The start of gas trading activities by the CEGH Gas Exchange of the Vienna Stock Exchange (Wiener Börse) today marks a further step towards positioning the Central European Gas Hub (CEGH) as an important international hub and trading gateway into the CEE area.

The CEGH ranks among the largest gas trading platforms in Continental Europe and seeks to facilitate access to gas trading. There are 100 trading participants currently registered on the platform and total trading volumes have increased, by roughly 2 bcm per month, since the founding of the gas hub four years ago. The start of trading activities by CEGH at Vienna Stock Exchange now marks a further important step.

“The opening of CEGH Gas Exchange of Wiener Börse sets another milestone for the creation of an European gas market and considerably strengthens the energy trading sector in Austria. This further improves the security of gas supply for Austrian customers based on market-oriented measures,” commented the Austrian Minister for Economic Affairs at the opening celebration.

For OMV, which still has a 100% share in CEGH, the expansion of these gas trading activities contributes further to consolidating its logistic gas business.

“The direct access to the infrastructure of the OMV distribution node Baumgarten, which is an interconnector of important transit pipeline systems and comprehensive storage facilities, allows the CEGH to be in a position to fulfill all necessary prerequisites of a state-of-the-art energy trading platform,” stressed Werner Auli, OMV Executive Board Member for Gas & Power. Furthermore, the cooperation between the CEGH and the Vienna Stock Exchange will further enhance the pivotal role of the Baumgarten compressor station, which is wholly owned by OMV Gas GmbH, as a physical distribution node in Central Europe. Roughly one third of total Russian gas exports to Western Europe are already transported via the OMV compressor station in Baumgarten. Short-term trade will optimally complement long-term delivery agreements, whilst safeguarding competition on the deregulated energy market.

“The CEGH Gas Exchange of Wiener Börse secures – for both of us – one of the most important positions for the future gas market at a regional and a European level. And it shows that at the Vienna Stock Exchange we have further expanded our strategic business fields,” explains Heinrich Schaller, Board Member of the Vienna Stock Exchange. The Vienna Stock Exchange will hold a 20% stake in CEGH.

Trading on the spot market of the CEGH Gas Exchange of Wiener Börse will be carried out via the Vienna Stock Exchange XETRA® electronic trading system. The CEGH will be responsible for the market and customer relationship management, while overall market supervision will be with the Vienna Stock Exchange.

Stock exchange trading at the CEGH Gas Exchange of Wiener Börse is subject to strict rules and requirements in accordance with the Stock Exchange Act, which guarantees a clear structuring and regulation of trading activities minimizing any risk for all trading participants. The settlement of trading activities on the spot market will be split in line with the standard practice of the energy business between the Leipzig-based European Commodity Clearing AG (ECC), which will be in charge of the financial settlement of transactions and the clearing of the gas volumes, and the hub trading points of the CEGH, which will be responsible for the physical settlement of trading activities on the basis of the stock exchange trading.

“This Stock exchange trading will ensure the highest degree of standardized trading and round off the wide range of services currently available; optimally complementing OTC trading,” added Harald Wüstrich, Managing Director of the CEGH AG.

A cooperation agreement signed between OMV and Gazprom in January 2008, envisages the participation of Gazprom Germania and Centrex in the CEGH with a 30% and 20% stake respectively. This is subject to prior approval under EU merger control law granted by the European Commission. This envisaged partnership will further enhance a secured supply of gas, via the distribution node Baumgarten, whilst also increasing liquidity for short-term trading activities.

Though international oil and gas prices have fallen steeply resulting in the economies of many countries in the Middle East facing negative growth and large-scale cut backs in energy projects, Qatar stands out as an exception.

Though the country’s hydrocarbons sector and the economy it underpins will not enjoy the same heady rates of growth seen over the past few years – with GDP estimated to have expanded by 18% in 2008 – predictions suggest that the economy will grow by around 9% this year.

Much of this growth will come through Qatar’s increased gas exports. With proven reserves of 25trn cu metres and production capacity expected to reach 77m tonnes by the end of the decade, Qatar has positioned itself to be the world’s leading supplier of liquid natural gas (LNG) for the foreseeable future.

