Saturday, July 10, 2010

Offshore oil treasures in eastern Mediterranean sea

http://www.csmonitor.com/World/Middle-East/2010/1101/Oil-and-gas-discoveries-produce-potential-Israel-Lebanon-flash-points

http://www.worldpoliticsreview.com/articles/6903/oil-and-gas-finds-fueling-tension-in-eastern-mediterranean




http://www.ogj.com/ogj/en-us/index/article-tools-template._printArticle.articles.oil-gas-journal.volume-106.issue-37.exploration-development.giant-oil-prospects-lie-in-distal-portion-of-offshore-east-mediterranean-basin.html

http://www.offshore-mag.com/index/article-display/230889/articles/offshore/volume-65/issue-6/geology-geophysics/lsquobottom-uprsquo-analysis-identifies-eastern-mediterranean-prospects.html

http://www.oilonline.com/News/NewsArticles/GeologicalGeophysical/articleType/ArticleView/articleId/29623/Eastern-Mediterranean-ready-to-reveal-its-sub-salt-secrets.aspx

http://www.helleniccomserve.com/cypruscontroversy.html

http://www.escwa.un.org/divisions/sdpd/wssd/pdf/2.pdf




http://www.energy-pedia.com/article.aspx?articleid=137966

http://www.eoearth.org/article/Energy_profile_of_Eastern_Mediterranean

http://rainbowwarrior2005.wordpress.com/2009/01/10/gaza-war-why-natural-gas-valued-at-over-4-billion-maybe/

Sep, 2010

http://favoritearea.com/petroleum-geo-services-explain-offshore-eastern-mediterranean

While offshore natural gas discoveries have spurred Lebanese and Israeli saber-rattling in a region widely viewed as rich in energy resources, a London analyst said it is too early to make categorical claims about the size and ownership of the potential reservoirs.

In the last several months, Noble Energy Inc., based in Houston, Tex., and Israeli companies have announced two offshore gas discoveries known as Tamar and Leviathan that they say may hold about 24 trillion cubic feet of gas.

Yet, it is “really too early to say” which country has the valid claim over the underwater resources in dispute, as they “may well extend into Lebanese waters,” Catherine Hunter, a senior analyst on the energy team at IHS Global Insight in London, told OilPrice.com. Without further surveys and drilling, the situation is still unclear, she said.

There is a chance of a “really large-scale discovery,” Hunter said, but the blocks are located within recognized Israeli waters and exploration would not have occurred outside of this area. “It will take a few years to figure out where exactly it is,” and until then “it’s all quite speculative,” she argued.

Leviathan is located 130 km from the city of Haifa in the north of Israel, while Tamar is based around 90 km from the city, Hunter later wrote in a research note. She said Leviathan is also located toward Cypriot territorial waters. Israel is reportedly in touch with the Cypriot authorities, who have not made claims to the find, although maritime borders still have to be officially delineated between Israel and Cyprus,
as well as Israel and Lebanon, she wrote.

Details on the size of the finds have also been uncertain, she argued. Leviathan, the larger discovery at 16 trillion cubic feet, has undergone seismic surveys but has not been proven via the drilling of actual wells and testing in the sea bed, Hunter said during an interview, adding this will take place later this year. The Tamar reserve base, estimated at about 8.4 trillion cubic feet, is “more understood” because of the
different wells that have been drilled, but it will “take ages” to fully assess as reserves have been upgraded at least twice so far, Hunter added.

The apparent natural gas windfall has ignited a war of words involving Hezbollah, Tel Aviv and Beirut.....

Hezbollah warned that it will not allow Israel to steal Lebanese gas resources. The Lebanese parliament, now struggling with a hefty debt of about $52 billion, is racing to ratify a law allowing oil and gas exploration before Israel begins to move into its territory.
In turn, Israel’s Minister of Infrastructure Uzi Landau cautioned that Israel will not think twice about using force to safeguard investments in the gas fields.

For Israel, the Tamar field alone can cover most of its needs for the foreseeable future, probably as distant as 2025, noted Hunter. The Leviathan prospect, however, will extend the country’s energy independence beyond this and potentially pave the way for gas exports to Cyprus through a new pipeline or liquefied natural gas shipments to more distant markets, she added.

The U.S. Geological Survey took note of the contentious area in an April assessment. It estimates that the Levant Basin Province, based in the Eastern Mediterranean region, is rich with about 122 trillion cubic feet of undiscovered, technically recoverable natural gas.

Fred Zeidman, a principal at financial advisory firm XRoads Solutions Group who has spearheaded the global energy practice, sees no legitimacy in the Lebanese claim to natural gas deposits recently uncovered off Israel.

“I have been in Israel,” Zeidman, based in Houston, told OilPrice.com. “I have seen the maps.” About a month ago, Zeidman said he asked government officials there about whether they anticipated competing claims from regional neighbors over territorial waters. “And they said, ‘Absolutely not,’” he noted.

Israel has been licensing for some time, but its Middle East neighbors have been slow to carve out their own gas domains.

Lebanon completed offshore surveys from 2006 to 2007 with the help of Norwegian firm Petroleum Geo-Services and had planned to launch a licensing round, which has been delayed, said Hunter, of IHS Global Insight. “You would have thought that the Tamar find that was made in early 2009 . . . would have prompted some kind of action,” she noted. “But it’s not been a legislative priority so far.”

The political divisions in post-2005 Lebanon have put any real movement on qualifying and quantifying potential resources -- along with most other socio-economic development and reform initiatives -- on the backburner, explained Aram Nerguizian, a resident scholar at the Center for Strategic and International Studies in Washington who is focused on security politics in the Levant and the Persian Gulf. As a result, calls from within both the Lebanese public and private sectors for a comprehensive geological survey of the Mediterranean coastal shelf off Lebanon have been “slow to materialize into action,” he noted.

Cyprus, meanwhile, has moved ahead with one round in its nearby territorial waters, while Syria has failed to carry out offshore exploration, according to Hunter’s research note. Syria called its first licensing round for four offshore areas in 2008, but received only one bid, which was then rejected, she wrote. A second attempt by Syria is planned for this year, although it has not yet been launched, she added.

Most experts doubt the conflict between Israel and Lebanon will spiral out of control into a full-fledged war, as the media have speculated.

“The defense of potential national resources in a poorly demarcated border region is a rallying cry and source of domestic legitimacy at the rhetorical level both in Israel and Lebanon,” CSIS’ Neguizian said. While the gas issue is a source of “political mobilization,” for now it will not escalate into a military matter because the reserves are “little more than an unknown” until detailed geological surveys are conducted by concerned parties, he added.

Battles have been waged over natural resources in the past, but no fighting has ever taken place near the Dead Sea where both Jordan and Israel own bromide deposits, said XRoads’ Zeidman.

And regardless of the “depth and breadth” of animosity between Israel and Lebanon, they have tended to have a “mutual respect” over natural resources, added Zeidman.

Even now, Israel has not experienced a cessation in either its coal supply from Turkey or fuel from Egypt, but the Tamar and Leviathan finds would be a saving grace should these political relationships grow sour, he maintained.

Cyprus and Lebanon should encourage exploration in their own waters and “come to an agreement with Israel if there is any crossover in the reservoir,” Hunter told OilPrice.com.

Maritime boundaries, however, also need to be clarified with “some urgency,” she said later in her research note. Failure to agree on onshore boundaries -- notably the Shebaa Farms and Israel's occupation of the Golan Heights -- does not instill a “strong degree of confidence” that any international ruling will be taken up, she warned.

With industry interest reawakened by recent deepwater, sub-salt gas finds offshore Israel, the eastern Mediterranean and Levantine Basin today loom large on the frontier exploration agenda. Offshore Cyprus and Lebanon are huge unexplored areas in the eastern Mediterranean. This deepwater area is close to proven offshore hydrocarbon provinces in the Nile Delta and Israel. Until recently, shallow post-salt targets have been the main focus in these areas; however, with recent advances in seismic technology sub-salt plays have been revealed. The recent deepwater, sub-salt gas discoveries offshore Israel have significantly increased industry interest in the eastern Mediterranean and particularly the Levantine Basin. High quality Lower Miocene reservoir sands were discovered in both the Tamar and Dalit wells (Figure 1). Analogues to the drilled structures offshore Israel can be found both offshore Cyprus and Lebanon which may prove to be a new province for oil and gas in the next few years.


When the Republic of Cyprus arranged its first licensing round in 2007, Noble Energy was awarded block 12. The second license round, scheduled to open this year, will include all the remaining open exploration blocks covering a huge unexplored area. Petroleum Geo-Services (PGS) has provided the Cyprus commerce, industry & tourism ministry with a dense 2D coverage over the exploration blocks, and one 3D survey. The data covers an offshore area of more than 50,000km2 and forms the basis for a geological report, with interpretation and assessment of the variety of plays in the Herodotus Basin, the Eratosthenes Continental Block, the Cyprus Arc Basin and the Levantine Basin.

The Republic of Lebanon is preparing for its first offshore licensing round and anticipates an announcement this year. It is offering oil and gas companies more than 25,000km2 of highly prospective acreage located north of the oil and gas producing areas of Gaza and Israel. The offshore area is covered by extensive 2D – an extension of the recent 2D dual-sensor (GeoStreamer) survey offshore Cyprus – as well as by 3D seismic data. The data reveals several attractive hydrocarbon plays where the primary focus would be in the Miocene sub-salt plays, the Jurassic/Cretaceous horst blocks and Miocene stratigraphic pinch-outs.


The recent 2D seismic data was acquired with the GeoStreamer which differs from a conventional streamer in that it has two recording sensors. A pressure sensor in a conventional towed streamer always records two wavefields that interfere with each other. The two wavefields are the up-going pressure wavefield propagating directly to the pressure sensor from the earth below and the down-going pressure wavefield reflected downwards from the free (sea) surface immediately above the streamer. Thus, every recorded reflection wavelet from conventional marine streamers is accompanied by a ghost reflection from the ocean’s surface.

The PGS dual-sensor streamer (GeoStreamer) measures both the pressure wave field using hydrophones, and the vertical component of the particle velocity using motion sensors. By combining the data from the two sensors the energy can be separated into up- and down-going parts (Carlson et al, 2007). By considering only the up-going wavefield, the effect of the ghost reflections from the sea surface is removed. When the ghost reflections are removed, the resulting spectrum is flat and broadband thus enabling the user to optimize the data quality, not just for one target depth, but for all depths shallow to deep.


The dual-sensor streamer was towed deep to increase the energy level on the low frequencies and still keep the desired content of high frequencies. The deep tow ensured a quiet environment which, combined with the enhanced low frequency signal, significantly increased the signal-to-noise ratio of the seismic data. Based on experience of the operations in the eastern Mediterranean, the dual-sensor streamer benefits have been seen in three key areas: enhanced resolution of the seismic image both shallow and deep, due to a broader frequency spectrum; better signal penetration revealing sub-salt and deeper targets, which have been valuable for the interpretation; and improved seismic operational efficiency due to less weather down-time.


