PJC Journal – Original

I must tell you I have had an itch about this since 2006 when I read a very interesting article,
which identified structural shortcomings in Gazproms ability to deliver
Gas to the EU. In 2008 I read with interest a piece by a British
Academic in the German Press here. There is a nice summary here in English. Alan Riley the academic responsible for the 2008 article is also published here and here, citing fundamental problems with the Russian monopoly Gazproms inability to deliver, which in summary are

• An antiquated pipeline system, going in one direction west through Ukraine
• Lack of investment in bringing on new reserves
• State enforced commitments to meet domestic priorities for supply
• Ageing agreements with former USSR states to supply Gas at cost
• The falling cost of Gas on the wholesale markets, further restricting development of new transmission systems and reserves
• Gazproms dependance on cost price East Asian gas imports to meet current demands

Russia
may have extraordinary reserves of gas, but these are underexploited,
and they lack the transmissions systems to meet their current demands -
ostensibly there is a shortage of Russian gas, and the solution is
investment – however the first of the new pipelines and fields are
unlikely to get past the planning stage this year and will not be
available for at least another 3-4 years…

This shortage became
apparent in 2006, but was blamed on the Ukraine, 2007 was a relatively
warm winter in Europe and Gazproms European transmission pipeline was
called upon to deliver less gas than for some years – no problem there.
But this winter is a cold one across Europe and the inability of
Gazprom to meet it's delivery commitments is a symptom of a shortage,
not the fictional wrangle between Ukraine and it's former masters. Gas
is stored in high pressure pipelines, backed by storage and production
facilities, when the taps are turned on by consumers the pressure
plumments unless you have sufficient supply capacity and compressors,
Gazprom has insufficient supplies and aged compressors – ie. neither.

Would it come to you as a surprise that our inept UK and European politicians are aware of this, I wonder why they are so silent on the issue?

Paragraph 170 and 171 of the House of Commons Foreign Affairs Committee Global Security: Russia Second Report of Session 2007–08

170.
The CSRC told us that “Impending shortages of gas […] present new risks
of supply disruption to [the] EU.” It also warned of the risk that CIS
states dependent on Russian energy were most likely to fall down the
widening gap between demand for and supply of Russian energy resources,
since, as we have seen, Russia is prepared to prioritise its higher
paying EU customers. Dr Averre warned that the likely reduction in
Russia’s ability to export “may be more of a problem than the idea of
holding countries to ransom. Similarly, Ms Barysch told us that “Our
main concern at the moment is not that Russia cuts off the energy to
us, but that it will not be able to deliver as much gas to us in the
future as we would like to buy”. We
conclude that the prospective shortfall in Russian gas production
represents an urgent energy security concern for the EU, and a greater
one than the risk of Russia disrupting supplies for political reasons.
The intensified competition for Russian gas which appears to be in
prospect between Russian domestic consumers, Russian CIS customers, and
the EU, has the potential to aggravate a number of political
relationships. We welcome the Minister for Europe’s apparent awareness
of the urgency of the problem. We recommend that the Government work to
achieve a common understanding of the likely Russian gas shortfall with
both EU partners and Moscow, and that it inform us in its response to
this Report of the steps being taken in this regard.

171.
Our witnesses largely attributed the shortfall in productive investment
in the Russian gas sector to the dominance there of the Russian state,
in the shape of Gazprom. Our witnesses pointed to developments in the
Russian oil sector as foreshadowing the pattern that seems likely to
unfold in gas. Having been below 20% in 2004, state ownership of the
Russian oil industry (by output) is expected to exceed 50% in 2007.
However, Professor Hanson told us that “growth of output and export
volume of oil has slowed strikingly” over recent years. According to Mr
Clark, the two main previously private oil firms, Yukos and Sibneft,
were achieving returns on total assets of over 30%. By contrast,
Gazprom and the state oil firm Rosneft, which have largely taken over
these two firms’ assets, achieve returns of less than 10%.

We should be very concerned about this lack of clarity, in this piece and the associated research paper, again by Prof Alan Riley it is made clear that Gazprom and our reliance on Russian gas is a threat to global security.

All
the time the Ukrainians are being turned into scapegoats by dint of
their misfortune to host the main interconnect to Europe, to save the
face of plundering Oligarchs and corrupt Politicians in Moscow.

I
don't have a solution, but I do know that we are sitting on massive
coal reserves in the UK, in addition to oil that is nowhere near peak,
and some gas reserves. Why do we need to import energy and fund a state
(Gazprom represent 25% of federal state revenues in Russia) that poses
a security threat and is incapable of honesty about their one genuine
commercial success since Glasnost?

Then we have EU Referendum which has an interesting story along the same lines here:

… the idea that Russia simply does not have the gas to sell is being to look more credible, and idea which we looked at here.

