Russia, China Sign Second Mega-Gas Deal: Beijing Becomes Largest Buyer Of Russian Gas

As we previewed on Friday, when we reported that "Russia Nears Completion Of Second "Holy Grail" Gas Deal With China", moments ago during the Asia-Pacific Economic Cooperation forum taking place this weekend in Beijing, Russia and China signed 17 documents Sunday, greenlighting a second "mega" Russian natural gas to China via the so-called "western" or "Altay" route, which as previously reported, would supply 30 billion cubic meters (bcm) of gas a year to China.

Russian President Vladimir Putin and Chinese leader Xi Jinping

Among the documents signed between Russian President Vladimir Putin and Chinese leader Xi Jinping were the memorandum on the delivery of Russian natural gas to China via the western route, the framework agreement on gas supplies between Russia's Gazprom and China's CNPC and the memorandum of understanding between the Russian energy giant and the Chinese state-owned oil and gas corporation.

"We have reached an understanding in principle concerning the opening of the western route," Putin said. "We have already agreed on many technical and commercial aspects of this project, laying a good basis for reaching final arrangements."

RIA adds, citing Gazprom CEO Alexei Miller, that the documents signed by Russia and China on Sunday define the western route as a priority project for the gas cooperation between the two countries.

"First of all these documents stipulate that the "western route" is becoming a priority project for our gas cooperation," Miller said, adding that the documents provide for the export of 30 billion cubic meters of Russian gas to China annually for a 30-year period.

Miller noted that with the increase of deliveries via the western route, the total volume of Russian gas deliveries to China may exceed the current levels of export to Europe in the medium-term perspective. In other words, China has now eclipsed Europe as Russia's biggest, and most strategic natural gas client. More:

Miller, who heads Russia's state-run energy giant, told reporters that "taking into account the increase in deliveries via 'western route,' the volume of supplied [natural gas] to China could exceed European exports in the mid-term perspective."

This came after Russian and Chinese energy executives signed on Sunday a package of 17 documents, including a framework deal between Gazprom and China's energy giant CNPC to deliver gas to China via the western route pipeline.

Miller said Gazprom and CNPC were in talks on a memorandum of understanding that would see Russia bring gas to China through the western route pipeline, as well as a framework agreement between the two state-owned companies to carry out the deliveries.

The western route will connect fields in western Siberia with northwest China through the Altai Republic. Second and third sections may be added to the pipeline at a later date, bringing its capacity up to 100 billion cubic meters a year.

The facts and figures of the Altay deal are broken down in the following map courtesy of RT

Also of note, among the business issues discussed by Putin and Xi at their fifth meeting this year was the possibility of payment in Chinese yuan, including for defense deals military, Russian presidential spokesman Dmitry Peskov was cited as saying by RIA Novosti. More from RIA:

Russia's President Vladimir Putin and China's President Xi Jinping have discussed the possibility of using the yuan in mutual transactions in different fields of cooperation, Kremlin spokesman Dmitry Peskov said Sunday.

"Much attention has been paid to the topic of mutual payments in diverse fields ... in yuans which will help to strengthen the yuan as the region's reserve currency," Peskov said commenting on the meeting held between Putin and Xi on the sidelines of the Asia-Pacific Economic Cooperation (APEC) summit in Beijing.

On October 13, Russian Economic Development Minister Alexei Ulyukayev announced that Russia was considering Chinese market to partially substitute access to the financial resources of the European Union and the United States.

The European Union and the United States have imposed several rounds of economic sanctions on Russia over its alleged involvement in the Ukrainian crisis, a claim Moscow has repeatedly denied. The restrictions prohibit major Russian companies from seeking financing on western capital markets.

Meanwhile, as China and Russia keep forging ahead in a world in which the two becomes tied ever closer in a symtiotic, dollar-free relationship, this is how the US is faring at the same meeting: "China, U.S. Parry Over Preferred Trade Pacts at APEC: Little Progress Made on Separate Trade Deals at Asia-Pacific Economic Cooperation Forum."

The U.S. blocked China’s initiatives because it worried that launching FTAAP talks would impede progress on a separate trade deal, the Trans-Pacific Partnership. The ministers’ statement said that any FTAAP deal would build on "ongoing regional undertakings"—a reference to TPP and other regional trade deals.

"The Chinese got all they could expect—a reaffirmation that we all share in the vision of having a regional integrated model" for trade, said U.S. Chamber of Commerce Executive Vice President Myron Brilliant.