The continuous seismic coverage from Cyprus to Lebanon provides an excellent starting point to understand the geological development of this prospective region. Matching and balancing of the entire PGS 2D and 3D seismic database and including third party data in the offshore regions, has been undertaken. A total of 18,000km GeoStreamer 2D data, 18,000km conventional 2D data, in addition to 2900km2 3D seismic data, has allowed interpretation of regional reflectors, with no restriction across country borders. The data has provided an improved understanding of the nature of the hydrocarbon systems, improved interpretation of plays and prospects, and clearer understanding of the hydrocarbon potential of the different basins in the area. Six key regional horizons have been interpreted across the data set. The horizons for interpretation were chosen based on reflector continuity and regional character, in order to enable us to delineate the different tectonic elements in the area such as the Levantine Basin, the Cyprus Arc, the Eratosthenes Seamount and the Herodotus Basin. The interpretation has also outlined several prospects and leads at the potential reservoir horizons.

While no wells have been drilled within the study area, the hydrocarbon charge system is interpreted to have potential source intervals in possible Middle Jurassic and Upper Cretaceous- Lower Tertiary and Lower Miocene. The isolated structural setting of the Levantine Basin favors the deposition of source rocks, and it is considered highly unlikely that no source rocks are present in such a thick sedimentary succession. Nearby discoveries in the NEMED block in Egypt, the recent deepwater Lower Miocene Tamar and Dalit discoveries and exploration wells drilled in the shallow water and onshore areas of Israel and Gaza have already proved the presence of a working hydrocarbon system in both the Herodotus and the Levantine Basin. Proven reservoir facies, in the Cenozoic of the eastern Mediterranean, occur in a variety of depositional settings and frequently display god reservoir quality and we believe that there is a strong likelihood that clastic and/or carbonate reservoirs will be present in the current area of interest. Preliminary regional interpretation indicates, among other possibilities, the presence of basin floor fan systems, channel systems and carbonate build ups. The sedimentary basins of the eastern Mediterranean contain a wide range of trapping styles.


The most prospective trap types in the deepwater Levantine Basin are currently considered to be sub-salt NE-SW trending folds and NNE-SSW trending faulted anticlinal Syrian Arc traps. But other trap types such as tilted fault blocks, horst blocks and stratigraphic traps have also been identified and the interpretation has already revealed several large structural analogues to the Tamar discovery in the Levantine Basin. The thick, extensive Messinian Evaporite succession that characterizes the geology of the eastern Mediterranean should constitute an effective regional top seal. As with its larger counterparts in the North Sea and West Africa, the EMMP is planned to expand, using a phased approach, to include data from neighboring countries offshore. But today it is already supplying interested parties with an invaluable head start prior to the upcoming licensing rounds in both Cyprus and Lebanon.


Offshore Cyprus and Lebanon are offering highly attractive acreage for exploration. A recent regional GeoStreamer 2D seismic data grid has improved the data coverage and quality to reveal new subsalt plays. The Eastern Mediterranean MegaProject is providing seamless seismic data coverage across country borders to increase the understanding of the hydrocarbon systems and potential of the eastern Mediterranean.

http://www.energy-pedia.com/article.aspx?articleid=137966

http://defense-update.com/newscast/0207/analysis/analysis-160207.htm

http://www.rense.com/general86/stake.htm



Global Research, July , 2010

We are not obliged to state the limits of our State.” – David Ben Gurion, 14 May 1948


http://www.globalresearch.ca/index.php?context=va&aid=2508


http://www.oilmarketer.co.uk/2007/08/13/pressure-in-cyprus-following-oil-and-gas-exploration-plans/


http://www.offshore-mag.com/index/article-display/361019/articles/offshore/volume-69/issue-5/international-report/gas-focus-shifts-to-eastern-mediterranean-and-arabian-gulf.html


http://www.futurespros.com/news/commodities---futures-news/interview-gas-fields-in-eastern-med-still-untapped--usgs-137908


http://carnegieendowment.org/publications/index.cfm?fa=view&id=41168


http://oilprice.com/Energy/Energy-General/Ownership-of-Offshore-Israel-Gas-Deposits-Speculative-Without-Further-Drilling.html


http://www.arabianoilandgas.com/article-7711-lebanon-opens-up-for-offshore-ep-activities/


http://www.researchandmarkets.com/reports/19835/19835.htm


In all regional disputes, big or small, Israel will invariably threaten or implement violence. It is the preferred method of conflict resolution. The recent discovery of natural gas reserves in Lebanese territorial waters, and Israel’s claim to them, is no exception.

It didn’t take long for Israeli infrastructure minister Uzi Landau to raise the prospect of war. That is, if Lebanon attempts to prevent his country from exercising full control over the field despite portions apparently falling within Lebanon’s exclusive economic zone.

“We will not hesitate to use our force and strength to protect not only the rule of law but the international maritime law,” he said. It was an absurd statement, of course, in light of the utter contempt Israel held for maritime law in the attack (in international waters) on the Turkish relief flotilla.

The Tamar natural gas field, 50 miles off Israel’s northern coast, is run by a consortium of American and Israeli companies, including U.S.-based Noble Energy. The latter announced that Tamar may contain up to 8.5 trillion cubic feet of natural gas and a second, Leviathan, 16 trillion. The deposits in these fields, both found in the last 18 months, are more than twice the size of Great Britain’s proven reserves.

Because Tamar appears to extend into Lebanese waters, and in full recognition of Israel’s history of stealing precious water resources from its neighbors, there have been urgent calls for Lebanon to ratify an energy bill. Last week, parliament speaker Nabih Berri indicated he would swiftly work to pass draft legislation to permit offshore oil and natural gas exploration before Israel claims the zone as its own and starts drilling.

“Israel is racing to make the situation a fait accompli and was quick to present itself as an oil emirate—ignoring the fact that, according to the maps, the deposit extends into Lebanese waters. Lebanon must take immediate action to defend its financial, political, economic and sovereign rights,” Berri said.

In an October statement, Norway-based Petroleum Geo-Services confirmed Lebanese waters contain potentially valuable deposits and may prove to be an “exciting new province for oil and gas.”

Despite the pending legislation, the government of Prime Minister Saad Hariri has been criticized for acting too slowly. “The Israeli enemy has started exploring for oil while Lebanon has started exploring an energy law,” quipped one Hezbollah official.

In the latest spat between the two countries still technically at war, one can see how the situation might deteriorate. Indeed, Landau’s threat was one Prime Minister Netanyahu endorsed with his silence.

For Lebanon, the stakes are enormous; potential revenue from tapping into oil and gas reserves would help finance a staggering debt accounting for nearly 150 percent of the country’s gross domestic product.

Will this be the cases belli Israel has been desperately seeking since the July 2006 Lebanon war ended in a humiliating draw?

The debate over which the country’s claim is most sound is not meant to be adjudicated here. What can be said, however, is that Israel’s reflexive threat to use military force to solve this—or any—disagreement with its neighbors cannot be legitimized.

Israel’s history of instigating conflict and then waging war has led to the immeasurable loss of life, land and property. If the pretext to do so again will be control of natural gas reserves shared with Lebanon, the international community must unequivocally declare this an issue to be resolved by rule of law, not act of war....


http://www.worldoil.com/Lebanon_opens_up_for_offshore_EP_activities.html


http://www.google.ch/#hl=en&&sa=X&ei=PD95TKTaH9HGOPTltOcG&ved=0CEYQBSgA&q=dossiers/guerre+petrol.pdf&spell=1&fp=f5eb22aeef1f6f76

http://www.google.ch/#hl=en&q=dossiers%2Fguerre+petrole&aq=&aqi=&aql=&oq=dossiers%2Fguerre+petrole&gs_rfai=&fp=f5eb22aeef1f6f76

P-800 Yakhont missiles....
http://www.google.ch/images?hl=en&q=P-800%20Yakhont%20missiles&um=1&ie=UTF-8&source=og&sa=N&tab=wi&biw=1024&bih=570

http://www.greenprophet.com/2008/07/natural-gas-middle-east/

http://criticalppp.com/archives/16404

http://dandelionsalad.wordpress.com/2008/08/22/the-eurasian-corridor-pipeline-geopolitics-the-new-cold-war-by-michel-chossudovsky/

.....

غاز إسرائيل يسبق غاز لبنان عامين كاملين

أعلنت إسرائيل أنها بدأت بعمليات التنقيب الفعلي عن الغاز الطبيعي، قبالة الساحل الشمالي لفلسطين المحتلة، فيما «يأمل لبنان»، بحسب ما أعلن رئيس الحكومة سعد الحريري، منح تراخيص التنقيب في مطلع عام 2012. تطوّران غير سويين للبنان، ويميلان إلى مصلحة إسرائيل

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خطت إسرائيل خطوة كبيرة جداً نحو فرض واقع جديد على لبنان والمنطقة، أن تكون أول الواصلين إلى السوق الأوروبية، المتعطّشة دائماً إلى إيجاد مصادر بديلة من الغاز الروسي، وأعلنت أن عمليات التنقيب عن الغاز قد بدأت بالفعل، وستستمر نحو خمسة أشهر للمرحلة الأولى، يؤمل في نهايتها تحديد مسارات بدء عمليات استخراج الغاز بكميات تجارية، ما يسحب من أمام لبنان إمكان مزاحمة تل أبيب على السوق الأوروبية، حتى مع تقدير هذه السوق أن أحجام الغاز الطبيعي الموجودة في الحقول اللبنانية هائلة جداً، وقد تفوق تلك التي أعلنت تل أبيب اكتشافها في عرض البحر، ذلك أن الأفضلية تكون دائماً للجهة التي تسبق وتبرم العقود.

وأشار الملحق الاقتصادي في صحيفة يديعوت أحرونوت، قبل أيام، إلى أن عوامة تنقيب إضافية (pride north America)، ستصل إلى البحر المتوسط بحلول شهر كانون الثاني عام 2011، للبدء بعمليات التنقيب عن الغاز، في موازاة عمليات التنقيب التي تجريها حالياً عوامة (sedco express) في موقع لفيتان الغازي، والمفترض أن تنتقل بعد أشهر إلى التنقيب في موقع تمار، ثاني أكبر مواقع الغاز المكتشفة إلى الآن في شرق المتوسط. وتأتي هذه المسارعة رغم عدم توصل إسرائيل مع شركات التنقيب إلى تحديد الجعالة المالية، التي تريد تل أبيب أن ترفعها من 12.5 في المئة إلى 20 في المئة، أي إن الشركات وإسرائيل فصلا حسابات التنقيب الاستكشافي وتكاليفه عن أصل الامتياز، انطلاقاً من ضرورة المسارعة إلى فرض الواقع الجديد.

