Russia's pipeline power

[corbe]

Russia's pipeline power

Washington is focused on Russia's political interference—but Moscow's campaign against the U.S. extends beyond the ballot box.

 By Edoardo Saravalle 
  | 06/20/2017 05:27 AM EDT
 
  For months, Washington has been fixated on Russia’s interference in our presidential election, as well as similar concerns in elections of our European allies like France and Germany. Moscow’s actions are a direct threat to the credibility of our presidential elections and it’s understandable that lawmakers and pundits have spent so much time discussing them.

But Russia’s campaign to undermine the United States extends beyond the ballot box and across multiple domains, from its annexation of Crimea in Ukraine to its support for Syrian dictator Bashar Assad. One extension of this policy that has received curiously little attention, though, is Russia’s energy policy.

As the world’s second-largest producer of natural gas, Russia actually has leverage over its European customers by threatening to cut off gas supplies, and it’s using this power to foster discord among European countries. A new pipeline that Moscow intends to build could dramatically increase that leverage, potentially raising its share of Germany’s gas market to above 50 percent. This policy, and the pipeline in particular, poses a direct challenge to the post-World War II U.S. interest in European stability—and could potentially have effects that outlast the election scandals.

At the end of April, Russian natural gas giant Gazprom signed a financing deal for its Nord Stream 2 pipeline, which would carry gas from Russia’s Ust-Luga area west of St. Petersburg across the Baltic Sea directly to Germany, where it would be distributed to other European countries. Natural gas infrastructure is costly and complex to build, and, once in place, pipelines can reshape the flows and relations between affected countries for decades. If Nord Stream 2 passes its environmental review, the project would deepen EU reliance on Russian gas and increase Moscow’s leverage over key U.S. allies.

Nord Stream 2 would expand Russia’s commanding position in European gas markets, a position it holds in part thanks to the Nord Stream 1 pipeline, which follows a similar sub-Baltic Sea route. In 2016, Russia supplied 34 percent of EU natural gas consumption, and Nord Stream 2 could double Nord Stream 1’s export capacity. In total, the new pipeline could deliver enough energy to Europe for 26 million households per year.

One analyst has argued Nord Stream 2 would increase Russia’s share of the German gas market to over 50 percent, from 43 percent of its imports in 2015. Poland already receives more than two-thirds of its natural gas supply from Gazprom. And Nord Stream 2 backers also note that European domestic gas supply is set to decline by 50 percent over the next 20 years, and the fear is that the pipeline would mop up a significant amount of this developing import gap, deepening European reliance by discouraging imports from elsewhere.

Military spending and disinformation have so far been the principal lenses for looking at the Russia threat. Since the 2006 Riga Summit, the United States has pressured its NATO allies to reach the target of spending at least 2 percent of their GDP on defense, and it was a major topic during Trump’s first official NATO meeting in May. Similarly, disinformation has attracted attention on Capitol Hill, including provisions in proposed Russia sanctions legislation.

The success of Nord Stream 2, however, is a reminder that security depends on more than military strength and a healthy media environment. The pipeline is a naked Russian attempt to divide and conquer Europe. What makes the Kremlin so clever, and this effort so insidious, is that Gazprom has engineered an attractive business case for the project for a number of European gas importers.

Russia’s construction of Nord Stream 2 would weaken Europe in three key ways. First, it would give Russia greater leverage over Germany and other European countries. With such a large share of its natural gas market, Germany will be hostage to Russia’s supply manipulation, particularly if Russia chooses to jack up the price, or, in the extreme, reduce delivery. That’s a lot of power for Russian President Vladimir Putin, and the United States and Germany should not assume that Russia would never choose to bring down the hammer.

<..snip..>

http://www.politico.com/agenda/story/2017/06/20/russia-pipeline-power-000460

[IsailedawayfromFR]

Russia's pipeline power

Washington is focused on Russia's political interference—but Moscow's campaign against the U.S. extends beyond the ballot box.