Though gas prices have dropped over the past year, this is expected to have less impact on Qatar’s overall economy than falling oil prices on some of its neighbours. This is due to the fact that many of the export contracts it has with overseas clients are long-term deals, rather than the more usual spot contracts in the oil industry.

Another factor in Qatar’s favour is its ongoing programme of increasing output, meaning it can maintain earning levels even if prices fall simply by selling more gas at a lower price.

There have been some claims that the international LNG market could see a glut this year, as the global recession pushes down demand and production increases. With Russia looking to ramp up output and break into the Asian market – a traditional stronghold of Qatar – as well as other gas production projects due to start this year in Indonesia and Yemen, competition is increasing.

Though there could be a brief period of oversupply, Faisal Al Suwaidi, the chief executive of Qatar Gas, believes the recovery of the global economy will bring about a balance.

“I would be lying if I said I wasn’t worried about the short-term outlook, but in the longer term the world will need this gas,” Al Suwaidi said in an interview with British daily The Times on April 6.

Though there may be concerns over pricing levels and oversupply, Qatar can look to the future with optimism, with clients lining up to secure imports. An increasing number of these new customers are in Europe, as the continent becomes increasingly disenchanted with Moscow as its main supplier, and Qatar is set to be one of the main benefactors from the recurring spat between Russia and Ukraine, which has seen pipelines running across Ukrainian territory into Europe closed twice in two years.

On April 16, Qatar Gas signed a 20-year agreement, due to come into force in 2014, to supply Poland’s state-owned gas company Polskie Gornictwo Naftowe i Gazownictwo with 1.4bn cu metres of LNG annually, equivalent to 10% of present consumption. Currently, Poland imports around one-quarter of its gas needs from Russia and like many European countries saw supplies disrupted in January after Moscow turned off the taps during its latest pricing dispute with Kiev.

Bulgaria, another country that experienced supply cuts in January, could become the latest in the line of clients for Qatari gas imports, the subject being discussed during talks held in mid-April between Qatar’s ruler, Sheikh Hamad bin Khalifa Al Thani, and Bulgarian President Georgi Parvanov.

Sofia also suggested the proposal of building an LNG terminal on Greece’s Aegean coast to allow shipped gas to be unloaded before being piped to Bulgaria itself and other customers across Europe, a move that would further expand Qatar’s export reach.

Established customers too are looking beyond the current economic crisis and are seeking to secure additional supplies. One of these is India, which Qatar is already contracted to supply 7.5m tonnes annually. On April 20, the Qatari deputy prime minister and minister of energy and industry, Abdullah bin Hamad Al Attiyah, told local media that India was seeking to increase its imports to feed a new regasification terminal under construction in Kochi.

Al Attiyah stated that one of the reasons India was looking to Qatar to meet its additional needs was down to the country’s reputation for reliability.

“Since we began supplying to Petronet, there was no disruption in our LNG cargoes to India. We remain committed to being a reliable supplier and supplier of choice,” he said.

It is this reliability as a supplier that is increasingly making Qatar the preferred choice for energy-hungry importers. With the country not using gas as a weapon of diplomacy as Russia has done; not being subject to sanctions or political concerns as is the case with Iran; and putting conditions on sales that Algeria, which is calling for the right to sell directly to consumers in some European markets, has done, Qatar has earned its reputation as a dependable business partner. It is this standing, along with reserves estimated to be able to maintain production at proposed levels for 100 years, that will aid the country’s economic growth.

Poland’s natural gas monopoly (PGNiG) and Russia’s Gazprom agreed on cooperation in gas supplies to Poland, PGNiG said in a statement on Friday.

“Both sides have agreed to increase supplies & to prolong the existing contract till 2037. Besides, a compromise on managing the Europol Gaz company and its rate policy has been found” PGNiG said in the statement.

Poland consumes 14 bcm of natural gas annually, approximately 30% of which is generated by domestic production. In 2008, Gazprom delivered over 7 bcm of gas to Poland via the Yamal-Europe gas pipeline. EuRoPol GAZ SA was established between PGNiG & Gazprom as a joint venture in 1993. The company owns the Polish section (684km) of the Yamal-Europe transit gas pipeline & five pump stations.

