Floating LNG - the new Power Play for the Major cash rich Oilcos

Offshore oil often involves flaring off gas - now the concept of Floating LNG where the gas is processed offshore for shipment is a major new technology and has lower capital cost to onshore processing.

This not only allows developers to exploit stranded gas reserves, but also give an opportunity to convert the currently large amount of flared gas from different platforms.

Shell is installing floating LNG facilities off the coast of Iraq, giving them a significant strategic asset to convert flared offshore gas into LNG.The gas will supply power plants and some would be exported as LNG through Basra, also Iraq's main oil export terminal. The terminal would be Iraq's first LNG export facility.

Shell is also said to be considering a floating LNG terminal for gas produced from a gas field off Western Australia. That terminal could be larger, with capacity of up to 5 million TPY.

The global market for floating liquefaction and regassification vessels where chilled liquid gas is converted to vapor state is said to be of the order of US$ 8.5 Bn.by 2015.


Floating LNG concepts offer flexibility, shorter construction period and lower overall cost compared to onshore terminals plus a reduction locally on security and safety poblems associated with land based facilities.

Dedicated LNG vessel designs including Floating Storage and Regasification Units (FSRU) are now being developed. Similar in concept to an onshore LNG receiving terminal, they are designed with storage capacities to 300,000 cubic metres.Other LNG facilities may also include Single Point Moorings (SPM) capable of transferring LNG by loading arm or flexible hose and offshore terminals of single or dual berth layout for calmer regions. These berths will replicate onshore LNG terminals and will be capable of mooring carriers of over 200,000 cubic metres.

Samsung Heavy Industries Co. based in Seoul, South Korea already has orders to build by 2012 four floating LNG vessels valued at over $1.2 billion, for Flex LNG Ltd., these are Self supporting Prismatic type B LNG containment systems. The vessels utilize the nitrogen expander liquefaction cycle technology, which enables them to source gas from offshore locations. Delivery was expected by 2012 so they can operate the world’s first floating LNG plant. In Januray they announced a 6 month delivery delay

FLEX LNG Ltd is a British Virgin Islands-based company listed in Norway.

Daewoo Shipbuilding & Marine Engineering Co., Samsung Heavy Industries Co. and Hyundai Heavy Industries Co all in South Korea, made bids for Royal Dutch Shell Plc’s vessel,(ye unplaced) which may cost as much as US$5 Bn. and be the world’s biggest Floating LNG facility.

Petroleo Brasileiro, Brazil’s state oil company, may order at least one floating LNG plant from Schiedam, Netherlands-based SBM Offshore NV, a marine equipment supplier and installer. For each barrel of oil at the deposit, called Tupi, there’s 700 to 1,000 cubic feet of gas that can be liquefied on a floating platform for shipment.

Exxon Mobil Corp. with about US$37 Bn in cash and Shell with US$9.7 Bn. have the backing for such ventures straight off the balance sheet and with curent AAA rating have the ability to finance projects, which smaller ventures cannot.

Such huge ventures will also help the big Korean yards who expct to see shipping orders at least halve this year. Only Samsung Heavy Industries Co., the world's second-largest shipbuilder, has won a single shipbuilding order this year - valued at US$680 million.

Hyundai Heavy, the country's leading shipyard, has diversified and recently started working on a 100-billion won ($67 million) project to build a plant that makes wind power generators.

Daewoo Shipbuilding has established a joint venture shipping company with the Nigerian National Petroleum Co. to carry crude oil. The Joint Venture - Nigeria Daewoo Shipping Ltd, will have a capital base of US$ 10 Mn., with Daewoo Shipbuilding owning 51 pct and Nigerian National Petroleum the rest.

The company is already involved in a solar energy business project. In 2006, the company exported $60 million worth of solar cell-related equipment to Spain.


Floating LNG plants may cost $550 to $700 per ton of capacity, compared with $1,500 for onshore projects. Such ventures may boost supplies by 12 million tons annually by 2015, a little more than growth in global demand last year.

Short development periods for projects and lower capital requirements help provide Floating LNG provide the much sought after energy security.

PS : Hyundai Heavy Industries Co. Ltd. delivered the Q-Flex liquefied natural gas (LNG) carrier Mesaimeer to Qatar-based Qatar Gas Transport Co. Ltd., also known as Nakilat on March 12th.

The 216,000 cubic meter (7.6 MMcf) carrier has been chartered on a long term contract to Qatargas Operating Company Limited. Mesaimeer will be used to ship LNG produced by Qatar Liquefied Gas Company Limited Qatar Liquefied Gas Company Limited (3), known as Qatargas 3, to markets primarily in the United States.

Qatargas 3 shareholders are Qatar Petroleum, ConocoPhillips and Mitsui & Co., Ltd

Medvedev and the Russian Bear tie up Serbian / South Stream / Gazprom Neft / INS deal to make inroads into Europe's soft underbelly

Finally, after talks lasting 11 months,( see Saturday, January 26, 2008 Putin plays the power card (again) in the Balkans ) Russia and Serbia have a mega bucks energy deal so that Russian state gas monopoly Gazprom Neft will now purchase 51% Serbia's oil monopoly NIS in exchange for building a gas pipeline through Serbia.

The deal was finalised today in the Kremlin between Dmitry Medvedev, the Russian president, and Boris Tadic, the Serbian President.

Alexander Dyukov, the Gazprom Neft president, said that his company would need to seek approval of Serbia's anti-monopoly agency for the deal to buy NIS, the Russian Interfax news agency reported. This means that if approval is given - and they have 130 days to think about it, the deal will be completed by May.

Not everyone is happy and economy minister , European leaning Mladjan Dinkic,of the panty waisted neo-liberal G-17 Plus has resigned. Critics point out that there are no guarantees that Russia will build the South Stream pipeline by 2015.

The US$13bn pipeline under the Black Sea would carry Russian natural gas to Bulgaria and Serbia before branching out to points in western Europe.

Others say that US$550 million (400 Mn Euros) for NIS is a giveaway and is really a hidden kickback for Russia's support of Serbia's bid to retain its claims on Kosovo. For what their opinion is worth Independent consultants Deloitte valued the whole company at 2.2 billion euros in September.

As part of the deal, Russia agreed to invest 550 million euros to modernize Serbian refineries and build a gas storage facility.

Reuters report that Vyacheslav Bunkov, an oil and gas analyst at Aton brokerage said that under the deal Gazprom essentially had received control of "all of Serbia's oil processing and sales network."

"Gazprom Neft begins its integration into Europe," he added.

One thing is certain , the guys in Camp Bondsteel in Kosovo and their masters will be none too happy with Mr Tadic.

