Liquid Gas Provides Alternative to Pipeline - February, 2009

Liquid Gas Provides Alternative to Pipeline

Liquid gas provides alternative to pipeline:

February, 2009

Russia is about to start exporting its gas to where pipelines cannot reach. The first liquefied natural gas plant has opened in the country's Far East. Russian President Dmitry Medvedev and Japanese Prime Minister Taro Aso have taken part in the opening ceremony on the island of Sakhalin. The plant’s product will, initially, go to Japan, South Korea and the United States. It will also offer an alternative method of getting some extra gas to Europe in the event of another transit crisis, such as the one in January.

Looking for new options

Last month, as Moscow and Kiev argued over gas prices, the EU saw its supplies from Russia severely disrupted. Moscow accused Kiev of siphoning off gas destined for Russia’s European clients and questioned Ukraine’s credibility as a transit route to the EU. "The January events in Ukraine proved that dependence on transit countries is very harmful politically, economically and financially," said Igor Tomberg, Chief Researcher at Energy Studies Centre. Moscow is looking for other transit options to Europe. The alternatives are two new pipelines Russia is building to bypass Ukraine. The South Stream would go under the Black Sea and the Nord Stream would run under the Baltic Sea. But as Europe has often spoken of reducing its energy dependence on Russia, Moscow is also looking for new clients and new ways of sending them gas. So far it’s only been pipelines. However, now tankers are coming into play as Russia is launching its first plant to liquefy natural gas. Said Igor Tomerg: "Pipelines bind the exporter to the supplier, leaving you no flexibility. We are a great gas power and using nothing but pipelines is no good."

First step

The plant’s opening marks the culmination of Sakhalin-2, one of the world's biggest oil and gas developments led by Russia’s energy giant Gazprom. The plant was built on Russia’s Sakhalin Island. It will receive natural gas from offshore fields via a pipeline. The gas will then be converted to liquid for ease of storage and transport. The reduction in volume makes it more cost-effective to carry over long distances where pipelines don't exist. Every year the plant is set to produce enough liquefied natural gas or LNG, to supply the entire three-year need of a country like Bulgaria - one of the worst hit in the recent Russian-Ukrainian gas dispute. Under contracts up to 20 years, Russia’s LNG will go to Japan, South Korea and the US, seeing Russia take off as an important energy player in the Pacific. "It would be hard to build pipelines to Japan or the US but LNG will open up a very promising market to us. Gas consumption there is only set to grow," said Sergey Pravodudov, Director of the National Energy Institute. Moscow is keen to prove its reliability as an energy supplier and to diversify its exports. The new LNG project is set to do just that. With the launch of its first LNG plant, Russia is breaking into a new market and can finally begin, experts say, to fully develop its potential as a major energy power.


Russia Unveils its First LNG Plant in Sakhalin-2

Russia unveiled its first liquefied natural gas (LNG) plant in Sakhalin on Wednesday opening up new energy markets in the Asia-Pacific region. The plant is designed to liquefy gas produced as part of the $20 billion Sakhalin-II oil and gas project off Russia's Pacific Coast. Some 9.6 million metric tons of LNG will be produced annually. Companies from Japan, the United States and South Korea have already signed contracts with Russia to buy the bulk of the gas within the next 25 years. Japan, the world's largest LNG market, will buy about 65% of Sakhalin liquefied gas. The ceremony was attended by Russian President Dmitry Medvedev, Japanese Prime Minister Taro Aso, British Prince Andrew, the Duke of York, Dutch Economics Minister Maria van der Hoeven and other guests from partner countries in the project. "I am positive, the new plant will change our gas export opportunities," Medvedev said at the ceremony adding the project would also improve international energy cooperation. Project operator Sakhalin Energy's CEO Ian Craig said: "Sakhalin has now firmly established its position on the global energy map. When the Sakhalin-II project is fully on stream, it will supply around 5% of the world's LNG and make a significant contribution to strengthening global energy security." Craig said LNG exports would begin in March with the first shipments to go to Japan. Aso said the project would allow Japan to diversify its imports. The energy-poor country imports almost all its oil from the Middle East. "Sakhalin-II will account for 7.2% of Japan's LNG imports. Energy resources in such close proximity to Japan are a long-held dream," the premier said, adding the project would also help Tokyo build a "strategic relationship with Russia" in the Asia-Pacific region. The Sakhalin II project includes the Piltun-Astokhskoye and Lunskoye oil and gas fields on Sakhalin Island's northeastern shelf, with recoverable reserves estimated at 150 million tons (1.1 billion bbl) of oil and 500 billion cubic meters of natural gas. Tankers with a capacity of 18,000 to 145,000 cubic meters will be used to deliver LNG from the plant. The minority partners in the project, Royal Dutch Shell, Mitsui and Mitsubishi, currently hold 27.5%, 12.5% and 10% stakes in the project respectively. Gazprom acquired a controlling stake (50% plus one share) in the project in December 2006.