من الواضح أن منسوب الخشية الإسرائيلية من لبنان مرتفع جداً، رغم أن تل أبيب تحاول الامتناع عن التعبير المباشر عن هذه الخشية، مع استثناءات بانت أخيراً. ومن الواضح أن حراك إسرائيل العملي حيال لبنان يعتمد على استراتيجية كسب الوقت والمسارعة إلى فرض الوقائع، مع العمل قدر المستطاع على إشغال لبنان وحرف أولوياته للفترة المقبلة، كي تصل إسرائيل إلى السوق الأوروبية منفردة. بحسب هذه الاستراتيجية، على لبنان أن يبتعد عن حقوله الخاصة التي لا ينازعه أحد حقّه فيها، ويُشغل بمعطيات وإجراءات لـ«استرداد» حقوقه من إسرائيل. من هنا، يمكن فهم ظهور معطيات في وسائل الإعلام الإسرائيلية، كان من شأنها أن تحرك المطالبة اللبنانية بملكية أحد الحقول البحرية، المعلن اكتشافها حديثاً في عرض البحر، والتي لاقت رداً إسرائيلياً رافضاً لكل «الادعاءات» اللبنانية بشأن الملكية أو المشاركة فيها، بينما التركيز الفعلي لتل أبيب ومعظم جهودها منصبّة على المسارعة إلى إيجاد واقع يفرض من جانبها، أن تكون أول مستخرجي الغاز في شرق المتوسط، تسهيلاً لإبرام العقود مع السوق الأوروبية، من دون أي مزاحمة لبنانية على هذا الصعيد.

استراتيجية تل أبيب في إشغال اللبنانين تظهر واضحة من التقارير المنشورة بكثرة في الأشهر الأخيرة، وفي التصريحات الرافضة للحق اللبناني، بل وفي التهديد باستخدام القوة ضد لبنان. يظهر أيضاً في الخرائط المنشورة في إسرائيل عدد من المواقع الواضح جداً أنها تابعة للبنان، لكنّ إسرائيل تصرّ على أنها إسرائيلية وغير قابلة للنزاع.

بحسب خرائط صادرة عن وزارة البنى التحتية في إسرائيل، فإن مواقع غاز كبيرة، تسميها تل أبيب حقول «الون»، وعددها ستة حقول، تقع إلى الشمال من سواحل فلسطين المحتلة، وتمتد من نقطة محاذية للناقورة، شمالاً إلى نقطة محاذية لبلدة الصرفند الجنوبية، أي تماماً في المنطقة الاقتصادية اللبنانية الخالصة، المفترض بلبنان أن يسارع إلى تحديدها. وتظهر الخرائط أيضاً وجود مواقع غاز قيد الاستكشاف، يفترض الواقع أن تكون ممتدة إلى داخل الأراضي اللبنانية، أي إلى اليابسة، لكنّ خرائط إسرائيل توائم ما بين الحدود الدولية البرية للبنان وفلسطين المحتلة، وحدود حقول الغاز والنفط الطبيعية، وكأن الجيولوجيا تعرف الحدود السياسية للدول. وتشير إحدى الخرائط المنشورة في صحيفة غلوبس الاقتصادية الإسرائيلية مثلاً، إلى أن أحد حقول الغاز يصل إلى مستوطنة مسكفعام ويقف عندها، دون أن يتجاوزها باتجاه قرى لبنانية في المنطقة، وتشير الخريطة إلى وجود حقل غازي آخر في القطاع الغربي، يحاذي الحدود تماماً، ويكاد يتعرّج مع تعرجاته، ما بين رأس الناقورة وصولاً إلى بلدة علما الشعب، أي إن مادة الصراع لا ترتبط في عرض البحر، بل هي أيضاً في اليابسة.

يصف الوزير الإسرائيلي يوسي بيليد، أمام لجنة الاقتصاد في الكنيست قبل فترة، واقع الخشية الإسرائيلية ومسبّباتها، ويشدد على أهمية عامل الوقت الذي يحتّم على إسرائيل المسارعة إلى فرض الواقع على كل الأطراف. بحسب الوزير الإسرائيلي «.. إنها المرة الأولى التي يتكوّن فيها ربط بين البعد الأمني والبعد الاقتصادي في إسرائيل.. وعامل الوقت هو الذي يقلقني في هذا المجال.. وما سأقوله موثوق ومؤكد، إذ لدى اللبنانيين، بالقرب من الأماكن التي اكتشفنا فيها حقول الغاز، أي على بعد مسافة كيلومترات معدودة، حقول غاز كبيرة وتوازي ما اكتشفته إسرائيل»، يتابع: «المشكلة لدى الأوروبيين، أن كل الغاز لديهم، أي نحو تسعين في المئة، يصل إلى أوروبا من روسيا. وكما هو معلوم، فإن أي دولة تخطط للمستقبل وتنظر إليه، عليها أن توجد بدائل لمصادرها. من هنا فإن الدول الأوروبية تبحث طوال الوقت عن هذه المصادر. وها هي شركات أوروبية كبيرة جداً تدير مفاوضات مع اللبنانيين، بهدف التوقيع على اتفاقات من 15 إلى 20 عاماً، من أجل الدخول إلى حقل الغاز الكبير الممتد مقابل الساحل اللبناني». يضيف: «تخيّلوا أن دولة لبنان تحولت بالفعل إلى دولة غاز. تخيّلوا مقدار المال الذي سيصل إلى هذا البلد، مع كل المعاني والأبعاد الكامنة في ذلك. هنا يتقاطع البعد الأمني مع البعد الاقتصادي، من دون أي شك»، ويخلص إلى القول: «لا وقت لدينا، ولا لإسرائيل القدرة على هدر الوقت، أو بدائل منه».

ويشير رئيس شركة ديليك الإسرائيلية، التي تتقاسم الامتياز الإسرائيلي للتنقيب عن الغاز مع شركة نوبل إنيرجي الأميركية، إلى «وجوب استنفاد الطاقة الموجودة في إسرائيل، من أجل المحافظة على الزخم القائم والاستمرار به»، محذراً من أن «الإضرار في هذا الزخم يمكّن دولاً أخرى كلبنان من احتلال مكان إسرائيل كمصدّر للغاز إلى أوروبا، وبالتالي ستخسر إسرائيل الرافعة الاقتصادية الجيوبوليتيكية الضخمة، الكامنة في الحقول الغازية».

من ناحية ثانية، هناك دعوة إسرائيلية إلى عدم القلق من لبنان، إذ يكتب أحد الخبراء الإسرائيليين في صحيفة غلوبس الاقتصادية، (05/10/2010) مشيراً إلى أن «جهات إسرائيلية تتابع ما يجري في لبنان، وهي على اقتناع بأن هذا البلد قادر على إعطاء الرخص الأولى للتنقيب عن الغاز حتى نهاية العام الجاري، إذ بإمكان لبنان أن يسدّ الفجوة الموجودة بينه وبين إسرائيل والتحوّل سريعاً إلى منافس حقيقي، لكن هذه الجهات نفسها ترى أن التجارب السابقة تظهر أن ما من سبب يدعو إلى القلق على المدى المنظور. فالكنوز الطبيعية اللبنانية تثير انقسامات داخلية وخارجية في هذا البلد، كذلك فإن لبنان يعيش حالة من عدم الاستقرار، وبالتالي لن تسارع شركات النفط العملاقة إلى استثمار المليارات في دولة كهذه».

وكانت صحيفة «وول ستريت جورنال» قد أجرت تحقيقاً واسعاً غن الاكتشافات الغازية الأخيرة في إسرائيل. وبحسب التقرير، فإن حقل لفيتان، إذا أثبت نفسه واستُخرجت منه الكمية المقدرة، سيكون أحد أهم حقول الغاز الواعدة في العالم، إذ يمكن كميات الغاز الكامنة فيه أن تكفي احتياجات إسرائيل لمئة عام. وبحسب الصحيفة، فإن الحقل المذكور، الذي يحتوي وفقاً للتقديرات الإسرائيلية على 16 تريليون متر مكعب من الغاز الطبيعي، من شأنه أن يغيّر خريطة الغاز العالمية، ويحوّل إسرائيل إلى إحدى الدول الأساسية المصدّرة للغاز.


في الكلام الإسرائيلي إشارات إلى الآتي:

ـــــ لدى إسرائيل معطيات، من المرجّح أنها مستندة إلى أبحاث ودراسات تمنع إعلانها، تشير إلى وجود حقول غاز في المنطقة الاقتصادية الخالصة للبنان، تحتوي على كميات هائلة من الغاز الطبيعي، وقد تكون أكبر بكثير مما أعلن اكتشافه في الجانب الإسرائيلي.

ـــــ الخلاف والسباق المستقبلي مع لبنان لا يرتبط بالغاز الموجود في البحر المتوسط فحسب، بل داخل اليابسة، وتحديداً في منطقة بلدات بليدا، ميس الجبل، حولا، ومركبا، وفي منطقة الناقورة ـــــ علما الشعب، في القطاع الغربي.

ـــــ العنصر الأكثر إقلاقاً لإسرائيل هو أن يسرّع لبنان خطواته باتجاه التنقيب عن الغاز، ما يحتّم عليها العمل على فرض واقع استخراجها الغاز أولاً، وأن تكون أول الواصلين إلى السوق الأوروبية لإبرام العقود معها.

ـــــ تخشى إسرائيل من موقع لبنان السياسي والجغرافي، وقربه من تركيا وسواحل أوروبا، ما يتيح له إنشاء شبكة أنابيب في المياه الساحلية الضحلة بالقرب من الساحل، بينما تضطر إسرائيل إلى استمثار مبالغ تتجاوز خمسة مليارات دولار من أجل مدّ شبكة أنابيب في المياه العميقة، بعيداً من الساحل، للوصول إلى أوروبا.

ـــــ تدرك إسرائيل أن لبنان قادر من ناحية فعلية على سدّ الفجوات القائمة معها، والتحوّل سريعاً إلى منافس ندّي ذي أفضلية لدى السوق الأوروبية، لكنها في الوقت نفسه تراهن على «عدم الاستقرار في لبنان»، وعلى السوابق الدالّة على إمكان تحوّل الغاز إلى مادة خلافية داخل البازار اللبناني، من شأنها أن تبطئ مسارات استخراج الغاز، وبالتالي تبطئ إمكان المنافسة.

الرهان الإسرائيلي قائم وما زال على ألا يسارع لبنان إلى البدء بعمليات التنقيب، وأن تنشأ خلافات لبنانية من شأنها أن تبطئ التنقيب وتعرقل المنافسة، إلا إذا اتّبع المسؤولون اللبنانيون استراتيجية مختلفة، تسابق السرعة الإسرائيلية للوصول إلى أوروبا أولاً.

على اللبنانيين أن يخرسوا

صحيح أن اللبنانيين يدّعون أن إسرائيل سرقت منهم أجزاءً من حقول الغاز في البحر المتوسط، لكنّ الخرائط التي رسموها هم أنفسهم، مع قبرص، تظهر أن إسرائيل لم تستول على مناطق بحرية لبنانية وحسب، بل إنها تنازلت عن منطقة بحرية كبيرة، والنتيجة إقرار لبناني بأن إسرائيل هي التي تنازلت.

بعد أن أعلن اكتشاف حقل تمار من الغاز الطبيعي، ونُشرت تقارير تحدثت عن كميات كبيرة في حقل لفيتان، ادّعى لبنان أن الحقول تقع ضمن مناطقه البحرية. لكن إذا قرر اللبنانيون دراسة ترسيم الحدود التي رسموها بأنفسهم، فسيكتشفون أن عليهم أن يخرسوا، لأنهم قد يربحون من صمتهم ومن الوضع كما هو عليه حالياً.