U.S. Secretary of State John Kerry said Saturday that negotiating the TPP "is a battle that we absolutely must win." Ministers from the 12 TPP nations met Saturday afternoon to try to narrow differences, including disputes between the U.S. and Japan over agriculture and auto trade. On Monday, the leaders of the TPP nations are again scheduled to discuss the trade deal, although no breakthrough is expected.

The U.S. is trying to tie an ITA deal to progress on other trade deals with China, as a way to increase its leverage with Beijing. "How the ITA negotiations proceed is an important and useful data point" on China’s ability to negotiate an investment treaty with the U.S., Mr. Froman said.

Trade analysts say the U.S. also hopes to use China’s desire to have the Beijing conference produce concrete results as leverage. This is the first major international summit held in China since Xi Jinping took over as Communist Party chief in 2012, and the government wants to use the session to affirm China’s greater role in the world.

Good luck trying to "increase US leverage with Beijing" using a trade conference being held in Beijing as the venue.

In other words instead of actual trade agreements, the US merely jawboned and "shared visions."

Then again, as noted here since 2010, in a world in which one can merely "print one's way to prosperity", what is the need for actual trade? Surely, which China and Russia are expanding their commercial ties at the expense of Europe, the US can continue to pretend it is the world's only superpower and has no need for either Russia or China. After all, Mr. Chairmanwoman can always go back to work and print some more of that "world reserve currency." More

 

 

 

© 2014

Global riot epidemic due to demise of cheap fossil fuels

If anyone had hoped that the Arab Spring and Occupy protests a few years back were one-off episodes that would soon give way to more stability, they have another thing coming. The hope was that ongoing economic recovery would return to pre-crash levels of growth, alleviating the grievances fueling the fires of civil unrest, stoked by years of recession.

Protester in Ukraine

But this hasn't happened. And it won't.

Instead the post-2008 crash era, including 2013 and early 2014, has seen a persistence and proliferation of civil unrest on a scale that has never been seen before in human history. This month alone has seen riots kick-off in Venezuela, Bosnia,Ukraine, Iceland, and Thailand.

This is not a coincidence. The riots are of course rooted in common, regressive economic forces playing out across every continent of the planet - but those forces themselves are symptomatic of a deeper, protracted process of global system failure as we transition from the old industrial era of dirty fossil fuels, towards something else.

Even before the Arab Spring erupted in Tunisia in December 2010, analysts at the New England Complex Systems Institute warned of the danger of civil unrest due to escalating food prices. If the Food & Agricultural Organisation (FAO) food price index rises above 210, they warned, it could trigger riots across large areas of the world.

Hunger games

The pattern is clear. Food price spikes in 2008 coincided with the eruption of social unrest in Tunisia, Egypt, Yemen, Somalia, Cameroon, Mozambique, Sudan, Haiti, and India, among others.

In 2011, the price spikes preceded social unrest across the Middle East and North Africa - Egypt, Syria, Iraq, Oman, Saudi Arabia, Bahrain, Libya, Uganda, Mauritania, Algeria, and so on.

Last year saw food prices reach their third highest year on record, corresponding to the latest outbreaks of street violence and protests in Argentina, Brazil, Bangladesh, China, Kyrgyzstan, Turkey and elsewhere.

Since about a decade ago, the FAO food price index has more than doubled from 91.1 in 2000 to an average of 209.8 in 2013. As Prof Yaneer Bar-Yam, founding president of the Complex Systems Institute, told Vice magazine last week:

"Our analysis says that 210 on the FAO index is the boiling point and we have been hovering there for the past 18 months... In some of the cases the link is more explicit, in others, given that we are at the boiling point, anything will trigger unrest."

But Bar-Yam's analysis of the causes of the global food crisis don't go deep enough - he focuses on the impact of farmland being used for biofuels, and excessive financial speculation on food commodities. But these factors barely scratch the surface.

It's a gas

The recent cases illustrate not just an explicit link between civil unrest and an increasingly volatile global food system, but also the root of this problem in the increasing unsustainability of our chronic civilisational addiction to fossil fuels.

In Ukraine, previous food price shocks have impacted negatively on the country's grain exports, contributing to intensifying urban poverty in particular. Accelerating levels of domestic inflation are underestimated in official statistics - Ukrainians spend on average as much as 75% on household bills, and more than half their incomes on necessities such as food and non-alcoholic drinks, and as75% on household bills. Similarly, for most of last year, Venezuela suffered from ongoing food shortages driven by policy mismanagement along with 17 year record-high inflation due mostly to rising food prices.

