Tag: Gas

Argentina’s Energy Dilemma

The Repsol-YPF Tower in Argentina
The Repsol-YPF Tower in Argentina. Image by Wikimedia Commons.

BUENOS AIRES – The expropriation of nearly all of the Spanish company Repsol’s stake in Argentina’s energy producer YPF, announced in a vehement speech by President Cristina Fernández de Kirchner, has raised legal alarms worldwide. In fact, the move will not resolve the country’s energy problems in the absence of enormous inflows of investment to the sector.

Repsol acquired complete control of YPF in 1999; in February 2008, it transferred part of its shares to the Petersen Group, which today holds 25%. Repsol currently holds 57%, with the rest owned by stock-market investors. The Argentine government intends to expropriate 51%, leaving Repsol with a 6% stake.

In the 2008 sale of shares, the two majority stockholders agreed to distribute at least 90% of future profits in cash. That decision was intended to allow the Petersen Group to service the debts to banks, and to Repsol itself, that it incurred with its share purchase, for which it made no initial payment.

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Will Natural Gas Power the 21st Century?

How will we satisfy our demand for power in the future? Lightning - Courtesy of Hugol/flickr

The “Nuclear Power Renaissance” might be coming to an end before it has had the chance to flourish. In light of the current nuclear meltdown in Japan, people are growing increasingly suspicious of nuclear plants. Governments in several countries are thus postponing or reviewing plans to advance nuclear power as the keystone of their electricity supply.

In their search for alternatives, policy makers would be well advised to take a good look at natural gas. Recent developments in the market are likely to render it increasingly attractive for consumers.

Firstly, the geography of gas supply is currently being turned upside down. Technological progress has enabled the exploitation of gas reserves previously thought inaccessible in North America. As a consequence, the US has become the world’s main producer, overtaking natural gas giants Russia and Iran.

Europe, India and China, too, are thought to be sitting on vast gas reserves, which may now be exploited thanks to new drilling techniques. At the moment, it remains uncertain how soon, and to what extent, these gas reserves will become economically viable. Nevertheless, global supply of natural gas is expected to rise markedly in the long run. Increased supply coupled with current sluggish demand (due to the global recession) should keep prices low. Moreover, consumers will be able to boost energy security by diversifying their natural gas supply.

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From ESPO to Druzhba?

Close-up of a pipeline
Close-up of a pipeline

Some of Russia’s pipelines have names that reflect more than just technical realities – such as the Druzhba (Friendship) pipeline system that brings oil to Central Europe. Yet, others are of a more prosaic kind, including the recently opened Eastern Siberia-Pacific Ocean Pipeline (ESPO). ESPO will bring the black gold from Eastern Russia to China and Russia’s Pacific Coast. Whether this new pipeline is the beginning of a new Russian-Chinese energy-friendship remains to be seen.

China’s growing appetite for gas and oil will be hard to saturate in the next decades. According to projections of the International Energy Agency, China’s demand for primary energy will nearly double from 1,765 million tons of oil equivalent (Mtoe) in 2007 to 2,539 Mtoe in 2020 and 3,451 Mtoe in 2035. The country will account for 30 percent of the increase in global primary energy demand for that period. Oil demand is expected to more than double while the demand for natural gas will more than triple.

Before that backdrop one would expect Russia, home to 5 percent of the world’s proven oil reserves and 24 percent of all proven gas resources, to be eager to enter this growing market; even more so, since the focus of Russia’s oil and gas production is moving eastwards. There are untapped hydrocarbon resources in Eastern Siberia and Russia’s Far East that are expected to cover falling production elsewhere. Furthermore, hooking up with China holds major potential for developing an economically backward region and would add another trump to Russia’s hand when bargaining with its European energy customers.

But that’s not how Russia seems to view the situation.

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Double Standards

Demonstrator at rally for Bhopal victims, courtesy of Ascanio Vitale/Flickr

The ongoing BP oil spill in the Gulf of Mexico and and the 1984 Bhopal disaster have been hot topics in the news as of late. Both events have reproduced a popular debate regarding multinationals using and abusing their host countries, particularly within the environmental context. But rather than analyzing the power of the multinational companies in relation to the state, what appears more noteworthy is the conflicting attitude of the US. This in turn has influenced the hierarchy of states that exists on the world stage.

What I find interesting is how aggressively the US has condemned BP’s activities, even in the face of damaging trans-Atlantic relations. Yet, it has been so passive about the extensive damage done by American Union Carbide Chemicals, now Dow Chemicals, in Bhopal.

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LNG from PNG

You may know that Papua New Guinea (PNG) is a tropical country located on the world’s second largest island in Oceania. You may also know that most of PNG’s 7 million inhabitants live in rural areas. You could call PNG a developing country: In the 2007 Human Development Index it is ranked 148 of 182, between Kenya and Haiti. You may know that PNG is rich of natural resources, including precious metals, timber and oil. What you would not expect, however, is PNG to be a major hydrocarbon producer.

Well, it’s time to revise your knowledge.

In a joint venture with firms from Japan, Australia and Papua, ExxonMobil plans “to develop gas fields in the Southern Highlands and Western Province of PNG and transport the gas via pipeline to an LNG (liquified natural gas) facility near Port Moresby (the capital) for shipment to markets overseas. The project will provide energy for the Asia-Pacific region, jobs and economic benefits for PNG.”

Economic benefits indeed; the question is for whom. According to a study, the project will double the country’s GDP and increase its exports of oil and gas four-fold. This gigantic endeavor – total capital investment is thought to amount to $10 billion, which is as much as the country’s annual GDP – raises two questions. First: Why is PNG’s oil and gas only now being exploited so intensively? Second: What is the project’s overall impact on PNG and its people?

The PNG LNG project / Illustration: screenshot from www.pnglng.com
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