إسرائيل ليست جاراً وحيداً للبنان في البحر المتوسط، وفيما الصراع معنا لا يسمح بأن نجري دراسة مشتركة ومتفق عليها، بما يرتبط بموضوع الحدود البحرية، نفّذ اللبنانيون دراسة مع القبارصة، بخصوص تقاسم المناطق البحرية بينهما، وفي هذا الإطار رُسمت النقطة التي تتقاطع فيها الحدود بين إسرائيل وقبرص ولبنان.

فحص الخرائط البحرية القبرصية أظهر أنه إذا وضعنا خطاً من رأس الناقورة، أي من النقطة الفاصلة بين لبنان وإسرائيل على الحدود البرية، إلى النقطة المشتركة التي اتفق اللبنانيون عليها مع القبارصة، فإن هذا الخط يمر شمال الخط الذي رسمته إسرائيل لنفسها في ما يتعلق بحقول الغاز. ومعنى هذا وجود منطقة فاصلة مثلثة بين إسرائيل ولبنان. يبدأ المثلث من الناقورة ويتجه نحو نقطتين، هما النقطة التي حددها لبنان مع قبرص، والأخرى هي النقطة التي حددتها إسرائيل.
(يديعوت أحرونوت)

خريطة صادرة عن وزارة البنى التحتية الإسرائيلية تظهر مواقع اكتشاف الغاز قبالة سواحل فلسطين المحتلة، بحسب مسمّياتها إسرائيلياً. يظهر في الخريطة حجم التعدي على حقوق لبنان، بما يشمل اقتطاع ستة حقول غازية تسميها إسرائيل «حقول الون الستة»، التي تبدأ في نقطة تحاذي بلدة الناقورة في الجنوب، وصولاً إلى النقطة التي تحاذي بلدة الصرفند في الشمال، في المنطقة الاقتصادية الخالصة للبنان. يظهر حقل لفيتان في الخريطة، وهو أكبر الحقول المعلنة أخيراً، ويليه في الأهمية حقل تمار.. المفترض أن تنتهي عمليات التنقيب فيهما خلال أشهر معدودة، على أن تلي ذلك عمليات تنقيب في الحقول الأخرى، خلال العام المقبل. تظهر الخريطة وجود حقلي غاز على الحدود البرية، الأول في القطاع الشرقي للحدود مع فلسطين المحتلة، ما بين الناقورة وعلما الشعب، والآخر إلى الشمال، على حدود بلدتي بليدا ومركبا، ما يشير إلى وجود كميات من الغاز داخل الأراضي اللبنانية



Friday, July 9, 2010

Georgia Approves Sale of Pipeline Delivering Russian Gas To Armenia


TBILISI (Oil & Gas Eurasia)–The Georgian parliament has approved the sale of a trunk gas pipeline which pumps Russian gas across Georgia to Armenia. eighty-eight members of parliament favored the law, while five voted against the measure.

Despite the law being passed by parliament, the Georgian opposition does not share the majority’s enthusiasm for the sale which they say will be “an energy and economic threat to Georgia”, RBK reports.

Parliament members of the opposition suggest that instead Georgia should retain a 51 per cent stake in the pipeline and remain the pipeline operator. The majority however, deemed the “Russian threat” exaggerated and passed the law. Another argument used in favor of the sale was the fact Tbilisi believes “private companies are more effective in managing such sites than the government”.

The trunk pipeline was built in the 1970s. it has not been upgraded since 1980.

Georgia’s intention to sell a trunk gas pipeline (north-south) delivering Russian natural gas to Armenia across Georgia has raised concerns in Armenia that the gas pipeline might be sold to an Azeri enterprise, which already owns Georgia’s 30 natural gas distributor companies.

If Azeri-owned (though Georgia expects to retain 51 percent), it is possible that transfer to Armenia would be shut off, losing a source that supplies about 70 percent of Armenia’s natural gas.

Earlier this week the Georgian parliament, on first reading, approved the bill on removing the gas pipeline from the list of strategic facilities, and later its privatization will be allowed according to the law.

The issue of selling the pipeline has been voiced since 2005, when the Russian Gazprom Company wanted to buy the pipeline to recover and repair it.
However, later, the United States sponsored its repair works, and that issue was closed.

In 2008, after the SOCAR Energy Georgia subsidiary company of an Azeri oil company bought about 30 natural gas distributor companies in Georgia, the issue of the natural gas entering Armenia was voiced again.

Georgian analysts are sure that it will not be sold to the Russian Gazprom by any means, so the second most probable purchaser is the Azeri SOCAR Energy Georgia.

Stepan Safaryan, head of the oppositional Heritage parliamentary faction, is sure that it may result in serious problems for Armenia, even up to an energy crisis.
“The Armenian authorities must do everything possible to prevent that deal, otherwise it may have serious consequences,” Safaryan told ArmeniaNow.
Hrant Bagratyan, former Prime Minister of Armenia, says that the first step that Armenia must take is to buy it.

“If Azerbaijan buys it [gas pipeline], the consequences are very clear. But first of all, the issue must be discussed why Armenia is not doing anything to buy it. The Republican Party [of Armenia] should have already discussed the issue for at last ten times, and must have looked for solutions,” Bagratyan told ArmeniaNow.

The Republican Party, however, has not discussed the issue.

Deputy Speaker of the National Assembly of Armenia Samvel Nikoyan told ArmeniaNow that as far as the major part of the gas pipeline (51 percent) stocks will be under Georgia’s control, “possibly no problems will occur no matter who buys it.”

“There are some concerns, but the ArmRosGazprom [joint Russian-Armenian national gas distribution company] recently made a statement that there was nothing to worry about,” Nikoyan says. He does not know yet whether Armenia will participate in the auction.

“It would not be bad if any Armenian enterprise bought it,” he says.

The 'why' of Europe's banks


The 'why' of Europe's banks


Two themes over the past week must offer stark evidence of the sheer imbalance in the global banking system: Agricultural Bank of China (ABC or AgBank) launched the world's largest initial public offering, raising over US$22 billion, and European banks are widely expected to fail rigorous stress tests being promulgated at the insistence of the European Central Bank (ECB).

Among the acres of newspapers expended on the need for and construction of stress tests for European banks, the key missing element is, almost predictably, "why?" As in, what is it about the European banks that made them particularly prone to the excesses of each credit crisis, which in this current one has effectively wiped out all but a handful of banks in the region?

Understanding these weaknesses would be central to exploring the future of banks in Asia - for example in China, an area of special concern to investors given the vast sums of money being raised, and the rather proximate (and painful) experience with bank equity in Japan.

European weaknesses
One could quite easily write an entire book about why European banks are in the state where they are today. Without that luxury, the objective here is to look at key factors that sometimes fed each other and ultimately contributed to a meltdown of the banking system.

The primary factor to systemic weakness in Europe is the lack of consolidation. There are thousands of banks across the continent - Germany alone boasts close to 3,000 banks - all with their own idiosyncratic behavior, focus areas and, more dangerously, regulatory requirements.

Despite the onset of the common currency and trade area for the past 10 years, banks have been zealously owned across national lines. The few exceptions are in Germany, where there are foreign-owned banks like HVB (part of Italy's Unicredit group), and Austria (where a number of banks are German-owned). Why has that been the case?

a. Too political to fail: in contrast to the "too big to fail" argument that dots the landscape in the US and Asia, the primary argument in Europe is to disallow pretty much any bank from failing. This has had a counter-intuitive effect on the European Union; namely that "nationalism has gone local"; thus every bank including community banks has ardent political supporters wanting to maintain the status quo. The mess in Spain with the local savings banks ("Caja") is driven entirely by such regional political aspirations; in a larger context, the French have zealously guarded their banks from German encroachment or Swiss efficiency, mainly for nationalist reasons.

b. Myriad regulations: it isn't just the number of banks that worries people, it is also the bewildering array of such institutions, ranging from savings banks to regional banks and commercial and investment banks that co-exist within the same framework. Adding to the confusion for example in Germany is that some regional or Landesbanken are the regulators of the savings banks (Sparkassen) who may actually own the shares of the Landesbank.

I don't even want to think about conflicts of interest in such a situation. With multiple regulatory frameworks in place, it quickly becomes clear that "arbitrage" involving the different banking regulators becomes easy at one level; equally, consolidation becomes tricky if not impossible at another level.

c. Rigidity of labor is another factor, albeit one that is more common across the landscape for both companies and banks. European buyers can hardly ever seize the type of efficiency improvements that offer immediate value enhancement for equity players in the US and Asia simply because in most cases excess staff cannot be fired. This reduces the willingness of banks and their shareholders to take acquisition risks within a country or even regionally across Europe

d. Competition considerations are also important to appreciate the fractured landscape. Unlike the generally laissez-faire regulations that ended up creating the "too big to fail" class of banks in the US, the European competition watchdog is much more activist. A merger of the kind that created today's JPMorgan Chase would be impossible to contemplate, let alone construct, in Europe. When RBS bought the ABN Amro group (to its eternal regret later on, which is another story altogether) it was forced to shed a number of businesses that were perfectly profitable and complementary to its existing suite of businesses.

e. Indifference: the lack of a widespread equity culture and more specifically the hunger for strong EPS growth that drives US managers to take substantive risks is central to the benign indifference to the consolidation principle in Europe. Too much choice is a bad thing, too: any potential buyer has hundreds of targets; narrowing down on a bottom-up (fundamental) basis is nearly impossible. Looking at such ideas top-down is a function of macroeconomic variables that aren't strictly the preserve of smart bankers.

The lack of consolidation has several effects:
a. Subscale and unprofitable: European banks are almost alone in the world in terms of the sheer losses that are absorbed in an area of banking that is bread-and-butter elsewhere in the world, namely retail banking. With too many choices, prices are set too low and rates paid out for funds too high

b. Low capital bases: since income diversification and counter-cyclical cushions are virtually absent in the European banking landscape, banks in general are poorly capitalized. This is usually acceptable when economies chug along nicely, but quickly becomes fatal when things fall apart.

c. Excessive concentration through either product or regionally (or as in the case of Spanish banks, both) is an ill that plagues European banks across the board due to the lack of consolidation in the sector. Understanding this requires an appreciation of concentration risk. Imagine that an earthquake hits a country (as it did in Kobe in the mid-1990s). One of the first requirements in the post-rescue reconstruction efforts would be to use credit instruments. This is rendered impossible when banks in the region have also been wiped out because of their concentrated lending to the same region.

d. Technology is a tough question for European banks. Typically they either have too much or too little of it. Investors seeking "sophisticated" products - such as the folks who lost their wealth in 2007 - have an excessive reliance on quantitative models and esoteric risk-management techniques. In contrast, many retail institutions lack basic computing architecture. Right-sizing the sector requires an integration of various types of franchises, which is rendered implausible for reasons cited above. The use of technology isn't a panacea for banking system ills per se, but the lack of risk-assessment techniques becomes all the more painfully apparent during a crisis.

The second factor is demographics, in particular the rapid aging of the European population. Much as in the case of Japan, the key problem this presents for banks is that when consumption as a whole declines (older people consume less than younger people, eg on houses, cars and so forth), the need for credit declines even as the supply - savings - goes up. This glut of savings typically creates headaches for banks, which are obliged to accept deposits but cannot necessarily place funds profitably.