 By Edoardo Saravalle 
  | 06/20/2017 05:27 AM EDT
 
  For months, Washington has been fixated on Russia’s interference in our presidential election, as well as similar concerns in elections of our European allies like France and Germany. Moscow’s actions are a direct threat to the credibility of our presidential elections and it’s understandable that lawmakers and pundits have spent so much time discussing them.

But Russia’s campaign to undermine the United States extends beyond the ballot box and across multiple domains, from its annexation of Crimea in Ukraine to its support for Syrian dictator Bashar Assad. One extension of this policy that has received curiously little attention, though, is Russia’s energy policy.

As the world’s second-largest producer of natural gas, Russia actually has leverage over its European customers by threatening to cut off gas supplies, and it’s using this power to foster discord among European countries. A new pipeline that Moscow intends to build could dramatically increase that leverage, potentially raising its share of Germany’s gas market to above 50 percent. This policy, and the pipeline in particular, poses a direct challenge to the post-World War II U.S. interest in European stability—and could potentially have effects that outlast the election scandals.

At the end of April, Russian natural gas giant Gazprom signed a financing deal for its Nord Stream 2 pipeline, which would carry gas from Russia’s Ust-Luga area west of St. Petersburg across the Baltic Sea directly to Germany, where it would be distributed to other European countries. Natural gas infrastructure is costly and complex to build, and, once in place, pipelines can reshape the flows and relations between affected countries for decades. If Nord Stream 2 passes its environmental review, the project would deepen EU reliance on Russian gas and increase Moscow’s leverage over key U.S. allies.

Nord Stream 2 would expand Russia’s commanding position in European gas markets, a position it holds in part thanks to the Nord Stream 1 pipeline, which follows a similar sub-Baltic Sea route. In 2016, Russia supplied 34 percent of EU natural gas consumption, and Nord Stream 2 could double Nord Stream 1’s export capacity. In total, the new pipeline could deliver enough energy to Europe for 26 million households per year.

One analyst has argued Nord Stream 2 would increase Russia’s share of the German gas market to over 50 percent, from 43 percent of its imports in 2015. Poland already receives more than two-thirds of its natural gas supply from Gazprom. And Nord Stream 2 backers also note that European domestic gas supply is set to decline by 50 percent over the next 20 years, and the fear is that the pipeline would mop up a significant amount of this developing import gap, deepening European reliance by discouraging imports from elsewhere.

Military spending and disinformation have so far been the principal lenses for looking at the Russia threat. Since the 2006 Riga Summit, the United States has pressured its NATO allies to reach the target of spending at least 2 percent of their GDP on defense, and it was a major topic during Trump’s first official NATO meeting in May. Similarly, disinformation has attracted attention on Capitol Hill, including provisions in proposed Russia sanctions legislation.

The success of Nord Stream 2, however, is a reminder that security depends on more than military strength and a healthy media environment. The pipeline is a naked Russian attempt to divide and conquer Europe. What makes the Kremlin so clever, and this effort so insidious, is that Gazprom has engineered an attractive business case for the project for a number of European gas importers.

Russia’s construction of Nord Stream 2 would weaken Europe in three key ways. First, it would give Russia greater leverage over Germany and other European countries. With such a large share of its natural gas market, Germany will be hostage to Russia’s supply manipulation, particularly if Russia chooses to jack up the price, or, in the extreme, reduce delivery. That’s a lot of power for Russian President Vladimir Putin, and the United States and Germany should not assume that Russia would never choose to bring down the hammer.

<..snip..>

http://www.politico.com/agenda/story/2017/06/20/russia-pipeline-power-000460

If German leadership agrees to allow Germany to be that dependent upon Russian gas deliveries, then that is certainly a German problem.

Merkel is kneecapping Germans bigtime with this and her refugee fiasco, and it will be difficult for the country to recover.

[thackney]

EIA: LNG exports expected to drive growth in U.S. natural gas trade
http://www.worldoil.com/news/2017/2/24/eia-lng-exports-expected-to-drive-growth-in-us-natural-gas-trade

[IsailedawayfromFR]

EIA: LNG exports expected to drive growth in U.S. natural gas trade
http://www.worldoil.com/news/2017/2/24/eia-lng-exports-expected-to-drive-growth-in-us-natural-gas-trade

In our wildest dreams, we would never had thought this could happen just a few years ago.

