REPOST: Ukraine crisis is about Great Power oil, gas pipeline rivalry

Is it about oil and gas? This article from TheGuardian.com discusses the link between the crisis in Ukraine and Russia's and US' intention on controlling energy pipelines in Eurasia.

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Russia's armed intervention in the Crimea undoubtedly illustrates President Putin's ruthless determination to get his way in Ukraine. But less attention has been paid to the role of the United States in interfering in Ukrainian politics and civil society. Both powers are motivated by the desire to ensure that a geostrategically pivotal country with respect to control of critical energy pipeline routes remains in their own sphere of influence.

Much has been made of the reported leak of the recording of an alleged private telephone conversation between US assistant secretary of state Victoria Nuland and US ambassador to Kiev Geoffrey Pyatt. While the focus has been on Nuland's rude language, which has already elicited US apologies, the more important context of this language concerns the US role in liaising with Ukrainian opposition parties with a view, it seems, to manipulate the orientation of the Ukrainian government in accordance with US interests.

Rather than leaving the future of Ukrainian politics "up to the Ukrainian people" as claimed in official announcements, the conversation suggests active US government interference to favour certain opposition leaders:

Nuland: Good. I don't think [opposition leader] Klitsch should go into the government. I don't think it's necessary, I don't think it's a good idea.

Pyatt: Yeah. I guess... in terms of him not going into the government, just let him stay out and do his political homework and stuff. I'm just thinking in terms of sort of the process moving ahead we want to keep the moderate democrats together. The problem is going to be Tyahnybok [Oleh Tyahnybok, the other opposition leader] and his guys and I'm sure that's part of what [President Viktor] Yanukovych is calculating on all this.

Nuland: [Breaks in] I think Yats is the guy who's got the economic experience, the governing experience. He's the... what he needs is Klitsch and Tyahnybok on the outside. He needs to be talking to them four times a week, you know. I just think Klitsch going in... he's going to be at that level working for Yatseniuk, it's just not going to work.

[...]

Nuland: OK. He's [Jeff Feltman, United Nations Under-Secretary-General for Political Affairs] now gotten both [UN official Robert] Serry and [UN Secretary General] Ban Ki-moon to agree that Serry could come in Monday or Tuesday. So that would be great, I think, to help glue this thing and to have the UN help glue it and, you know, Fuck the EU.

Pyatt: No, exactly. And I think we've got to do something to make it stick together because you can be pretty sure that if it does start to gain altitude, that the Russians will be working behind the scenes to try to torpedo it.

As BBC diplomatic correspondent Jonathan Marcus rightly observes, the alleged conversation:

"... suggests that the US has very clear ideas about what the outcome should be and is striving to achieve these goals... Washington clearly has its own game-plan.... [with] various officials attempting to marshal the Ukrainian opposition [and] efforts to get the UN to play an active role in bolstering a deal."

But US efforts to turn the political tide in Ukraine away from Russian influence began much earlier. In 2004, the Bush administration had given$65 million to provide 'democracy training' to opposition leaders and political activists aligned with them, including paying to bring opposition leader Viktor Yushchenko to meet US leaders and help underwrite exit polls indicating he won disputed elections.

This programme has accelerated under Obama. In a speech at the National Press Club in Washington DC last December as Ukraine's Maidan Square clashes escalated, Nuland confirmed that the US had invested in total "over $5 billion" to "ensure a secure and prosperous and democratic Ukraine" - she specifically congratulated the "Euromaidan" movement.

So it would be naive to assume that this magnitude of US support to organisations politically aligned with the Ukrainian opposition played no role in fostering the pro-Euro-Atlantic movement that has ultimately culminated in Russian-backed President Yanukovych's departure.

Indeed, at her 2013 speech, Nuland added:

"Today, there are senior officials in the Ukrainian government, in the business community, as well as in the opposition, civil society, and religious community, who believe in this democratic and European future for their country. And they've been working hard to move their country and their president in the right direction."

What direction might that be? A glimpse of an answer was provided over a decade ago by Professor R. Craig Nation, Director of Russian and Eurasian Studies at the US Army War College's Strategic Studies Institute, in a NATO publication:

"Ukraine is increasingly perceived to be critically situated in the emerging battle to dominate energy transport corridors linking the oil and natural gas reserves of the Caspian basin to European markets... Considerable competition has already emerged over the construction of pipelines. Whether Ukraine will provide alternative routes helping to diversify access, as the West would prefer, or 'find itself forced to play the role of a Russian subsidiary,' remains to be seen."

A more recent US State Department-sponsored report notes that "Ukraine's strategic location between the main energy producers (Russia and the Caspian Sea area) and consumers in the Eurasian region, its large transit network, and its available underground gas storage capacities", make the country "a potentially crucial player in European energy transit" - a position that will "grow as Western European demands for Russian and Caspian gas and oil continue to increase."

Ukraine's overwhelming dependence on Russian energy imports, however, has had "negative implications for US strategy in the region," in particular the strategy of:

"... supporting multiple pipeline routes on the East–West axis as a way of helping promote a more pluralistic system in the region as an alternative to continued Russian hegemony."

But Russia's Gazprom, controlling almost a fifth of the world's gas reserves, supplies more than half of Ukraine's, and about 30% of Europe's gas annually. Just one month before Nuland's speech at the National Press Club, Ukraine signed a $10 billion shale gas deal with US energy giant Chevron "that the ex-Soviet nation hopes could end its energy dependence on Russia by 2020." The agreement would allow "Chevron to explore the Olesky deposit in western Ukraine that Kiev estimates can hold 2.98 trillion cubic meters of gas." Similar deals had been struck already with Shell and ExxonMobil.