Does that not give real credibility to the Daily Express story that the EU is going to make a grab for our gas supplies:

Our masters in Brussels would happily see the UK freeze, if it meant that their core supporters kept warm this winter. In the same fashion as the UK's Sovereignty, Brown and his cohorts will happily give it away.
It does make one wonder how little we know about our energy supplies, and the storm that is surely coming our way. Could be time to open up that fireplace again……

Hattip wholly Rude & Obnoxio

I must tell you I have had an itch about this since 2006 when I read a very interesting article,
which identified structural shortcomings in Gazproms ability to deliver
Gas to the EU. In 2008 I read with interest a piece by a British
Academic in the German Press here. There is a nice summary here in English. Alan Riley the academic responsible for the 2008 article is also published here and here, citing fundamental problems with the Russian monopoly Gazproms inability to deliver, which in summary are

• An antiquated pipeline system, going in one direction west through Ukraine
• Lack of investment in bringing on new reserves
• State enforced commitments to meet domestic priorities for supply
• Ageing agreements with former USSR states to supply Gas at cost
• The falling cost of Gas on the wholesale markets, further restricting development of new transmission systems and reserves
• Gazproms dependance on cost price East Asian gas imports to meet current demands

Russia
may have extraordinary reserves of gas, but these are underexploited,
and they lack the transmissions systems to meet their current demands -
ostensibly there is a shortage of Russian gas, and the solution is
investment – however the first of the new pipelines and fields are
unlikely to get past the planning stage this year and will not be
available for at least another 3-4 years…

This shortage became
apparent in 2006, but was blamed on the Ukraine, 2007 was a relatively
warm winter in Europe and Gazproms European transmission pipeline was
called upon to deliver less gas than for some years – no problem there.
But this winter is a cold one across Europe and the inability of
Gazprom to meet it's delivery commitments is a symptom of a shortage,
not the fictional wrangle between Ukraine and it's former masters. Gas
is stored in high pressure pipelines, backed by storage and production
facilities, when the taps are turned on by consumers the pressure
plumments unless you have sufficient supply capacity and compressors,
Gazprom has insufficient supplies and aged compressors – ie. neither.

Would it come to you as a surprise that our inept UK and European politicians are aware of this, I wonder why they are so silent on the issue?

Paragraph 170 and 171 of the House of Commons Foreign Affairs Committee Global Security: Russia Second Report of Session 2007–08

170.
The CSRC told us that “Impending shortages of gas […] present new risks
of supply disruption to [the] EU.” It also warned of the risk that CIS
states dependent on Russian energy were most likely to fall down the
widening gap between demand for and supply of Russian energy resources,
since, as we have seen, Russia is prepared to prioritise its higher
paying EU customers. Dr Averre warned that the likely reduction in
Russia’s ability to export “may be more of a problem than the idea of
holding countries to ransom. Similarly, Ms Barysch told us that “Our
main concern at the moment is not that Russia cuts off the energy to
us, but that it will not be able to deliver as much gas to us in the
future as we would like to buy”. We
conclude that the prospective shortfall in Russian gas production
represents an urgent energy security concern for the EU, and a greater
one than the risk of Russia disrupting supplies for political reasons.
The intensified competition for Russian gas which appears to be in
prospect between Russian domestic consumers, Russian CIS customers, and
the EU, has the potential to aggravate a number of political
relationships. We welcome the Minister for Europe’s apparent awareness
of the urgency of the problem. We recommend that the Government work to
achieve a common understanding of the likely Russian gas shortfall with
both EU partners and Moscow, and that it inform us in its response to
this Report of the steps being taken in this regard.

171.
Our witnesses largely attributed the shortfall in productive investment
in the Russian gas sector to the dominance there of the Russian state,
in the shape of Gazprom. Our witnesses pointed to developments in the
Russian oil sector as foreshadowing the pattern that seems likely to
unfold in gas. Having been below 20% in 2004, state ownership of the
Russian oil industry (by output) is expected to exceed 50% in 2007.
However, Professor Hanson told us that “growth of output and export
volume of oil has slowed strikingly” over recent years. According to Mr
Clark, the two main previously private oil firms, Yukos and Sibneft,
were achieving returns on total assets of over 30%. By contrast,
Gazprom and the state oil firm Rosneft, which have largely taken over
these two firms’ assets, achieve returns of less than 10%.

We should be very concerned about this lack of clarity, in this piece and the associated research paper, again by Prof Alan Riley it is made clear that Gazprom and our reliance on Russian gas is a threat to global security.

All
the time the Ukrainians are being turned into scapegoats by dint of
their misfortune to host the main interconnect to Europe, to save the
face of plundering Oligarchs and corrupt Politicians in Moscow.

I
don't have a solution, but I do know that we are sitting on massive
coal reserves in the UK, in addition to oil that is nowhere near peak,
and some gas reserves. Why do we need to import energy and fund a state
(Gazprom represent 25% of federal state revenues in Russia) that poses
a security threat and is incapable of honesty about their one genuine
commercial success since Glasnost?

Then we have EU Referendum which has an interesting story along the same lines here:

… the idea that Russia simply does not have the gas to sell is being to look more credible, and idea which we looked at here.

Does that not give real credibility to the Daily Express story that the EU is going to make a grab for our gas supplies:

Our masters in Brussels would happily see the UK freeze, if it meant that their core supporters kept warm this winter. In the same fashion as the UK's Sovereignty, Brown and his cohorts will happily give it away.
It does make one wonder how little we know about our energy supplies, and the storm that is surely coming our way. Could be time to open up that fireplace again……

Hattip wholly Rude & Obnoxio