[txradioguy]

IMHO...We could kneecap Gazprom and prevent Putin from funding his military with O&G profits if we'd simply tap into our natural gas reserves that we haven't drilled yet and start shipping it to Europe at say .02 to .05 cents per Mmcf below whatever Putin is trying to charge European customers/hostages to his gas supply.

He uses the threat of turing off the tap during the winter to scare countries like Poland and others that depend on NG for heating etc into going along with whatever Moscow is trying to do at that time.

[IsailedawayfromFR]

IMHO...We could kneecap Gazprom and prevent Putin from funding his military with O&G profits if we'd simply tap into our natural gas reserves that we haven't drilled yet and start shipping it to Europe at say .02 to .05 cents per Mmcf below whatever Putin is trying to charge European customers/hostages to his gas supply.

He uses the threat of turing off the tap during the winter to scare countries like Poland and others that depend on NG for heating etc into going along with whatever Moscow is trying to do at that time.

Subsidizing Europe?  We have been doing that for too long, particularly in the military arena.

If Germany or other countries wish to not be complacent servants, why don't they pay a few more per MMCF to the US rather than the US get paid less?

Same purpose accomplished.

I believe they will not do it, as they wish to become those complacent servants.

[txradioguy]

Subsidizing Europe?  We have been doing that for too long, particularly in the military arena.

If Germany or other countries wish to not be complacent servants, why don't they pay a few more per MMCF to the US rather than the US get paid less?

Same purpose accomplished.

I believe they will not do it, as they wish to become those complacent servants.

No not subsidize...out bid the competition.  Let our oil and gas companies break Putin's stranglehold on the natural gas business in Europe.

[thackney]

start shipping it to Europe at say .02 to .05 cents per Mmcf below whatever Putin is trying to charge

If Russia wanted to be economic, it would be tough to beat Pipeline delivered NatGas with LNG.  We can prevent him from overcharging too much, or trying to cut off supply, but for most of Europe, pipelines have the economic advantage.

US LNG VS PIPELINE GAS:
EUROPEAN MARKET SHARE WAR?
https://www.platts.com/IM.Platts.Content/InsightAnalysis/IndustrySolutionPapers/SR-us-lng-pipeline-gas-european-market-share-0916.pdf
SEPTEMBER 2016

...But so far the key northwestern European markets – where
import demand is growing fastest due to decline in indigenous
production – have not attracted any US LNG.
Indeed, the fact that Portugal and Spain are the first European
countries to import LNG from the US is telling.
The Iberian Peninsula is considered an “island market” with
poor interconnection to the rest of Europe, so the delivery of US
LNG into the region is not likely to be seen as a sign that it will
take hold in the wider European market....

... Russia clearly does have the option to undercut the US
LNG price to ensure it keeps its share of its key European
markets and could flood the market with cheap gas, maximizing
revenues and cash flow at a time when producers worldwide are
suffering from the impact of such low prices....

[txradioguy]

If Russia wanted to be economic, it would be tough to beat Pipeline delivered NatGas with LNG.  We can prevent him from overcharging too much, or trying to cut off supply, but for most of Europe, pipelines have the economic advantage.

US LNG VS PIPELINE GAS:
EUROPEAN MARKET SHARE WAR?
https://www.platts.com/IM.Platts.Content/InsightAnalysis/IndustrySolutionPapers/SR-us-lng-pipeline-gas-european-market-share-0916.pdf
SEPTEMBER 2016

Some of our new NATO partners like Estonia and Poland could benefit too couldn't they?

Or at the very least have advisors from our companies help those nations explore possible ways to become more self reliant and develop their own resource deposits.

[thackney]

Cost Breakdown for LNG:



https://www.linkedin.com/pulse/cost-natural-gas-lng-logistics-kenneth-engblom

[thackney]

Some of our new NATO partners like Estonia and Poland could benefit too couldn't they?

