Week 40 Overview
The last week raised a question. Is there a Ukraine - EU disconnect on gas matters or perhaps European Commissioner Gunther Oettinger committed a diplomatic "faux pas"?
On September 26, Oettinger said in Berlin that there was a high probability that Moscow and Kiev would have signed the interim agreement by the end of last week. But this was not the case. Ukraine balked at the supposedly agreed arrangements. The only fact hinting at a resolution came on Friday, when Ukrainian Energy Minister Yuri Prodan declared that authorities from the two countries could meet within two weeks.
Meanwhile, on Sunday, Ukraine’s military accused pro-Russian separatists of breaking a month-old truce. This is not a good signal for Ukraine, despite the recent declarations of Russia’s President Vladimir Putin who told Angela Merkel that the Kremlin would have played its cards to promote a stabilisation in the country.
As a result, another period of tensions is likely, as confirmed by ExxonMobil and Shell suspending their plans in the Arctic and in Siberia.
In this backdrop, other important news came from Turkey, Algeria and the UK, which seems the only European country moving forward with its plans. Despite the strong opposition from the public, London is seriously trying to promote a national shale gas industry. The decision could be controversial for someone, but it is at least an indication of some vitality.
TUG OF WAR BETWEEN UKRAINE AND RUSSIA, WHERE IS GERMANY?
On Monday, Russian reports said that Ukraine’s President Petro Poroshenko would push for the EU Association Agreement to come into force in full in November, breaking the deal that would have postponed full implementation to January 2016. Russian officials said that the Kremlin could retaliate.
Also on Monday, ExxonMobil confirmed it is preparing to leave the Arctic in the next month. This is likely to happen soon despite a recent discovery announced last week.
On Thursday, Putin confirmed his intention to stick to the peace plan. He committed to promoting the withdrawal of heavy weapons on both sides.
Putin repeatedly spoke with Merkel, but it seems that negotiations and Ukraine are not the main priority. Some analysts even hypothesised that Putin could be simply looking for ways to strengthen ties with Germany, making concessions on an economic level to avoid repercussions on a political and diplomatic level.
‘The President of Russia gave a high appraisal of the great positive potential that Russia and Germany have built up in their relations and noted how important it is to preserve and build on this foundation in the current difficult period,’ reads a note released by the Kremlin on Friday.
TURKEY AND TAP
On Wednesday, Russia moved to strengthen its ties with Turkey.
Gazprom agreed with Taner Yildiz, Minister of Energy and Natural Resources of the Republic of Turkey, that the company will pump more Russian gas to the Blue Stream.
‘It was agreed to load Blue Stream with Russian natural gas to full capacity as soon as possible in order to satisfy the growing demand of Turkish consumers,’ reads a note released on Wednesday.
Turkey also plays a major role in the Southern Corridor that should connect Azerbaijan with Italy. A success for the Trans Adriatic Project is indeed in Ankara’s interest. TAP and TANAP are key to Turkey's ambition to become an important gas hub.
In this sense, the country might sigh with relief in light of Enagás’ decision to join the Trans Adriatic Project. The Spanish company is buying a 16% stake in the company, partly compensating for the exit of E.ON and Total, which are selling 9% and 10% respectively. Fluxys is buying another 3% of the project, with its stake increasing from 16% to 19%.
Fluxys and Enagás are now the fourth and the fifth main stakeholders, after BP, Socar and Statoil. The British company, like the Azerbaijani and the Norwegian, owns 20% of the TAP each. Axpo keeps its 5% stake.
UK: INEOS, SCIENTIFIC APPROACH, IGAS&DART
UK’s Department of Energy and Climate Change has awarded two licences for onshore oil and gas exploration to Ineos, giving the green light to the acquisition of the majority share in a block in Scotland.
‘The Department of Energy and Climate Change (DECC) has given the go ahead to major chemicals giant Ineos to take a majority share in an onshore oil and gas licence block in Scotland by taking over BG’s interest (51%). The other licensee, Dart is the operator in the block next to the Firth of Forth,’ reads a note released on Sunday.
The Government is also trying to strengthen its scientific know-how, appointing John Loughhead as Chief Scientific Advisor. Loughhead, currently Executive Director at UK Energy Research Centre (UKERC), has a well-respected academic background. He is also the non-executive director at the R&D Board of the UK Ministry of Defence.
‘With vast engineering experience across academia and the private sector, Professor Loughhead brings a depth of knowledge that will be invaluable in areas such as shale gas,” Energy and Climate Change Secretary Ed Davey commented in a note.
This process goes along with a consolidation of the British gas industry.
UK-based IGas announced that it will implement its scheme of arrangement for the acquisition of Dart Energy by IGas.
‘The scheme will now be implemented in accordance with the timetable announced yesterday,’ reads a communiqué. On Tuesday, the Supreme Court of Queensland gave the green light to the scheme.
ALGERIA
Last week, Norway’s Statoil, Anglo-Dutch Shell and Sonatrach were awarded the Timissit Permit Licence in the Illizi-Ghadames Basin onshore Algeria.
‘The licence is located in southeastern Algeria and covers an area of 2730 square kilometres. Statoil bid in partnership with Shell, where Statoil will be the operator with 30% equity, Shell will hold 19% equity and the remaining 51% will be held by Sonatrach,’ reads a note released on Tuesday.
The companies are willing to test the shale resource play.
SO WHAT TO EXPECT?
Another sign of poor prospects for Europe. Poland, which is the only big European country that kept good growth in the last 20 years, might run into some problems. According to the Polish Ministry of Treasury, the Polish industry is undergoing a period of stagnation.
‘Poland's PMI fell to 49.0 pts in August 2014 from 49.4 pts in July, HSBC said on September 1, citing the results of a study conducted by researcher Markit. The August reading constitutes the sixth consecutive decline of the Polish PMI,’ reads a press released published by the Polish Government on Tuesday.
Another week passes without clarity. The next weeks will tell whether Europe will be able to have a common voice or whether Germany and other influential countries may move to get commercial advantages out of the situation, leaving Europe’s periphery behind.
Sergio Matalucci