US / NATO / EU left to ponder over the consequences of Saakashvilli's blunder - the Russian Bear carries his gun and his hands on the gas + oil taps

It is extremely difficult to construct a coherent picture of events in the Caucasus and even harder to forecast the consequences both on the ground but on commodity pries, especially oil and gas.

The Russkis are calling for President Saakashvillis head. His short lived, and ineffectual attack on the tiny town of Tskhinvali, the capital of South Ossetia, reveals he truth of Tallleyrand's dictum: it was worse than a crime, it was a blunder.

1. It appears that 3 days after the deliberate "invasion" of Georgian forces into South Ossetia (which is by any international legal standards Georgian territory) there has been a declared withdrawal and ceasefire from 5 am local time, (EST +8 hrs)and something like a 90% ceasfire - ie Georgians are still shelling in Abkhazia and into Ossetia - firing at aircaft. TV coverage is very confusing as the location / date / forces are not identified.

2. The Russians are relentlessly pursuing military action on the ground and from the air. It seems (BBC) that a military airport near Tibiklis has been bombed and some reports talk of the International airport being bombed.

The Russians have sunk at least one missile coastal patrol boat , they say it ignored shots across it's bows - there are also credible reports of widespread damage at Poti and maybe the BT oil terminal at Supsa - it would be like shooting fish in a barrel as they have overwhelming air superiority.

There are reports , most likely exagerated of 7/8 Russian planes shot down. At least one Georgian plane has been shot down in Ossetia.

3. Some 20-25 thousand Ossetians who have been given Russian passports have fled north to Russia and many Georgians in ossetia have fled south - there have also been smaller scale movements in Abkhazia.

4. It seems most Western Embassies have told nationals to leave , there has been no information about flights out -- passengers reaching London etc.,Poland, a major US ally who are already members of NATO have called for an EU stabilisation force to be sent in.

5. There are no reports of consequential armed events in Nagorno Karabak, Armenia etc.,

6. There are no reports of damage to the BTC pipeline although Georgia has cklaimed it was bombed but missed. The Russians must surely know precisely where the pipeline lies - pumping stations etc. It s probably safe to assume that 1% of the world's oil supply has been held up for at least 4-6 weeks and maybe for 6 months.

7. Geneva conventions apply as this is an international conflict - looking after civilians etc., and Georgia is a member of the ICC. This is aproblem for lawyers way down the road. It is evident in Gori that civilian targets were hit

8. There is much talk but little evidence of any result of EU intervention , diplomacy. Zalmay Khalilzad (a Pushto speaking Afghani-American) the US representative at the UN has tabled a motion about Ruissia's "inappropriate behaviour" which in their diplomatic doublespeak isn't even a rap over the knuckles. Silence reins on the surface but anxious phone calls will be made and nails chewed in Downing Street. Quote is ""We have made it clear to the Russians that if the disproportionate and dangerous escalation on the Russian side continues, that this will have a significant long-term impact on US -Russian relations."

The Russian response has been dismissive ..Russia's UN ambassador Vitaly Churkin branded "completely unacceptable" US claims that the Russian military in Georgia has waged a campaign of "terror." "This is completely unacceptable, especially from the lips of a representative of a country whose action we are aware of in Iraq, Afghanistan and Serbia." (Trans. Kosovo)

The Russian Press talks of Georgian "genocide".

The timing for Putin et al is perfect, Bush wants no more adentures and the contenders don't want to, and haven't even mentioned Georgia.

Somebody in Sarkozy's office (everyone in France is on Vacances) said they should all stop fighting.

NATO's secretary general Jaap de Hoop repeated his call for an immediate cease-fire, he also expressed his concerns about the disproportionate use of force and lack of respect for the territorial integrity of Georgia."

The Ukrainian Foreign Ministry stated that the country reserved the right to forbid vessels of the Russian Black Sea Navy to return to their base in Ukraine’s Sevastopol.

A "Ukrainian official" said that Ukraine was not willing to become involved in the conflict. They also have had their gas cut off.

9. It can only mean markets will open lower and oil / gas prices will move up at least US$5 and maybe more for near month contracts.

10. Casualties / deaths are impossible to assess. Visually there a few dead and few injured but bad civilian residential damage. Much of the shelling / missile strikes / bombing seems haphazard.

The Russkis are calling for Saakashvillis head. His short lived, and ineffectual attack on the tiny town of Tskhinvali, the capital of South Ossetia reveals he truth of Tallleyrand's dictum: it was worse than a crime, it was a blunder.

Not an ideal man to unify the Georgians - but can Uncle Sam have his glove puppet changed or removed ?

Where will Georgia get their gas from this year ? - it was turned off before in December '06 afterwhich they agreed on doubling the price with Gazprom.

Monday papers
Daily Telegraph - Georgia: America admits it has few options for dealing with Russia-Georgia war
Independent Georgia bows to might of Russia
Times Retreat and terror in face of Russian Army (Exclusive ! ?)
Guradian Russia rejects ceasefire calls as Georgia withdraws
Daily Mail Russia tanks 'turned back' at Georgian border as refugees flee in panic byline "A Daily Mail reporter - shy war correspondent?

As we go to bed Oil is holding steady with no major movement at all.

Thanks to aangirfan for link to excellent backgrounder in Sunday Herald 'This is no longer about the future of a tiny far-away country but about the nature of the world order in the 21st century - Rob Parsons, former BBC Moscow correspondent

On Thursday night, Georgian forces launched a lightning attack that brushed aside Ossetian resistance within hours. By Friday afternoon, they had taken control of the Ossetian capital, Tskhinvali.

The Georgians have modernised and restructured their armed forces to bring them into line with Nato standards, and their special forces now serve regularly in Iraq and Afghanistan. They are well-trained and battle-hardened. But the Georgians miscalculated. They thought that if they moved quickly before the Russians could act, the international community would then act to ensure the conflict was contained.

The Russians were indeed caught off balance. Moscow had a tough choice: face the humiliation of accepting a fait accompli or incur the anger of the international community by effectively going to war against a Western ally.

With Putin at the helm, there was never really any question what the Russians would do - at least not once Russian peacekeepers died. The ferocity of the Russian response, though, has caught the West by surprise.

The ferocity of the Russian response, though, has caught the West by surprise....Why ? on't we have mebassies . military attaches, surveillance , intelligence - or is everyone on holiday ?

We must not forget 2 things - the recent exercises with US troops and the bombing / damage / cutting off of the BTC pipeline in Turkey.