“At the business level, I positively assess the agreement. It still has to be presented to the team for energy security & later to the Council of Ministers,” Polish Deputy Prime Minister and Economy Minister Waldemar Pawlak told Polish news agency PAP.

As we reported previously, Gazprom turns off taps on Ukraine’s gas supply, European energy security is at present over reliant on Gazprom & Ukranian transit pipelines, this being one of the major reasons that so much emphasis is being given to the Nabucco Pipeline project at present.

Similarly, with winter about to hit Central Europe with a vengeance, Poland is eager to ensure that sufficient supply is secured, especially as Poland has been reliant on more than 3 bcm of gas from Ukraine’s Naftogas. Earlier this year, Poland was seriously affected when Gazprom shut down gas supply to Ukraine, causing Europe wide fears.

Although this is good news for both parties, Poland is also moving to secure further supply & following similar moves by other EU nations, is looking to move away from over reliance on Gazprom. In 2007, PGNiG announced that it would be constructing a new LNG terminal on the Baltic Sea. According to Downstream Today Swinoujscie facility is planned to be in operation by early 2013 & consists of a regassification plant with two LNG storage tanks (each 160,000 cubic meters), providing an initial capacity of 5 bcm per annum, with the opportunity to rapidly expand to 7 bcm as required.

The Vice Prime Minister of the Russian Federation, Igor Ivanovich Sechin, the Russian Minister of Energy, Sergei Shmatko, the Minister of Energy of the Republic of Turkey, Taner Yildiz and the Minister for Economic Development of the Italian Republic, Claudio Scajola, signed today in Milan a joint statement concerning the construction of the Samsun-Ceyhan oil pipeline between Turkey’s Black Sea coast and its Mediterranean coast.

The agreement testifies the level of cooperation among the three Governments, in particular in the energy sector, and it underlines their joint commitment to enhance energy security in their respective countries and in the European market through the diversification of transport routes, as well as the protection of the environment.

In line with the agreements signed in Ankara on August 6th 2009 by the representatives of the Russian Federation and the Republic of Turkey, which envisage the participation of Russian oil companies in the Samsun-Ceyhan Project, the Ministers agree that this initiative will contribute to strengthening security of supply, to protecting the environment and to enhanced cooperation.

At the same time, representatives of Eni, Calik Holding, JSC Transneft and Rosneft, the energy companies involved, signed a Memorandum of Understanding which envisages the commitment to discuss the definition of the economic and contractual conditions for Russian companies to participate in the Samsun-Ceyhan Project in order to ensure the volume of crude that would guarantee the economic sustainability of the project.

Eni (NYSE:ENI) has been heavily involved in the oil pipeline project since 2005 and will play a leading role in its realization. In 2006, Eni bought 50% of Trans Anadolu Pipeline Company (TAPCO), the company designed for the realization and management of the Samsun Ceyhan pipeline.

The project has been developed taking environmental issues into consideration and adopting measures which comply with the most rigorous international safety standards. Furthermore, in order to cause minimal disturbance to the environment and existing infrastructure, the pipeline will be built along existing pipeline routes.

The Samsun-Ceyhan pipeline will facilitate safer transport across the Bosphorus and Dardanelles Straits as well as reducing the impact on the region’s complex and delicate ecosystem.

The Nabucco Intergovernmental Agreement that was signed by representatives of transit countries Turkey, Bulgaria, Romania, Hungary, and Austria, represents a huge symbolic step toward diversifying EU energy supplies. The project should carry gas reserves to Europe from the Caspian Sea region, Iraq, and the Middle East — and not from Russia, currently the EU’s biggest and most capricious supplier. At the ceremony, European Commission President Jose Manuel Barroso called Nabucco “a truly European project” that “will provide energy security to Turkey, to Southeast Europe, and to Central Europe.”

“I sincerely believe we are starting to confound the skeptics, the unbelievers,” Barroso said. “Some time ago people said that this project would not go ahead, that the negotiations seemed irrevocably blocked. Now we have an agreement and I believe this pipeline is now inevitable rather than just probable.”

EU officials insist Nabucco’s intention is not to pick a fight with Moscow, but they make no secret of the fact that Russia’s reputation as a supplier has taken a beating following repeated gas spats with Ukraine — and that finding reliable alternatives is now an EU priority.

