14/1/2015: Gazprom to Europe: See You in Turkey

And we have it... from the mouthpiece of Moscow, the Rossiyskaya Gazeta (link to Russian version here).

Head of "Gazprom" Alexei Miller announced new strategy in response to the changes to the EU energy policy. This involves:
1) South Stream pipeline is dead. Permanently.
2) South Stream is to be replaced by Turkish Stream, crossing Black Sea and landing in Turkey, with no plans for connecting to Europe.
3) If Europe wants Russia gas, it will have to build its own connection from Turkey.
4) All gas supplied via Ukraine - currently 63 bcm of gas going to Europe via Ukraine transit - will be shipped via Turkish Stream.
5) Shipments of gas via non-Ukraine transit will continue (in 2013 total Russian gas supplies to Europe were 161.5 bcm and in 2014 these were down roughly 10 percent).

All of this is a response to the EU plans to monopolise purchasing of energy from outside the EU. The EU is aiming to increase its bargaining power both vis-a-vis prices of delivery and delivery channels (pipelines access). Understandably, Russian objective is to retain some pricing power and control over transit systems (remember, these systems are built either using Russian funds or a combination of funds involving Russian funds).

The implications of Miller's announcement are wide-ranging. In effect, Russia is calling Europe's bluff on both Ukraine and Energy Union.

If Ukraine is shut out of transit of Russian gas, Kiev will be forced to lock into European supply systems. The risk of non-payments - a very material risk given Kiev's track record over the 1990s and 2000s - will fall squarely onto European system. Alternatively, Ukraine will be exposed to the risk of Gazprom dictating its terms on gas supplies to Ukraine. Ukraine will also lose lucrative billions in transit fees (ca USD3bn in 2013 alone) and will face new costs for shipments of gas - cheaper via direct route from Russia, more expensive via European system link up.

Turkey is a big winner here as it gets to become the dominant key hub (ahead of Nord Stream) for transit of gas to Europe (including Central Asian gas).

EU is not necessarily a loser in this, however. Owning the pipe from Turkey to Europe, the EU will be able to negotiate transit of Central Asian gas as a substitute for Russian gas with minimal capital expenditure.

17/6/2014: Gas, Oil, Russia, Ukraine & Europe: couple of links

An interesting report from Bloomberg on Russia's demand for oil exploration and production JVs with Western companies: here.
One core reference is to the new/old Bazhenov superfield which I covered before here.
Meanwhile, I commented before that Ukraine gas supply disruption is a distinct issue from the European gas supplies, as Ukraine has a separate contract relating to gas transit and this contract has always been paid in full and there are no arrears on it. Ukraine legally does not own the gas it transits. In other words, any disruption to supply of gas to Europe via Ukraine can only come from Ukrainian authorities appropriating gas that belongs to other countries. I expect this to be highly unlikely, especially since Ukraine has pumped in gas reserves sufficient to last it through mid-December 2014.
To confirm this, here is the EU Commission position on the issue of security of supply to European customers. 
And Gazprom position on the issue: "Russian gas transit supplies via Ukraine are being delivered in routine mode. The daily gas amount stands at slightly more than 185 million cubic meters. An emergency headquarters started working in Russian energy giant Gazprom, monitoring the situation every day. If Gazprom finds that gas intended for Europe is left in Ukraine, Russia will increase gas supplies via Nord Stream and Yamal-Europe projects, Miller said. The upstream throughput capacity of Ukrainian gas delivery system makes 288 billion cubic meters and the downstream one amounts to 178.5 billion cubic meters. The country’s gas transportation system consists of 72 gas compressor stations, 110 shops and 1,451 gas hubs. The length of gas pipelines makes 38,600 kilometers."

Predictably, Ukraine blames 'terrorists' (aka 'separatists') for today's explosion. Report here. However, not known for its pro-Russian views, Euronews had to acknowledge that "...explosion was far from the violence in east Ukraine..." Never mind, we know Ukraine has no extremists on the other side of the ethnic divide... why, none at all... and none of them would ever want to do any harm to Gazprom lines to Europe... why, never, of course. It is just so slightly inconvenient that Mr Yatsenuk's own backers - Euro Maidan - are on the record saying they are in favour of blowing up pipelines: http://euromaidanpr.wordpress.com/2014/04/13/plan-b-flatten-belgorod/.

Nice touch there ahead of spreading uranium, and shelling Russian cities (the brave folks would obviously expect Russia to not retaliate),

Truth is - we simply do not know who blew up the pipe, and it is unlikely we will ever find out.