Repsol doesn't have the gas???

irving3
Originally uploaded by Oldmaison.

Charles,

This may mean that Repsol doesn't have the gas they thought they would have....a bit of good news don't ya think ?


http://www.mineweb.net/energy/409491.htm

Russia’s LNG strategy runs into opposition
By: John Helmer
Posted: '13-NOV-06 09:00' GMT © Mineweb 1997-2006



MOSCOW (Mineweb.com) --There are three opponents of Russia's strategy to become a global LNG exporter -- the Western Gray Whale, the US Government, and Gazprom.

For the time being, and for quite different reasons, all three, including the LNG producer itself, Gazprom, have succeeded in delaying and redirecting plans to start shipments from the first of Russia's LNG plants at Aniva Bay on Sakhalin Island, in the Fareast; and to postpone indefinitely drawing-board plans and joint venture agreements to build the second and third LNG plants on the Baltic, and to the north, on the Barents Sea.

During the Soviet period, energy planners in Moscow concentrated on piping natural gas to domestic users, and for export westwards by pipeline across land to Europe. At the consumer end of this pipeline system, reliance on Russian gas is currently 100% in Finland; 99% in Bulgaria; 97% in Slovakia; and 76% Greece. In volume of Russian gas consumption, Germany takes most, followed by Italy, Turkey and France. In the Soviet period, the technology for liquefaction was costly, and although in development by Soviet ally Algeria, Moscow believed there was no pressing economic reason for installing it.

The energy price boom of the past three years has created enormous cash reserves for Gazprom, which the Kremlin-directed management wants invested as quickly as possible, avoiding devaluation by the unstable dollar, and threatened market manipulation by the Americans and West Europeans. That has meant increasing interest on Gazprom's part in diversifying upstream, as well as downstream, in the gas market.

Shell had started the ball rolling, a decade ago, with its plan to build the Aniva Bay plant to liquefy gas, and tanker it to Japan and South Korea. With 9.6 million-tons in annual export capacity, this plant has already contracted to sell more than 7 million tons for 20 years to Japanese and Korean buyers.

However, a combination of huge cost-overruns, postponements of tax payments to the Russian treasury, and environmental damage led the Kremlin to attempt a move this year to transfer operating control, and shareholding equity in the project, to Gazprom. For the time being, Asian buyers cannot count on a whiff, or a drop, of gas from Sakhalin.

The campaign to protect the whales by Russian environmental organizations -- endorsed by regional court rulings -- has been under way for several years. Royal Dutch Shell, controlling shareholder and operator of the Sakhalin-2 project has repeatedly denied that its dredging, construction of offshore production platforms and a tanker berthing jetty, and the laying of undersea pipelines had upset the marine ecology in the Sea of Okhotsk. Starting in 2005, the Russian courts began to disagree.

This year, the federal authorities extended their criticism to onshore pipeline construction, the cutting of forest, the heightened threat of mudslides, and other problems. After suspending the project's environmental clearances, the deputy head of the Russian environmental protection agency Rospriradnadzor, Oleg Mitvol, said Shell's proposed new clean-up plan was worthless. "It is not serious. It is a joke collection. We had expected to see technical solutions and they are dealing with small local problems," Mitvol said during a site inspection on November 11.

The changing economics of gas exports persuaded Gazprom strategists in Moscow that they too should build their own LNG facilities. Accordingly, during 2006, Gazprom negotiated agreements with Algeria's Sonatrach to cooperate in developing these plants in Russia for export of the product to the North American market.

Natalia Bortsova, a gas industry analyst in Moscow, told Mineweb: "Gazprom has a serious intention to produce LNG, but currently has no production facilities of its own." She said the technology required is readily available, and Sonatrach has unique experience building LNG plants, operating them, and marketing the product.

"Sakhalin LNG is controlled by Shell, and Gazprom has been trying to get a share there without success yet. [An LNG project for St.Petersburg involves] PetroCanada and Gazprom, but the negotiations are still in stage of memorandum of intentions." She acknowledged that Gazprom's desire to export LNG to the US market will run into potential competition with Sonatrach, already a major US supplier, unless the two companies agree to cooperate. "It is very important to create the partnership, not to compete," Bortsova said.

The Bush Administration has objected that a Gazprom-Sonatrach combination threatens gas markets with the potential for cartel pricing. But the Americans were unable to dissuade Sonatrach from signing its MoU with Gazprom.

At the same time, the Kremlin was persuaded to rethink the usefulness of allowing US partners to take equity and possibly operational control of the northwestern LNG plants in planning -- one on the shore of the Gulf of Finland, near St. Petersburg, in partnership with Petro-Canada; and another on the Barents Sea coast, above the Arctic Circle, with US oil companies, ChevronTexaco and ConocoPhillips.

According to the statement by Petro-Canada on October 12, 2004, Petro-Canada’s CEO Ron Brenneman, and Gazprom’s Chairman, Alexey Miller had signed a Memorandum of Understanding (MOU) "to investigate a joint liquefied natural gas (LNG) project which would see LNG from Russia shipped to North American markets by 2009. Specifically, the MOU covers options for Petro-Canada and Gazprom to jointly develop a liquefaction plant in the St. Petersburg region, and investigate options for gas supplies to that LNG plant and re-gasification in North America."

Without a supply of gas on tap, however, that deal is a dead letter.

Thus, the decision Gazprom made on October 9 this year -- two years after the Petro-Canada MoU -- to limit initial production from the Shtokman field to pipeline deliveries of natural gas could defer the Baltic plant indefinitely. According to the Gazprom announcement, "pipeline gas deliveries from the Shtokman field to the European market would take priority over LNG shipments. Shtokman will be the resource base for Russian gas export to Europe via the Nord Stream gas pipeline. Gazprom will develop the field on its own, without attracting foreign partners.”

The latest Gazprom evaluation of Shtokman boosted field reserves by 10-percent to over 4 trillion cubic metres. It also concluded that lifting the gas and condensate, and piping it 550 kilometres to shore, will be less risky, and less costly, than Gazprom has previously thought. The political value, however, of liquefying the gas, either on the Barents shore, or on the Gulf of Finland, has vanished, at least for the time being -- and Russia will leave the American LNG market to Sonatrach for the foreseeable future.

The China market remains difficult for Gazprom to supply, unless it can divert Sakhalin gas away from its intended Japanese and Korean contract customers. A fresh engineering estimate, released last week, suggests that the cost of building overland the proposed Altai gas pipeline over 2,700-km from West Siberia to China would require an investment of around $14 billion. Even if that is affordable, Gazprom's ambition to place large volumes of gas in the Chinese market as early as 2010 may be defeated by lack of gas. "We do not think that Gazprom has the gas for this, at least from West Siberia," comments Adam Landes, a Renaissance Capital analyst. "We therefore continue to believe that Russian gas exports to Asia will be sourced from East Siberia and Sakhalin only, and dismiss the notion that the Altai pipeline will ever be built."

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