Best of the Week
Most Popular
1. Stock Markets and the History Chart of the End of the World (With Presidential Cycles) - 28th Aug 20
2.Google, Apple, Amazon, Facebook... AI Tech Stocks Buying Levels and Valuations Q3 2020 - 31st Aug 20
3.The Inflation Mega-trend is Going Hyper! - 11th Sep 20
4.Is this the End of Capitalism? - 13th Sep 20
5.What's Driving Gold, Silver and What's Next? - 3rd Sep 20
6.QE4EVER! - 9th Sep 20
7.Gold Price Trend Forecast Analysis - Part1 - 7th Sep 20
8.The Fed May “Cause” The Next Stock Market Crash - 3rd Sep 20
9.Bitcoin Price Crash - You Will be Suprised What Happens Next - 7th Sep 20
10.NVIDIA Stock Price Soars on RTX 3000 Cornering the GPU Market for next 2 years! - 3rd Sep 20
Last 7 days
TESLA! Cathy Wood ARK Funds Bubble BURSTS! - 12th May 21
Gold Price During Hyperinflation - 12th May 21
Stock Market Extending Phase Two? - 12th May 21
Crypto 101 for new traders – ETH or BTC? - 12th May 21
Stock Market Enters Early Summer Correction Trend Forecast Time Window - 11th May 21
GOLD GDX, HUI Stocks - Will Paradise Turn into a Dystopia? - 11th May 21
Cathy Wood Bubble Bursts as ARK Funds CRASH! Enter into a Severe Bear Market - 11th May 21
Apply This Technique to Stop Rushing into Trades - 10th May 21
Stock Market Entering Early Summer Correction Trend Forecast - 10th May 21
CHIA Getting Started SSD Crypto Mining by Plotting and Farming on Your Hard Drives Guide - 9th May 21
Yaheetech Mesh Best Cheap Computer /. Gaming Chairs on Amazon Review - 9th May 21
Breaking US Trade Embargo with Cuba - Build 7 Computers in 14 Hours Before Ship Sales Challenge - 9th May 21
Dripcoin Applies New Technology That Provides Faster Order Execution - 9th May 21
Capital Gains Tax Hike News: Was It REALLY to Blame for Sell-off? - 7th May 21
Stock Market Transportation Index Continues To Grind Higher - 7th May 21
SPX Stock Market Correction Arriving or Not? - 7th May 21
How to Invest in an Online Casino? - 7th May 21
Gold & Silver Begin New Advancing Cycle Phase - 6th May 21
Vaccine Economic Boom and Bust - 6th May 21
USDX, Gold Miners: The Lion and the Jackals - 6th May 21
What If You Turn Off Your PC During Windows Update? Stuck on Automatic Repair Nightmare! - 6th May 21
4 Insurance Policies You Should Consider Buying - 6th May 21
Fed Taper Smoke and Mirrors - 5th May 21
Global Economic Recovery 2021 and the Dark Legacies of Smoot-Hawley - 5th May 21
Utility Stocks Continue To Rally – Sending A Warning Signal Yet? - 5th May 21
ROIMAX Trading Platform Review - 5th May 21
Gas and Electricity Price Trends so far in 2021 for the United Kingdom - 5th May 21
Crypto Bubble Mania Free Money GPU Mining With NiceHash Continues... - 4th May 21
Stock Market SPX Short-term Correction - 4th May 21
Gold & Silver Wait Their Turn to Ride the Inflationary Wave - 4th May 21
Gold Can’t Wait to Fall – Even Without USDX’s Help - 4th May 21
Stock Market Investor Psychology: Here are 2 Rare Traits Now on Display - 4th May 21
Sheffield Peoples Referendum May 6th Local Elections 2021 - Vote for Committee Decision's or Dictatorship - 4th May 21
AlphaLive Brings Out Latest Trading App for Android - 4th May 21
India Covid-19 Apocalypse Heralds Catastrophe for Pakistan & Bangladesh, Covid in Italy August 2019! - 3rd May 21
Why Ryzen PBO Overclock is Better than ALL Core Under Volting - 5950x, 5900x, 5800x, 5600x Despite Benchmarks - 3rd May 21
MMT: Medieval Monetary Theory - 3rd May 21
Magical Flowering Budgies Bird of Paradise Indoor Grape Vine Flying Fun in VR 3D 180 UK - 3rd May 21

Market Oracle FREE Newsletter

How to Protect your Wealth by Investing in AI Tech Stocks

What’s Behind Ukraine’s Energy Mess

Politics / Eastern Europe Feb 28, 2014 - 10:48 AM GMT

By: Money_Morning

Politics

Dr. Kent Moors writes: As you read this, Marina and I are on an airplane flying to 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 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 that all of that reserve is now gone.

Second, the European Union (EU) had offered assistance pending reforms of the gas transit system in tandem with the EU’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 is it unclear where outside interests such as the EU or the US 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. Russia/Gazprom/Kremlin had been pushing for the same concession.

Third, there is an element I happen to be working on currently. It’s the need 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, Russian ethnic 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 ethnic –revolution in the capital.

So there is a rising concern that Russian-speaking 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://oilandenergyinvestor.com/2014/02/quick-guide-whats-behind-ukraines-energy-mess/

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