360° Coverage : What Ukraine Needs Is An American-Style Shale Gas Revolution

2 Updates
What Ukraine Needs Is An American-Style Shale Gas Revolution
Photo Credit: Forbes Business

What Ukraine Needs Is An American-Style Shale Gas Revolution

Mar 3 2014, 5:10pm CST | by

Natural gas was the origin of the crisis in Ukraine. The country serves as a transit point for about 6 billion cubic feet per day of Russia’s natgas exports into Europe. That’s about 2.2 trillion...

Filed under: news

 
 
 

26 weeks ago

What Ukraine Needs Is An American-Style Shale Gas Revolution

Mar 3 2014, 5:10pm CST | by

Natural gas was the origin of the crisis in Ukraine. The country serves as a transit point for about 6 billion cubic feet per day of Russia’s natgas exports into Europe. That’s about 2.2 trillion cubic feet per year, or 14% of Europe’s total supply.

More than just serving as a middleman for Russian gas, Ukraine is like the dealer who got hooked on his own supply. Under the terms of its last supply deal, Gazprom agreed to sell gas to Ukraine at $7.70 per thousand cubic feet, a 33% discount to what European customers pay (but a big premium to U.S. gas prices of roughly $4.50 per mcf). Moscow even agreed to gradually buy $15 billion of new Ukrainian bonds, to keep the country from defaulting on other debts.

Yet even at that discounted price, Ukraine has had a tough time paying Gazprom’s invoices. Earlier today Russia suggested that if Ukraine didn’t pay its $1.5 billion gas bill Gazprom might just shut off the valves and renege on those price discounts. Since 2006, Putin has twice cut off the gas to Ukraine, most recently in 2009.

Edward Chow at the Center for Strategic and International Studies, wrote in this essay last December that Ukraine’s being “addicted to cheap gas … has blocked the modernization of its industry, economy and politics.”

Ukraine has been a junky for Russian gas. Putin clearly had no problem with that; it is in Russia’s interest to keep Ukraine and Europe hooked on Russian gas at prices just low enough to quash incentives to drill and frack for shale gas. Russia’s state-run news and propaganda outlets have for years disseminated articles critical of fracking and supported opponents of the technique, despite its 50-year track record of proven efficacy and scant mishaps.

Even Ukraine’s ousted President Yanukovich, despite his dealmaking with Russia, had clearly acquiesced to pressure to explore Ukraine’s other energy options.

Last year Ukraine signed natural gas exploration deals with Royal Dutch Shell as well as Chevron, which pledged to invest as much as $10 billion if adequate supplies of shale gas were found. The government said it hoped the two companies’ projects would add more than 50% to Ukraine’s current domestic natgas supply. Ukraine could hold more than 40 trillion cubic feet of recoverable shale gas, enough to satisfy decades of demand.

Now with Yanukovich gone it’s as if Putin has taken the Crimea as a kind of hostage — collateral to hold against what Ukraine owes Russia for gas.

A few billion dollars in IOUs is, of course, a less than flimsy pretext for thuggery. Which is why the Kremlin’s propaganda machine has been spreading lies about how his soldiers are there to save Ukraine’s ethnic Russians from right-wing crazies.

But Putin’s actions underscore the threat that shale gas development really does pose to Russia’s gas-fueled diplomacy.

Even if Gazprom were to cut off gas supplies to Ukraine, there is no real fear of a gas shortage in Europe, according to Bernstein Research. This winter has been a warm one in the region (as witnessed by the balmy temps for the Sochi Olympics), so demand for heating has not been as great. Thus, natural gas volumes in storage are higher than average, at about 50% of capacity.

What’s more, even if Russia did halt shipments through Ukraine, there’s enough extra space in the Nord Stream pipeline running from Russia into Germany to pick up about half of the slack.

The rest of any shortfall could likely be met with greater imports of superchilled LNG. Europe has been building more gas storage in recent years precisely to balance out Russia’s influence and to position itself to receive LNG not just from established gas giants like Qatar, but also from giant new projects in Australia, a host of planned export terminals in the U.S. and even new developments in the works offshore Israel.

Analyst Oswald Clint, of Bernstein, said in a note today that several big oil and gas companies are positioned well to benefit from higher gas prices on the continent. BG Group ships a lot of LNG and has a higher percentage of its supply free to be sold on the spot market. While Shell is also a big LNG player. Statoil, meanwhile, is the company with the highest leverage to European gas, with Bernstein figuring that 47% of its net income last year came from European gas production and marketing.

As for oil, Ukraine uses about 300,000 barrels per day, with roughly 80,000 bpd sourced domestically. There the country is also beholden to Russia; Rosneft already owns Ukraine’s second-biggest oil refinery, and is in process of acquiring the biggest.

That’s too bad, because now would have been the perfect time for the Obama administration to lift the ban on American oil exports so that we could send a few million barrels of  American “freedom oil”  to Ukraine.

