Gazprom close to revealing financing for $11bn pipeline
Russian energy group seeks to end wrangling with European regulators over project
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Gazprom will reveal a financing package for the $11bn gas pipeline to Germany by the end of this month as the Russian energy company seeks to draw a line under the cost of a series of political battles with European regulators.
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The group was forced in August to abandon plans to split the cost of the 1,200km Nord Stream 2 pipeline under the Baltic Sea with the project’s European partners Engie, OMV, Wintershall, Shell and Uniper after Polish competition regulators objected. Alexander Medvedev, Gazprom’s deputy chairman, said a new financing model would be announced this month and that the European companies were still preparing to find a way to contribute to the pipeline’s construction. “Theoretically, Gazprom could carry the whole cost but I believe that our co-operation with our partners will not allow us to do it,” Mr Medvedev told the Financial Times. On Thursday, Gazprom chairman Alexei Miller met with Uniper chairman Klaus Schaefer in Moscow for talks on the pipeline. “Gazprom and Uniper confirmed their intention to promptly put into operation Nord Stream 2,” the Russian company said in a statement released after the meeting, adding that work on the project would be “carried out in accordance with the schedule”. Taking the full cost would significantly increase the burden on Gazprom, the world’s largest natural gas producer, which is also spending €11.4bn on a new pipeline to Turkey. Gazprom in January budgeted just $1.8bn in investment this year for Nord Stream as part of a $15.3bn total spend on pipelines and transportation in 2017. Many eastern European countries have objected to the pipeline, saying it will increase the EU’s reliance on Gazprom and bypass existing gas pipelines in Ukraine, financially harming Kiev. Gazprom says the pipeline is a commercial venture. Gazprom already supplies 34 per cent of Europe’s gas. Exports to Europe and Turkey rose 12.5 per cent in 2016 last year to a record high. But low gas prices have hurt profitability and its share price has fallen 16 per cent this year amid costly legal delays. Last month, chief executive of Austria’s OMV, Rainer Seele, said that a deal to pay for the pipeline had to be implemented this year to ensure construction would begin next year, ahead of a scheduled opening of late 2019. “Every participant has a preferred model," Mr Seele told Tass, the Russian news agency. “We should agree a common model, which is supported by the five potential European partners and Gazprom — but we do not have one as yet.” Gazprom has also been blocked from fully utilising Opal, an existing European pipeline, by European courts who temporarily upheld a Polish complaint that its dominant user status hurt competition. “Blocking of Opal is giving us substantial financial damages,” said Mr Medvedev, who described the decision as having been taken not with "economic consideration . . . but political consideration”. Mr Medvedev declined to say whether he felt Gazprom had been treated unfairly by European regulators, but expressed confidence that an upcoming European Court of Justice ruling would overturn the decision. “I’m rather sure that objective consideration of the court is making support of Poland practically impossible,” he said. “And we still believe in European justice and that’s why I believe European Court has enough professional experts to separate political speculations from economic consideration.” Mr Medvedev also said that he expected a decision this year to resolve a longstanding financial battle between Gazprom and Ukraine’s Naftogaz over a 10-year gas supply contract that ends in 2019, but admitted the two companies had yet to start discussions. The two companies have appealed to the Arbitration Institute in Stockholm over claims and counter-claims worth almost $70bn relating to gas pricing and transit fees for gas pumped to Europe through Ukraine. Mr Medvedev added that the company was open to discussing future gas supply contracts through Ukraine but had yet to agree with Ukrainian officials where the talks would take place.
E&P firm VNG awards FEED contracts to Subsea 7, Technip FMC, and Aker Solutions
The move comes after the second approval was granted for the development of the Pil and Bue discoveries on the Halten Terrace in the Norwegian sector last month.
Subsea7 and TechnipFMC are to work on plans for SURF (Subsea structures, Umbilicals, Risers & Flowlines) infrastructure.
The FEED work for the Subsea Production Systems (SPS) is to be carried out by TechnipFMC and Aker Solutions.
The awards were based on a prequalification of tenderers.
The studies will culminate in a design competition on which the contract for Engineering, Procurement, Construction and Installation (EPCI/EPC) will be awarded in Q4 2017.
VNG Norge is the operator of the Pil and Bue project. The firm holds a 30% interest, while Faroe Petroleum holds 25% and Point Resources 45%.
The total resource estimate is 90-200million boe.
The selected concept for the field development is a subsea tie-back to the Njord platform.
Technical study for Alexandroupoli LNG unit by this summer
Technical studies for a floating LNG terminal being planned for Alexandroupoli, northeastern Greece, are expected to be completed by this coming summer.
The prospective project was described as one of pivotal importance for Europe’s energy security and US interests, Robin Dunnigan, Deputy Assistant Secretary for Energy Diplomacy at the US Department of State’s Bureau of Energy Resources, noted yesterday following talks with officials at Gastrade, a Copelouzos corporate group company interested in the LNG unit’s development, as well as Greece’s energy minister Giorgos Stathakis.
The official pointed out that the US’s transformation from natural gas importer to exporter has led to a revision of the country’s outlook on the southeast European region and projects such as the prospective Alexandroupoli facility.