The 3,300-kilometer Nabucco pipeline — which should run from eastern Turkey to the Austrian capital, Vienna — is expected to come online in 2014. When fully operational, it could carry 31 billion cubic meters (bcm) of gas annually and supply between 5-10 percent of the EU’s projected gas consumption in 2020.  Russia, the bloc’s largest external supplier, provided around one-quarter of the EU’s gas at the last reliable count.

“The consequences of the Nabucco project will reach far beyond simply laying down a pipeline and filling gas into it,” Hungarian Prime Minister Gordon Bajnai said in Ankara, hinting at the broad impolications for the 27-member EU. “This will have very significant, positive consequences in the economic, social, and political sense for all of our citizens.”

Nabucco has always been seen to have a political dimension, and Russia’s reliability as a provider has suffered in recent years, with many new EU member states distrustful of Moscow’s motives. But the European Commission’s energy spokesman, Ferran Tarradellas, told RFE/RL last week that moves to diversify EU energy supplies did not mean the bloc was turning its back on Russia.

“Nabucco is going to make a contribution — it’s going to [deliver] gas from different sources, through different transport routes, and therefore it’s going to bring more security of supply, more freedom of choice to European markets,” Tarradellas said. “But this doesn’t mean that we’re not going to go on working with Russia. On the contrary, Russia is very likely to remain our main supplier of gas and Nabucco has never been a project against Russia.”  Tarradellas said the EU has been “very transparent with our Russian friends.”

Senior Russian officials have stated publicly that the EU’s efforts to lessen its energy dependence on Moscow are driven by “Russophobia.” Privately, EU officials argue that regardless of Russian objections, the bloc must look out for its own energy security. They point out that most eastern member states are wholly dependent on Russian gas.

“You know our history with Russia and Ukraine,” one senior European Commission official commented recently, alluding to the recurrent price disputes between the two countries which saw half of the EU’s member states suffer debilitating gas shortages as Russia turned off the taps in January. Briefing journalists in Brussels, the official intimated more than once that enhancing EU member states’ security of supply and lessening their reliance on Gazprom amount to the same thing. The benefits of Nabucco in this regard, he said, will be felt from “Greece to Hungary” and in the Western Balkans, and will extend as far as Poland, Germany, and France — all of which will have access to the gas transported to Europe via the pipeline.

Nabucco has long been hampered by a lack of commitment from both suppliers and investors. Searching for the initial 8 bcm of gas needed annually to start up Nabucco, EU officials are looking to Azerbaijan’s Shah Deniz II gas field, projected to go online in September, to provide the necessary start-up volumes. Azerbaijan’s recent 500 million cubic meter deal to sell gas to Gazprom does not appear to worry Brussels, where officials say the deal is just a small portion of Azerbaijan’s overall gas output. EU sources also say Azerbaijan’s government thinks that country could produce “far more” gas than the 8 bcm needed to make Nabucco viable. There is talk of a possible 30 bcm being available from Azerbaijan alone by 2015. Given the mounting geopolitical risks in the South Caucasus, however, EU decision-makers are exploring alternatives as well.

Should anything go wrong with the South Caucasus transit corridor, Iraq is said to be in a position to step in and supply the minimum 8 bcm needed annually. Iraqi Prime Minister Nuri al-Maliki was attending the Ankara signing ceremonies. The bloc is setting its sights much higher, hoping to reach beyond Azerbaijan to the massive reserves held by the Central Asian states.

Tarradellas also said Turkmenistan is the next natural target for Nabucco after Azerbaijan.”Turkmenistan has large reserves that have been proven, so probably it’s going to be the next country that is going to be an important player on the Southern Corridor project. We have also contacts with Kazakhstan and with Uzbekistan as possible future suppliers.”

Turkmenistan has at least one gas field with a proven capacity of 4 trillion-14 trillion cubic meters — enough to keep Nabucco operational at its currently projected levels for at least 120 years. The EU is working with Azerbaijan and the Central Asian countries to set up a Caspian Development Corporation (CDC), a commercial enterprise tasked with establishing transit routes — possibly a pipeline — across the Caspian Sea.

