Best of the Week
Most Popular
1. US Housing Market Real Estate Crash The Next Shoe To Drop – Part II - Chris_Vermeulen
2.The Coronavirus Greatest Economic Depression in History? - Nadeem_Walayat
3.US Real Estate Housing Market Crash Is The Next Shoe To Drop - Chris_Vermeulen
4.Coronavirus Stock Market Trend Implications and AI Mega-trend Stocks Buying Levels - Nadeem_Walayat
5. Are Coronavirus Death Statistics Exaggerated? Worse than Seasonal Flu or Not?- Nadeem_Walayat
6.Coronavirus Stock Market Trend Implications, Global Recession and AI Stocks Buying Levels - Nadeem_Walayat
7.US Fourth Turning Accelerating Towards Debt Climax - James_Quinn
8.Dow Stock Market Trend Analysis and Forecast - Nadeem_Walayat
9.Britain's FAKE Coronavirus Death Statistics Exposed - Nadeem_Walayat
10.Commodity Markets Crash Catastrophe Charts - Rambus_Chartology
Last 7 days
Silver Bull Market Update - 7th Aug 20
This Inflation-Adjusted Silver Chart Tells An Interesting Story - 7th Aug 20
The Great American Housing Boom Has Begun - 7th Aug 20
NATURAL GAS BEGINS UPSIDE BREAKOUT MOVE - 7th Aug 20
Know About Lotteries With The Best Odds Of Winning - 7th Aug 20
Could Gold Price Reach $7,000 by 2030? - 6th Aug 20
Bananas for All! Keep Dancing… FOMC - 6th Aug 20
How to Do Bets During This Time - 6th Aug 20
How to develop your stock trading strategy - 6th Aug 20
Stock Investors What to do if Trump Bans TikTok - 5th Aug 20
Gold Trifecta of Key Signals for Gold Mining Stocks - 5th Aug 20
ARE YOU LOVING YOUR SERVITUDE? - 5th Aug 20
Stock Market Uptrend Continues? - 4th Aug 20
The Dimensions of Covid-19: The Hong Kong Flu Redux - 4th Aug 20
High Yield Junk Bonds Are Hot Again -- Despite Warning Signs - 4th Aug 20
Gold Stocks Autumn Rally - 4th Aug 20
“Government Sachs” Is Worried About the Federal Reserve Note - 4th Aug 20
Gold Miners Still Pushing That Cart of Rocks Up Hill - 4th Aug 20
UK Government to Cancel Christmas - Crazy Covid Eid 2020! - 4th Aug 20
Covid-19 Exposes NHS Institutional Racism Against Black and Asian Staff and Patients - 4th Aug 20
How Sony Is Fueling the Computer Vision Boom - 3rd Aug 20
Computer Gaming System Rig Top Tips For 6 Years Future Proofing Build Spec - 3rd Aug 20
Cornwwall Bude Caravan Park Holidays 2020 - Look Inside Holiday Resort Caravan - 3rd Aug 20
UK Caravan Park Holidays 2020 Review - Hoseasons Cayton Bay North East England - 3rd Aug 20
Best Travel Bags for 2020 Summer Holidays , Back Sling packs, water proof, money belt and tactical - 3rd Aug 20
Precious Metals Warn Of Increased Volatility Ahead - 2nd Aug 20
The Key USDX Sign for Gold and Silver - 2nd Aug 20
Corona Crisis Will Have Lasting Impact on Gold Market - 2nd Aug 20
Gold & Silver: Two Pictures - 1st Aug 20
The Bullish Case for Stocks Isn't Over Yet - 1st Aug 20
Is Gold Price Action Warning Of Imminent Monetary Collapse - Part 2? - 1st Aug 20
Will America Accept the World's Worst Pandemic Response Government - 1st Aug 20
Stock Market Technical Patterns, Future Expectations and More – Part II - 1st Aug 20
Trump White House Accelerating Toward a US Dollar Crisis - 31st Jul 20
Why US Commercial Real Estate is Set to Get Slammed - 31st Jul 20
Gold Price Blows Through Upside Resistance - The Chase Is On - 31st Jul 20
Is Crude Oil Price Setting Up for a Waterfall Decline? - 31st Jul 20
Stock Market Technical Patterns, Future Expectations and More - 30th Jul 20
Why Big Money Is Already Pouring Into Edge Computing Tech Stocks - 30th Jul 20
Economic and Geopolitical Worries Fuel Gold’s Rally - 30th Jul 20
How to Finance an Investment Property - 30th Jul 20
I Hate Banks - Including Goldman Sachs - 29th Jul 20
NASDAQ Stock Market Double Top & Price Channels Suggest Pending Price Correction - 29th Jul 20
Silver Price Surge Leaves Naysayers in the Dust - 29th Jul 20
UK Supermarket Covid-19 Shop - Few Masks, Lack of Social Distancing (Tesco) - 29th Jul 20
Budgie Clipped Wings, How Long Before it Can Fly Again? - 29th Jul 20
How To Take Advantage Of Tesla's 400% Stock Surge - 29th Jul 20
Gold Makes Record High and Targets $6,000 in New Bull Cycle - 28th Jul 20
Gold Strong Signal For A Secular Bull Market - 28th Jul 20
Anatomy of a Gold and Silver Precious Metals Bull Market - 28th Jul 20
Shopify Is Seizing an $80 Billion Pot of Gold - 28th Jul 20
Stock Market Minor Correction Underway - 28th Jul 20
Why College Is Never Coming Back - 27th Jul 20
Stocks Disconnect from Economy, Gold Responds - 27th Jul 20
Silver Begins Big Upside Rally Attempt - 27th Jul 20
The Gold and Silver Markets Have Changed… What About You? - 27th Jul 20
Google, Apple And Amazon Are Leading A $30 Trillion Assault On Wall Street - 27th Jul 20
This Stock Market Indicator Reaches "Lowest Level in Nearly 20 Years" - 26th Jul 20
New Wave of Economic Stimulus Lifts Gold Price - 26th Jul 20
Stock Market Slow Grind Higher Above the Early June Stock Highs - 26th Jul 20
How High Will Silver Go? - 25th Jul 20
If You Own Gold, Look Out Below - 25th Jul 20
Crude Oil and Energy Sets Up Near Major Resistance – Breakdown Pending - 25th Jul 20
FREE Access to Premium Market Forecasts by Elliott Wave International - 25th Jul 20
The Promise of Silver as August Approaches: Accumulation and Conversation - 25th Jul 20
The Silver Bull Gateway is at Hand - 24th Jul 20
The Prospects of S&P 500 Above the Early June Highs - 24th Jul 20
How Silver Could Surpass Its All-Time High - 24th Jul 20

