Caspian Report - Issue: 07 - Spring 2014
Radu Dudau 98 de facto monopolies inside their national markets. Their terms of delivery (usually 20-25 years) included clauses that suddenly became highly problematic: oil- indexed gas prices, “take-or-pay” (obligation to pay at least 85% of annually contracted volumes regardless of actual physical delivery), and “destination clauses” (under which imported gas cannot be re-exported). From 2009, the situation for Western European utility companies was unsustainable: under pressure from local distributors securing cheaper gas from trading hubs, the obligation to acquire minimal gas volumes at oil-indexed prices became unmanageable. As a consequence, utility companies required and obtained gradual price reductions and more flexible contractual clauses from international suppliers. Some concessions were reached through amicable renegotiations, others through decisions by international arbitration tribunals. Taken together, these three tendencies of the EU natural gas markets may well be sufficiently transformative to allow Romania to enjoy diversified import sources and better contractual terms. Import diversification prospects 99% of Romania’s gas imports come from the Russian Federation, equal to about 20% of current total gas consumption. Nevertheless, these developing trends offer for the first time serious prospects for diversified import sources. Russian gas from the West Following the elimination of destination clauses and the construction of the Hungarian interconnection, Romania could import Russian gas from West to East; in the short to medium term, the most feasible options are imports from Austria’s Central European Gas Hub (CEEGH) in Baumgarten and der March. To illustrate the feasibility of this option, the case of Ukraine case is helpful. Since 2012, Kiev has been importing Russian gas from Germany’s RWE through Poland and Hungary. To enable larger scale imports, in December 2013 Eustream (the Slovak natural gas TSO) agreed to make arrangements for reverse-flow into Ukraine via one of its four major transit pipelines, allowing Kiev to import up to 10 bcm/year from Germany – equivalent to more than a third of the volumes imported from Russia in 2013. But back then this arrangement did not come to fruition, since Russia rewarded ex-president Yanukovych for turning away from the EU Association Agreement with a massive discount on gas prices, from approximately $400 to $268.5. As it is turned out, those improved price terms were short-lived: the success of the Euromaidan movement was followed by the Russian annexation of Crimea and the onset of an extremely tense political standoff between Moscow and Kiev. Not only was the gas price discount revoked, but the new price was set to $480/tcm, one of Europe’s highest. Under these circumstances, the
Eastern Mediterranean. new Ukrainian authorities have once again become keenly interested in gas imports from the EU, as well as in European financial support in order for Kiev to be able to service its debt to Gazprom. However, in the meantime, Gazprom gave Slovakia a discount, and no new talks have yet been set about installing reverse-flow capacity on Slovakia’s gas transport system. Besides, knowing Kiev’s dismal track record on debt, it is doubtful that European gas traders will take the risk on arbitrage into the pricier Ukrainian market, unless a financial back-up arrangement from the EU, Washington and the IMF are established first. The Levantine Basin An emerging gas-producing region closer to European markets other than the Caspian Basin is the Levantine Basin in the Eastern Mediterranean. Offshore discoveries since 2009 – mostly in deep and ultradeep water – in Israel, Cyprus and Lebanon are estimated by the EIA (2013) to hold 1,170 bcm of technically recoverable gas. The Israeli Leviathan field, with an estimated 535 bcm of gas and 31.1 million barrels of liquid condensate is scheduled to start production in 2017. 5 99 CASPIAN REPORT, sprıng 2014 5. There may well be delays, though, as the expected entrance of Australia’s Woodside Energy into the Leviathan consortium – a 25% acquisition worth $2.71 billion – has not come to fruition by the end of March, as previously agreed. Woodside, which is to become the project’s LNG operator, has requested that the Finance Ministry recognizes return on capital of between 17 and 19% for floating LNG production, yet not such clause has been included in the taxation principles’ outline (Jerusalem Post, “Woodside Entrance into Leviathan Gas Field Consortium Still Uncertain,” 27 March 2014).
