Gas for Europe will Rise in Price
FROM THE REDACTION
According to “Gazprom’s” official repre-sentative Kuprianov, the gas concern is going to raise the price of exported gas to 250 USD per 1000m3. He exactly formulated the gas concern’s price policy in relation to Europen consumers. This statement is an adequate response to the publications in press concerning systematic formation of a “gas empire” which is expressed in energy resources price management policy.
Condoleezza Rice called Russia for responsibility and advised to solve the problem by means of a dialog and not by threats. It is pointed out here that in the US gas price per 1000m3 already makes up 330 USD, and that is why the price proposed by “Gazprom” will not be considered as economically ungrounded.
On the other hand, the crisis caused by the resignation of Ukrainian government may have an effect on European consumers that get 80% of gas from “orange” pipeline. It is expected that the number of protesters against the tough policy in relation to supply of energy resources will increase.
The first wave of such anxiety was observed in Eastern Europe.
Romania
The Romanians that receive 40% of the consumed gas from Russia were one of the first to express their discontent. The Romanian government is dissatisfied by the fact that it pays for gas more than the neighboring Moldova and Ukraine.
The country’s Minister of Trade and Ecomomy Ioan-Kondrutz Sheresh expressed came interested in that fact why the gas price for his country had been raised but the same had not been done for Ukraine. Mediatory companies refused to sign a contract with “Gazprom” that is going to raise the gas price for Romania to 250 USD per 1000m3 till 2013.
As a result, currently the terms of another agreement are effective in Romania, in accordance with which in the first quarter of 2006 the country will purchase gas at the price of 270 USD per 1000m3. Then, during the period till 2030 – no more than 285 USD. Sheresh used to support the existing agreement. If we take into account the trend of rising of energy resources prices, it is clear that the prices will rise from year to year; in this case it is more profitable to reserve the maximum price for a long time period so that to keep it at the fixed point. It is also clear that under the existing situation it is more convenient for Romania to consolidate its position with the European countries that are worried about the behavior of the chairman of the “G8”.
Bulgaria
In Bulgaria there is a different situation in the gas sector. According to the statement of the Minister of Energy, Rumen Ovtsarov, Bulgarian rejected “Gazprom’s” demand concerning changing of the contract on gas supply. The amendment proposed by “Gazprom” will entail increasing of price for Russian gas. In accordance with one of the contracts that was concluded between “Bulgargaz” and “Gazprom”, Bulgaria pays 258 USD per 1000m3. According to the additional agreement, Russia’s transit tax gives Bulgaria an opportunity to receive part of gas at the price of 83 USD per 1000m3.
The Bulgarians carry out transit of Russian gas to Turkey, Greece and Macedonia. It was offer to “Bulgargaz” to substitute for the transit barter, and make the gas price 258 USD. They rejected this proposal and pointed out that the old agreement remains effective till 2010. We have to suppose that in 4 years Russian gas will be rather expensive for the country. The worst thing is that Bulgaria receives the whole of its gas from Russia.
Moldova
Moldova refused to buy gas from Russia for 160 USD and now, in fact, it does not receive Russian blue fuel. The Moldavians used 80 USD per 1000m3, but the situation changed before 2006. According to the statement of Moldova’s President Vladimir Voronin, 160 USD for 1000m3 is not the market price. He points out that special preferences have been created for Russian-Moldavian joint business in the gas sphere. The EU called the parties for renewing of negotiations within a short period of time.
Other countries
Poland decided to diversify the sources of gas import and partially pass on to LN gas. Austria and Hungary are also going to implement similar projects. According to their supposition, gas from Central Asia will be supplied to Europe through Austria and Turkey. Besides, the construction of a pipeline for the delivery of LN gas from the Middle East and Northern Africa may be launched.
Turkey is also dissatisfied with increasing of gas prices but cannot do anything about it. Iraqi gas is more expensive for them. A threat of the Turkish government is already heard, but there is no respond from Russia for the time being.
Conclusion
Fixing of gas price does not take place by “Gazprom” directly. It is influenced by demand, transit tariffs and other conditions.
Currently, “Gazprom” is constructing the North European gas pipeline together with the German part, which will considerably reduce the gas price.
According to the contract signed by Russia and Ukraine, a Swiss company ROSUKRENERGO is a mediatory company between “Gazprom” and the Ukrainian party. As a European legal entity, this company may play a mediatory role not only between “Gazprom” and “Naftogas”, but between “Gazprom” and any Europen gas company, which makes it possible to supply gas directly from Switzerland to Europe in accordance with European prices.