Europe to Remain Gazprom's Main Market in Mid Term

Gazprom is continuing to regard Europe as its main natural gas market in the mid term, the CEO of the Russian energy giant said on Wednesday. "In the mid term, we continue to regard Europe as the most important market despite the European Commission's plans to develop alternative energy," Alexei Miller said. Miller said Gazprom expected gas consumption to continue growing in the European Union and to hit 600 billion cubic meters by 2020. "Due to cuts in production in Europe, the share of Russian gas on the market will increase from the current 26% to 33-35% by 2020," he said. Miller confirmed new expected pipelines, designed to increase gas flows to Europe and reduce dependence on East European transit countries, would be completed on time. He said the $12 billion Nord Stream pipeline, to bring gas from Siberia to Europe under the Baltic Sea, would come on stream in 2011 despite environmental concerns raised by some littoral states. The project operator, Nord Stream AG, said earlier this month it planned to unveil a final environmental report to the Baltic Sea states in early March. Gazprom is building the pipeline jointly with Germany's E.ON and BASF, and Dutch gas transportation firm Gasunie. Miller said South Stream, another pipeline bringing gas to the Balkans and on to other European countries, would be built on time. He said agreements with Serbia, Bulgaria and Hungary had been signed and entered force, and a feasibility study was being carried out. Supplies through the South Stream pipeline, estimated at least $20 billion are scheduled to start by 2013. "We will therefore be able to meet the region's growing demand for gas in full," Miller said. Miller said ex-Soviet states were the second most important market for the company, including Central Asian republics where it buys gas.


In other news:

Russian Steel: Potentials Found in Few Other Places, in Today's World

A combination of economic and political factors has swung heavily in the favor of Russian steel production and now offers Europe and to a smaller extent, North America, an opportunity worth pursuing and capitalizing on. The first true Russian steel/iron works and forge shops date back to the late 1600s and Peter the Great's reforms. That gives Russian steel production a history of over 350 years. Production continued to expand and increase in quality for the duration of that period and now offers some of the highest quality material in the world. Furthermore, as the late 1990s and 2000s progressed, Russian steel output grew very quickly, making Russia the 3rd largest producer of steel, speciality steel and semi and fully finished steel products. Steel and steel components, both forged and cast, are Russia's biggest exports, after petro chemicals.

As the Bank Panic of 2008 and the Economic Collapse of 2009 proceed, Russian open capacity sky rocketed. A large portion of Western European demand disappeared and internal credit crunch conditions have created a lot of work that can not be done without payment upfront. Russian steel mills and metal works have, unlike the West, not responded by mass layoffs but have cut every one's hours to half or less. This gives them the ability to very quickly upscale production, without having to go through a rehiring process. Further, Russian steel prices have come down heavily, both due to a heavy drop in the cost of steel, a lack of demand and the devaluation of the ruble. Add to this, the Medvedev government's decision to loan, at zero percent interest, large sums of money to retool heavy industry, and Russia offers potentials found in few other places, in today's world.

Russia has it all in the steel business: location, quality, price, stability. There will always be a market for steel. Structures, utensils, weapons and vehicles will always be needed. Russia is totally able to handle delivery of the product. In fact, it was surprising to learn that Russia owns 10% of US steel, a very interesting fact. Severstal bought River Rouge Steel in Michigan, near Detroit. It seems Russia was able to return the favour of coming in to buy cheap in today's market. The dollar has lost nearly 15 percent of its value against the Russian ruble in the last two years. What is most important is the economic stability offered without the maniacal lust for profit at any cost. So instead of doing like in the west where everyone gets the pink slip, hours are merely cut, leaving the workers in place to gear up at a moment's notice and more than happy to do so. It's a win-win situation under the pressure of the global economic crisis. Bottom line is that Russia can be relied upon. The west is sunk in financial collapse, China has its problems as does India. So look to Russia. Russians do it better.