German banks have suffered this problem since the 1980s. When the Berlin Wall came down, there was an immediate upsurge of lending interest to the former East German side. However, a combination of poor demographics, the lack of economic growth in the East and the absence of a credit culture put paid to any expansion plans. Instead, the newly rich East Germans simply deposited more money (from their newly exchanged deutschemarks) into the banks. Similarly, the implosion in Russian sovereign debt in 1998 caused further inflows for European banks.

Excessive inflows of savings were also accompanied by the structural factors of low consumption that afflict demographically challenged populations. This development alone could have vastly eroded the profitability of retail and community banking in Europe and driven more banks to seek more exotic investment opportunities in bonds, leveraged loans and the like.

That was the main driving force behind European banks opening branches all around the world. Their timing couldn't have been worse. The rush into Asia during the early 1990s culminated in the absurdly large losses suffered during the Asian financial crisis of 1997. Before that, various banks from southern Europe had managed to lose massive amounts of money in Latin America (albeit not quite to the same extent as American banks that had rushed in to diversify from the imploding US economy of the 1970s).

As deposits grew faster and European banks found themselves unable to expand balance sheets further through geographical expansion, increased risk-taking through lower-quality exposures (high yield) and extending maturity (longer term) came into vogue. From the regulatory perspective, this soon made the balance sheets of European banks not just difficult to read but also impossible to value properly. That in turn forced regulators to push for greater transparency and market-based benchmarking of assets.

The push towards markets was soon made easier by another development - the capital adequacy regime imposed by the Bank for International Settlements, BIS for short, which is based in Basel, Switzerland. Mention the town to any banker and the first reaction will likely be a shudder.

Basel capital reforms implemented in the 1990s were to prove more dangerous for banks though. While the initial version was fairly broad-based, the second version (Basel II) attempted to codify into regulatory practice the notion of risk-weighted assets, with the assessment of risk being driven by credit ratings. This was an important development because it explicitly moved banks away from home-turf advantage (they knew their borrowers) to a less transparent but still standardized practice around credit ratings.

What would you rather do when a regulator calls about your capital adequacy - explain 5,000 files for borrowers, each of whom has about $10,000 against his name, or simply buy a bunch of bonds for $5 billion and explain it away in one sentence as "triple-A rated"?

More than in the US and Asia, this opportunity for expanding assets without having to raise new capital was seized on by European banks. The regulations, for which various European governments and banking groups had lobbied, were almost tailor-made for the sector. In one fell swoop, a number of key structural problems associated with cross-border lending and the accumulation of illiquid securities had been eliminated.

With rules-based investment inevitably comes the opportunity for malfeasance. In effect, a combination of the above three factors made European banks captive customers for the kind of products that Wall Street would later manufacture. The story though isn't quite complete yet. There were two other factors that came into play in the earlier part of this decade, both of which played havoc on the investment behavior of European banks, driving them en masse towards self-destructive behavior.

The first of these factors (call them accelerants) was the European Commission's decision to ban government guarantees on various banks that operated in the commercial space and competed for lending business; in particular the developments affected the functioning of German Landesbanken.

Previously, much like the operations of US agencies such as Fannie Mae and Freddie Mac, bonds issued by Landesbanken carried implicit guarantees from German states, thereby carrying significant credit ratings (triple A). The ruling of the competition commission in 2004 paved the way for such bond issuance to cease, but did provide a single-window exemption, namely that bonds could still be issued until a certain time in 2005 with attendant government guarantees. That clause, called "grandfathering", forced them to issue an excessive amount of cheap bonds, in turn accentuating their liquidity and making more acute the need for deployment.

The last factor was the monetary easing by the US Federal Reserve, which played a big part in the pursuit of "sophisticated" triple-A products as yields on government bonds fell sharply, at times below the cost of borrowing of even the cheapest bonds by the German banks. This "negative" carry had to be taken out of the picture by purchasing more structured investments that were highly rated (remember the banks had excessive liquidity, not capital) but yielded more than "true" triple-A assets such as US government bonds (due to the structuring mechanics of Wall Street).

All these factors essentially pushed the European banks into the vortex of almost unconscious investments into heavily structured products created by Wall Street.

Implications for China
Even as China and its fans celebrate the launch of the AgBank initial public offering this week, itself paving the way for four of the top 10 banks in the world by capitalization to be Chinese, warning signs have emerged.

The first point of concern is the rampant political interference in the Chinese banking system, with the central bank forever tweaking rules on lending, especially to the property sector, altering levels of reserves against certain types of loans and so on. This makes the decision-making process forever hostage to political changes; for example, when the economy slows down the government inevitably relaxes guidelines about lending. This behavior is counter to the principles of sound banking, and as such strikes at the heart of the valuation being placed on Chinese banks today.

The second factor is very similar to the core affliction of European banking, namely the demographic time-bomb that China has become. The rapidly aging population combined with rapid economic growth means that conditions are ripe for exactly the kind of logjam that the European banking system (and the Japanese banking system before it) went into.

Much like the criticism about European banks, the deployment of technology in China is uneven; much worse is the use of risk-management techniques that have become more common globally. The uneven pace of implementation combined with the lack of accounting transparency renders the financial positions of many Chinese banks questionable in many respects.

Lastly, there is the continued issue of corruption - not quite a European affliction but certainly one that played a part in Japan previously - which could further accelerate the losses being suffered by investors in Chinese banks.

Present heady growth in the sector, combined with the strength of the government financial position, makes this the best time to properly implement measures that would prevent the Chinese banking system from heading in the same direction that European banks followed over the past 20 years. There are already enough reasons to suspect that it could be too late to structurally reform and rescue the sector; wasting more time could prove inadvisable in the extreme.

Thursday, July 8, 2010

Russia plans far eastern energy drive


Russia plans far eastern energy drive...
By Sergei Blagov

MOSCOW - Russian officials have reiterated pledges to pursue far eastern energy policies backed by sizable investments. Moscow will invest up to US$100 billion to develop new natural gas deposits in the next five years, Deputy Prime Minister Igor Sechin announced last month. Many of these new deposits are located in eastern Siberia and Russia's far east.

Russia's far eastern and east Siberian regions are expected to produce up to 150 billion cubic meters (bcm) of gas annually by 2020, according to Russian government estimates. Moscow has insisted that the country would have no trouble supplying gas to China and other Asian-Pacific nations as its east Siberian gas reserves exceed 65 trillion cubic meters (tcm).

The state-run energy monopoly Gazprom also reiterated its plans
to control natural gas resources in Russia's vast eastern regions by taking over new gas deposits and forging new partnerships.

In May 2010, Sechin announced that Gazprom had started negotiations with South Korean companies to discuss joint projects to develop West Kamchatka offshore gas deposits.

In July 2009, Gazprom was granted licenses to develop West Kamchatka and Sakhalin-3 offshore gas deposits. Gazprom pledged to cooperate with the state-run oil giant Rosneft to develop West Kamchatka gas deposits estimated to contain up to 2 tcm of gas reserves.

In recent years, Gazprom has repeatedly pledged to take over the largest gas fields in Eastern Siberia and the far east. Hence, Gazprom moved to expand its presence in all four future gas production centers: Sakhalin, Yakutia, Krasnoyarsk and Irkutsk regions. The gas giant also sought tax breaks in the far east, including zero gas export duty that would total $4.5 billion annually.

Meanwhile, Gazprom has conceded that its project to build a gas pipeline to China remained stalled and gas supplies via the Altai pipeline would not start in 2011 as earlier planned. In May, Sechin expressed hope that Russia and China might agree on gas prices by September this year.

Three years ago, Moscow promised to export up to 40 bcm of Russian gas to China via a 6,700 kilometer, $10 billion Altai pipeline. In March 2006, Gazprom and China National Petroleum Corporation (CNPC) signed a memorandum on the delivery of Russian natural gas to China from 2011, a follow-up to the partnership deal signed in October 2004. Subsequently, Gazprom reportedly offered to supply gas at European prices, while CNPC insisted on significantly lower gas prices.

In October 2009, Gazprom and CNPC signed a framework agreement on gas supplies, including construction of a gas pipeline. Gazprom and CNPC agreed that gas prices would be connected with the "Asian oil basket". The agreement reportedly did not involve any gas-for-loans schemes used in the agreement between Russia's state-run oil company Rosneft and CNPC in April 2009. Russian officials had previously expected a final agreement on gas prices to be reached in June this year, and gas supplies to start in 2014-2015.

State-run Rosneft has also moved to increase its crude output in Siberia, relying on government support. On June 18, Rosneft head Sergei Bogdanchikov announced plans to produce 17 million tonnes of crude oil at Vankor deposit in Krasnoyarsk region. He also pledged to discover new oil deposits in Siberia.

Rosneft apparently needs increases in crude production in Russia's far east and east Siberian regions to honor its contracts with China. In April 2009, the Chinese and Russian governments finalized an inter-governmental deal under which Russia will supply China with 300 million tonnes of crude for 20 years in exchange for $25 billion in loans to Russian state-run companies. According to the agreement, the branch's construction would start in April and be completed by the end of 2010.

Not surprisingly, the Kremlin has been encouraging the country's oil producers to increase output in regions close to Russia's border with China. As a measure of direct state support, crude oil produced in Eastern Siberia is at present subject to a preferential export duty at zero rates. The measure was apparently aimed to encourage increased oil production in the far east and east Siberian regions.

However, Russian authorities appeared to find that the country's far eastern oil projects had already received enough state support. In recent weeks, the government has indicated plans to levy an export duty at $69.90 per barrel. On June 16, Sechin argued that the measure would yield by 2012 some 350 billion roubles (US$11.3 billion) in revenues.

Russia's long-term energy strategy in its far east and east Siberian regions appears to be based on assumptions of higher energy prices that would justify sizable investments in energy projects there. However, it remains a matter of debate as to whether this energy strategy might prove economically viable in the longer term.

Pakistan-Iran pipeline....


Pakistan to construct 780-km, 42 inch diameter pipeline....

KARACHI: Pakistan will construct about 780-km, 42” diameter pipeline from the border, traversing along the Makran Coastal Highway to connect with its existing gas transmission network at Nawabshah, said Naim Sharafat, MD, Interstate Gas Systems (Pvt) Ltd (ISGS) here on Wednesday.

Briefing the Senate Standing Committee for Petroleum and Natural Resources about the status of the Iran-Pakistan Pipeline project, he said almost 665-km of the pipeline will pass through Baluchistan while about 115-km of the pipeline will be laid in the Sindh province, he said.

This was the first Senate Committee meeting held at SSGC since Iran and Pakistan inked the historic agreement in Tehran in June 2010 for the supply of natural gas to Pakistan from 2015.

The meeting was chaired by Sabir Ali Baloch, the Standing Committee Chairman. Naim Sharafat, MD, ISGS who was accompanied by his CFO Mobin Saulat dilated on the salient features of the 1,150 km pipeline, which will connect Iran’s South Pars gas field with Baluchistan and Sindh provinces.

The estimated cost of Pakistan segment is $1.2 billion to be incurred over a 4-year period, Mr. Sharafat added.

