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CCNet 02/04/14

Russian Gas Weapon Pushes Europe To Develop Shale Gas

In State Of Emergency, UK Could Produce Shale Gas In 4 Years



 
 
 
Russia’s Gazprom has begun to tighten the noose on Ukraine, raising the cost of gas deliveries by 44pc and threatening to claw back billions of dollars of previous discounts. The move came as military tensions between NATO and Russia continued to escalate on several fronts, belying claims that the world’s most serious geo-political clash since the Cold War is subsiding. --Ambrose Evans-Pritchard, The Daily Telegraph, 2 April 2014
 


 
 
 

Shale gas production in Britain could begin within four years if the current crisis in Ukraine escalates to such an extent that a national state of emergency is declared, the chief executive of Cuadrilla Resources said. f the Ukraine crisis worsens dramatically and Britain declares a state of national emergency and removes all constraints, "it would take two, three or four years to get up to appreciable production rates," Chief Executive Francis Egan said. --Nina Chestney, Reuters, 2 April 2014
 
 
 
 
 
Europe, seeking to reduce its dependence on Russian natural gas, is encouraging political leaders to step up efforts to tap the region's shale gas deposits. Jose Manuel Barroso, president of the European Commission, the EU's executive body, said growing tension with Russia over its actions in Ukraine serve as a "very strong wake-up call for Europe" about energy issues. Shale gas continues to be front of mind among energy ministers and policymakers. "The outlook [for shale] is undoubtedly brighter now than it was a year ago," said energy analysts at Eurasia Group. --Alanna Petroff, CNN Money, 31 March 2014
 
 
 
 
Current tensions with Russia over Ukraine have turned the spotlight on Germany’s heavy dependence on Russian gas and are pushing Europe’s biggest economy to reconsider its entire energy policy. Last week, Chancellor Angela Merkel said the Ukraine crisis would lead to “a new look at energy policy as a whole.” --Mathilde Richter, Agence France Presse, 1 April 2014
 
 
 
 
Gas really is a weapon, but only in the hands of a highly sophisticated buyer, not in the hands of a "petrocrat" who exports oil and gas and imports everything else. In the end, the buyer can always find a new supplier for what has become a highly politicized commodity. But the seller — at least in the case of Russia — cannot even provide gas to its friend and ally, Venezuela. I suspect that the Kremlin is trying to divide Ukraine primarily for fear that Ukrainian shale gas, which is scheduled to start production late this year, will weaken Russia's perceived gas weapon not only on the Ukrainian market, but even on the European market. --Yulia Latynina, The Moscow Times, 1 April 2014
 
 
 
David Cameron wants to go into the next election pledging to “rid” the countryside of onshore wind farms, a source close to the Prime Minister has said. Mr Cameron wants to toughen planning laws and tear up subsidy rules to make current turbines financially unviable – allowing the Government to “eradicate” turbines, the source said. Cutting subsidies would not only reduce the number of planned wind farms but could encourage developers to start “dismantling” turbines built in recent years, the source said. --Peter Dominiczak, The Daily Telegraph, 2 April 2014
 
 

1) Russia Uses Gas Weapon To Tighten Noose On Ukraine - The Daily Telegraph, 2 April 2014
 
2) In State Of Emergency, UK Could Produce Shale Gas In 4 Years, Cuadrilla Says - Reuters, 2 April 2014
 
3) Russia Fallout Pushes Europe To Develop Shale Gas - CNN Money, 31 March 2014
 
4) Ukraine Crisis: Angela Merkel To Reconsider German ‘Energy Policy As A Whole’ - Agence France Presse, 1 April 2014
 
5) Yulia Latynina: Kremlin Is Trying To Divide Ukraine To Grab Its Shale Resources
The Moscow Times, 1 April 2014
 
6) David Cameron Wants To Get ‘Rid’ Of Wind Farms - The Daily Telegraph, 2 April 2014
 
7) Green Lobby Worried About Tory Victory & Cut In Subsidies - Financial Times, 2 April 2014
 
8) And Finally: The Ministry Of Truth Orders Crackdown On Climate Sceptics
The Times, 3 April 2014

 
 
 
 
1) Russia Uses Gas Weapon To Tighten Noose On Ukraine
The Daily Telegraph, 2 April 2014
 
Ambrose Evans-Pritchard
 
Russia’s Gazprom has begun to tighten the noose on Ukraine, raising the cost of gas deliveries by 44pc and threatening to claw back billions of dollars of previous discounts.