- Page 50 and 51: Davide Tabarelli 48 evaluate potent
- Page 52 and 53: View of the old town Ostuni, Puglia
- Page 54 and 55: Davide Tabarelli 52 of some 200 mil
- Page 56 and 57: Iran Nuclear Negotiations and Turke
- Page 58 and 59: Mehmet AkIf Okur 56 posal stated th
- Page 60 and 61: Iranian President Hassan Rouhani an
- Page 62 and 63: Mehmet AkIf Okur 60 The steps that
- Page 64 and 65: Mehmet AkIf Okur 62 It is possible
- Page 66 and 67: Frank Umbach 64 Strategic Perspecti
- Page 68 and 69: Frank Umbach 66 Many of the shale g
- Page 70 and 71: Frank Umbach 68 are considerably hi
- Page 72 and 73: Frank Umbach 70 The UK government i
- Page 74 and 75: With Russia’s President Vladimir
- Page 76 and 77: Frank Umbach 74 During the last thr
- Page 78 and 79: Frank Umbach 76 approved by the gov
- Page 80 and 81: Shale gas drilling rig. Frank Umbac
- Page 82 and 83: THE IMPORTANCE OF TAP FOR ITALY SOM
- Page 84 and 85: AntonIo SIleo 82 the end of 2011, g
- Page 86 and 87: AntonIo SIleo 84 Power generation o
- Page 88 and 89: ily limited because of the emergenc
- Page 90 and 91: AntonIo SIleo 88 ductant chemical r
- Page 92 and 93: AntonIo SIleo 90 emerge as a signif
- Page 94 and 95: Radu Dudau 92 Romania’s Energy St
- Page 96 and 97: Radu Dudau 94 countries pay for Rus
- Page 98 and 99: Radu Dudau 96 This industry, howeve
- Page 102 and 103: Radu Dudau 100 In October 2013, the
- Page 104 and 105: Radu Dudau 102 In spite of the ling
- Page 106 and 107: caspian
- Page 108 and 109: Why World Oil Prices Should Be High
- Page 110 and 111: Luay Al-Khatteeb 108 for $1 of reve
- Page 112 and 113: emın akhundzada 110 Turkey as an E
- Page 114 and 115: emın akhundzada 112 markets. Given
- Page 116 and 117: emın akhundzada 114 First, it shou
- Page 118 and 119: FatIh Ozbay 116 Discussions about V
- Page 120 and 121: FatIh Ozbay 118 The Black Sea is a
- Page 122 and 123: FatIh Ozbay 120 these two countries
- Page 124 and 125: FatIh Ozbay 122 Montreux is quite s
- Page 126 and 127: MUbarIz Hasanov 124 Some Remarks on
- Page 128 and 129: Turkey will be USD 37 billion highe
Eastern<br />
Mediterranean.<br />
new Ukrainian authorities have<br />
once again become keenly interested<br />
in gas imports from the EU, as<br />
well as in European financial support<br />
in order for Kiev to be able to<br />
service its debt to Gazprom.<br />
However, in the meantime, Gazprom<br />
gave Slovakia a discount, and no<br />
new talks have yet been set about<br />
installing reverse-flow capacity on<br />
Slovakia’s gas transport system. Besides,<br />
knowing Kiev’s dismal track<br />
record on debt, it is doubtful that<br />
European gas traders will take the<br />
risk on arbitrage into the pricier<br />
Ukrainian market, unless a financial<br />
back-up arrangement from the EU,<br />
Washington and the IMF are established<br />
first.<br />
The Levantine Basin<br />
An emerging gas-producing region<br />
closer to European markets other<br />
than the <strong>Caspian</strong> Basin is the Levantine<br />
Basin in the Eastern Mediterranean.<br />
Offshore discoveries since<br />
2009 – mostly in deep and ultradeep<br />
water – in Israel, Cyprus and Lebanon<br />
are estimated by the EIA (2013)<br />
to hold 1,170 bcm of technically recoverable<br />
gas. The Israeli Leviathan<br />
field, with an estimated 535 bcm of<br />
gas and 31.1 million barrels of liquid<br />
condensate is scheduled to start<br />
production in 2017. 5<br />
99<br />
CASPIAN REPORT, sprıng <strong>2014</strong><br />
5.<br />
There may well be delays, though, as the expected entrance of Australia’s Woodside Energy into<br />
the Leviathan consortium – a 25% acquisition worth $2.71 billion – has not come to fruition by the<br />
end of March, as previously agreed. Woodside, which is to become the project’s LNG operator,<br />
has requested that the Finance Ministry recognizes return on capital of between 17 and 19% for<br />
floating LNG production, yet not such clause has been included in the taxation principles’ outline<br />
(Jerusalem Post, “Woodside Entrance into Leviathan Gas Field Consortium Still Uncertain,” 27<br />
March <strong>2014</strong>).
Change language