While dependence on increasingly expensive food imports plays a role here, at the heart of both countries is a deepening energy crisis. Ukraine is a net energy importer, having peaked in oil and gas production way back in 1976. Despite excitement about domestic shale potential, Ukraine's oil production has declined by over 60% over the last twenty years driven by both geological challenges and dearth of investment.

Currently, about 80% of Ukraine's oil, and 80% of its gas, is imported from Russia. But over half of Ukraine's energy consumption is sustained by gas. Russian natural gas prices have nearly quadrupled since 2004. The rocketing energy prices underpin the inflation that is driving excruciating poverty rates for average Ukranians, exacerbating social, ethnic, political and class divisions.

The Ukrainian government's recent decision to dramatically slash Russian gas imports will likely worsen this as alternative cheaper energy sources are in short supply. Hopes that domestic energy sources might save the day are slim - apart from the fact that shale cannot solve the prospect of expensive liquid fuels, nuclear will not help either. A leaked European Bank for Reconstruction and Development (EBRD) report reveals that proposals to loan 300 million Euros to renovate Ukraine's ageing infrastructure of 15 state-owned nuclear reactors will gradually double already debilitating electricity prices by 2020.

"Socialism" or Soc-oil-ism?

In Venezuela, the story is familiar. Previously, the Oil and Gas Journal reported the country's oil reserves were 99.4 billion barrels. As of 2011, this was revised upwards to a mammoth 211 billion barrels of proven oil reserves, and more recently by the US Geological Survey to a whopping 513 billion barrels. The massive boost came from the discovery of reserves of extra heavy oil in the Orinoco belt.

The huge associated costs of production and refining this heavy oil compared to cheaper conventional oil, however, mean the new finds have contributed little to Venezuela's escalating energy and economic challenges. Venezuela's oil production peaked around 1999, and has declined by a quarter since then. Its gas production peaked around 2001, and has declined by about a third.

Simultaneously, as domestic oil consumption has steadily increased - in fact almost doubling since 1990 - this has eaten further into declining production, resulting in net oil exports plummeting by nearly half since 1996. As oil represents 95% of export earnings and about half of budget revenues, this decline has massively reduced the scope to sustain government social programmes, including critical subsidies.

Looming pandemic?

These local conditions are being exacerbated by global structural realities. Record high global food prices impinge on these local conditions and push them over the edge. But the food price hikes, in turn, are symptomatic of a range of overlapping problems. Global agriculture's excessive dependence on fossil fuel inputs means food prices are invariably linked to oil price spikes. Naturally, biofuels and food commodity speculation pushes prices up even further - elite financiers alone benefit from this while working people from middle to lower classes bear the brunt.

Of course, the elephant in the room is climate change. According to Japanese media, a leaked draft of the UN Intergovernmental Panel on Climate Change's (IPCC) second major report warned that while demand for food will rise by 14%, global crop production will drop by 2% per decade due to current levels of global warming, and wreak $1.45 trillion of economic damage by the end of the century. The scenario is based on a projected rise of 2.5 degrees Celsius. More

 

Posted with Blogsy

Message To World Elites: Don’t Bet On Coal And Oil Growth

Davos 2014

A mind-boggling sum of about US$ 800 for each person on the planet is invested into fossil fuel companies through the global capital markets alone. That’s roughly 10% of the total capital invested in listed companies. The amount of money invested into the 200 biggest fossil fuel companies through financial markets is estimated at US$ 5.5 trillion.

By keeping their money in coal and oil companies, investors are betting a vast amount of wealth, including the pensions and savings of millions of people, on high future demand for dirty fuels. The investment has enabled fossil fuel companies to massively raise their spending on expanding extractable reserves, with oil and gas companies alone (state-owned ones included) spending the combined GDP of Netherlands and Belgium a year, in belief that there will be ongoing demand for dirty fuel.

This assumption is being challenged by recent developments, which is good news for climate but bad news for anyone who thought investing in fossil fuel industries was a safe bet. Frantic growth in coal consumption seems to be coming to an end much sooner than predicted just a few years ago, with China’s aggressive clean airpolicies, rapidly dropping coal consumption in the US and upcoming closures of many coal plants in Europe. At the same time the oil industry is also facing slowingdemand growth, and the financial and share performance of oil majors is disappointing for shareholders.

