainian gas transportation system. Meanwhile, at the World Economic Forum, President V.Yanukovych told about the reform of the Naftogaz NJSC. According to media reports, the government seek opportunities to increase gas imports from Europe to 12 bcm, especially because of its comparably lower price. Also, the Foreign Minister L.Kozhara expressed hope to restore gas imports from Turkmenistan. Against this background, according to the Ministry of Energy and Coal Industry, Ukraine has reduced in 2012 both gas imports (by 24.5%) and consumption (by 7.6%). 2. Despite activity of project participants, the key decision on the Southern Gas Corridor has not been made. Nabucco Gas Pipeline International GmbH has signed agreements on financing and cooperation with the partners developing the Shah Deniz field. This step was welcomed by the EU Commissioner for Energy G.Oettinger, and Nabucco itself expects up to 9-10 shareholders. Similar agreements with the Shah Deniz consortium were signed by the competing TAP project, which secured support of Albania and wants to continue cooperation with the TANAP project. Intergovernmental agreement on the latter was approved by the President of Azerbaijan. Despite this, the final investment decision on the route to supply Caspian gas to Europe was postponed again, and is expected in mid-2013. 3. Internationally, there are favourable conditions for oil and gas production, including those from unconventional sources. According to Baker Hughes, the worldwide number of drilling rigs reached record. In the U.S., where shale gas production is booming, permission was given to construct the first LNG exporting plant. Poland considers to decrease the expected tax on exploration of hydrocarbons. China has given the rights to develop most of the 19 shale gas fields to local companies.
DiXi Group, 2013
Energy information ● Analysis ● Consulting
www.ua-energy.org/en
In Ukraine, the government accelerates the process of developing unconventional gas reserves, but ignores an important element – communication with the public. As expected, companies Shell and Nadra Yuzivska signed in Davos the production sharing agreement, previously approved by the Cabinet of Ministers, in the presence of the President of Ukraine and Prime Minister of the Netherlands. It is noteworthy that shortly before the signing, the government reduced fees for special permits on exploration under the PSAs by 99%. The parties of the agreement emphasize its positive impact on the economy, and the Energy Minister E.Stavytskyi announced an optimistic forecast of producing 20 bcm of gas in 5 years. Leadership of the Kharkiv region expects 200 mln. USD investment from the first exploration well, considers production on the Yuzivska field reasonable and does not expect significant environmental problems. Despite both journalists and academics argue in favour of production, the All-Ukrainian Union "Svoboda" continues to emphasize the risks, and the Front for Change appealed the decision of Donetsk Regional Council in the court. According to media reports, this may complicate the approval of the PSA for Oleska field in western Ukraine, where public hearings on shale gas will be held. Given the weak organization of discussion about the advantages and disadvantages of extraction, the U.S. Ambassador HE Mr. J.Tefft has offered help in developing the public communication strategy on unconventional gas. 4. The EU strengthens control over nuclear energy policy. The European Parliament’s Committee on Budgetary Control discovered inefficient use of the NPP decommissioning funds in 3 EU member states. The Commissioner for Energy G.Oettinger said that Bulgaria shall agree the construction of new unit at the Kozloduy NPP with the European Commission. The Ten-Year Network Development Plan, which is currently prepared by the ENTSO-E, should provide a single approach to the distribution of produced electricity. 5. In Ukraine, the government delays decisions in the area of energy efficiency and promotion of renewables. The government has not yet adopted the National Energy Efficiency Action Plan, although Moldova implemented this requirement of the Energy Community. The UNIDO and the Global Environment Facility launched a new project which will develop the standard for biomass use and will contribute to the development of the National Renewable Energy Action Plan. One of the commercial banks launched the 10 mln. USD program to finance energy efficiency projects. Kyiv should learn from Western countries which create new standards for the promotion of renewable energy. Strategically, the industry is considered as the centre of the EU long-term energy balance – especially given the research proving high profitability of clean energy. In practice, the European Commission announced measures to develop environmentally friendly transport and allocated funds for the solar energy project in the Mediterranean. Against this background, the WTO recognized the "local content" requirements of the Canadian province of Ontario are contradictory to free trade obligations. 6. Russian factor can potentially destabilize the situation on the European oil market. The EU has asked Transneft company to reveal its plans for investment and supply. Last but
DiXi Group, 2013
Energy information ● Analysis ● Consulting
www.ua-energy.org/en
not least, these concerns were caused by the reduction of oil transit via Ukraine and the expected peak of oil production in Russia. Moscow declared its intention to maintain oil transit via the Druzhba pipeline for European consumers, although it is preparing itself to fuel deficit. Experts believe this will cause increased prices for diesel in Ukraine where – despite stable prices at the filling stations – separate retail networks increased the cost of petroleum, and more fuel is stored in the Crimea. Statistics show the possible shadowing of the Ukrainian fuel market. After 11 months of the last year, Ukraine cut oil imports by 71%, while oil production decreased by 42.6% (petroleum) and 48.2% (diesel), and the production of liquefied petroleum gases fell by 20.7%. Meanwhile, the State Statistics Service recorded a decrease in fuel consumption by only 7.7% in December 2012. 7. The number of lives lost in the coal industry accidents continues to grow due to lack of reforms and corruption. In the Donetsk region, two workers were killed on the mine of Vugleservis LLC. Violation of the methane emission forecasting was recognized as the cause of the accident at the Komsomolets Donbasu mine, although the expert commission called the coal combine impact on the area of geological breach as the main cause. DTEK, which produces 46% of all coal in Ukraine, assured in its compliance with social legislation for miners of the Sverdlovskantratsyt mine. The miners of state-owned DVEK demand to cancel the order on withdrawing three mines from the association. Against this backdrop, the head of Donetsk Regional State Administration A.Shyshatskyi said about "complete degradation" of mining towns, and the media investigations revealed the scheme to legalize coal from illegal mines. 8. The government discusses not the fact of increasing tariffs for utility services, but the format of such a step. According to experts, the growth of tariffs is inevitable, because the state budget does not provide appropriate subsidies. According to media reports, the draft state program of economic revitalization provides for higher tariffs already this year. Prime Minister M.Azarov promised to shift the price burden on wealthier parts of the population, and the National Commission for the Regulation of Utility Services convinces it will address the issue of social inequality. The experts, however, indicate the impossibility of establishing individual tariffs for the rich and the overpayment for heat supply. 9. Ukrainian electricity market will face a wave of privatization and concentration which can have negative impact on consumers. According to analysts, the generating companies Tsentrenergo and Donbasenergo will be privatized already in Q1 2013. The shares, according to media, can be purchased by DTEK, which provided most of the 52% growth in electricity exports in 2012. The so-called "Luzhnikovskaya group" will participate in the privatization of Khmelnytsk- and Mykolaivoblenergo. Earlier, VS Energy resold the controlling stake in Zakarpattyaoblenergo to new unknown owners, and the media reported on the agreement to buy Kyivoblenergo and Rivneenergo of the AES Corporation which denied the information. The draft law was registered in the parliament proposing to exclude electricity supply from the regulation of the public procurement law, which will also narrow the playground for competition.