Again the oil price remains fairly unmoved by all this. Latest 1230 EST US$116.31
Up US$ 1.11 Up 0.96%

Sarko and La Reine .. that secret conversation that the microphone picked up

Phil the Greek, not very sotto voce can be indistinctly heard ... " a carrier or two like the de Gaulle wouldn't go amiss if the Brest shipyard's not that busy...tell him"

Chinese Coal carriers grounded off newcastle,NSW, Australia

Global energy flows are remarkably fragile. China, Japan and Korea buy huge quantitites of coal from Australia which is shipped from the the world's largest coal export harbor in Newcastle, NSW, Australia which are run by Port Waratah Coal Services

At any time 50 bulk carriers are waiting for cargo of the port. This week Severe weather, caused by low pressure off the mid-north coast of New South Wales whipped up gales grounding one carrier and endangering 2 more.

Consequently all loading services have been halted as the grounded Pasha Bulker, (Panamanian flagged by Wealth Line Inc. for the Japanese shipping line Sansho Kaiun Co.,) a Panamax-size vessel, ran aground just before 10 a.m. on Friday at Nobbys Beach, south of Newcastle (see pic above) port said Neil Patchett, a spokesman for NSW Maritime, the maritime authority of New South Wales state. The 225-meter (738-foot) ship also has 38 tons of diesel and 40 tons of lube oil aboard, but no coal.

Maximum wind gusts of 106 kilometers (66 miles) an hour recorded today were less than the 165 kilometers an hour gusts recorded when the Sygna coal carrier ran aground at Newcastle in May 1974, said Deryn Griffiths, acting manager of weather services for the New South Wales region at the Bureau of Meteorology.

A second coal ship, the Betis, lying about 2.5 nautical miles off the coast of Swansea, south of Newcastle, has a tug on site to provide assistance if required, NSW Maritime said. A third ship, the Sea Confidence, is about 1 mile offshore from Stockton Beach and appears to be stable, riding on its anchor with a tug standing by, it said. It is unclear whether the ships broke or dragged their anchors.

As many as seven coal ships may be at risk of grounding, said Lucy Muirhead, a spokeswoman at the International Transport Workers Federation in Sydney.

Any disruption of supplies to China can result in severe short term power supply problems.

Pic is of "Corona Lions" a typical Panamax 85,600 DWT Coal Carrier delivered on January 22, 2007 at Oshima Shipbuildyard in Japan for Fukujin Kisen Co., Ltd., Ehime, Japan ,which will ship coal from Australia to Japan - where coal consumption is rising die to problems with the Japanese nuclear power stations. See "Japan faces long hot summer"

Houston hubris and President Dubya visits Novozyme

Cambridge Energy Research Associates’ (CERA) recently held their annual Executive Conference in Houston last week - it is the Energy Industries annual shindig where the big beasts meet 'n' greet and make pompous speeches . This year's beanfest (the 25th since founding by Daniel Yergin) was entitled “The New Prize: Energy’s Next Era.” . CERA are owned by IHS Energy and wired into the Rockefeller inspired and funded Council on Foreign Relations.

Deputy Secretary of Energy Clay Sell spoke on February 8th, and amidst the self congratulation a few remarks stood out.

He outlined the back of the envelope figures that should make anyone pause for a while before deciding what to do about global warming / climate change / emissions trading .

The Department of Energy estimates that the global demand for energy may increase by as much as 50 % by 2025, with more than half of that growth coming from the world’s emerging economies.

Specifically regarding electricity, the growth is projected to be particularly steep; increasing nearly 75 % over the next two decades.

Sell returned, as ever, to the fundamental belief of the American nation in the superiority of their technology and the great enabling power of US led technology and innovation.

To compete in the increasingly global economy, we know what we must do – and that begins, first and foremost, with the building blocks of technical innovation: math and science.

Craig Barrett, the Chairman of Intel, has said, “U.S. technological leadership, innovation, and the jobs of tomorrow require a commitment to basic research funding today.”

He went on to describe the American Competitiveness Initiative, a program that the President seeks to reinvigorate our math and science base to lead "the discoveries of tomorrow."

Over the next ten years, the combined budgets of the National Science Foundation, the Department of Energy’s Office of Science, and the Department of Commerce’s National Institute of Standards and Technology will exceed $50 billion in new research funding, a doubling of those budgets over the next ten years.

...and you can be sure there will be a long queue of people knocking on their doors for research dollars. Lord Patel listened this summer as Purdue scientists argued for a further genetic research into the genome of Populus species (Cottonwood trees) to grow bigger, faster and better.... with a payoff maybe in 50 years.

Yet the President last week called by the Danish company Novozyme's offices in Franklinton North Carolina (Pop.2,500) who have the only workable process enzymes for biomass breakdown.Now in use in Spain and China - (for details search this site for Novozyme.)

The improbably named Garrett Screws of Novozyme says after Bush's State of the Union promise to help wean America from oil it made perfect sense for him to visit them ..... and pretty remarkable.

The Department of Energy estimates that the global demand for energy may increase by as much as 50 % by 2025, with more than half of that growth coming from the world’s emerging economies.

Specifically regarding electricity, the growth is projected to be particularly steep; increasing nearly 75 % over the next two decades.

There's a lot of catching up to do after spending wasting all that money on armaments for so many years.

EU - a view from America

At the excellent Oil Drum , some comments by ThatsItImout from the US today, regarding the problems that Europe faces in energy security ..... as discussed by ex USAmbassador to Lithuania Keith Smith, in a commentary on EU proposals for energy security after the Putin/ Belarus/ EU blackmail , published Center for Strategic and International Studies (CSIS)

"The EU has no REAL POWER to enforce anything. Going back to the birth of the Euro currency, anyone who asked how this organization would be able to enforce policy was called "out of touch" with the new modern idea of the Uber Europe, which of course could enforce it's will by simply proclaiming, and did not need real enforcement. Beside, Europe had the Charters (voted down by a fair number of Euro states), it's constitution (never accepted by a fair number of Euro states, it's "economic understandings" (ignored by most). Europe has no real military power, no home base of resources, a slow to non moving economy, rapidly approaching social welfare obligations it cannot possibly meet, and an aging demographic that makes our social security issues look like a cake walk. ....

The EU has about the clout of the old Trilateral Commision, and now fears the world will begin to see the truth of it's situation. Then what? Easy answer, money begins to leave a currency that has never been anything more than a glorified travelers check. Only the Americans are still completely bought into the cult of European superiority. Compounded by America's own almost blinding self hatred, and the utter disgust and disdain we hold for our Administration, we have been easy suckers for the Uber Euro scam, and many Americans who invested in Europe simply to spite our own nation stand to be wiped out when the reality of the world situation hits."

Discuss.

Moscow / Gazprom - the saliviki are on the march - energy prices on the rise in Europe.

Fathidin Mukhsiddinov of the Tajik state-owned gas company says that Uzbekistan has almost doubled the price of gas it sells to Tajikistan to US$100 usd per 1,000 cubic metres from Jan 1 2007. A contract for 700 Mn cubic metres is said to have been concluded.