Market Oracle FREE Newsletter

How to Get Rich Investing in Stocks by Riding the Electron Wave

Investor Energy Potential in Ukraine's Troubles

Politics / Energy Resources Mar 01, 2014 - 06:50 PM GMT

By: Money_Morning

Politics

Dr. Kent Moors writes: [LONDON] As you read this, Marina and I will be in London for the annual energy consultations at Windsor Castle.

Now, if it seems like I'm spending far too much time traveling these days, you're right. But the truth is our trip to England is just the beginning... more is yet to come.

You see, most of the major new developments are no longer taking place in North America. The global energy sector is intensifying, and its importance has never been more striking than it is right now.


The American unconventional oil and gas revolution has gone global. In fact, that is the prime topic of our discussions at Windsor.

However, there is another place in the world that has my attention on this flight. It's Ukraine.
Needless to say, the situation there hasn't exactly been encouraging.

But here's what you might not be aware of. In addition to all of its other problems, Ukraine is also at the center of an increasingly messy energy situation.

Here's what's behind it all...

Six Facets of a Very Sticky Situation

There are at least six components here, and they complicate any easy receipt of the short-term, international financial support that is critical.

First, the country still remains dependent on natural gas from Russia. The chill in cross-border relations as a result of the ongoing political turmoil hardly improves this situation.

In fact, the Kremlin had advanced the prospect of offering discounted gas. But that was before the pro-Russian President Viktor Yanukovych was ousted and pro-Ukrainian nationalists took over the reins of government in Kiev.

Now, that gas will certainly revert to its earlier "cash on the barrel head," or COB arrangement.

There will be no Russian credit forthcoming, and Ukraine cannot pay. They had been playing their earlier contracts by accumulating volume in storage during the high summer at low prices to be used in the higher-priced winter months, but all of that reserve is now gone.

Second, the European Union (E.U.) had offered assistance pending reforms of the gas transit system in tandem with the E.U.'s Energy Charter Treaty (ECT).

