Russia, The EU and Ukraine: The Kea Gas Triangle


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Russia, The EU and Ukraine: The Kea Gas Triangle

  1. 1. Russia, the EU and Ukraine: the Kea Gas Triangle Konstantin Simonov Vienna January, 28 2010
  2. 2. 2009: Year of Dangerous I llusion s <ul><li>The European gas market has never before seen such a decrease in consumption in its history. But it can be not the beginning of long-term trend </li></ul><ul><li>European Trust : </li></ul><ul><li>Gas to gas competition </li></ul><ul><li>LNG in Europe from other markets </li></ul><ul><li>Age of cheap gas </li></ul><ul><li>Flourishing of spot gas market </li></ul><ul><li>Triumph of energy efficiency </li></ul><ul><li>Development of renewables </li></ul><ul><li>Shale gas </li></ul>
  3. 3. 2009: Year of Dangerous I llusion s <ul><li>BUT do not forget </li></ul><ul><li>T he internal production of gas in the EU will continue to decline from approximately 190 billion cubic metres in 2008 to 100-110 billion in 2020 </li></ul><ul><li>Decline of Norway production in 2012-2015 </li></ul><ul><li>20-20-20 Strategy is a myth </li></ul><ul><li>Renewbles – more PR than reality </li></ul><ul><li>Energy efficiency is only a Keynesian project </li></ul><ul><li>Problems with resource base of Nabucco </li></ul><ul><li>Turkmenistan is for China but not for Europe </li></ul><ul><li>No political breakthrough in Iran </li></ul><ul><li>C ONCLUSION : Europe has serious need in gas. Potential of gas to gas competition are overstated. The import of gas must at least remain at the level of 390-400 billion cubic metres in 2020 and most likely even grow </li></ul>
  4. 4. 2009: Year of Dangerous I llusion s <ul><li>Reply of Russia: “If you want diversification we will organize it” </li></ul><ul><li>Blackmail of Europe with Chinese market </li></ul><ul><li>Export of gas to China can be a mistake. Building of pipes to China + stagnation of production = problems with European contracts </li></ul><ul><li>Chinese Temptation: BUT cheap price ($ 130-140 per 1,000 cubic metres ) and serious political risks </li></ul><ul><li>C ONCLUSION : the EU and Russia can make mutual mistake </li></ul>
  5. 5. China as an Alternative ? During last visit of Vladimir Putin to China Gazprom and CNPC signed another framework agreement on the main terms of natural gas supply. The assumed volumes are in line with those specified in a memorandum three years ago (about 70 billion cubic metres), the beginning of export are rescheduled to 2014-2015 (from 2011), while the price or even the pricing principles are, as before, not agreed Source: Gazprom
  6. 6. I n the H ope of R ehabilitation of I ndustry <ul><li>RUSSIA: </li></ul><ul><li>2009 : decline of gas export –10.3% </li></ul><ul><li>But in December +55.4% </li></ul><ul><li>2009: decline of production -12.4% But in December +8.5% </li></ul><ul><li>2009: decline of domestic consumption -6.6% But in December +6.3% </li></ul>
  7. 7. Don’t Forget about Russia and Ukraine <ul><li>Under already signed contracts, the take or pay minimum from 2011 (the launch of the first run of Nord Stream) amounts to some 180 billion cubic metres annually, which guarantees Gazprom its share in the European gas market </li></ul><ul><li>Gazprom transports through the territory of Ukraine about 80% of its export to non-CIS states (110-120 billion cubic metres a year) </li></ul>
  8. 8. Gas Roadmap <ul><li>M aintenance of Russian status of main gas supplier of Europe </li></ul><ul><li>We are speaking – China is building </li></ul><ul><li>Two main questions: 1.Integration of South Stream and Nabucco 2. Ukraine </li></ul><ul><li>No gas war – but this is not the end of Ukrainian story </li></ul>Source: Expert
  9. 9. Main Risks <ul><li>Naftogaz must be declare bankrupt </li></ul><ul><li>Naftogaz is buying Russian gas at a high price and than sell it at a cheap price + defaulted payment s </li></ul><ul><li>The future of Ukrainian GTS. Who will pay for reconstruction ? </li></ul>
  10. 10. Russian Contribution
  11. 11. Strange Market
  12. 12. Future of Ukraine <ul><li>Two candidates - but the same problems </li></ul><ul><li>Serious connections with domestic business. Main aim is cheap gas </li></ul>
  13. 13. Next Steps <ul><li>J oint a ction in solving the problem of Ukrainian GTS </li></ul><ul><li>Integrated negotiations with new President of Ukraine </li></ul><ul><li>Pipeline Consortium + Third Package </li></ul>
  14. 14. <ul><li>Thank you! </li></ul><ul><li> </li></ul>