Nevertheless, even faced with weakening demand prospects, outdated investment patterns are driving fossil fuel companies to waste trillions of dollars in developing reserves and infrastructure that will be stranded as the world moves beyond 20th century energy.

A good example is coal export developments. The large recent investment in coal export capacity in all key exporter countries was based on the assumption of unlimited growth of Chinese demand. When public outrage over air pollution reached a new level in 2012-2013, the Chinese leadership moved swiftly to mandate absolute reductions in coal consumption, and banned new coal-fired power plants in key economic regions. A growing chorus of financial analysts is now projecting a peak in Chinese coal demand soon, which seemed unimaginable only a couple of years ago. This new reality has already reduced market capitalization of export-focused coal companies. Even in China itself, investment in coal-fired power plants has now outpaced demand growth, leading to drops in capacity utilization.

Another example of potentially stranded assets is found in Europe, where large utilities ignored the writing on the wall about EU moves to price carbon and boost renewable energy. Betting on old business models and the fossil-fuel generation, they built a huge 80 gigawatts of new fossil power generation capacity in the past 10 years, much of which is already generating losses and now risk becoming stranded assets.

Arctic oil drilling is possibly the ultimate example of fossil companies’ unfounded confidence in high future demand. Any significant production and revenue is unlikely until 2030 and in the meantime, Arctic drilling faces high and uncertain costs, extremely demanding and risky operations, as well as the prospect of heavy regulation and liabilities when (not if) the first major blowout happens in the region. No wonder the International Energy Agency is sceptical about Arctic oil, assuming hardly any production in the next 20 years. More

 

Beijing in $130bn global assets spree as it builds energy security

CHINESE state-owned oil and gas companies such as China National Petroleum Corporation (CNPC) have outlaid more than $130 billion since 2007 to snap up assets across the globe in their ongoing quest for energy security.

Some of their biggest buys include shale assets in western Canada and the US, oilfields in Egypt, Iraq and Africa, stakes in Australian liquefied natural gas joint ventures, and a share in some of the most challenging energy projects in the world: the Kashagan field in the Caspian Sea, the Yamal LNG project in northwest Siberia, and the "presalt" deepwater fields off the coast of Brazil.

Chinese companies accounted for 21 per cent of all oil and gas mergers and acquisitions in the first nine months of 2013, spending $US18.6bn ($20.8bn) out of a total $US90.8bn market, according to data released recently by US oil industry information and advisory firms PLS and Derrick Petroleum Services.

Cumulative figures by PLS/Derrick show that since 2007, CNPC and other state-owned entities such as China Petrochemical (Sinopec), China National Offshore Oil Corporation (CNOOC) and Sinochem Group invested $US129bn in oil industry mergers and acquisitions.

Since those figures were released, CNPC has made further investments in Latin America and the Middle East. In November, it agreed to pay $US2.6bn for the Peruvian oil assets of Brazil's state-owned Petrobras, while in the same month its listed arm PetroChina said it would buy 25 per cent of Iraq's West Quran 1 gasfield from ExxonMobil. The deal price was not announced, but analysts estimate the stake could be worth more than $US1bn.

The previous month, PetroChina agreed to join CNOOC in a consortium led by Royal Dutch Shell and Total that won the right to join Petrobras in developing the Libra field, located in deep water off the Brazilian coast. The field, part of what is known as Brazil's "presalt" oil and gas reserves, potentially can produce up to one million barrels a day.

CNPC made the single biggest international buy of 2013, agreeing in September to spend $US5bn for ConocoPhillips' 8.4 per cent stake in the massive Kashagan project in Kazakhstan's part of the Caspian Sea.

Kashagan, regarded as one of the biggest oil and gas finds of the past 40 years, has so far proved an expensive undertaking for its international investors. After a five-year delay, it finally began producing in September, but a series of leaks from its main gas pipeline forced its shutdown. A decision on resuming production is expected this month.

Earlier last year, CNPC also committed to pay about $US4.2bn for a 20 per cent stake in Italian oil producer Eni's Mozambique offshore gas project known as Area 4, part of the wider Rovuma gasfield.

Last year, CNOOC made what remains the single biggest acquisition by a Chinese company, paying $US15.1bn for 100 per cent of Canadian company Nexen, which has extensive shale and oil sands assets in western Canada and interests in the Gulf of Mexico. The Nexen deal closed in February last year, after approvals by Canadian and US regulators.