He further explained the project is planned to be funded at a debt-equity ratio of 70:30 requiring an equity investment of $373 million and debt financing of $872 million. Mr Sharafat said the project’s debt portion is expected to be secured from a combination of domestic and international financiers including Sindh and Baluchistan governments, SSGC, SNGPL, OGDCL, PPL, PARCO and NBP (whose contribution will be $190 million or 51% of equity structure) as well as potential private investors including Petronas and Gazprom (whose contribution will be $183 million or 49% of the equity structure). MD, ISGS stated that under the Gas Sale and Purchase Agreement (GSPA), Pakistan will import 750 mmcfd gas with a provision to increase it to one billion cubic feet a day (bcfd).

The senators suggested that the stakeholders in the routes traversing the pipeline must be taken into confidence, majority of which are remote and less developed areas, with clear-cut assurances for the provision of new schools, hospitals and vocational training centers. In response to the senators’ queries, MD, ISGS said that being one of the largest infrastructure projects the country has ever seen, the IP project will create new job opportunities in the provinces of Baluchistan and Sindh, thus improving the income level and the standard of living of its citizens.

In response to the senators’ apprehensions, Mr. Sharafat stated that Iran-Pakistan Project’s GSPA was broad enough to allow force majeure relief in the event the project is hampered due to UN sanctions on Iran. MD, ISGS said that in case the project does not materialize, an LNG terminal will be set up in Gwadar to allow re-gasified LNG to the system.

Explaining the current status of the project, MD, ISGS said that a detailed route survey was in progress to pave way for the engineering and design of the pipeline facilities....

http://www.algerie-focus.com/2010/05/24/jeu-d%E2%80%99influences-en-afrique-du-nord-l%E2%80%99algerie-au-coeur-du-nouveau-grand-echiquier-maghrebin/


A long economic winter ahead....


A long economic winter ahead....
By Rodrigue Tremblay


Jul 8, 2010,

“A State divided into a small number of rich and a large number of poor will always develop a government manipulated by the rich to protect the amenities represented by their property.” --Harold Laski (1893-1950), British political theorist, 1930

“Money becomes evil not when it is used to buy goods but when it is used to buy power . . . economic inequalities become evil when they are translated into political inequalities.” --Samuel Huntington (1927-2008), political scientist

“ . . . if financial markets are skittish and don’t have confidence in a country’s fiscal soundness, that is also going to undermine our recovery.” --President Barack Obama, June 25, 2010

“Any intelligent fool can make things bigger, more complex, and more violent. It takes a touch of genius, and a lot of courage to move in the opposite direction.” --Albert Einstein (1879-1955) Physicist and Professor, Nobel Prize 1921

The bond market is telling us that there could be hard economic times ahead and that deflation, for the time being, is more of a threat than inflation. Leading indicators are also pointing to possible economic weakness ahead. -The Euro zone is being pulled apart by the economic asymmetry of its members, the less productive among them (Greece, Spain, Ireland, Portugal and Italy) being unable to keep pace with the very productive German economy. -The U.S. money supply M3 is contracting. -The Chinese bubble is dangerously approaching the bursting point. -And, the deflation of debt all over the place threatens to plunge the world economy into a deflationary tailspin. In this context, there is a good chance of a double-dip recession next year, in 2011.

Readers of this article know where I stand on this issue. One year ago, on July 10, 2009, when everybody and his uncle was declaring the recession over and the return of business as usual, I wrote a piece announcing that my analysis was pointing to 10 years of economic hardship, entitled We are in the Midst of the Great Baby-Boomers Economic Stagnation of 2007-2017. I wrote then that “many observers think that ‘prosperity is around the corner’ and that this recession, like others since World War II, will end as soon as the stock market, as a leading indicator, recovers and people start spending again. This is a myopic view of the current economic big picture.”

Let us keep in mind that in May of 1930, President Herbert Hoover was also proclaiming that “the danger . . . is safely behind us.” This was 10 years too early for such a declaration. Just as in the 1930s, the U.S. economy and many part of the world economy suffer from a debt overhang that usually takes at least ten years to correct. When overall debt is four times larger than the economy, as it is the case today and as it was close to being the case in the 1930s, a debt deflation becomes unavoidable.

Economic booms built on a mountain of debt, some of which is fraudulent and speculative debt, tend to end badly. The higher the debt mountain relative to the real economy, the more serious is the following economic meltdown. This is because an unsustainable debt level means that some of the investments and projects thus financed make no economic sense and no sufficient income can be forthcoming to service and repay the debts. The first consequence is excess capacity and falling asset prices. The second consequence is an unavoidable liquidation of debts and a debt deflation. The third consequence is economic stagnation.

The danger that accompanies a protracted period of debt-liquidation and debt deflation after a binge of over-indebtedness is well known in economics. In 1933, Yale economist Irving Fisher published his debt-deflation theory of economic depressions. The core of the theory is that over-indebtedness leads to deflation, which in turn leads to an economic contraction. Fisher summarizes the links between debt liquidation and economic contraction in nine interacting steps:

1- Debt liquidation leads to distress selling.

2- Contraction of deposit currency, as bank loans are paid off, and to a slowing down of the velocity of circulation of money.

3- A fall in the level of prices.

4- If the fall of prices is not interfered with by reflation or otherwise, this is followed by greater fall in the net worth of business, precipitating bankruptcies.

5- This leads to a like fall in profits.

6- A reduction in construction, output, trade and in employment of labor results.

7- Losses, bankruptcies and unemployment lead to pessimism and loss of confidence.

8- The result is hoarding and a contraction in bank credits, which contribute in slowing down even more the velocity of circulation of money.

9- The overall deflation causes a fall in the nominal or money interest rates accompanied by a rise in the real or commodity rates of interest as prices fall.

A similar self-reinforcing spiral-down of debt-deflation and economic contraction can be feared in the coming years as the level of debt to the economy goes from about four times the economy to a more manageable two times the economy. In other words, it should not take more than $1.50 or $2 of new debt and credit to generate one dollar of new output. When it takes more debt than that to generate new production, this is an indication that the economy is becoming over-leveraged with debt.

Judging by the pronouncements made by leaders at the recent G8 and G20 meetings in June, and their collective commitment to cut governments’ deficits in half by 2013, I don’t think that politicians fully understand the danger presently facing the world economy. In fact, any new shock hitting the world economy, economic or political, risks accelerating the collapse of the debt house of cards, with dire consequences for production and employment.

Austerity fiscal measures may raise government efficiency, but they are not what will cushion the real effects of the debt deflation. Both reflationary monetary policies and overall stabilization policies are needed, especially in the banking sector, in order to make sure that producers and employers are not frozen out of new bank credit.

Rodrigue Tremblay is professor emeritus of economics at the University of Montreal . He is the author of the book “The Code for Global Ethics.

Wednesday, July 7, 2010

Europe keeps mum on Russian cobalt



Europe keeps mum on Russian cobalt....
By John Helmer

MOSCOW - Kosh-Agach is a steppe word meaning "so long, tree". It's the world's end, the driest and direst place in far-eastern Russia at a remote corner where the frontiers of Mongolia, Kazakhstan and China meet. It is also the location of a large reserve of rare metals, including cobalt. So rare is cobalt that since 2008, Russian law doesn't allow foreigners to dig it out of the ground, sell it or export it without special permission.

So why has the European Bank for Reconstruction and Development (EBRD) spent US$30 million so far on investing in a project, details of which it insists on keeping secret?

The EBRD is financed by 61 shareholding countries of Europe, North America and Australasia, plus the European Union and the
European Investment Bank. The EBRD's website claims the bank "seeks to develop a sound investment climate based on an effective legal and regulatory framework and promotes corporate governance, including sound management practices, a firm stance against corrupt practices, disclosure of information, and clear and consistent accounting and auditing practices". On January 8, 2008, this is what the minutes of the EBRD board of directors reported as happening at Kosh-Agach:
The Board approved an equity investment of up to USD 30 million (EUR 21.4 million) to Imperial Mining Holding Company. The equity investment will be used to finance preparation of a full feasibility study (including a full international-standard EIA [environmental impact assessment]), implement preparatory work for the development of Karakul cobalt-copper deposit in Altai region of Russia, and expected acquisition of nearby satellite deposits.
The minutes record that the decision was taken by the then-president Jean Lemierre, three of his deputies, including the EBRD's chief lawyer. Voting in favor were 22 directors and 21 alternates. The director for Russia voted in favor; her name is Elena Kotova, and she is still the Russia director.

Almost all equity investments, mine project loans and cash disbursements the EBRD has made in Russia are heavily documented in the bank's public record before they are approved at board level. EBRD says that from its inception in 1991, it counts 613 projects altogether in Russia, and has paid out 12.4 billion euros (US$15.6 billion). To count only mining and natural resource projects, there have been 25. Five of these focus on timber, gold, zinc, iron-ore and mineral water; all the others involve energy resources, such as oil and gas. There is no reference to Imperial Mining or the Karakul cobalt mining project.

Counting the EBRD's equity investments in Russia since 1991, there are more than 40 projects in total. The money has gone for shares in banks, brokerages, venture funds, regional development funds, a truckmaker, carmaker, railway operator, airline and a shipping company. The list is interesting because at least two of the banks in which EBRD invested - Tokobank and Inkombank - disappeared in scandalous circumstances. Again, there is no reference to an equity interest in Imperial Mining or the Karakul cobalt mining project.

EBRD's complete list of 395 project, disbursement and investment identifications since 1991 range from sausage factories to bakeries, telephones to bottles, sewers to supermarkets - but not a reference to Karakul cobalt. [1]

In short, unlike any other EBRD payout to Russia for mining resources, there is just a two-sentence record that the board approved it - and nothing else. EBRD spokesman Anthony Williams was asked to say whether the equity investment EBRD has made in the venture is in a Russian company; whether EBRD believes the license it has spent $30 million to exercise carries mining rights, or is limited to exploration and proving; and finally, whether EBRD knows that, according to Russian law on mining strategic metals, cobalt is prohibited for mining by a foreign company without Kremlin permission.

Williams answered: "I have no comment to make on this issue." Rarely can so little mean so much that EBRD wants to keep secret.

But first, consider the Kosh-Agachinsky region, in the southeast corner of Russia's Altai territory. [2]

A travelogue reports that the steppe hereabouts is "extremely interesting and exotic for the traveler from the viewpoint of its landscape, flora and fauna, with a slightly undulating plain at the altitude of 1,700-1,900 meters above the sea level, surrounded by mountain ridges covered with snow. Severe climate, dry and windless, means that the permafrost runs to 90 meters in depth. Wormwood and thorn bush are the only obvious vegetation."

Cobalt is more interesting. The metal is used in diverse industrial and military applications. The most serious of these is in superalloys, which are used to make jet engine parts. It is almost always mined as a by-product of other more abundant metals. More than half of the world's supply is produced as a by-product of copper mining and refining in the Democratic Republic of Congo (DRC) and Zambia. Cobalt production in Russia and most other countries is a by-product of nickel mining. Although some producers can increase or decrease the amount of cobalt mined or refined, most cobalt production is ultimately dependent on the production of copper and nickel.