 
 

 
The move came as military tensions between NATO and Russia continued to escalate on several fronts, belying claims that the world’s most serious geo-political clash since the Cold War is subsiding.
 
Nato chief Anders Fogh Rasmussen denied claims by Moscow that Russia is withdrawing its 40,000 troops concentrated near the Ukrainian border. “This is not what we have seen. This massive military build-up can in no way contribute to a de-escalation of the situation, so I continue to urge Russia to pull back its troops,” he said.
 
The alliance suspended “all practical civilian and military cooperation” between NATO and Russia at a closed-door session in Brussels. Poland’s foreign minister, Radek Sikorski, called for two heavy brigades with 5,000 NATO troops to be sent to the Polish-Ukrainian border as a show of force. German fighter jets have been sent to Lithuania to bolster air defence in the Baltics, where tension is also high.

Markets appear to operating in a parallel universe, betting that the worst is over.
 
The RTS index of Russian equities has regained most of the ground lost at the outset of the crisis in late February, while yields on Russian dollar bonds have dropped 70 basis points to 4.82pc.
 
Gazprom said it had raised the price of gas for Ukraine from $268 to $385 per 1,000 cubic metres, a tariff that may soon jump to $480 as the Kremlin ends the lease discount for Russia’s Black Sea fleet in Sevastopol, rendered null and void by the annexation of Crimea. This will push Ukraine’s energy costs to crippling levels, far above average EU costs. Gazprom claims that Ukraine owes $16bn for unpaid gas bills, equal to 11pc of GDP.
 
The EU is drawing up emergency plans to cut dependence on Russian energy. It is searching for ways to funnel gas to Ukraine at a viable cost if need be, but there are serious doubts over whether this can be done quickly.
 
Citigroup said it would be a complex task to set up a “reverse flow” of gas to Ukraine from western Europe though Slovakia. Nor is it clear where the immediate supplies would come from. The global market for liquefied natural gas (LNG) remains tight, despite a largely symbolic move last week by the US to open an export terminal. There have been interruptions in supplies from Norway.
 
Full story
 
 
 
2) In State Of Emergency, UK Could Produce Shale Gas In 4 Years, Cuadrilla Says
Reuters, 2 April 2014
 
Nina Chestney
 
LONDON, April 2 (Reuters) - Shale gas production in Britain could begin within four years if the current crisis in Ukraine escalates to such an extent that a national state of emergency is declared, the chief executive of Cuadrilla Resources said.
 
Britain is in the early stages of exploring for shale gas to counter its growing dependence on imports, and geologists have estimated it could have shale resources equivalent to several hundred years of demand.
 
Cuadrilla is the only company in Britain so far to have used hydraulic fracturing, or fracking, in test wells in Lancashire.
 
It is two to three years away from establishing whether its British shale gas operations are commercially viable, Chief Executive Francis Egan said at an event at think-tank Chatham House on Tuesday evening.
 
If the Ukraine crisis worsens dramatically and Britain declares a state of national emergency and removes all constraints, "it would take two, three or four years to get up to appreciable production rates," he added.
 
In an emergency situation, Cuadrilla could start constructing a drilling site immediately and start drilling after two months. Drilling a well would take around four months, and three to four wells would be needed to demonstrate the commercial value of shale gas.
 
In normal circumstances, it will take two to three years just to find out whether shale is commercially viable, because it has not yet been established at what rate the wells would flow.
 
Energy consultancy Poyry has estimated it would take up to eight years for a developer to start commercial production in Britain after receiving a licence.
 
BARRIERS
 
As Russia's occupation of the Crimea region has led to the worst East-West crisis since the Cold War, there is increasing urgency for European countries to find alternatives to Russian gas supplies, which arrive via Ukraine.
 
Last week British Prime Minister David Cameron called the current crisis in Crimea a "wake-up call" and said shale gas was a good opportunity for Europe to move away from Russian gas.
 