In Monday trading, shares of Statoil advanced 2.5%; Shell was down 1.4%; while Total (which has a gas venture with Russia’s Novatek) declined 2%. BP, which owns about 20% of Kremlin-controlled Rosneft, was down 3%. Gazprom’s ADRs plunged 11%./>/>

Vladimir Putin

Source: Forbes Business

 
Update
2

3 days ago

Khazanah throws MAS RM6b lifeline

Aug 29 2014 5:01pm CDT | Source: Business Times Singapore

August 30, 2014 1:15 AMKHAZANAH Nasional will inject RM6 billion (SS$2.4 billion) over three years to resuscitate loss-making Malaysia Airlines (MAS) under a recovery plan that includes even an Act of Parliament. Other key moves are migrating its operations, assets and liabilities to a new com ...
Source: Business Times Singapore   Full article at: Business Times Singapore
 

 
Update
1

4 days ago

MAS posts loss of RM307m for Q2

Aug 28 2014 5:00pm CDT | Source: Business Times Singapore

August 29, 2014 1:13 AMMALAYSIA Airlines (MAS) registered a loss of RM307 million (S$122 million) for the second quarter to end-June, but warned of worse to come in the second half when the "full financial impact of the double tragedies of MH370 and MH17" hits home. ...
Source: Business Times Singapore   Full article at: Business Times Singapore
 

 

Don't miss ...

 

<a href="/latest_stories/all/all/30" rel="author">Forbes</a>
Forbes is among the most trusted resources for the world's business and investment leaders, providing them the uncompromising commentary, concise analysis, relevant tools and real-time reporting they need to succeed at work, profit from investing and have fun with the rewards of winning.

 

blog comments powered by Disqus

Latest stories

Nigeria to get Japanese drug for Ebola treatment
Abuja, Sep 2 (IANS) Nigeria will soon get a Japanese drug to treat Ebola, the country's Health Minister Onyebuchi Chukwu said Monday.
 
 
Japan to aid connectivity upgrade in northeast India
Tokyo, Sep 1 (IANS) India and Japan Monday decided to strengthen cooperation for improving connectivity and socio-economic development in northeastern states of India.
 
 
Three Ebola cases recorded in Nigeria oil hub
Abuja, Sep 1 (IANS) At least three cases of Ebola virus disease (EVD) have been recorded in Nigeria's oil hub of Port Harcourt, where a fatality was confirmed last week, the country's Minister of Health Onyebuchi Chukwu said here Monday.
 
 
India, Japan to elevate strategic partnership
Tokyo, Sep 1 (IANS) Prime Minister Narendra Modi Monday said relations with Japan were of the "highest priority" for his government and announced a slew of initiatives, including turning the strategic partnership into a "special" partnership and a fast-track channel for Japanese investors.
 
 
 

Latest from the Network

13 killed in Baghdad bomb blasts
Baghdad, Sep 2 (IANS) As many as 13 people have been killed in two explosions in Iraq's capital Baghdad Monday, a police source said. Thirteen people were killed and 45 others injured when two car bombs exploded in...
Read more on Politics Balla
 
Rebels, Syrian forces clash near Golan Heights
Cairo, Sep 2 (IANS/EFE) Islamic rebels clashed with the Syrian forces near Israeli-controlled Golan Heights Monday, the Syrian Observatory for Human Rights said. The observatory, in a statement, said that fighting...
Read more on Politics Balla
 
Kelly Brook suffered second miscarriage
London, Sep 2 (IANS) Actress-model Kelly Brook has revealed that she suffered a second miscarriage while dating Thom Evans. The 34-year-old and the former rugby star lost their first child May 6, 2011 when Brook gave...
Read more on Celebrity Balla
 
Russia may retaliate against fresh EU sanctions
Moscow, Sep 2 (IANS/EFE) Russia will take retaliatory measures to defend its legitimate interests if the European Union imposes new sanctions over Moscow's intervention in Ukraine, the country's foreign ministry said...
Read more on Politics Balla
 
Britney Spears looking forward to dating
Britney Spears is looking forward dating again. The 32-year-old singer admitted during her 'Piece of Me' show at the Planet Hollywood in Las Vegas yesterday (08.31.14) that she's excited about meeting someone new...
Read more on Celebrity Balla
 
Lindsay Lohan seeks hypnosis to quit smoking
Lindsay Lohan has reportedly been undergoing hypnotherapy to help her give up smoking. The 28-year-old actress has turned to psychotherapy in the hope of kicking her nicotine addiction before she performs in 'Speed-the...
Read more on Celebrity Balla
 
Ian Somerhalder and Nikki Reed spend $860 in sex shop
Ian Somerhalder and Nikki Reed allegedly spent nearly $1,000 in a sex shop yesterday (08.31.14). The new couple, who have been dating for the past few months, reportedly forked out $860 on a number of erotic toys -...
Read more on Celebrity Balla
 
Robin Williams' daughter returns to Twitter
Robin Williams' daughter has returned to Twitter. Zelda Williams posted her first tweet on the social networking site tonight (01.09.14) almost three weeks after she abandoned her account when she received abusive...
Read more on Celebrity Balla
 
Is Miley Cyrus dating Douglas Booth?
Los Angeles, Sep 2 (IANS) Pop star Miley Cyrus and British actor Douglas Booth are reportedly dating. The "Wrecking Ball" hitmaker was first rumoured to be romancing Booth in 2010 when they co-starred in teen drama "...
Read more on Celebrity Balla
 
UN chief alarmed by Israeli claim on West Bank land
United Nations, Sep 2 (IANS) UN Secretary-General Ban Ki-moon Monday expressed alarm at the Israeli declaration of a 400 hectares area in the West bank as "state land". "The secretary-general is alarmed by yesterday's...
Read more on Politics Balla