In May Uzbekistan reduced its exports to Tajikistan, (one of the poorest in central Asia), because bills of US$4.5 MN had not been paid which caused industrial and commercial chaos until payment were made.

In Moscow at Gazprom's HQ, Prime Minister Sergei Sidorsky 's representative First Deputy Prime Minister Vladimir Semashko of Byelorussia signed a midnight deal to pay Gazprom GAZP.MM: Quote,$100 per 1,000 cubic metres of gas. More than double last years US$46 but less than the US$105 demanded.

For the next four years, Belarus would pay a portion of the cost in shares of Beltransgaz(Белтрансгаз). Which ends several years of negotiation over ownership of the company., now valued at $5 billion by ABN Amro but which Gazprom says is really US$3.5Bn.

Semashko, however, said Belarus would pay US$100 in cash in 2007 (half the US$200 demanded) and that Gazprom would pay for half of Beltransgaz and it's 6000 km's of pipelines in cash. He said the price would increase by US$11 annually after 2007, reaching US$144 in 2011.

In Minsk there had been threats to cut power to pump stations on the Yamal-Europe pipeline, which carries all Russian gas transiting Belarus to Western Europe.

Germany -- for whom Russia is a main gas supplier and the EU have used diplomatic pressure on Moscow and Minsk to reach a deal quickly and avoid any disruption to supplies to germany and Europe.

It appears that agreement has been reached but it has only moved the hand on the spigot to Moscow from Minsk... Moscow can now look to having used the gas supply weapon on deals directly with Armenia, Moldova, Georgia, Ukraine and now Byelorussia and Karimov has moved in concert over Tajikistan.

Which helps to maintain high world prices for gas, and factors in a security factor in all future negotiations.

We wait to see what happens when Gazprom offers to buy out Centrica (up 1% today @ 358p).. or Mr V Alekperov does through LUKoil.

EU what for want of a better expression we will call POLICY

European Commission President José Manuel Barroso will unveil , "An Energy Policy for Europe." on Jan. 10, 2007. the result of intensive discussion and analysis by ,”a small group of experts” in EC headquarters in Brussels. This is apparently talked of by EC insiders in their natural style of hyperbole as, “ the dawn of a new industrial revolution." German industry probably will see it as the sunset of their domestic industry. Viewed from here it is difficult to determine whether it's authors heads are ;

1. In the sand
2. In the clouds
3. Up their arse

Der Spiegel (EU Energy Plan Calls for Radical Emissions Reductions By Frank Dohmen ) claims to have access to a 25 page “Confidential” draft which is said to address 3 principal areas of concern ;

1. To establish ambitious climate protection goals in terms of reductions in so called greenhouse gases - a 35 percent reduction in CO2 emissions in the EU by 2035, and 50 percent by 2050.

2. To promote renewables (solar, wind and biomass ) as part of an EU wide energy security strategy – with renewables supplying 20% of electrical energy by 2020 . Biofuels to be equivalent to 10% of usage of fuel oils (by the same date?)

3. To promoting competition in energy markets by separating energy producers from distributors and transmission utilities, and encouraging a greater level of open market access to energy suppliers.

4. A more permissive view of what is seen as environmentally friendly nuclear power to generate electricity.

It is assumed that this will form a framework (if not a blueprint) for final ratification at the summit meeting of European heads of state in March 2007 - 50 years since the signing of the Treaty of Rome.. Under the rotating Presidency this will be presided over by Angela Merkel the German Chancellor – she starts the job next week having chosen the curious leitmotif to characterise her job as "succeeding together" (?).

Ms Merkel will need skills of a high order to arrive at a consensus on the basis of this naive and simplistic dpocument, evidently prepared by economists with blinkers. Whilst Foreign Minister Steinmeier has recently talked of used the term “selbstbewusste Bescheidenheit” (self-confident modesty) to characterize German foreign policy (explaining the modest achievements of the German troops used by NATO in Lebanon and N.Afghanistan no doubt) this which hardly suggests any change from Klaus Kinkel’s “Kultur der Zurueckhaltung” (culture of restraint) government’s foreign policy.

In selling this mild pabulum Chancellor / President Merkel will find the strongest criticism from within her own country – which has set it’s face decidedly against nuclear power, and even more firmly against reality - as has Tony Blair and his long (and lengthening ) line of Energy Ministers - who promises us yet another Energy review in the Spring - or some time soon.

Apparently Neelie Kroes, the European Commissioner for Competition has has been busy for months gathering evidence of the questionable competitive practices of Europe's energy giants to confirm her view that , major utility companies like Germany's RWE and E.on and Sweden's Vattenfall will be required to sell off their electricity and natural gas networks.

This clear separation between power production and power transport through the networks is a typical bureaucratic reflexive response which provides zero benefits and will add costs for the consumer rather than reduce them by allegedly stimulating competition – viz power prices in the UK where there is a very distinctive separation which has resulted in domestic and commercial prices almost double in 2 years in step. A function of global price rises of oil, gas and coal rather than internal costs. cf : International cost comparison chart of gas from WAPO

Naturally the established and massively powerful coal based utilities in Germany have already been active in lobbying Merkel’s office. Apparently The Commission sees that the currently nationally based networks create border bottlenecks as utilities have kept power and gas lines undersized, effectively preventing foreign competitors from gaining access to domestic markets.

An EU regulatory agency with extensive powers would monitor the new system, ensuring that energy prices are based on supply and demand and national governments are prevented from intervening.

This supra - nationalistic meddling is anathema to the German power giants who have already been protesting against Brussels' plans in Phase 2 of the Emissions Trading Scheme (ETS) for German industry to cut annual CO2 emissions by 12 million tons to 453 Mn tons for the 2008/12 period from the proposed 465 Mn tons.

On top of this the EC sees the EU should assume a "global leadership role in climate protection" and in the "development and use of efficient energy technologies." More bluntly this involves a 35 % reduction in CO2 emissions over 1990 levels by 2035 and a 50 % reduction by 2050…. And that means massive costs to the producers which trickles down as higher prices to the consumer and industrial user – with huge implications on global competitiveness.

It appears that nobody has noticed that the Emissions Trading Policy (ETS) has collapsed with a unit trading at it's lowest ever of just above Euros 6. The cost / utility of wind energy are now becoming evenb more apparent with experience of usage.

At a meeting of European heads of state two weeks ago, Spiegel claims Chancellor Merkel indicated that she is unwilling to accept the EU energy concept in its entirety. These are delicate issues, Merkel said, which revolve around the "tough representation of interests -- also for Germany."