Russia provides around a third of Europe's gas, with most of that going to central and southeastern Europe rather than Britain, but Britain will begin to import gas from Russia under formal contract for the first time this year.
 
British domestic gas production from the North Sea basin is declining, and it imports most of its gas from Norway or via liquefied natural gas shipments.

North Sea gas production will fall to 19 billion cubic metres (bcm) by 2030 from 108 bcm in 2000, Minister of State for Energy Michael Fallon said at the Chatham House event.
 
"Without shale we are forecasting we will be importing 70 percent of our gas by 2025, which equates to a 10 billion pound ($16 billion) per year import bill," he added.
 
Full story
 
 
 
 
3) Russia Fallout Pushes Europe To Develop Shale Gas
CNN Money, 31 March 2014
 
Alanna Petroff
 
LONDON (CNNMoney) - Europe, seeking to reduce its dependence on Russian natural gas, is encouraging political leaders to step up efforts to tap the region's shale gas deposits.
 
Jose Manuel Barroso, president of the European Commission, the EU's executive body, said growing tension with Russia over its actions in Ukraine serve as a "very strong wake-up call for Europe" about energy issues.
 
"Europe is working very decisively to reduce its energy dependency," he said last week at an EU-U.S. summit in Brussels.
 
Europe can pursue many long-term options such as ramping up renewable energy production and importing liquefied natural gas, both expensive propositions. But shale gas continues to be front of mind among energy ministers and policymakers.
 
Accessing nearby shale gas resources would be cheaper than other options and could create up to one million jobs in the coming years, according to research commissioned by the International Association of Oil & Gas Producers.
 
"The outlook [for shale] is undoubtedly brighter now than it was a year ago," said energy analysts at Eurasia Group.
 
According to figures from the U.S. Energy Information Administration, European countries are sitting on roughly 470 trillion cubic feet of recoverable shale gas resources -- a huge amount considering gas demand in Europe is roughly 18 trillion cubic feet per year.
 
But it's not going to be an easy process: Europe's shale gas production is essentially zero right now, and it will take a coordinated effort to get moving.
 
Pavel Molchanov, an energy analyst at Raymond James, says the whole process will take years.
 
"Over the next five years, [European] countries will have to identify where their resources are and build out the infrastructure for this industry to develop -- that can include developing pipelines and training workers," he said. "This also means getting the required rigs to drill for shale gas, which are in the U.S. and Canada, but don't really exist in Europe."
 
Full story
 
 
 
 
4) Ukraine Crisis: Angela Merkel To Reconsider German ‘Energy Policy As A Whole’
Agence France Presse, 1 April 2014
 
Mathilde Richter
 
Current tensions with Russia over Ukraine have turned the spotlight on Germany’s heavy dependence on Russian gas and are pushing Europe’s biggest economy to reconsider its entire energy policy.
 
It is currently Germany’s aim to be able to meet as much as 80 percent of its energy needs from renewable sources such as wind and solar power by 2050.
The country is also committed to phasing out nuclear power completely over the next decade or so.
 
And gas — 35 percent of which Germany imports from Russia — should act as a good stop-gap until the country’s renewable capacity is fully in place.
But with the crisis over Ukraine and the threat of a tit-for-tat battle of sanctions, Germany may have to reconsider its energy policy.
 
Some, like the environmentalist Greens party, insist the country should step up its renewable drive while others insist that alternative sources of gas must be found.
Last week, Chancellor Angela Merkel said the Ukraine crisis would lead to “a new look at energy policy as a whole.”
 
Some people have interpreted this seemingly anodyne remark as a hidden call to reconsider Germany’s plans and targets for the energy transformation, formulated by Merkel herself three years ago.
 
Others suggest that the remarks — made in the presence of Canadian Prime Minister Stephen Harper — could herald an about-face on the highly controversial technology of fracking.
 
Full story
 
 
5) Yulia Latynina: Kremlin Trying To Divide Ukraine To Grab Its Shale Resources
The Moscow Times, 1 April 2014
 
Three weeks ago, just as Russia was in the early stages of annexing Crimea, I wrote in this space that the most strategic move the West could take against President Vladimir Putin would be to help lower world oil and gas prices. On Wednesday, U.S. President Barack Obama announced that Washington was prepared to supply gas to Europe in place of Russia.
 