But Brussels is now playing down earlier promises extracted from Ashgabat to guarantee the EU 10 BCM a year. This was a “political commitment,” the official said on July 10. He said the Central Asian countries would always keep their options open until the last possible moment to maximize their bargaining power and commercial advantage with regards to all prospective buyers.

The Brussels-based official also described Nabucco’s main impact on Turkey in terms of reducing that country’s dependence on the current dominant supplier, Gazprom. Nabucco’s gas flow, the official said, will be reversible, enabling Turkey to switch at will from Russian supplies to gas coming from the North Sea, Algeria or Libya.

Should Nabucco fail to tap into the Central Asian gas reserves, prospects for its large-scale expansion will remain bleak. The EU source said there are “no great hopes” for the Pan-Arab Pipeline which connects to Turkey via Syria, as most of the Middle Eastern gas is expected to move south.
Iran, with its large reserves, is not a “desirable” partner for Nabucco in the current political climate, in the words of the EU official. He also underlined the fact that Iran presently imports gas.

Given that the South Caucasus Pipeline from Azerbaijan to Georgia can currently handle only 10 bcm a year, there exists an obvious transit bottleneck. Officials in Brussels say the capacity of the pipeline could be doubled but decline to comment further. “The EU has no preference” as to the location or contractors of any other prospective pipelines, said one senior source.

The bloc’s casual stance could undermine prospects for the White Stream pipeline project, to run under the Black Sea from Georgia to Romania, recently elevated to the status of a priority EU project. Officials say Nabucco with its current prospects will offer a “very good” rate of return at a low risk. The EU itself has agreed to bankroll 250 million euros of the estimated total cost of 7.9 billion euros.

This article first appeared in Radio Free Europe

As reported in early December by news agency Novosti, Gazprom is looking to acquire 51% of the Russian sattelites energy reserves & control of its refining & retail operations, for $400M. In return, Gazprom offers to invest up to $500M in developing & building new gas storage infrastructure & also construction of a distributions spur for the South Stream Pipeline.

“An agreement was reached today (5th Dec 08) to sign three deals by the end of the year,” CEO Alexei Miller said, referring to Gazprom Neft’s acquisition of state-owned Naftna Industrija Srbije, Gazprom’s $500 million investment in a gas storage facility in Serbia, and the construction of the Serbian segment of the South Stream pipeline.

The South Stream Pipeline is set to provide a distribution network across SE Europe, allowing Gazprom to distribute up to 30Bln cubic meteres of gas via Greece, Bulgaria & Serbia. The pipeline has attracted some controversy, mainly from the US, as it is seen as being a further attempt by Gazprom to put a stranglehold on EU energy supplies. Russia contends that this is purely diversification, an understandable premise, as soured relations with Ukraine on transit deals & domestic prices caused Gazprom to turn off the Ukrainian supply in 2006. More on the myriad of pipeline deals can be sourced here at The Bridge.

Meanwhile, although the deal is done from a Gazprom point of view, it is causing ructions within the Serbian government itself. Serbia’s Economy Minister Mladjan Dinkic said Serbia should sell its state energy company, NIS, only if Russia signs firm guarantees that the South Stream natural gas pipeline will indeed be built. But Deputy Prime Minister Ivica Dacic said Serbia should sell the company even without Moscow’s guarantees, or risk losing the support of its “strategic” political ally.

Dinkic and other pro-Western ministers in the government fear that Russia’s takeover of the country’s energy sector would dramatically increase Moscow’s political influence in the Balkan country.

Dinkic said that Russia insists on maintaining a monopoly over the sale of oil products in Serbia until 2014, is reneging on its promise to invest €500 million in modernising NIS, and has offered no guarantees that the European Union’s pollution protection standards would be implemented.

so capitalism Russian style.

UPDATE 1 10/02/09 : From OilVoice : Gazprom completes acquisition of 51% in NIS

JSC Gazprom Neft completed the acquisition of 51% of shares in Serbia’s NIS at a price of 400 million euros. The acquisition was made in accordance with the purchase agreement between Gazprom Neft and the Serbian government.

The agreement also provides for the reconstruction and upgrade of NIS process facilities by 2012; investment will amount to at least 500 million euros. As part of the upgrade, measures will be taken to improve the quality of oil products so that they meet European standards (Euro-5).