Russia's Reserve Fund Enough to Balance Budget For Years - Putin

Russian Prime Minister Vladimir Putin said Tuesday at an economic conference that the country's Reserve Fund will be sufficient to balance this year's and future budgets. The Reserve Fund was designed to cushion the federal budget against a fall in oil prices. Finance Minister Alexei Kudrin has said there would be extensive use of reserve funds to cover the 2009 budget deficit, which he said could total at least 6% of GDP. "The deficit will be covered from our own resources: activities on the domestic loan market and the Reserve Fund, which currently stands at 4.8 trillion rubles [$132.6 billion]. These funds will be enough to balance the budget in this and subsequent years," Putin said. According to the parameters of the federal budget for 2009 approved last year, expenditures were to total 9.024 trillion rubles ($248.4 billion at current exchange rates) and revenues slightly over 10 trillion rubles ($275.3 billion). These figures will be adjusted. Putin also said the government would include the cost of implementing its anti-crisis program in the revised budget. He said that although budget revenues would be cut, the government would not refrain from implementing key social and investment programs. "In addition, new expenses will be fixed in the budget as part of anti-crisis measures," he said.


Russia Will Weather the Storm

The Russian administration is certain of its actions under the conditions of the economic crisis, including the actions to support state-run and private-owned enterprises, the smooth devaluation of the ruble and the development of employment programs. These are the main theses of Dmitry Medvedev's interview to Rossiya TV channel. The interview has dotted all i's. The president acknowledged that he considered the anti-crisis policy his personal responsibility. Medvedev highlighted two issues - the devaluation of the Russian currency, the ruble, and the growing level of unemployment. Medvedev approved the actions of the Central Bank to weaken the rate of the national currency. "Unfortunately, we have begun to receive less income recently, and our payments in foreign currency have increased. We had to make such changes, but we needed to conduct them in a quiet way, and this is exactly what the Central Bank did, I believe. I am not saying that the ruble must freeze now. The Central Bank believes that the current currency rates mirror the real state of our currency and its current solvency," the president said. The Central Bank will watch the current rate closely and any sudden fluctuations will thus be excluded, Medvedev added. It seems once again that Russia has the right man for the right time. Having headed the highly successful Gazprom, Dmitry Medvedev is a steady hand with a calming influence. He is not given to panic or drastic measures. He is also quite mindful of the common ordinary citizen and his/her problems. The economic crisis gripping the globe cannot but affect Russia. It is totally unavoidable. Russia has dealings with other countries that are affected in a most negative way. But Russia's leaders, beginning with Vladimir Putin have seen to it that Russia's economy is built upon a solid foundation of gold reserves and a balanced budget, so the currency has back up. The country is blessed with great resources. Russia will weather the storm. Already the rainbow can be seen...


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The last 20 years has helped me see the Russian nation as the last front on earth against the scourges of Westernization, Americanization, Globalism, Zionism, Islamic extremism and pan-Turkism. I have also come to see Russia as the last hope humanity has for the preservation of classical western/European civilization, Apostolic Christianity and the traditional nation-state. These sobering realizations compelled me to create this blog in 2010. Immediately, this blog became one of the very few voices in the vastness of cyberia that dared to preach about the dangers of Globalism and the Anglo-American-Jewish alliance, and perhaps the only voice preaching about the strategic importance of Armenia's close ties to the Russian nation. From about 2010 to 2015, I did monthly, at times weekly, commentaries about Russian-Armenian relations and Eurasian geopolitics in general. It was very difficult for me as I had no assistance in this endeavor. The time I put into this blog therefore came at the expense of work and family. But a powerful feeling, dare I say voice, inside me urged me to keep going; and I did.

When Armenia finally joined the EEU and fully integrated its armed forces into Russia's military structures a couple of years ago, I finally felt a deep sense of satisfaction and relief, as if a very heavy burden was lifted off my shoulders. I finally felt that my personal mission was accomplished. I therefore felt I could take a step back, as I really needed the rest. Simply put: I have lived to see the institutionalization of Russian-Armenian alliance. Also, I feel more confident now that Armenians generally speaking are collectively recognizing the strategic importance of Armenia's ties with Russia. Moreover, I feel satisfied knowing that, at least on a subatomic level, I had a hand in the outcome. Today, no man, no political party is capable of driving a wedge between Armenia and Russia. That danger has passed. As a result, I feel a strong sense of mission accomplished. I therefore no longer have the urge to continue as in the past. In other words, the motivational force that had propelled me in previous years has been gradually dissipating because I feel that this blog has lived to see the realization of its stated goal.

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