Or at the very least have advisors from our companies help those nations explore possible ways to become more self reliant and develop their own resource deposits.

Estonia and Poland are even closer to the pipeline sources from Russia, even lower transportation costs for pipeline and farther transportation cost for LNG.






These countries are not backwards third world hell holes.  The oil/gas majors have been operating there for many decades.  Exploration of shale possibilities have gone on for a while.

[thackney]

Some of our new NATO partners like Estonia and Poland could benefit too couldn't they?

Or at the very least have advisors from our companies help those nations explore possible ways to become more self reliant and develop their own resource deposits.

Polish shale hits the rocks
http://www.dw.com/en/polish-shale-hits-the-rocks/a-19279069
24.05.2016

...It had all looked so promising only three years ago, when current European President Donald Tusk - then Polish prime minister - heralded the beginning of a new phase in Poland's perpetual search for independence from Russian gas and diversification away from domestic coal.

But the country now has an LNG terminal at Swinoujscie on the Baltic coast, importing LNG from Qatar. It has also been mulling its nuclear options and renewable energies have come to the forefront of plans to diversify energy sources. Currently, about 70 percent of Poland's gas is imported from Russia; for geopolitical reasons, Poland's leaders see this as problematic.

Shale gas, unlocked with US technological help and major investments, was intended to be a game changer.

But it hasn't turned out that way. The reason why is complex and multi-layered. There are geological issues at work, as well as environmental concerns and a powerful coal lobby. Some say suspicion of foreign firms added to regulatory and political opacity that stymied the nascent industry, seeing only local firms left to fight the shale corner.

"It is simply not working," says Antoine Simon, a campaigner at Friends of the Earth Europe. "The geology is not favorable, and I would expect the concessions to continue to decrease. Unless gas prices rise dramatically, it is now just a matter of years before all of Poland's shale projects are stopped,” he says....

- - - - - - - -

FREE GAS MARKET KEY TO ENERGY SECURITY IN THE BALTIC STATES
http://internacional.elpais.com/internacional/2017/03/21/actualidad/1490092399_223520.html
21 MAR 2017

...Considering high reliance on natural gas for energy production, gas infrastructure is the backbone of energy security and a precondition for effective functioning of gas market in the Baltic States. Latvia has well developed natural gas transmission system and so does Lithuania and Estonia. Region’s only natural gas storage facility is situated in Latvia —the capacity of the Inčukalns underground gas storage facility (UGSF) allows storing up to three months of the Baltic gas consumption in winter and just under two years of Latvian consumption alone. Lithuania bore the costs of building currently the only alternative gas supply route to the Baltic States— with the Klaipeda LNG terminal in Lithuania having started commercial operation at the end of 2015, gas supplies to Lithuania have been coming in also from Norway’s gas producer Statoil providing a good leverage for Lithuanian consumers when negotiating prices with Russia’s Gazprom, which is still the biggest gas supplier to the region. Consumers in Latvia are looking forward eagerly at the opportunities that will come with gas market liberalisation.

Success of free gas market and improved energy independence depends on how smoothly the three countries can cooperate in the energy sector. Although clamped together on a comparatively small territory and often perceived as one, the three countries represent three different situations in terms of their energy portfolios. The role of natural gas in the three neighbouring countries differs significantly with Lithuania being the most dependent and Estonia being the least dependent on this valuable energy resource....

[txradioguy]

Estonia and Poland are even closer to the pipeline sources from Russia, even lower transportation costs for pipeline and farther transportation cost for LNG.






These countries are not backwards third world hell holes.  The oil/gas majors have been operating there for many decades.  Exploration of shale possibilities have gone on for a while.

I guess the point I was actually getting at is that it seems to me that there should be some way we could let our experts  show these countries there are other places to go than to kiss Putin's ring for their energy needs.

I saw the reports when I was working in Germany about how Putin would threaten to cut off gas supplies to Poland...or Belgium or Germany...or worse increase what they were being charged by Gazprom if they started talking about really tough sanctions about things like invading the Ukraine or shooting down a passenger jet. 

And I also saw how those countries toned down their rhetoric after those threats were made.