The global bust for commodities and metals that began in the autumn of 2008 resulted in reduced demand for and supply of cobalt. According to a report from the US Geological Service (USGS), the world availability of refined cobalt during the first half of 2009 was 13% lower than in the first half of 2008. This decline was primarily because of a decline in 2009 production from China, and the closure of a Zambian refinery in late 2008.

During the second half of 2009, a strike at a company in Canada resulted in reduced production of refined cobalt from that country. Beginning in late 2008, production of cobalt-bearing concentrates and intermediate metals was hurt by cutbacks at many nickel mines around the world, and at some copper-cobalt operations in DRC. Financing, construction and startup of proposed brownfield and greenfield projects were delayed because the demand for the metal was falling, along with prices; and banks weren't ready to lend to new mines.

The chart shows cobalt falling like a stone - down 73% from the May 2008 peak to the December 2008 bottom. Since then the price recovery has been modest.



Vale (Brazil), BHP Billiton (Australia), Xstrata (Switzerland), Teck Resources (Canada), Antofagasta Plc (UK) and Katanga Mining (Switzerland) are the biggest of the mining companies which produce cobalt.

Norilsk Nickel, Russia's sole miner of cobalt (the two other Russian producers of copper do not have cobalt by-production) says as little as possible about its cobalt reserves or output. The last financial report for 2009 gave no information at all. The 2008 report indicated that the main company had signed contracts to provide up to 6,500 tonnes of cobalt per year for refining at the OM Group's Harjavalta plant in Finland, which Norilsk Nickel had taken over the year before.

Output numbers appear from time to time when Norilsk Nickel executives let them slip. In 2004, when a new Russian cobalt refinery was being planned, its annual capacity was said to be 2,500 tonnes. In the first half of 2008, when the OM refining deal was disclosed, cobalt production for that period was said to be 1,160 tonnes.

Norilsk Nickel's annual report for 2009 skips cobalt production for the year, but notes that revenues were down on account of falling price. "The main reason for the decline in revenue from the sale of by-products was a sharp fall in sales prices of rhodium - from USD 6,600 per ounce in 2008 to USD 1,600 per ounce in 2009, and cobalt - from USD 73,000 per tonne in 2008 to USD 32,500 per tonne in 2009." The report fails to disclose revenues from cobalt sales.

Norilsk Nickel's main cobalt reserves are hidden. In a pseudo-disclosure, deposits under exploration, which are described in the company's literature, are reported to contain a grand total of 850 tonnes, according to the Russian C1 and C2 classifications.

The table below shows how the USGS reports Norilsk Nickel's cobalt output and reserves, compared to other countries. The reality may be more or less, but because of the military uses of the metal, how much Russian holds underground in reserves, in stocks above ground in strategic stockpiles, and in annual trade remains a classified secret:


Mine Production* Reserves*
2008 2009
United States - - 33
Australia 6.1 6.3 1,050
Brazil 1.2 1.0 29
Canada 8.6 5.0 120
China 6.0 6.2 72
Congo (Kinshasa) 31.0 25.0 3,400
Cuba 3.2 3.5 500
Morocco 1.7 1.6 20
New Caledonia 1.6 1.3 230
Russia 6.2 6.2 250
Zambia 6.9 2.5 270
Other Countries 3.4 3.2 180
World Total (rounded) 75.9 62.0 6,600
Source: USGS, June 2010. *All figures in thousands of tonnes.

Altai regional sources report they have been hoping against hope that they are sitting on a cobalt mine of great value. Exploration began in the Soviet period, between 1978 and 1985. A deposit license was issued in January 2006 to a Russian company called Altai Ruda Metall (ARM, "Altai Ore and Metal"). ARM is owned by Imperial Mining, a company registered outside Russia.

In May 2007, ARM told a local newspaper that it had "carried out technological expertise, and that currently an environmental assessment was being completed. Negotiations [were underway] with the European Bank for Reconstruction and Development to allocate a large loan to a mine production. The timing is not yet known, [the project is] waiting for the completion of appraisals."

Six months later, the EBRD came through with $30 million - far from enough to build a mine but more than was needed to complete a bankable feasibility study. No reserves have been published, and the Ministry of Natural Resources in Moscow isn't saying what their estimates are. The only clue to the deposit is a report that from drill samples the ores are believed to contain 0.23% cobalt, 0.15% bismuth, 0.32% copper, 0.55% tungsten trioxide and traces of vanadium and gold.

A regional environmental protection publication reported this year that if the mine goes ahead, it may destroy the habitat and migratory pattern of the argali, the horned mountain sheep, and several other rare species, including the steppe hawk.

EBRD claims that it subjects all its project loans and investments to tough environmental compliance standards and impact assessments. Nothing appears to have been done before it handed out the cash this time.

Ilya Smelyansky, an expert for the Siberian Environmental Center in Novosibirsk, has reported to the Bird Protection Union of Russia that he and his colleagues have held talks with ARM and Imperial Mining group on the impact of mining on bird life in the area. He confirms that "one deposit [Karakul] is already taken on license by the company AltaiRudaMetall (Imperial Mining) and is being prepared for development; the rest [of the deposits] are included in the list of sites for auctions to be held in the near future."

Smelyansky is in the field at present; his mobile telephone is turned off, and he is unavailable to answer questions. According to his report, the Siberian Environmental Center and the Bird Protection Union want to form "a coalition of environmental organizations, which should seek recognition of the special status of the [Kosh-Agach] territory and full compliance with environmental legislation by the Government of the Altai Republic, to initiate a dialogue with companies, in particular to develop a joint plan of action to minimize the adverse effects on birds, maintain a dialogue with municipal authorities and local communities. A special task was to achieve reduction in the total number of licensed deposits."

Vladimir Gulevich is the chief executive officer of ARM. A spokesman confirmed that his company held the Karakul license, but declined to say more.

There is inconclusive evidence of an Indian shareholder interest in Imperial Mining alongside the European Bank for Reconstruction and Development and large mining institutional investors.

A source at the Office of Foreign Investment Control, a branch of the Federal Antimonopoly Service (FAS) in Moscow, acknowledges that two statutes which Prime Minister Vladimir Putin signed into law in April of 2008 subject foreign-owned or controlled companies to special restrictions in strategic sectors of Russian business and define cobalt as a mineral of strategic value to Russia, whatever the size of the deposit where it has been found.

These laws, FZ-57 and FZ-58, require an application by any foreign company seeking to own, or control, a cobalt mining venture to apply for government permission. This petition goes to the FAS in the first instance, where the papers are prepared for review by the Committee on Foreign Investment Control, which is chaired by Putin. The committee review is slow; eventual approval may be hedged with conditions, or not granted at all.

But according to the FAS, no petition has been filed by Imperial Mining or ARM for committee review and approval. That means that for the time being it is legal for Imperial Mining, the EBRD and any possible Indian interest to own a company with a Russian cobalt mining license, but no mining of cobalt is allowed until government authorization is granted.

Reviews of the legislation by well-known international law firms have been in wide circulation since the two laws came into force, and the effect of their provisions on foreign mining and other investment continues to be widely debated. [3]

It cannot be likely, therefore, that EBRD's lawyers and bankers do not know what their investment in the Karakul cobalt deposit would require, even if they were careless when the board of directors voted approval back in January of 2008. Even then it is improbable that the board and its Russian director, Kotova, didn't know that cobalt was on the strategic list. Less than three months were to elapse before Putin signed the law into force, but the State Duma (parliament) and Federation Council had been voting on drafts of the legislation well before the EBRD board acted.

Kotova happens to be working in Russia this week, and a spokesman relayed to her the question of what she knew, or knows, about Imperial Mining and the restrictions in Russian law on the cobalt project. At the time of publication, she has yet to reply.

After Williams had written to say EBRD would not answer any question on the $30 million investment in Karakul cobalt, he was asked whether the lack of project, loan or due diligence data for Karakul or Imperial Mining, published on the EBRD website, had any precedent for Russian project disclosure. Williams was also asked to explain why his refusal to respond to the questions asked should not be interpreted as a coverup of wrongdoing at the EBRD. There has been no reply. Williams did answer a separate question on Kotova's status, confirming that she "is the Director representing the Russian Federation on the EBRD's Board of Directors .. [and] sits on the Financial and Operations Policies Committee, currently as Vice Chair."

A source at the Russian Ministry of Natural Resources in Moscow reveals there may be a catch in the cobalt mining rules. Cobalt mining is strategic, and subject to special permission by the Russian government, the source acknowledges. But if a license holder like ARM and Imperial Mining, "started developing the field prior to the entry into force of the law [April 29, 2008], the permit is not required". Since Soviet prospectors first discovered the Karakul deposit more than 30 years ago, what counts now is when exactly Imperial Mining and its local affiliate started work at the site, and what counts as development under the Russian law.

According to the ministry, the cobalt mining venture may not be restricted, or subject to Kremlin permission, if the deposit was "let for use for the aim of geological studies, exploration and extraction carried out on a combined license, and for which the user has completed the subsurface geological studies, and begun in the prescribed manner exploration and extraction, before the coming into force of the present Federal Law."

The EBRD board record appears to show that Imperial Mining had not completed its geological studies, nor started mining, in January 2008. When the strategic legal restrictions came into force 111 days later, the situation was almost certainly the same. But the facts on the ground, the corporate records, and the ambiguities in the law remain unclear and unexplained. If the loophole disclosed by the mine authorities in Moscow provides one motive, then at least $30 million of EBRD cash makes an even bigger reason to keep this mine a secret.

Note
1. The EBRD can be accessed here.
2. For a map of the Kosh-Agachinsky region, see here.
3. See here

John Helmer has been a Moscow-based correspondent since 1989, specializing in the coverage of Russian business.

Tuesday, July 6, 2010

An Azeri-Turkish deal on gas - a partnership renewed ?


Agata LOSKOT- STRACHOTA
Edito Energie, juin 2010

http://www.ifri.org/?page=detail-contribution&id=6127

The package of the Azeri-Turkish gas agreements signed in Istanbul on 7 June in the presence of President Ilham Aliyev and Prime Minister Recep Erdogan certainly makes cooperation easier in a sector which both parties consider to be strategic. It does not, however, specify all details of the sale and transit of gas (see e.g. EurasiaNet, 7 June). The documents above all have important political significance. The resumption of gas negotiations and the ability to reach a compromise on gas cooperation to the satisfaction of both Azerbaijan and Turkey serve as proof of a warming of relations between the two countries. Good, bilateral relations will make it easier for both Azerbaijan and Turkey to implement their regional political interests (in the south Caucasus and also, as an example, in dealings with Russia) and bring them tangible economic benefits. The further specification of the commercial details for gas cooperation and the relatively rapid signing of final documents is, however, very much in the interests of Azerbaijan and the implementation of its energy policy goals (putting into operation routes for the profitable gas exports to the west). For Turkey, however, the current outline format of the gas deal seems to be sufficient at the moment – it will smooth the way for them to inter alia negotiate with other producers while still leaving room for manoeuvre with Azerbaijan. In consequence, it is presently difficult to say much about the ultimate shape and way of implementating the deal and about its actual significance for the Southern Corridor concept supported by the EU.