Also in February, Sinopec agreed to pay $US1.02bn for half of Chesapeake Energy's Oklahoma shale field known as the Mississippi Lime, while a month earlier Sinochem said it would buy a 40 per cent stake in Pioneer Natural Resources' Wolfcamp shale field in Texas for $US1.7bn.

In August, Sinopec agreed to buy 33 per cent of US producer Apache's oil and gas assets in Egypt for $US3.1bn.

The $US130bn cumulative figure since 2007 does not include the value of oil purchase agreements and investments that CNPC struck during 2013 with Russian state-owned companies Gazprom and Rosneft, and with the privately owned Russian gas producer Novatek.

In June, Rosneft agreed to supply CNPC with oil worth up to $US270bn over a 25-year term from 2018. The deal includes a $US70bn prepayment to Rosneft. In October, the two companies agreed to work on a joint venture that would develop oil and gas reserves in eastern Siberia.

CNPC and Gazprom struck a deal in September covering gas supplies to China. The final terms have yet to be decided.

In June, CNPC agreed to join Novatek and France's Total in the Yamal LNG development in Siberia, committing to a 20 per cent stake. The value was not disclosed but is estimated to be $US800 million-plus. In October, CNPC followed up by signing a 15-year deal with Novatek to take 3 million tonnes a year of LNG. Yamal is expected to begin production at the end of 2016.

Novatek plans to ship the gas to China via the Northern Sea Route, which runs along the top of Russia in Arctic waters. The route, which is shorter than the conventional journey from Europe, is open for about six months a year, and requires special ice-proof tankers and icebreaker support.

China, the world's biggest energy consumer, imports about 10.5 million barrels of oil a day, or about 60 per cent of its crude oil requirement. While much of that comes from the Middle East, part of China's quest for a diversified energy supply involves bringing in more oil and gas via pipelines from Central Asia, Russia and Myanmar, and more LNG from Australia, Russia, Canada and the US. More

 

 

NE China's first nuclear power plant starts operation

The Hongyanhe nuclear power station, the first nuclear power plant and largest energy project in northeast China, started operation on Sunday afternoon.

The plant's first unit went into operation at 3:09 p.m., said Yang Xiaofeng, general manager of Liaoning Hongyanhe Nuclear Power Co., Ltd.

Construction on the first phase of the project, which features four power generation units to be built at a cost of 50 billion yuan (7.96 billion U.S. dollars), began in 2007 and is expected to be completed by the end of 2015, said Yang.

The four units will generate 30 billion kilowatt-hours (kwh) of electricity annually by then, accounting for 16 percent of the total electricity consumption in 2012 in Liaoning Province, Yang said.

Construction on the second phase of the project, which features two power generation units to be built with an investment of 25 billion yuan, started in May 2010 and is expected to be completed by the end of 2016, he said.

The power plant will generate 45 billion kwh of electricity after it is fully completed in 2016, he said.

The plant's construction is highly localized, with more than 80 percent of the parts and components it features being produced locally, Yang said.

It is also the first Chinese nuclear power plant to use seawater desalination technology to provide cooling water, he said.

The plant is located near the county-level city of Wafangdian, which is 110 km away from Dalian Port. More

 

China threatens U.S. energy security

PARIS, July 20 (UPI) -- A rising energy appetite from the booming Chinese economy creates concerns for energy security in the United States, political analysts said. 

The International Energy Agency said in Paris that the surging Beijing economy has redefined the global energy sector as China passes the United States as the world's largest energy consumer.

The IEA in its latest report said China outpaced U.S. energy consumption by 4 percent in 2009. The United States, the report said, has been the largest energy consumer in the world since the dawn of the 20th century.

David Pumphrey, a senior fellow at the Center for Strategic and International Studies, said China's economic growth could affect U.S. energy security. More >>>

Gigascale Solar

Fri, September 11, 2009 - The Wall Street Journal and The New York Times report this week what could be another first for First Solar: a preliminary agreement with the Chinese government to build a 2-gigawatt photovoltaic farm in Inner Mongolia.

If the plant is actually built, it will be in stages over a decade, to cover eventually as much as 25 square miles. But "much of the deal hasn't been worked out yet," says the Journal with some understatement--minor details such as how much First Solar might be paid have yet to be settled. The company's plan is to sell the plant to a Chinese operator upon its completion, but the plant's profitability will depend on the size of the subsidies it would be eligible for. That's another detail to be worked out, as China right now is trying to decide whether to adopt a feed-in tariff that would guarantee returns on investments in renewables. More >>>