European energy security is not up to Europe

      By Alexandros Petersen  | EUobserver

BRUSSELS - It is no secret that Russian dominance of European natural gas markets has splintered the Union.

 

The imperative of having enough heat or cooking fuel in the winter has put countries – especially in central and eastern Europe – in two camps: those who make bilateral deals with Russia’s energy behemoth Gazprom (Western unity be damned), and those who suffer from the disunity and call continually not just for co-ordinated policies to withstand Moscow’s pressure, but also for alternative resources from the Caspian region or elsewhere to diversify supply.

The second camp has it right, but they – as well as Euro-Atlantic institutions – have sabotaged their own efforts by seeking to dictate terms to alternative producers, such as Azerbaijan.

All the while, the pro-Russia camp has made gains.

Earlier in March, Serbia passed a constitutional amendment on land ownership to make it easier for Gazprom to buy up the land it needs for a major pipeline project aimed at increasing southeastern Europe’s dependence on Russian resources and defeating regional plans for diversification. This follows Germany’s joint development with Russia of the Nord Stream pipeline, which connects German consumers directly to Russian fields across the Baltic Sea. It bypasses and undermines the energy security of fellow Nato and European Union members, Poland and the Baltic states.

The problem with these policies is that in making a bilateral deal with Gazprom on natural gas supply, individual European countries are in fact coming in line with Kremlin policy which seeks to divide and conquer the continent.

 

Turkish energy: not enough storage

by David O'Byrne | Financial Times


There is an oft-repeated mantra used to help explain Turkey’s perennially problematic current account deficit: “A $10 rise in the oil price adds $4bn to the current account deficit and half a percentage point to the inflation rate”.

It’s a simplification but it does neatly sum up Turkey’s position as a country with few energy reserves of its own. What it doesn’t tell you is the extent of Turkey’s dependence on imported gas and, given the country’s economic growth, how it is starting to look irreversible. Now the question is whether Turkey can get enough gas at the right time to avoid shortages.

Indeed, as successive speakers at the Gas to Power 2013 conference in Istanbul this week pointed out, the main challenge facing Turky’s energy sector is not how to reduce dependence on gas but rather how to get more of the stuff.

Despite official pledges to reduce the country’s gas burn, efforts to diversify have been slow-moving. Around 40 per cent of Turkey’s power is generated by burning imported gas.

There is an official target of 20GW of wind power capacity by 2023 – but few believe that anything more than a faction of the target is attainable. Incentives to encourage development of low-grade domestic lignite coal are only now being introduced.

More worryingly, new gas-fired facilities are still being developed, with around 9GW already licensed and expected to be commissioned by 2018, for which new gas supplies will have to be found.

Gas in Cyprus – how much of a guarantee ?

by Nick Butler | Financial Times

The controversial bailout deal for Cyprus proposed by eurozone finance ministers has led President Nicos Anastasiades to promise investors who stay in the country after the compulsory forfeit of 9.9 per cent of their deposits that they will share in the country’s future wealth from natural gas.

In return for the forfeit they will be given shares in the banks and what are described in press reports as ” equity returns, guaranteed by future natural gas revenues”.

Whatever equity returns means, nothing can be guaranteed by future gas revenues at this stage. The facts are simple. Only one well has been drilled offshore Cyprus. The field identified – in Block 12 to the South East of the island – is said to contain perhaps 7 tcf of gas. But with only one well there can be no hard estimate. It could be more, but it could just as easily be less. Nor does anyone yet know what the cost of extraction will be.

The head of Cyprus’ State Hydrocarbons Company – Charles Ellinas – said last week that Cyprus could have up to 40 tcf of gas within its exclusive economic zone. He talked about Cyprus exporting gas to Europe via an LNG terminal by 2019.

Yes, and pigs might fly over Nicosia. No one will build an LNG terminal until someone drills more wells to confirm the existing find and several more successful wells on other blocks. The licensing round has barely begun, and interestingly Noble Energy, who drilled the first successful well, are not bidding for more acreage. That is a very odd decision if the company shares Mr Ellinas’ view that the area holds 40 tcf.

Turkish government committed to liberalize gas market; energy minister

Gas to Power Journal

The gas market is not yet fully liberalized and things still needs time, but as the government we are committed to duplicating the efforts made when we liberalized the power market, Turkey's deputy minister for energy and natural resources, Hasan Murat Mercan, told a conference in Istanbul organized by Gas to Power Journal.

With the electricity draft legislation being debated in parliament, the gas legislation will need to follow suit swiftly. "Parliament needs [to] get a draft legislation finalised," he said but called for patience and pointed out that proceedings had also taken a couple of month time to revise the oil legislation.

"The problem for natural gas lies within power generation. Our policy is to rely on local resources –solar, lignite –and there are incentives for investors," he stressed. In contrast, gas-fired power generation projects acquired or launched after June 2012 will no longer enjoy incentives.

Turkey aims to increase natural gas imports to cater for the country's rising gas and power demand. However, it has proven difficult to substantially increase gas supplies from Azerbaijan – let alone from Turkmenistan or the Kurdish region of northern Iraq.

Turkey aims to privatize all thermal power plants by 2015

Gas to Power Journal

Keen to fast-track the liberalisation process of the Turkish energy market, the government has set a timeline for divestment of state-owned power generation assets.

 "We hope to finish the privatization of Turkey's thermal power plants by 2015," Atif Kir, Head of Project Group, at the Turkish Ministry of Privatization Administration (OIB) told Gas to Power Journal in an interview.

To complete divestment of state-owned power plants, a total of 12,000 MW of state-owned coal- and gas-fired power plant capacity is up for auction.

"Private capital currently owns about 55 percent of power generation assets and our aims to get at least 85 percent of capacity to be run by private businesses in the near future," he said, implying that the remainder might be classified as 'strategic assets' which may remain in the hands of the state.