In the same way we bankrupted the Soviet Union in the 80's to stop their global expansion plans...we could find a way to do that via capitalism and the free market in the 21st century.  Except instead of Star Wars and a 400 ship Navy...we break Putin's plans to remake the USSR by helping European countries achieve energy independence.

[thackney]

I guess the point I was actually getting at is that it seems to me that there should be some way we could let our experts  show these countries there are other places to go than to kiss Putin's ring for their energy needs.

I think I am missing your point.  Are you suggesting they don't know about other supplies like LNG in the US??

I saw the reports when I was working in Germany about how Putin would threaten to cut off gas supplies to Poland...or Belgium or Germany...or worse increase what they were being charged by Gazprom if they started talking about really tough sanctions about things like invading the Ukraine or shooting down a passenger jet. 

Yes.  The US LNG market, and other growing LNG supplies like Australia, Africa, etc all limit the cut-offs and price spikes Russia Gas Pipelines can make.

And I also saw how those countries toned down their rhetoric after those threats were made.

In the same way we bankrupted the Soviet Union in the 80's to stop their global expansion plans...we could find a way to do that via capitalism and the free market in the 21st century.  Except instead of Star Wars and a 400 ship Navy...we break Putin's plans to remake the USSR by helping European countries achieve energy independence.

We cannot send LNG to Europe cheaper than Russia can deliver Nat Gas by pipeline.  Nor are we going to subsidize it with Tax Payer dollars. 

What we can do, through private business and US growth, is limit what Russia can do with their pipelines.

[txradioguy]

I think I am missing your point.  Are you suggesting they don't know about other supplies like LNG in the US??

More like they don't realize they have options other than Gazprom.

Yes.  The US LNG market, and other growing LNG supplies like Australia, Africa, etc all limit the cut-offs and price spikes Russia Gas Pipelines can make.

Good.  I know in the past Putin has used oil and gas profits to bolster the defense budget to bring the Russian military into the 21st Century...as a child of the Cold War I'd like to see the Soviets have as difficult a time as possible rebuilding their arsenal.

We cannot send LNG to Europe cheaper than Russia can deliver Nat Gas by pipeline.  Nor are we going to subsidize it with Tax Payer dollars.

 

That's too bad.

What we can do, through private business and US growth, is limit what Russia can do with their pipelines.

And honestly that should be part of our strategic planning not only on the foreign policy side but the military side as well.

You'll have to forgive some of the simplistic things I say...I know what I know about the oil and gas business from what I could glean from my dad...and just living in W Texas all my life.  I know just enough sometimes about how it works to be dangerous LOL!

[thackney]

More like they don't realize they have options other than Gazprom.

Very unlikely anyone of decision making authority in their natural gas network has not heard of LNG, especially since they are building LNG terminals over there.

Vopak ready to set up €250 million regional LNG terminal in Estonia
http://news.err.ee/118671/vopak-ready-to-set-up-250-million-regional-lng-terminal-in-estonia
229.07.2016

Good.  I know in the past Putin has used oil and gas profits to bolster the defense budget to bring the Russian military into the 21st Century...as a child of the Cold War I'd like to see the Soviets have as difficult a time as possible rebuilding their arsenal.
 

That's too bad.

And honestly that should be part of our strategic planning not only on the foreign policy side but the military side as well.

You'll have to forgive some of the simplistic things I say...I know what I know about the oil and gas business from what I could glean from my dad...and just living in W Texas all my life.  I know just enough sometimes about how it works to be dangerous LOL!

I would be far happier to see the government stay out of the private business.  The best help government ever provides in the long run of business is the least amount of involvement.

[txradioguy]

I would be far happier to see the government stay out of the private business.  The best help government ever provides in the long run of business is the least amount of involvement.

I don't want the military/government interfering with private business...but they do have their ways to interfere in their own special way with the economy of a wannabe world power like Russia.  Just gotta find people willing to dust off the Cold War playbook and actually use it.

[Joe Wooten]

No not subsidize...out bid the competition.  Let our oil and gas companies break Putin's stranglehold on the natural gas business in Europe.