Dunnigan pointed out that annual US LNG exports are expected to exceed 100 billion cubic meters over the next five to seven years, increasing the country’s global market share in the sector to around 20 percent.
This prospect has increased the importance of the Alexandroupoli LNG station for US gas trading companies as the facility is being regarded as a gateway for American shale gas into the Balkans and central Europe.
The US energy official also noted that the US government plans to offer support to American firms planning to invest in Greece’s energy market, a remark interpreted as an indirect reference to Cheniere, which has expressed an interest to export LNG and supply the wider Balkans via the prospective Alexandroupoli facility. To date, Cheniere has already completed sixteen American LNG shipments to Europe.
Work on the FEED (front-end engineering and design) technical study being conducted for the Alexandroupoli floating station began recently. Its expected completion by this coming summer will enable Gastrade to make a final investment decision by the end of 2017.
If all goes well, the Alexandroupoli facility, a floating Storage Regasification Unit (FSRU) with a 170,000 cubic meter capacity planned for a location 17.6 km southwest of the Alexandroupoli port, will begin operating at the end of 2019.
Classified as an EU Project of Common Interest (PCI), the facility is planned to be incorporated with the region’s TAP pipeline and Greek-Bulgarian IGB interconnection.
Siemens to supply compressor trains, generator packages to Liwa project
Siemens and its Dresser-Rand business will supply two gas turbine-driven compressor trains and two gas turbine generator packages for the Liwa Plastics Industries Complex, a major petrochemical project in Oman.
The natural gas liquids (NGL) extraction plant in Fahud, situated approximately 300 km southwest of Muscat, is part of the industrial complex.
The order was placed by Korean construction firm GS Engineering & Construction Corporation for the state-run oil refinery and petrochemical provider ORPIC, which will operate the plant and the industrial complex. The NGL extraction plant is expected to go into operation in 2019 to extract liquefied natural gases.
The scope of supply includes four Siemens SGT-700 industrial gas turbines. Two of the gas turbines each drive a barrel-type turbo compressor (STC-SV) for lean gas compression. The gas will be routed back to the national natural gas distribution system.
Electricity supply
The other two gas turbines, each of which drives a generator, will supply electricity to the Fahud NGL plant to extract natural gas liquids and provide waste heat for the NGL extraction process. The extracted NGL from rich gas feed will be transported via a pipeline from Fahud to Sohar.
NGL is the feedstock for the petrochemical complex in Sohar. The Liwa Plastics Industries Complex will turn NGL into polyethylene and polypropylene plastics. These are used for products like packaging, suitcases, garden furniture, cars and computers. This will enable Oman to produce polyethylene for the first time.
Key contributor
Siemens has been a key contributor to Oman’s infrastructure since 1972. The company’s technology has enabled Oman to conserve its valuable natural resources, thanks to energy-efficient gas turbines used in power generation.
In 2013, Siemens supplied five gas turbines for the Sur independent power project, the largest gas-fired power plant project in the eastern province of Oman. It had also supplied two turnkey combined cycle power plants for Barka and Sohar.
Nearly £1-trillion to be invested in nuclear energy globally over 20 years
It is estimated that, over the next 20 years, more than £930-billion will be invested in expanding civil nuclear energy capacity worldwide. This was affirmed by UK Secretary of State for International Trade Dr Liam Fox in his keynote address at the Civil Nuclear Showcase 2017 in London, on Tuesday. He also pointed out that more than 20 nuclear markets were represented at the Showcase.
“Nuclear power is an industry with a truly global reach,” he highlighted. “As we speak, there are 447 commercial reactors operating in 31 countries across the world, meeting around 11% of global electricity demand. Yet this is only the beginning – there are currently another 60 reactors under construction, and plans for many more.”
The UK alone had a highly skilled and qualified nuclear workforce of more than 65 000, and the country’s nuclear new build programme was expected to increase the nuclear workforce by at least another 40 000. “The nuclear industry is a key wealth creator in the UK, supporting tens of thousands of jobs and raising our international profile,” he stated.
Fox stressed the role of the UK in the global nuclear industry; the country, he said, “has a pivotal role to play in the future of nuclear power”. This took the form of both the export of British nuclear expertise and the market the UK was providing for the global industry through its nuclear new build programme.
“With no domestic reactor vendor of our own, UK companies are uniquely placed to offer impartial support, advice and assistance to our international partners,” he noted. “Already, nuclear industries across the world, from China to the Czech Republic, are seeing the benefits of our industry-leading support.”
British companies were also exporting their expertise in nuclear decommissioning and waste management. The UK had a large-scale nuclear decommissioning programme, with a value of £3.2-billion a year, and world-leading research and development centres. He highlighted that two UK enterprises have been involved in the clean-up operations at Japan’s stricken Fukushima Daiichi nuclear power plant (which had been severely damaged by a tsunami, following a devastating earthquake, in 2011).
Then there are the investment opportunities presented by Britain’s new nuclear programme. “Our domestic market is flourishing, marked by last September’s approval of Hinkley Point C – the first new nuclear power station in this country for a generation,” he affirmed. “And … plans are also coming together for subsequent new domestic projects involving [nuclear companies] Horizon, NuGen and EDF and CGN.”