The move coincided with Ukraine's efforts to "cement closer relations with the European Union at Russia's expense", through a prospective trade deal that would be a step closer to Ukraine's ambitions to achieve EU integration. But Yanukovych's decision to abandon the EU agreement in favour of Putin's sudden offer of a 30% cheaper gas bill and a $15 billion aid package provoked the protests.

To be sure, the violent rioting was triggered by frustration with Yanukovych's rejection of the EU deal, along with rocketing energy, food and other consumer bills, linked to Ukraine's domestic gas woes and abject dependence on Russia. Police brutality to suppress what began as peaceful demonstrations was the last straw.

But while Russia's imperial aggression is clearly a central factor, the US effort to rollback Russia's sphere of influence in Ukraine by other means in pursuit of its own geopolitical and strategic interests raises awkward questions. As the pipeline map demonstrates, US oil and gas majors like Chevron and Exxon are increasingly encroaching on Gazprom's regional monopoly, undermining Russia's energy hegemony over Europe.

Ukraine is caught hapless in the midst of this accelerating struggle to dominate Eurasia's energy corridors in the last decades of the age offossil fuels.

For those who are pondering whether we face the prospect of a New Cold War, a better question might be - did the Cold War ever really end?

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More news related on oil and gas production can be read on this Dr. Ali Ghalambor Twitter page.

U.S. Natural Gas Exports Poised For Takeoff

This article talks about the increasing role of the US in natural gas exportation.

Shale gas is the energy topic of the day. Production is increasing, but so is gas demand – for electric generation, transportation, and as an industrial feedstock. However, perhaps the most significant dynamic with the potential to drive natural gas prices up in the foreseeable future is a growing push to export LNG from the US. That particular dynamic has recently gone into hyper-drive, with numerous liquified natural gas (LNG) export requests having been filed with the US Department of Energy in the past few years.

Consider this: according to the Energy Information Administration, total natural gas consumption for 2011 was 24.3 trillion cubic feet (Tcf), and 2012 consumption looks to be on the order of 26 Tcf. In the meantime, just since mid-August, US companies have filed for permits with the USDOE to export 7.8 Tcf of LNG – about 30% of current total domestic consumption. Totalrequests year-to- date equal 11.2 Tcf (though almost 1 Tcf is for re-export of Canadian gas). Add to that, the 5.3 Tcf of exports requested last year, and you get approximately 16.5 Tcf. That’s over 60% of current domestic consumption. It’s also more than the amount of US LNG export capacity from five brownfield and three Greenfield projects in play that are listed in a recent Wood MacKenzie report.

Of course, not all of these planned facilities will get permitted or built. But some will, and perhaps a good number, because the economics are compelling and the market is there.

At the September LNG Producer-Consumer Conference in Tokyo, the Indian delegate was quoted as saying that India’s LNG import capability will multiply five-fold in as many years. It’s not likely to stop there, in a country of over a billion inhabitants, with their enormous energy problems. For its part, post-Fukushima Japan has shut down all but 2 of its 54 reactors, and Tokyo Electric Poweris reportedly in talks with North American suppliers(and negotiating with Washington) to secure long-range gas contracts to supply gas-fired generators. There is a big hole to fill and gas will help fill it.

Clearly, much of the LNG imported by these and other Asian countries will be sourced from places other than North America. Today, 18 countries export the gas to 25 importing nations (with Qatar supplying almost a third of all global LNG in 2011). The US is the new kid on the block, supplying only .1% of the world’s exports last year. However, a powerful combination of robust pipelines, multiple vendors, and world class shale reserves is likely to turn the US – and especially the Gulf Coast – into a favored supplier. If permits can be secured, export growth could occur relatively quickly.

The process of condensing natural gas into a liquid at -160 degrees Celsius reduces its volume by a factor 600, and makes it economic to ship. But the industry is enormously capital-intensive and costs are considerable: A “typical” investment includes an outlay of one to two billion dollars for liquefaction facilities, over two hundred million per vessel for LNG tankers, and half a billion to a billion dollars for receiving terminals. Yet even with those costs, the economic incentive is there. Currently, the North America pays just over $3 per mmBtu, while the Japanese spot market price hovers around $13. In part that’s because Asian gas prices are linked to oil. According to Reuters, long-term contract shipments to Japan would likely be priced at less than $10 per mmBtu. That’s a powerful market differential. Investments in supplying LNG to hungry Asian markets may yield payback periods of under five years for the first players into the game, Woods MacKenzie notes.

The laws of economics dictate that, in the long run, supply and demand reach an equilibrium. LNG facilitates that equilibrium dynamic by linking land-locked North American supplies to world markets. The arbitrage opportunity may eventually diminish if Asian gas and oil prices are de-linked (gas is currently indexed to oil, but there is a strong movement to change that). In the meantime, however, that price differential constitutes a powerful incentive.

The Obama Administration has been looking at this LNG export issue, with a study and recommendations (thrice delayed) due to be released in December. To some degree, this push for numerous twenty-year (or longer) export permits seems to have caught just about everybody off guard. In fact, theEnergy Information Administration study from January of this year evaluating this issue posits a high case scenario of 12 Bcf/day. In the meantime, exporters have lined up quickly, and export requests for 1.25 times that amount have been submitted in the past two years.

Although it can take several years and billions of dollars to build the LNG facilities, the LNG price differential and export dynamic truly make gas markets more “liquid.” This is bound to have a long-term upward impact on US natural gas prices. The challenge for the Obama Administration will be how to balance international free markets with the long-sought goal of US energy security. It won’t be easy.

Source: http://www.forbes.com/sites/peterdetwiler/2012/11/08/us-natural-gas-exports-poised-for-take-off