Given the cost to liquefy natural gas, there would have to be a subsidy to compete with the Russian pipelines. No more subsidies to Eurocrats. I don't care if Germany is making itself more in thrall to Russia, it's their choice. The they want energy independence, then let them start building nukes again. Get your supply to ~80% nuclear, and you can make the Russians in thrall to Germany.

[txradioguy]

Given the cost to liquefy natural gas, there would have to be a subsidy to compete with the Russian pipelines. No more subsidies to Eurocrats. I don't care if Germany is making itself more in thrall to Russia, it's their choice. The they want energy independence, then let them start building nukes again. Get your supply to ~80% nuclear, and you can make the Russians in thrall to Germany.

Problem is Frau Merkel has ordered the closing of all 22 Nuclear generating plants in Germany because they are the same design as the reactors that melted down at Fukashima.

All across what used to be endless landscapes of beautiful German countryside...it's now infested with huge clusters of Windmills.

Farmers land that should be growing crops now have acres of solar panels.

That is how the Germans think they can replace the generating power of those 22 Nuclear power plants.

[thackney]

Given the cost to liquefy natural gas, there would have to be a subsidy to compete with the Russian pipelines. No more subsidies to Eurocrats.

Thanks.  I was trying to make that point, clumsily.

We can limit the top end of what Russia can charge, because too high a price makes LNG an economical choice.  And LNG can supply (at a price) Nat Gas when pipelines are threatened to be cut off.

But most of our LNG supply to Europe is going to be to locations like Spain, far from other sources of Nat Gas.

[Joe Wooten]

Problem is Frau Merkel has ordered the closing of all 22 Nuclear generating plants in Germany because they are the same design as the reactors that melted down at Fukashima.

All across what used to be endless landscapes of beautiful German countryside...it's now infested with huge clusters of Windmills.

Farmers land that should be growing crops now have acres of solar panels.

That is how the Germans think they can replace the generating power of those 22 Nuclear power plants.

Not all of them, only a couple of the German nukes were BWR's, and they were later models than the Fukushima plants. Germany had several Westinghouse style PWR's, like Biblis, and those are being shut down too.

[IsailedawayfromFR]

But most of our LNG supply to Europe is going to be to locations like Spain, far from other sources of Nat Gas.

Spain and Italy have several pipelines carrying natural gas from Algeria and Libya, both having abundant supplies of natural gas, especially Algeria which is close by.

There are LNG liquefaction facilities at both places as well which supply gas to Spain for many decades.

If my memory is correct when I worked Libya, I believe Exxon or Shell began the effort in the early 70's in a place in Libya called Benghazi.

[IsailedawayfromFR]

Cost Breakdown for LNG:



https://www.linkedin.com/pulse/cost-natural-gas-lng-logistics-kenneth-engblom

This cost breakdown is representative of a greenfield LNG plant, which is typically justified based upon long-term contracts. 

I would factor that way down for incremental sales to occasional customers which is commonly done when operational supply is achieved above those long term commitments.

Further, I note the example provided indicates it is for delivered LNG to Asia, which is much more expensive to deliver to than Europe.

[IsailedawayfromFR]

Very unlikely anyone of decision making authority in their natural gas network has not heard of LNG, especially since they are building LNG terminals over there.

Yep, I can attest as I attended the 3rd annual LNG conference held in 1989 in Nice, France.

Someone had to do it, and I gained 4 pounds eating bouillabaisse that week.

It has been redefined since then and the next one later this year is being held in Barcelona for those interested. http://lngcongress.com/
I do not need any more weight gain so will not be attending.

And, for those interested, Europe has had LNG terminals longer than anyone in the world as it had the very first terminal to receive LNG at Canvey Island in the UK.  That first cargo originated in Lake Charles, La in 1959.

[IsailedawayfromFR]

No not subsidize...out bid the competition.  Let our oil and gas companies break Putin's stranglehold on the natural gas business in Europe.

Call it any way you want, but if Frau Merkel truly wished to remain out of Russian servitude, she would cut a deal with us instead of Russia, even if it cost more.