The ECT requires that signatories separate production and distribution assets as well as provide third parties with access to domestic pipeline and other transit systems. Russia has rejected this all-too-obvious frontal attack on Gazprom's natural gas monopoly over the market pricing and home pipeline system. Ukraine has been (at least in theory) more flexible.

After the recent events, however, Kiev will now probably have to give up some administrative control over the pipeline system for significant energy assistance.

Yet it is unclear where outside interests such as the E.U. or the U.S. would be able to source gas for use inside Ukraine. Some financial assistance will be forthcoming, but when it comes to the large price tag demanded by the domestic pipeline upgrades, immediate help will require that whatever government emerges be amenable to relinquishing some control.

The Kremlin, and therefore Gazprom, had been pushing for the same concession.

Third, there is an element I happen to be working on currently.

It's the need to bring additional foreign interests to bear on shale gas development in Western Ukraine and the building of a liquefied natural gas (LNG) terminal outside Odessa. Progress so far on the first has been slow and uneven, while on the second there is interest in Azerbaijan and Iraq to provide gas, but nothing substantive, and it would require several years of engineering and construction.

With genuine onshore conventional oil and gas prospects more limited, the country needs the domestic "new gas" and imports by a non-pipeline (and not-across-Russia) transit venue to avoid experiencing a genuine contraction on the demand side. That would wreak havoc with an already hard-pressed economic picture.

Fourth, Ukraine still controls the majority of Russian gas moving on to Western Europe, but that will end with the completion of the Russian bypass pipelines. Nord Stream, across the Baltic Sea bed, is already operating to Germany, while South Stream is about to move Russian gas into Southeastern Europe by way of the Black Sea and Turkey.

In addition, the alternative Yamal-Europe gas pipeline crossing Belarus to Poland is already owned by Gazprom. The Russian giant now owns 100% of the Belarusian national gas pipeline company, a fate several in Kiev believed was on the planning block for its own system once Russia laid out its full assistance schedule.

The end result here is less gas for Ukraine since much of the throughput fee is paid in kind by Gazprom for crossing Ukrainian territory, and even less prospects for using that transport avenue as a pawn in the negotiation process with its larger neighbor.

Fifth, the prospects for development of offshore Black Sea deposits are now up in the air. It is likely that a short-term response to the political instability now gripping Kiev will create more movement to fast track projects in Russian Black Sea waters.

Finally, given the increasing difficulties of meeting gas prices even before the current crisis, Ukraine had been moving more toward replacing gas with coal. But in addition to the environmental consequences, there is now a genuine political problem developing.

The primary domestic coal supplies are in the eastern, ethnic-Russian, Donetsk basin, where what has happened in displacing a local politician from the presidency has gone over hard.

Many in Donetsk, Crimea, and other parts of the eastern and southeastern portions of Ukraine are livid about the rise of a pro-Ukrainian nationalist - and anti-Russian - revolution in the capital.

So there is a rising concern that Russophone Ukraine may withhold coal supplies from Ukrainian-speaking Ukraine. And then there is the Russian Black Sea fleet which just happens to be based in the Crimean (and Ukrainian) port of Sevastopol.

It's an example of how geopolitical events sometimes have a major energy component. In the case of what is transpiring in Ukraine, energy may be the main chess board in which political change is worked out.

But that is hardly reassuring.

Source : http://moneymorning.com/2014/03/01/energy-potential-ukraines-troubles/

Money Morning/The Money Map Report

©2014 Monument Street Publishing. All Rights Reserved. Protected by copyright laws of the United States and international treaties. Any reproduction, copying, or redistribution (electronic or otherwise, including on the world wide web), of content from this website, in whole or in part, is strictly prohibited without the express written permission of Monument Street Publishing. 105 West Monument Street, Baltimore MD 21201, Email: customerservice@moneymorning.com

Disclaimer: Nothing published by Money Morning should be considered personalized investment advice. Although our employees may answer your general customer service questions, they are not licensed under securities laws to address your particular investment situation. No communication by our employees to you should be deemed as personalized investent advice. We expressly forbid our writers from having a financial interest in any security recommended to our readers. All of our employees and agents must wait 24 hours after on-line publication, or after the mailing of printed-only publication prior to following an initial recommendation. Any investments recommended by Money Morning should be made only after consulting with your investment advisor and only after reviewing the prospectus or financial statements of the company.

Money Morning Archive

© 2005-2019 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Post Comment

Only logged in users are allowed to post comments. Register/ Log in

6 Critical Money Making Rules