With its 34tn cubic metres of natural gas, enough to satisfy current EU natural gas demand for 90 years, Iran has the biggest gas reserves in the world. Despite this rich natural endowment, the country has not yet translated potential into reality. Paradoxically, its natural gas production continues to be barely sufficient to satisfy its own domestic consumption.
There are two reasons for the under-exploitation of Iran’s natural gas resources: the international sanctions regime (which has targeted the country’s energy sector since 2007, completely halting the activities of international energy companies) and the country’s legal petroleum framework (the so-called ‘buyback scheme’, encumbered by very unattractive terms for international energy companies). Read more
There are very few things on which economists overwhelmingly agree: free trade and apple pie are about it. But almost all of them will say that across-the-board subsidies for households and companies to lower the price of fuel are a terrible idea.
While advanced economies in general tax fossil fuels – or the carbon emissions that emanate from its use – emerging markets are still big users of subsidies and price caps. The IMF estimates that consumption of petroleum, electricity, natural gas and coal were subsidised by about 2 per cent of total government revenue in 2011 – and much more if compared to a hypothetical efficient tax system. Hydrocarbon exporters accounted for about two-thirds of the total. The subsidy of fossil fuels by oil producers and particularly within the Middle East and North Africa is extreme. Read more
By Alan Riley of City Law School
Following South Stream’s demise the Danube nations must look again at their energy vulnerability. These low income states, locked into antique energy infrastructure and facing high renewable bills, face a major energy dilemma – a dilemma shared, in a less acute form, with the rest of the European Union. One way forward is to look again at whether a deal on gas between Russia and the EU could be made to work as a means of encouraging economic growth and helping to settle the dispute over Ukraine. Read more
By Riccardo Puliti of the EBRD
Until recently the Nabucco pipeline, just like the chorus in Verdi’s opera of the same name, was a symbol of freedom. It was designed as an alternative route for large quantities of natural gas coming into Europe, reducing the continent’s dependency on the Soviet-built pipeline system that runs from East to West.
But the Nabucco dream did not become reality, mainly because it would not transport enough gas to make it viable and especially because Turkmenistan, a big producer of natural gas, was not part of the project. However, this vision of independence could yet live on in another guise – but only if there is the political will to drive it forward. Read more
Poor forward planning and political manipulation of energy prices look likely to leave Turkey facing gas shortages this winter, even before the prospect of regional gas cuts due to the on-going hostilities in Ukraine.
Turkey last week experienced an unexplained drop in pressure in its western import line, through which it receives 14bn cubic metres (bcm) of gas from Russia, or about 30 per cent of Turkish demand. That sparked fears of further cuts during the peak mid winter demand period should a working ceasefire not be concluded.
But Turkey’s gas woes are not confined to one import line through Ukraine. Read more
By Jarosław Ćwiek-Karpowicz and Dariusz Kałan of PISM
The tug-of-war between the European Union and Russia over Ukraine has highlighted – if that were necessary – the geopolitical role of natural gas in the region. But for much of the rest of central Europe, an ambitious plan to complete a North-South Gas Corridor offers the potential for a separate geopolitical breakthrough to rival the region’s regime changes of 1989. Read more
By Sujoyini Mandal and Marika Semerdzhian
Gazprom’s traditional economic and strategic business models are coming under tremendous pressure. Shifting LNG trade patterns are impacting spot markets in Europe and Asia, partly as a result of the shale gas boom in the US; lack of investment in new fields is depleting Russia’s gas reserves; and Russia’s domestic gas market is facing market pressures from liberalisation.
There is no doubt that Russia remains a central player in the global energy sector. Vertically integrated, Gazprom controls about half of the country’s proved reserves of natural gas and its export monopoly is enshrined in law. This could change very soon. Gazprom experienced a difficult 2012, with net profits falling by a third in the first half of the year. This comes in the wake of a weaker demand from Europe caused by the economic crisis and perhaps unwillingness to put up with the gas giant. In spite of these challenges, we believe Gazprom is actually positioned to take advantage of, rather than suffer from, rapid changes in the energy industry, both at home and abroad. Here is why. Read more
On Friday, India’s cabinet approved the creation of an independent regulator for the coal industry and announced that the Coal Regulatory Authority Bill 2013 will now be put before Parliament.
So far, all as expected. So why have shares in Coal India jumped over 7 per cent? Read more
There is a new Great Game afoot and it is taking place beneath the sea floor of the eastern Mediterranean.
Turkey and Israel’s tentative reconciliation is a process so fraught that US Secretary of State John Kerry appeared in Istanbul at the weekend to chivvy the two sides towards restoring full diplomatic ties. But if the steps he set out can be taken — agreeing compensation for nine Turks killed by Israeli forces in 2010, avoiding inflammatory talk, exchange of ambassadors — then a whole series of changes could be unleashed from Damascus to Brussels. Read more
With billions of dollars of natural gas at stake, Ukraine and Russia seem to once again be putting brotherly Slavic love aside in favour of poker-faced brinkmanship.
It’s been two weeks since the FT revealed that Russia’s Gazprom had slapped Ukraine with a whopping $7bn bill for natural gas not supplied in 2012. Strangely, Gazprom has not said much on the matter since then. It could yet challenge Ukraine through arbitration, yet Ukrainian officials appear unphased by the prospect. Read more
Rosneft is set to become the world’s biggest listed oil producer following its $55bn merger with TNK-BP. But the ambitions of Russia’s state oil company don’t stop there. Rosneft is also advancing deeper into the Russian natural gas market where it signed a 25 year deal on Thursday to supply gas to Inter RAO, the state electricity producer and trader. Read more