Meanwhile we learn that Putin / Medvedev / Gazprom’s theft of over half the Sakhalin project involved more hidden costs (US$3.6Bn.) to Shell and their Japanese partners. The stand off between Russia and Belarus over gas supplies / prices is also focussing (as if it were needed) the alarming dependence of Europe, now and forever, on Russian Gas and oil and it’s fickle and undiplomatic owners.

For the record Ukraine has now agreed for Gazprom gas supplies @ US$135 per 1,000 cubic meters (US$3.82 per cubic foot)for 2007. Georgia will pay US$235 per 1,000 cubic metres (US$8.07 per cubic foot) and Gazprom are now asking Belarus to pay US$105 per 1,000 cubic meters (US$2.97 per cubic foot) a rise of 123% on last year – and Gazprom wants the internal distribution pipelines.

(On the New York Mercantile Exchange today gas closed down @ US$6.113 per million British thermal units = approximately 1 cubic foot. It has been as high as US$15 – typically the hub price quoted above is 50% of the cost to the domestic user.) (See table for mid 2005 comparable gas prices worldwide from WAPO - click to see enlarged version)

Europe has more to worry about, over sources and global energy costs than the niceties of internal transfer costs and squeamishness about nuclear energy.

If you want to understand what the Russkis are up to listen to this.

UPDATE SATURDAY 30/12

The Daily Torygraph 30/12/06 "Fears of high gas prices in Britain this winter have returned after a "second gas war" broke out between energy-rich Russia and one of its neighbours in eastern "Europe.

A spokesman for the Department of Trade and Industry said: "We would not expect to it to have any impact on the UK's supplies but we can't anticipate prices."

There are people children who couldn't anticipate the problems we face now, several years ago....so if gas prices rise - warm yourself with the thought that the DOT (Dep of Energy ?) couldn't anticipate the rise in prices.

The New York Times today has a brief but telling OP ed piece

Obstacles in Turkey’s Path

"Turkey is also becoming an important hub for transporting oil and gas to Europe from Russia and Central Asia, making it crucial to Europe’s energy security."

Energy geo-politics - How Europe needs Iran / Turkey / Bulgaria / Romania

EU solidarity on energy plans and trade embargoes with Iran both have taken a severe blow with news from Teheran. It also emphasise the supreme inportance of a tiny village (pop 190) in Eastern Austria.

1. Nosratollah Seifi, the managing director of the National Iranian Gas Export Company (NIGEC) has announced the transfer of transfer of 0.5 to 4.5 billion cubic meters of Iran’s gas intended to be used in markets like Italy to Switzerland with gas transfer via a pipeline passing through Turkey. The deal was signed 3 weeks ago. Turkey has agreed to the transfer across their territory.

2. Michael Peisser and Udo Raap, joint managing directors of Austrian EconGas have announced (EconGas is a joint venture between BEGAS (2.6%), EVN (15.7%), Linz AG (0.45%), OMV Gas International (50%),OÖ. Ferngas AG (15.55%) and WIEN ENERGIE (15.7%) ) they are looking to source 10 billion cubic meters of gas per year from Iran. Econgas currently supply industrial markets in Germany, Hungary and The Czech Republic.

The Swiss are also considering other routes such as through Georgia and the Black Sea. Austria is also backing the Nabucco pipeline project to get gas from the Caspian area into central Europe, and Iranian gas could be fed into this.

The Nabucco gas pipeline will be 3,300 km (2,050 miles) long it should start carrying gas from 201 and will guarantee the supply of about 30 bn cm of gas a year to Central Europe by 2015. It will route Iranian gas via Erzerum (Turkey) , Istanbul, Bulgaria, Romania,Hungary to the Austrian Baumgarten gas hub. The pipeline is considered an alternative to the Russian gas supply to Europe.See EU map here

Baumgarten an der March is the entry point for Russian gas to Europe and takes advantage of using exhausted local gas fields as resevoirs - Matzen, Puchkirchen, Tallesbrunn, Schönkirchen Reyersdorf, Thann and Zwerndorf. Its role as a natural gas hub ( and therefore a supremely critical node in the security of energy supply in Europe) will increase further with the construction of the Nabucco pipeline.

The current Nabucco shareholders are OMV (Austria) MOL (Hungary) Transgaz (Romania) Bulgargaz (Bulgaria) BOTAS (Turkey) - Gaz de France and Total, and German E.ON Ruhrgas and RWE are also interested in a stake as well as Gazprom.

The EU on current projections will require an additional 200 to 300 billion cubic meters of natural gas per year in 25 years - i.e about another 10 Nabucco's.

Georgia's gas is still playing cold - Turkey to settle price / volume.

International news media are reporting that Georgia has secured the Turkish element of the Azeri gas from the Caspian Shah Deniz fields, that will soon be filling the Baku -Tbilisi -Erzurum pipeline. (This follows the Baku - Tbilisi - Ceyhan (BTC) oil pipeline for a great deal of its journey.)

It now appears that Georgian Energy Minister Nika Gilauri's plans are no slam dunk. Further talks are to be held in Baku after Georgian Prime Minister Zurab Nogaideli met with Azeri President Ilham Aliyev whi have agreed on supplies of 1 Mn cubic metres to determine the origin and price of natural gas deliveries from Azerbaijan's Shah Deniz field.(Pic Azebaijani students, thrilled at news)

Initial deliveries in September were postponed because of construction delays on a new pipeline in Turkey, the State Oil Co. of Azerbaijan said last month.

``Technical problems'' continue to hold up deliveries,said Energy Minister Gilauri's spokesman Doliashvili ``When the project goes online, we'll start getting gas from Shah Deniz.'' BP PLC, Friday said that output had been halted at the offshore field (10% owned by Russian LUKoil) because of "unspecified technical problems." Production began just under two weeks ago.

A meeting early this week in Istanbul at a trilateral meeting in which Azeri dynastic President Ilham Aliyev will take part will decide by whom the gas to Georgia is supplied, volumes and transfer prices.

It is difficult for an outside observer to see why that price will vary from the agreed Gazprom price of US$235.... although of course the announcement (if made) may confuse, obfuscate the agreed costs.

It is, after all, in all supplier's interest to maintain higher prices..... which will impact in the long(er) term on Western Europe .... and on the Norwegian Government Pension Fund.

There is a useful post at The Reliant with many detailed press links that highlights the closure on December 23, of the Russian military headquarters in Tbilisi to the Georgian government, following the completion of the withdrawal of Russian military hardware from Tbilisi on December 14 (BBC report) . Final vacation of the installation became complete with the departure of the last personnel on December 25. The closing of the installation and of its staff of 340 employees will represent the end of any formal Russian military presence in the Georgian capital - an event which has been described as a "historic moment" by Georgian deputy defense minister Levan Nikoleishvili.