Signing the deal

The documents signed by the energy ministers of Azerbaijan and Turkey and the heads of energy corporations SOCAR and Botas (being 2 Memoranda of Understanding and one Declaration) determined, according to media reports, the following:

- the conditions for settling outstanding payments and for the present supplies of Azeri gas from the current 1st phase of exploitation of the largest Azeri deposit, Shah Deniz (according to information revealed in the Turkish press, the price is set to rise from US$120 to US$300 per 1000m³);

- the volumes of Azeri gas exports to Turkey in the coming years: from the 2nd phase of Shah Deniz (which is set to commence c. 2016), 6 bcm of gas will be delivered to the Turkish market. Additionally 1.2 bcm/y will be supplied to the Petkim petrochemical holding (owned by a joint venture made up of SOCAR and Turcas Rafineri); and

- an outline of regulations for transit to Europe through Turkish territory (according to the Turkish press the transit fee for Azeri gas is to be around US$45 /1000 cubic meters).

There remain, however, a few issues which in the long-term will require further clarification (for example, those concerning precise rules of transit and a finalized formulation enabling changes in the price for Azeri gas over the coming years, especially when Shah Deniz II starts) and talks on this subject should, according to what is being said by the Azeris, last approximately 6-8 months.

A background to the current deal

A major source of the Azeri-Turkish problems was (aside from Turkish attempts to improve relations with Armenia) the inability to reach a consensus regarding the price of Azeri gas sold to Turkey (in 2009 this led to no agreed price being set) and no agreement being reached for the terms for the transit of gas to Europe. The intensification of gas talks and the reaching of a compromise acceptable for both sides following two years of ineffective negotiations and worsening Azeri-Turkish relations has come directly after the breakdown (in April 2010) of the process to normalise Turkish-Armenian relations. However, the concessions made by Turkey were undoubtedly partly caused by activities taken by Azerbaijan aimed at limiting its strong, unilateral dependence on the sale and transit of Azeri fuel (gas and especially oil) through Turkish territory. Baku, in an attempt to reduce the asymmetry in energy relations with Ankara, initiated an active search for alternative routes for gas export. One effect of this was the appearance of a project strongly supported by Azerbaijan in recent months for LNG exports from Georgian coast, via the Black Sea to Romania (AGRI project).

The significance of the gas compromise for Azerbaijan …

A long-term improvement in relations with Turkey (possible in part due to working out binding rules for gas cooperation which are satisfactory for both parties) would bring many benefits to Azerbaijan. It is key in the political sphere (as a counterbalance to relations with Russia and Iran and to strengthen its relations with the West), for security (the Nagorno-Karabakh issue), and for the economy (initiating profitable gas export routes to the EU). Against this background the deal that has been signed will above all bring a short term results. It facilitates bilateral cooperation not only in the gas sphere, including specific Azeri investments in Turkey. One of the issues solved is that of gas supplies to the co-owned by SOCAR Petkim petrochemical holding which used to be a problematic issue for Azeri company. There is an increased likelihood that the Turkish administration will consent to the same j.v. constructing a refinery worth 5 billion euros.

The longer term effects of documents signed are not certain, although the agreement in principle that has been reached paves the way for firm commitments and stable future cooperation. The outline transit deal makes it possible to begin concrete talks on the subject of Azerbaijan selling gas to European buyers. Nevertheless, in order to be able to finalise these talks and to choose the optimal gas export route(s) for Azerbaijan (choosing from Southern Corridor projects running through Turkish territory - Nabucco, the Turkish-Greek-Italian ITGI interconnector, the transadriatic pipeline TAP - and AGRI) it will be necessary to bring a relatively quick conclusion to the gas talks with Turkey, including specifying all the details currently missing which are connected to the trade and transport of gas.

... and for Turkey

Reaching a compromise in gas cooperation issues with Azerbaijan undoubtedly also serves Turkish interests. Nevertheless it is worth remembering that from Ankara’s perspective, with its visibly growing regional ambitions, Azerbaijan is only one of its important partners when it comes to the gas sphere. This is why the fact of signing these documents is being used in the large part as a means to realise its aims/goals only indirectly (if at all) linked to Azeri-Turkish relations. By making partial concessions (e.g. in connection with the current price for Azeri gas) Ankara is trying:

- to gain the trust of its main partner in the south Caucasus, which – especially after the fiasco of the talks with Armenia – would increase the efficacy of its regional policy.
- to confirm its will and the actual possibility of realization a transit corridor on Turkish territory carrying Caspian gas to the EU. This seems to be a major element in the implementation of Turkey’s ambitions to create a strategic (for Europe and the Eurasian and Middle East gas producers) gas hub.
- to gain a bargaining chip in the ongoing talks on energy cooperation with Russia; above all in the difficult gas negotiations (concerning a change in the terms for gas supplies to Turkey and the South Stream and Blue Stream II gas pipeline projects).

Consequences for regional gas export projects

The warming of Azeri-Turkish relations and the perspective of an intensified gas cooperation is ringing alarm bells in Russia. On the one hand it hampers the ongoing negotiations to extend the gas contract for the supply of 6 bcm of Russian gas. The contract expires at the beginning of next year and is one of three currently in force. On the other hand Russia is worried by the perspective of an acceleration of the implementation of projects for exporting Caspian gas through Turkey (e.g. Nabucco) which are in competition with Gazprom’s plans (the South Stream pipeline).

The current deal clearly simplifies negotiations concerning the sale of Azeri gas to EU markets and makes plans for the transit of Caspian gas through Turkey more realistic. However, it does not constitute a breakthrough which will make possible a fundamental speeding up of work on the process of making final investment decisions concerning the specific projects of the Southern Corridor (Nabucco, ITGI and TAP).

It seems that the finalisation of Azeri-Turkish talks and the determining of clear, unambiguous rules for gas transit to the EU could speed up work especially on the implementation of the ITGI and TAP projects. The Nabucco partners signed already in July 2009 an intergovernmental agreement that regulates the issue of gas transit through Turkey, but the project would certainly benefit from ameliorating relations between Azerbaijan and Turkey and the increased prospects of their productiv cooperation in the gas sector. At the same time it appears that in parallell with solving the transit issue for all the projects of the Southern Corridor concept it is necessary to make sure the contracts for the delivery of gas are signed.

Friday, July 2, 2010

The short list on markets and investments



The short list on markets and investments
By Chankhay
There are two tragedies in life. One is to lose your heart's desire. The other is to gain it. - George Bernard Shaw
Right in the middle of the wonderful soccer in the World Cup, comes this rather inconvenient if perfectly logical market correction. I am not surprised, and have been talking down risk assets for a while now, as regular readers would know. Still, the soccer beckons once again; hence the rather short article this week.

A whole bunch of reasons have been cited, none of which should be any surprise to anyone except moronic Keynesians (pardon the tautology):

1. Worries in Europe continue with credit spreads of Greece and a bunch of other countries moving to levels wider than before the European intervention that supposedly "guaranteed" all debts.

2. Weak data from the United States (retail sales, consumer confidence), China (exports, production) and other countries globally that highlight the significant probability of a "double-dip" recession (you say that only if anyone believed that the first "recovery" was real, which I certainly don’t).

3. Ongoing macroeconomic adjustments including austerity budgets from various European countries (UK, Germany) and US states.

4. An interesting head-fake in the form of a "stress test" for European banks that was seen as anything but;

5. The adjustment of the Chinese yuan, which many expect will push up bond yields in the US and Europe over the near-term, further pressuring those economies

6. Some casual brushes with the truth that authors may choose to regret later on (viz, US Treasury Secretary Timothy Geithner - "US consumption can no longer drive global growth"). Well, you don't say that to a bunch of nervous stock investors holding technology shares at 100 times PE, Tim.

Still, it is still appropriate to examine expectations for future moves:

A. I don't think this correction is over. The best possible outcome is that risk assets recover due to various short-term measures over the course of July but swoon once again when macro data doesn't back up anything meaningful.

B. Sell Australia. In every way, the country's stock and currency markets represent a call option on global, and particularly Asian growth. The realization of poor prospects down the road will push these assets sharply down over the second half of this year.

C. Sell emerging markets. The idea that emerging markets will somehow avoid the contagion from weakening US and European data is completely bunkum. All of the major markets – Brazil, Russia, India, China will continue to swoon, albeit in different areas (for example, Chinese stocks may stabilize about 10% from here, but property will likely fall further).

D. Sell industrial commodities. There is too much capacity in global production, and way too much froth from extended credit (or available cash balances) to correct the story quite yet. Ergo, production cuts will resume in the second half driving down demand for industrial metals and commodities.

E. Sell government bonds. Current yields on longer-dated government bonds are simply nonsensical for the level of credit risk entailed. If you must hold these darn instruments, at least have the sense to hold short-term instruments only.

F. Sell high-quality corporate credit. This is another bubble, driven by Wall Street analysts calling for "corporates to outperform sovereigns". Nonsense. Start by paring down positions in bank credit (senior bonds but more importantly, subordinated or capital-like bonds), then sell the bonds of "high quality" companies, so on down the chain.

G. Sell low-quality corporate credit. This is the most stupid bubble out there - investors chasing higher yields in low-quality companies because government bond yields have fallen so much. The decline in risk assets means that these bonds will not repay principal in many cases. Sell now to avoid further losses, especially as some silly investors still remain around.

H. Buy Switzerland, buy Singapore. New banking rules in Europe, the US and UK mean that financial institutions will likely move shop - the two most favorable destinations are Switzerland and Singapore. Then there all the new income and profit taxes to consider globally. There are other advantages including low capital gains taxes, easy regulatory / legal regimes that will appeal to investors.

I. Buy gold. Self-explanatory.

So what do I like?

Examining the flotsam and jetsam of the current financial crisis, its important for anyone with fresh capital to consider investing in precisely the areas that have been neglected the most by the upsurge in government spending and/or banking system largesse. This would be the class of entrepreneurs, small and medium-sized enterprises and trade credit.

1. Many developed countries - the US, Canada, UK, Germany, France - have an observed shortfall of capital for smaller companies. Pick the type of businesses you know (eg your neighborhood plumber) and look at investment opportunities. Its harder work than blindly following the idiotic advice of Wall Street analysts or CNBC commentators, but is potentially much more rewarding.

2. Pursue mass-market low technology manufacturers. Forget the Apples of the world. In a recession, the cheapest manufacturers of essential products will win. So look at manufacturers of such products globally.

3. Agriculture. Any benefits of the current swirl of global liquidity would likely be seen first in soft commodities, ie foodstuffs, agricultural products and the like. Freak weather phenomenon, disasters in various food production areas (eg the Gulf of Mexico) all augur well for this sector.

4. Africa. Its been awhile coming, but my thoughts are heavily focused on the opportunities in Africa now. Rather than the generic (and now overwrought) emerging market story, Africa offers real advantages that play to longer-term strengths for consumption and manufacturing. Admittedly, the World Cup helped to egg me along in this line of thinking.

(Disclaimer: As most readers have figured out for themselves, acting on the recommendations of well-known market pundits is perilous enough. From that observation, it follows that acting on the ideas of a pseudonymous commentator in an online publication isn't likely to be suitable for most people. Always consult with trusted advisers, friends - or better yet, trust your common sense).