After Russia unleashed its "gas war" against Ukraine in 2006, Europe realized that the Kremlin was an unreliable supplier and that it used gas as a weapon, not a commodity. Therefore, even before the advent of the shale gas revolution, Europe began making every effort to reduce its dependency on Russian gas. As a result, from 2006 to 2013, the share of Russian gas in Europe's overall consumption fell from 39 to 25 percent.
 
Actually, Russia's most hawkish patriots suggested that Moscow stop supplying Europe gas and sell it to China instead.
 
To get an idea of whether Russia could really make good on such a threat, consider the following: In 2013, China extracted only 200 million cubic meters of shale gas, but it expects to extract 6.5 billion cubic meters in 2015 and up to 60 billion to 100 billion cubic meters by 2020.
 
What's more, Beijing built a 6.4 thousand-­kilometer gas pipeline from  Turkmenistan to China at a cost of $6.5 billion, or about $1 million per kilometer. By comparison, Gazprom built the Bovanenkovo-Ukhta pipeline at a cost of $18 million per kilometer, or 18 times higher than China's.
 
Shale gas production in the U.S. now costs from $100 to $130 per thousand cubic meters. Chinese extraction costs probably will not exceed that figure, even though its gas generally is located much deeper underground. Although the exact figure is a commercial secret, China probably pays Turkmenistan about $100 to $140 per thousand cubic meters of gas. In other words, between Turkmenistan and its own shale deposits, China has plenty of inexpensive gas to cover its needs.
 
Throughout recent years, Gazprom never reached an agreement on price to begin selling gas to China — and that was even before Beijing began exploiting its own shale gas and buying from Turkmenistan.
 
In other words, China is unlikely to agree to buy Gazprom gas for more than $100 to $120 per thousand cubic meters — that is, for less than it costs on the Russian domestic market.
 
The cruel irony is that ever since 2005, when officials signed the contracts for the Nord Stream project, the Kremlin's entire policy toward Europe has been based on gas — that is, on gas as a weapon.
 
Gas really is a weapon, but only in the hands of a highly sophisticated buyer, not in the hands of a "petrocrat" who exports oil and gas and imports everything else. In the end, the buyer can always find a new supplier for what has become a highly politicized commodity. But the seller — at least in the case of Russia — cannot even provide gas to its friend and ally, Venezuela.
 
I suspect that the Kremlin is trying to divide Ukraine primarily for fear that Ukrainian shale gas, which is scheduled to start production late this year, will weaken Russia's perceived gas weapon not only on the Ukrainian market, but even on the European market.
 
It seems that Putin's actions have actually helped hasten the very scenario that he had been scheming so hard to prevent.
 
 
 
6) David Cameron Wants To Get ‘Rid’ Of Wind Farms
The Daily Telegraph, 2 April 2014
 
Peter Dominiczak
 
David Cameron wants to go into the next election pledging to “rid” the countryside of onshore wind farms, a source close to the Prime Minister has said.
 
Mr Cameron wants to toughen planning laws and tear up subsidy rules to make current turbines financially unviable – allowing the Government to “eradicate” turbines, the source said.
 
The move will delight campaigners in traditional Conservative countryside seats and comes amid a growing Coalition row over whether to try and cap the number of wind farms.
 
Mr Cameron is now “of one mind” with the Government’s most vociferous opponents of “unsightly” onshore wind turbines, the source added.
 
The Conservatives could make a manifesto pledge to cap the total number of wind farms, toughen up planning rules to make them harder to build or even lower Government subsidies for turbines, it is understood.
 
Cutting subsidies would not only reduce the number of planned wind farms but could encourage developers to start “dismantling” turbines built in recent years, the source said.
 
Full story
 
 
 
 
7) Green Lobby Worried About Tory Victory & Cut In Subsidies
Financial Times, 2 April 2014
 
Jim Pickard and Pilita Clark
 
Renewable energy companies are concerned about the possibility of a Tory victory in 2015 as it emerged that Nick Clegg had thwarted Conservative proposals for a moratorium on new onshore wind farms.
 
David Cameron, who once promised “Vote Blue, Go Green”, has privately called for a cap that would effectively mean that the coalition would not support any new onshore wind projects. He was strongly supported in the argument by George Osborne, the chancellor.
 