Watch this space,

Cold wars suddenly got colder - Official

Mobile Topol-M ballistic missile
Lord Patel met Senator Richard Lugar , Chairman of the US Senate Foreign Relations committe at Purdue this summer, whilst his immediate interest was to boondoggle for his home state Indiana's share of ethanol subsidies he made some trenchant remarks about energy security in the modern world.

He is a tough, shrewd, worldly wise politician who is now bowing out from centre stage. Following his summertime remarks in Purdue, he made a chracteristically blunt (but unremarked ) speech at the Marshall Fund conference in Riga, in Latvia in advance of the NATO summit. In the light of Turkmenbashis's death it is worth considering. Full text at US Embassy

NATO he points out is bigger, it is busier than ever. That is not a guarantee however of security in a global world - when NATO was originally forged to deal with the defence of Europe from the Warsaw Pact countries. He dwelt at some length on the role of NATO in Afghanistan ...

"Although the hunt for al-Qaeda terrorists continues, the primary threat to the stability of Afghanistan is Taliban insurgents who are challenging ISAF in greater numbers, sowing dissent among Afghanis, cooperating with the bourgeoning narcotics trade, and complicating security efforts in ways that inhibit the rule of law and reconstruction."

He pointed out that whatever the political will, action was dependent upon expenditure ..

"To overcome these challenges and similar ones, we must reverse the downward spiral of defense budgets. Only a handful of members spend more than 2 percent of their gross domestic product on defense. Good intentions can only carry a military force so far ..."

He pointed out what many in the US see as the foot dragging of NATO nations ..

"It is imperative that NATO fulfills its commitments to Afghanistan. The Alliance has found it difficult to generate the political will to meet NATO objectives.....Unfortunately, NATO capitals are making the military mission even more difficult by placing national caveats on the use of their forces. These restrictions, coupled with troop shortages, are making ISAF a less cohesive and capable force."

He moved on and marked the " Centrality of Energy" to the NATO mission, to prevent wars and not fight them. He then outlined a key problem which a less than united Europe should consider..

" In the coming decades, the most likely source of armed conflict in the European theater and the surrounding regions will be energy scarcity and manipulation. It would be irresponsible for NATO to decline involvement in energy security, when it is abundantly apparent that the jobs, health, and security of our modern economies and societies depend on the sufficiency and timely availability of diverse energy resources."

" .... our experiences provide little reason to be confident that market rationality will be the governing force behind energy policy and transactions."

He then highlighted that we live in a much changed .. and rapidly changing world of energy flows.

"As recently as four years ago, spare production capacity exceeded world oil consumption by about ten percent. As world demand for oil has rapidly increased in the last few years, spare capacity has declined to two percent or less. Thus, even minor disruptions of oil supply can drive up prices."

He continued, to describe what he was to call geo-strategic blackmail.

"We are used to thinking in terms of conventional warfare between nations, but energy could become the weapon of choice for those who possess it. It may seem to be a less lethal weapon than military force, but a natural gas shutdown to a European country in the middle of winter could cause death and economic loss on the scale of a military attack."

he then warmed to the core of his concerns, which affects NATO and their allies.

"We must move now to address our energy vulnerability. "

"Article Five of the NATO Charter identifies an attack on one member as an attack on all.....We should recognize that there is little ultimate difference between a member being forced to submit to foreign coercion because of an energy cutoff and a member facing a military blockade or other military demonstration on its borders."

Addressing the concerns about Rusia he called for dialogue ..

"I believe that Russia has a long-term interest in achieving a more prosperous stability that comes with greater investment in its energy sector and the development of a reputation as a trusted supplier. But its recent actions to temporarily reduce gas supplies to the West, confiscate some foreign energy investments, and create further barriers to new investment are undermining confidence in Moscow’s reliability. "

Remember ....this was before Gazprom successfully strong armed Shell over Sakhalin and Tblisi gave in on a new price for gas from next week.

He concluded ..

"I understand that adopting energy security as a mission is a major advancement from NATO’s origins. But it represents an historic opportunity to change the circumstances of geopolitics to the benefit of all members".

Meanwhile the first regiment of Topol-M mobile intercontinental ballistic missiles (ICBMs) went on active duty in the Ivanovo region in central Russia this month and received a visit from President Vladimir Putin on 14 December 2006. He called the deployment a "significant step forward in improving our defense capabilities".(see exclusive pic)

"Maintaining a strategic balance will mean that our strategic deterrent forces should be able to guarantee the neutralization of any potential aggressor, no matter what modern weapon systems he possesses," Putin said.

The state-of-the-art mobile Topol-M ballistic missile, with a liftoff weight of 47.2 tonnes, a range of more than 10,000 kilometers and capability of carrying a 1,200-kilogram warhead, which is immune to electromagnetic impulses is a valuable reminder of the uncreasingly tough competition between the great powers for unimpeded access to raw materials, including energy resources.

On 15 December 2006 Colonel-General Nikolai Solovtsov, commander or Russia's Strategic Missile Forces,said "We will begin to equip the Topol-M mobile missile system with multiple re-entry vehicles in a few years."


Ukraine's Prime Minister Viktor Yanukovych had a visitor to discuss gas supplies for winter this week. President Putin.

Cold front in gas wars

The BBC are reporting at 13.39 GMT today
Russia to cut off gas to Georgia

Russian gas company Gazprom has said it will cut off gas supplies to Georgia from 1 January in an escalation of a long-standing price dispute.

Georgia has refused to accept Gazprom's demand for a doubling in its gas price to $230 per 1,000 cubic metres.

... and they haven't buried Turkmenbashi yet !

Lord Patel has been chronicling the growing stranglehold on European and ex CIS States see here

Tuesday, December 12
George has Georgia on his mind and Vladimir standing on his toes
Sunday, November 19
Gazprom / LUKoil - Russian energy gets to grips with Europe
Tuesday, June 6
CIS states discuss defence and the UAE takes a look / Baku Defence MInisters meet from CIS

Also at Investigating New Imperialism 24/11/03 "Georgia, Velvet Underground in Overdrive"

Pic Happier Days, Ex US Secretary of Defence, Donald Rumsfeld and Ex President of Georgia, Edward Shevardnadze on December 15th 2001.

Meanwhile 2 hours later Novosti report ...

" ..... Gazprom [RTS: GAZP] signed three contracts Friday on supplies of 1.1 billion cubic meters of gas to Georgia in 2007 at $235 per 1,000 cubic meters, the head of Gazprom's export arm, Gazexport, said.

Alexander Medvedev said the contracts have been clinched with three companies on condition that 2006 supplies total 1.8 billion cubic meters, with two of them for supplies throughout 2007, and one for January-March, as Kavtransgaz-Tbilisi has confirmed supply volumes for just this period, and is likely to prolong its contract later."