Rise in the Price of Gas will Make Problems for the US
From summer 2003 to summer 2005 the price of imported oil in the US doubled. During this period consumers’ expenditures and investments made by businessmen were retained, GDP is growing and the unemployment rate decreased by 4,9%. Further rising in price of oil is expected since the demand for it is constantly increasing in China and other Asian countries, and reducing of production will push up the prices. In 2003 the US had luck, since it got rid of changes in monetary and fiscal policy, which could have caused rising in price of oil. But this time there will be no luck if the oil price will increase again.
Iranian Nuclear Weapons may Cause Rising in Price of Oil
Oil in the US rose in price after Iran spread information that it would not allow an unexpected inspection concerning nuclear weapons. The US and Europe believe that Iran hastens to create a nuclear power station in order to conceal an attempt to create nuclear weapons. The International Agency for Atomic Energy believes that economic and political sanctions will be imposed on Iran. Oil traders think that in this case the price of crude oil will increase again, there is no doubt that Iran uses oil as a weapon.
Russian Gas will Reach Jerusalem
It is possible that Turkey will become a new transit corridor for Russia. Russia intends to supply gas to Greece, Italy and even Israel. Gazprom’s head Alexsey Miller is planning to supply natural gas to Turkey across the Black Sea. One such gas pipeline “Blue Stream” already stretches on the bed of the Black Sea.
Oil Production in Azerbaijan will Increase Three Fold within Three Years
In 2006 oil production in Azerbaijan will reach 28,55 million tons, in 2007 – 42,15 million tons, in 2008 – 61,06 million tons, and in 2009 – 61,15 million tons. Azerbaijani State Oil Company points out that production growth will take place thanks to the “century contract”.
Sweden’s Ambition – to be Independent of Foreign oil by 2020
Though American President George Bush has called for his nation to find a better alternative for foreign oil, this was not news for Sweden, since this country has the same objective. The Swedes have already set an ambitious objective – to be independent of foreign oil in 15 years. This was declared by the country’s Prime Minister in September. He also said that an alternative fuel should be found. No one objects this striving, just as it is the case with Bush’s statement.
China’s Growing Demand for Oil has no Effect on the US
Bush’s administration declares that an attempt of Chinese companies to buy international energy assets will not inflict harm to the US, and calls China’s energy policy “economically neutral”. It is also pointed out that China cooperates with those states where US companies cannot or do not want to make investments, which may enlarge world oil supply.
Rising in Price of Gas in Georgia
According to Georgian experts, rising in price of gas will not only inflict harm to the Georgian economy but will also empty citizens’ pockets. This information is being spread by “Khvalindeli Dghe” newspaper. In accordance with forecasts, essential goods will rise in price. Expert Gia Khukhashvili believes that bread did not rise in price because its weight has been reduced. Rising in price of gas will seriously accelerate inflation in Georgia. “Our economy is not so strong to sustain such blow”, the expert says. Another expert – Gogita Tsutskiridze believes that gas is the energy resource which the whole economy depends on. The Project of the Eastern Oil Pipeline is being Implemented at High Rates
Experts of state ecological expert examination signed the draft of construction of the first stage of “Eastern Siberia – Pacific Ocean” oil pipeline. However, as it became known, serious mistakes were made during the expert examination. First of all, the entire project was adopted, while the experts considered only one part of it, from Taishet to Skovorodino. Secondly, in spite of the fact that three different groups of the expert commission considered three different parts of the project, all votes were taken into account in taking the decision. The project was prepared by “Transneft”, they do not want to give any comments until official documents appear. It is expected that the Technical Supervision Service of Russia will sign the decision of the state expert examination and a principle decision on construction of the oil pipeline will not be reconsidered. However, ecologists will try to convince the court of the necessity of changes.
Last December Russian Prime Minister Mikhail Fradkov signed a decision concerning the construction of “Eastern Siberia – Pacific Ocean” oil pipeline. The capacity of 4 000 km long oil pipeline will be 80 million tons of oil a year. The first stage of construction will be implemented from Taishet (Irkutsk region) to Skovorodino (Amur region). Its capacity is 30 million tons of oil a year. It is supposed that its construction will be completed by the second half of 2008. The second stage implies construction from Skovorodino to Perevoznoye bay, with the capacity of 50 million tons a year. The total amount of investments – 11,5 million USD.
A legal process is planned for March, concerning the government’s illegal decision on construction of the pipeline, though it is questionable whether this attempt will be a success.