It emerged on Tuesday that Mr Clegg, the Lib Dem deputy prime minister, had rejected the idea.
 
“Nick Clegg was simply not going to allow the Tories to move the goalposts on green energy again,” said a Lib Dem aide. “Some sort of crude block towards onshore wind would seriously damage investor confidence in Britain’s energy markets. It would be a double whammy – bad for both British business and for the environment.”
 
The news comes at a sensitive time, given that only last week the prime minister was praising the decision by Siemens, the German engineering giant, to invest in a new offshore wind turbine factory in Hull. Mr Cameron had hailed that announcement as vindication of both the coalition’s green credentials and its commitment to manufacturing.
 
Yet the prime minister has been under considerable pressure from backbenchers who believe that wind farms are inefficient and spoil the landscape. Two years ago, more than 100 Tory MPs signed a petition calling for a moratorium on new wind farms.
 
Full story
 
 
 
8) And Finally: The Ministry Of Truth Orders Crackdown On Climate Sceptics
The Times, 3 April 2014
 
Ben Webster
 
Ministers who question the majority view among scientists about climate change should “shut up” and instead repeat the Government line on the issue, according to MPs.
 
The BBC should also give less airtime to climate sceptics and its editors should seek special clearance to interview them, according to the Commons Science and Technology Committee. Andrew Miller, the committee’s Labour chairman, said that appearances on radio and television by climate sceptics such as Lord Lawson of Blaby, the former Chancellor of the Exchequer, should be accompanied by “health warnings”.
 
Mr Miller likened climate sceptics to the Monster Raving Loony Party and said that the BBC should limit interviews with them just as it restricted the coverage it gave to fringe political parties.
 
In a report published today, the committee criticises the BBC’s coverage of climate change, saying that its news programmes “continue to make mistakes in their coverage of climate science by giving opinions and scientific fact the same weight”.
 
The MPs say that the BBC should apply the same “stringent requirements” to interviewing climate sceptics as it applies to interviewing politicians. “For example, any proposal to invite politicians to contribute to non-political output must be referred to the Chief Adviser Politics. The BBC could benefit from applying a similarly stringent approach when interviewing non- experts on controversial scientific topics such as climate change,” the committee says.
 
Speaking to The Times, Mr Miller added that when Lord Lawson appeared, the BBC should make clear that his think-tank, the Global Warming Policy Foundation, questioned the conclusions of the Intergovernmental Panel on Climate Change. “At the very least, put a caption at the bottom of the screen: ‘the Global Warming Policy Foundation’s views are not accepted by 97 per cent of scientists’,” he said.
 
The committee’s report says that the Government is “failing to clearly and effectively communicate climate science to the public”. It concludes: “All Ministers should acquaint themselves with the science of climate change and then they, and their Departments, should reflect the Government approach in person, in media interviews and online by a presenting a clear and consistent message.”
 
Mr Miller named Owen Paterson, the Environment Secretary, as one of the ministers he believed had deviated from the Government line on climate change. Mr Paterson reportedly told a fringe meeting at the Conservative Party conference last year: “People get very emotional about this subject and I think we should just accept that the climate has been changing for centuries.”
 
Mr Miller said: “There are dissenting voices inside the Government machine . . . Frankly, the role of a minister is either to accept collective responsibility or shut up or leave. Climate change is such a hugely important public policy issue and therefore to have inconsistency from within Government is extremely dangerous territory.”
 
He said it was not acceptable to have “ministers who are not prepared to line up beside No 10 and say ‘yes, I accept climate change is real, we must do something about it’ .” He added: “Paterson is one example — he is ducking and diving on this.”
 
The committee also criticises the Daily Mail and The Daily Telegraphfor placing “heavy reliance . . . on the ability of their readers to distinguish between fact and opinion on climate science”.
 
Responding to Mr Miller’s comments, Lord Lawson said: “I think it is appalling that a member of the House of Commons should want to shut down debate on this issue.”
 
A BBC spokesman said: “The BBC does its utmost to report on this complex subject as clearly as possible using our specialist journalists. While the vast bulk of our interviews are with climate scientists, as part of our commitment to impartiality it is important that dissenting voices are also heard.”
 
 
 
 
 
 

 
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