To be followed by the BBC at 15.08 GMT with the same news.

Short sharp war, no-one hurt. Russian Bear moves on to Kiev, and Рэспубліка Беларусь for a comradely chat with President Lukashenko.

UPDATE 10.30 GMT
The original BBC report timed 13.39 GMT linked above has mysteriously vanished to be replaced by the later story. Journalism is the first draft of history ?

Turkmenbashi dead - Georgia and Ukraine to feel the cold ?

A 670-lb. meteorite landed @ Tashauz, in the Dashkhowus Velayatat in the Central Asian republic of Turkmenistan on June 20, 1998,happily, the 6th Anniversary of the election of President Saparmurat Niyazov Local scientists asked the head of state to name the celestial body Turkmenbashi.

66-year-old Saparmurat Niyazov now President for life has like the meteorite named after him fallen to earth. A sudden cardiac arrest stilled the father of the Nation announced the National TV.

No doubt his 5 million citizens will turn to the many vodkas made in his name to seek solace and fall like their father to Earth. Meanwhile the fight starts over the massive gas fields and their riches - the folks in Tblisi and Kiev will be looking over their shoulders and getting the extra blankets out.

Watch this space.

Martin the Meteorite man will sell you a 40gm chunk of the meteorite for US$140.

Nuclear power plant construction capacity being swallowed up - UK waits for another Energy review - the 3rd in 4 years.

British Nuclear Fuels sold Westinghouse the American based Nuclear power engineer to Toshiba (77% - US$4.16 Bn.) and the US based Shaw group (20% - US$1 Bn.) and Ishikawajima-Harima Heavy Industries Co. purchased a 3 percent stake for US$162 million,earlier this year. This will give Toshiba nearly 30% of the world market.

Toshiba / Westinghouse have announced today they have sold 4 of their AP 1000 reactors to China in a US$8Bn. deal for installation by 2013 - two at Sanmen in Zhejiang province, with another two at Yangjiang in Guangdong.

Westinghouse said the deal will create or sustain roughly 5,000 design, engineering and manufacturing jobs in the US with additional jobs being created at US-based suppliers in at least 20 states. On top of this, AP 1000 technology has been selected for 12 projected plants in the US - which are still in the planning, regulatory approval stages.

The French company Areva and Russia's Atomstroiexport were said to be in the bidding.

As part of the deal the US company will transfer technology to the Chinese enabling them to build their own plants eventually with up to a 50% Chinese content.

Areva are experiencing highly publicised problems with the Finnish EPR plant at Olkiluoto (pic) and even though they are one year behind schedule they claim that this, the first of the so called 3rd generation reactors scheduled for completion in about five and a half years. The EPR plant is based (like the AP 1000 on a pressurised water reactor but provides greater efficiencies in using Uranium oxide fuel slightly enriched with up to 5% U235, or a mixed uranium and plutonium oxiderecycled fuel (MOX).

Areva have had to make provisions to allow for the problems at Olkiluoto which they announced last week operating income for 2006 is expected to be sharply down from that of 2005, although it will easily remain well in the black. See Lord Patel's July 13th posting on UK construction capacity and the lessons of Olkiluoto.

Atomstroiexport is currently constructing the US$800 Mn. Iranian Bushehr nuclear power plant for the Iran's Atomic Energy Organization which has been recently re - scheduled to become operational by the second half of 2007. The contract was first placed in 1995

Atomstroiexport has a total of five plants under construction, Bushehr, 2 VVER-1000 reactors at Kudankulam in India . The Chinese Tianwan NPP, which uses 2 improved VVER-1000 reactors and K-100-6/3000 turbo-generators, under the terms of a Russian-Chinese agreement signed in 1992 was successfully tested at 75% load in October 2006.

At the same time they announced this milestone, they also announced that they had successfully tendered for Bulgaria's Belene plant , near the capital, Sofia, for the national Bulgarian National Electric Company (NEK) for two 1,000 MW reactors. The first plant will be operational by 2011 and the second by 2013.

Areva and Germany's Siemens will also be involved in the construction of these plants - Westinghouse and the Czech Republic's Skoda were underbidders on the project.

Meanwhile, having sold off Westinghouse, the people who make the decisions in the UK are twiddling their thumbs for the new Energy Review in the Spring (?) as gas reserves, oil production plummet, energy demand soars and unrealistic expectations are provided about renewable energy - as domestic energy costs soar and empty boasts are made about the EU ETS market - still staggering along at the lowest level ever of €6.65 per tonne.

This is what they call my children, UK energy security.

UK Gas price rise Shock !

Scottish & Southern Energy the UK's third largest gas supplier, pledged no further increases in 2006 when they raised energy prices twice this year. SS&E (which includes Scottish Hydro Electric) announced today that its 600,000 customers north of the Border would face increases of 12.2 per cent for gas and 9.4 per cent for electricity on New Year's Day.

Scottish Gas (part of British Gas AKA Centrica) simultaneously announced that they will be cutting prices for their 1 million gas customers and 1/2 Mn electricity customers in the spring - but provide no details ( delayed until spring says Times) . They are renowned as the most expensive energy suppliers North of the Border.

Centrica (who buy in 2/3 rds of the gas they supply) with 29,000 staff overall,(and approx 16 Mn. domestic consumers) has also announced 1,310 job cuts with the closing of their Stockley Park HQ in Middlesex - a response to the loss of 1 mn customers in 2006 throughout the UK after losing 670,000 gas customers in 2005.

Centrica claim British Gas had a 52 % share of the residential gas market and a 23 % of the household electricity market as of the end of June 2006 but has since seen it's domestic share drop to lower than 50%.

Centrica sees the Morecambe Bay gas field (pic) generate half the profits (£900 Mn) - expected to halve this year as the field is declining massively (15% in Q1 2006). The board has invested in North Sea exploration but the City patiently wait for a takeover at £4/5 a share (say £20Bn) from Norsk Hydro, Gaz de France or Lord Patel's friend at the gaming tables Vagit Alekperov and LUKoil. Goldman Sachs had them as a BUY (again) on Friday 15/12 @ 340p up from 250p over the year.

All this news of domestic energy prices follows the energy regulator Ofgem on December 4th authorising funding for more than £5 billion of investment in Britain’s gas and electricity transmission systems over the next five years which will allow energy suppliers to raise their prices to pay for new networks for LNG gas supplies and wind farms which have hitherto not been factored in to the costs of future energy supplies.

£1 Bn of this will be spent in the next 12 months by Scottish & Southern Energy, National Grid and United Utilities, to improve the gas network compared with a total of £864 million on improving their networks during the last five years. Much of this work is part of a 30 year plan to replaced ageing cast iron pipes.

This was explained by Ofgem as an agreement to increase overall transmission charges by 8% to consumers over 2006-2007 charges and 2% above inflation for each year thereafter, while gas transmission revenues will increase in line with inflation. The effect on domestic customers it was said will "be relatively small as transmission makes up only 3% of household energy bills." Ho.Ho.

Ofgem say that in the first three quarters of 2006, 2.9 Mn. customers switched gas suppliers, and 3.52 Mn. their electricity provider. Which keeps those busy bees drones in the call centres busy. (1,000 in British Gas in Cardiff alone)

This my child is all part of UK energy security.

Lord Patel's advice is buya forest, a wood stove and lay in some candles.

George has Georgia on his mind and Vladimir standing on his toes

The Caspian is seing an intricate game of oil /gas warfare, NATO brink statesmanship, Turkish ambitions for the EU and US dislike of Iran, helping Georgia out of a hole in this winter's energy supplies caused by Russian state owned Gazprom guided by the bad boy on the block Vlad Putin.

Azerbaijan's President Ilham Aliyev (another ex Communist dynastic Dictator President, playboy who followed his father in 2003) visited both Brussels and Moscow last month. In Brussels he wanted to get help from the European Union to develop and deliver energy supplies from the Caspian basin to the EU .

In Moscow he played a dangerous game by showing he was unwilling to help Moscow freeze out Georgia from Russian Gas this winter. Don't be surprised if he ends up with Baloneyium in his breakfast.

The Empire Strikes back

From 1/1/07 , Sergei Kupryanov of state owned Russian gas giant, Gazprom told Azerbaijan last Wednesday 6th December (Interfax) that exports willl be cut from 4.5 billion cubic meters in 2006 to 1.5 Bn.c.m and simultaneously double the cost the "European price " of approx US $200 and US $230 per 1,000 cubic meters.

1/1/07 will be a busy day because Gazprom are also scheduled to cut gas supplies to Georgia if they don't agree to pay this "European price" - this threat is also tied in with the Gazprom offer of US$250 MN to purchase the Georgian network and pipeline systems - and the refusal to allow Gazprom to buy the ageing, bankrupt Tbilgazi. Currently Georgia gets about 1.5 billion cubic metres from Gazprom of which 400-450 million cubic metres are imported by the Russian gas company Itera.

Armenia, a much more Russo-centric state (so far) will continue to pay the old US$110 per 1.000 c.m - they still have problems with Georgia over the unending duispoutes in the Nagorno - Karabakh region,

There are three objectives in this policy by Russia

1. To show how Moscow is not frightened to exercise it's economic muscle usinf energy supply and cost as a lever.

2. To prevent Azerbaijan from diverting gas to Georgia.

3. To release supplies to be available for Europe as growing supply commitments are hit by stagnant extraction levels in Russia.

To fuck with the Baku boys even further Alexsandra Chubais' Unified Energy Systems (RAO/UES) said in November it would cut electricity supplies from 300 MW per day in 2006 by 80%, again on 1/1/07.

All this will force Azerbaijan back to use domestic oil and gas supplies, whilst gas should not be a problem they will struggle to meet electricity demand and heating requirements, especially if it is a hard winter - the newly developed giant Shah Deniz offshore field may also not be producing as hoped this winter. This is scheduled to begin in September 2006 for transport to Turkey in the Baku-Tbilisi-Erzurum - with some being fed into Georgia via Tblisis, but construction has hit problems and agreements with Turkey remain to be concluded so nothing has moved yet. To get the deal done, Turkey, a U.S. ally and member of NATO, will have to forgo gas it already has signed to buy, which would allow Georgia to buy it instead.(See below, penultimate para)

The Shah Deniz field is a consortium of British Petroleum ( technical) operator and Norway's Statoil ( commercial) operator, each with 25.5% Azerbaijan's State Oil Company, Total of France, National Iranian Oil Company (NIOC) (this share is shipped as gas to Georgia), with 10% each; a partnership of Agit Alekperov's LUKoil and Italy's Agip with 10% , and Turkish Petroleum = 9%.

Iranian gas could reach Georgia through Azerbaijan’s recently refurbished but small-capacity Astara-Gazi Mahomed-Gazakh pipeline - it will provide relief but nothing more (and is not welcomed by the US) . This line was revived after the mysterious and unexplained bomb blasts in Russia's North Caucasus that sabotaged 2 pipelines carying Russian gas late January this year. This "Iranian" gas will actually be from Turkmenistan which hits the Iran border at a reported US$66 per 1,000 c.m. and for which georgia will be happy to pay US$110 per 1,000 c.m.

The US Ambassador recently made it clear to the Georgian government that it would not be acceptable for the US if Georgia were to form a longterm strategy for energy cooperation with Iran.

President Aliyev characterised these moves against Baku by Moscow as "exorbitant and unjustificable" and is prepared to hit back by cutting northward (Russia) bound crude oil through the Baku-Novorossiysk pipeline (projected 5 Mn tons in2007), use some internally and send the rest southwards in the Baku-Ceyhan pipeline (which is expected to double capacity with a parallel pipeline soon).

The US throws it's hat into the ring... again

Matthew Bryza, is the deputy assistant secretary of state, quaintly titled the "coordinator of U.S. energy policy in the Caspian and Black seas area" and is with Georgian Prime Minister Zurab Nogaideli in Washington to discuss post New year's Day gas supplies , "political blackmail" he characterises it, and their wish to join NATO.(Georgia - 1/7th the size of California with 5Mn population. GDP per head US$2000)

The United States doesn't like Georgia's negotiations with Iran, but says Bryza, any deal is simply a "stop gap" (Oh yeah ?). If they have no alternative, and Iran comes offering, even if we told the Georgians, 'Well, we would prefer you simply freeze this winter - I'm not sure how much weight that would carry," said Bryza.

Meanwhile yesterday in simultaneous meetings whilst the US leant on President Nogaideli in Washington, in Tblisi, after an 8 hour closed session, the three energy ministers of Turkey, Azerbaijan and Georgia (with some help from Us educated running back for Unlce Sam,President Mikheil Saakashvili ) agreed that Turkey would surrender their (9% share) of which 2.8 billion cubic metres of gas it receives from the Shah Deniz project of which Georgia should receive 1.5 billion cubic metres of gas - no transfer prices have been made public.

For some background on US / Russian intervention over energy supplies to Georgia go here. 24/11/03 Georgia, Velvet Underground in Overdrive" more about the Georgians keeping their cool here.

"When the rest of the world recognizes how thinly spread the US military is, thinly spread physically, and economically, because it is not a sustainable institution in its current incarnation, rebellions will occur. Indeed they have already started. The response of the weakening US will be to lash out, often with unforeseeable consequences, just as the consequences of this impending invasion are unforeseeable, and unknown."