Putin's Gas  

I'm never quite sure if William Engdahl should be filed under "parahistory" or not - but he does write some interesting stuff on oil geopolitics. Here is his take on the Russia-Ukraine gas game .

Putin is many things but he can’t be accused of being passive in the face of strategic threat to Russian national interests. Moscow moved swiftly last summer to exploit a growing rift between Uzbekistan and Washington, and the result was a ban by Uzbekistan of US military overflights and use of its airbase, a right that had been granted by President Karimov after September 2001 to get Uzbekistan into the ‘good’ side of the US War on Terror. Relations between Uzbekistan and Moscow today are very close, including in military mutual defense agreements. That rapprochement dealt a major blow to the Washington encirclement on the Eurasian space of both Russia and China.

The next move in this complex geopolitical power chess game will be in Ukraine where Yushchenko faces parliamentary elections in March. Discontent with his lack of progress on the economy had given him very low poll ratings. Some Russian experts believe Putin is playing hardball with Yushchenko to remind Ukraine voters where their energy security lies, i.e. not with Yushchenko and his Western friends, but with Moscow. Russia regards a NATO Ukraine inside the EU as a ‘strategic threat’ to put it mildly.

The Gazprom Ukraine ‘compromise’

By ending the dispute so swiftly, with a doctored compromise, Putin made his point, and he immediately reassured edgy West European gas importers that Gazprom never intended to cut their gas, only the uppity Ukraine’s.

Under the terms of the new deal, Gazprom will sell the gas which Ukraine receives, but in a devious way. It will be sold for $230 thousand cubic meters (tcm) to an Austrian trading company, Rosukrenergo. Rosukrenergo is in turn owned by Gazprom and the Austrian Raifeissen Investment AG. Then Rosukrenergo simultaneously buys gas from Turkmenistan for $50 a tcm. The two are ‘mixed’ and Ukraine’s Naftogas buys the final gas for a price of $95 tcm. Both sides can claim ‘victory.’

Gazprom also agreed to pay a 50% higher Transit Fee to Ukraine for its pipeline route through Ukraine to Europe, a fee of $1.60 instead of $1.06 per tcm per 100 kilometer. As well, both parties will settle in dollars not in the form of gas.

The West was caught in a dilemma in opposing the Gazprom price demand of $230. First, as it was only half the ‘market’ price, showing some restraint on Gazprom’s account. Second, because Western organizations from the WTO to the IMF to the Washington Bush Administration have been demanding Gazprom begin selling its gas in Eastern Europe at ‘market’ prices and not at a ‘subsidized’ price. Ukraine is far the largest Eastern Europe gas customer of Gazprom.

Significantly enough, on January 5 US Energy Secretary Sam Bodman told US companies they should not be discouraged from investing into the Russian energy sector merely because of the Ukraine dispute, adding that the dispute had not undermined his confidence that Russia was a good place to invest. ‘We continue to encourage our companies to explore opportunities with Russia,’ he added. Washington clearly has a larger agenda in the region. So too does Putin, and the two agendas are manifestly divergent.

The swift settlement of the Ukraine gas dispute, as well as the details of the compromise, in which Ukraine de facto pays what it offered before the cut-off, suggests what Yushchenko claimed. It was not an issue of commercial policy. It was and is an issue of power politics, Russian power geopolitics.

Its real focus is how Putin perceives the danger posed by an ever-more-ambitious USA foreign policy in Eurasia and what he can do to contain that threat. It’s clear the cut-off was intended to send a sharp signal to Kiev: don’t get any cute ideas of joining NATO and becoming a part of a hostile alignment to Russia. Here the US build -up of potential war threat against Iran also figures into the Kremlin calculus.

Moscow’s military muscle shows

On December 26, as most of the West was distracted in Holiday cheer, the Russian military activated a new fleet of Topol-M missiles. The new generation weapon is capable of fitting a nuclear warhead, as well as changing trajectory to foil an enemy interception device such as the current generation of US anti-missile defense weapon.

This was no small act of macho bravado. General Nikolai Solovtsov, commander of Russian Missile Forces simultaneously announced the mobilization of a new battalion for the Topol-M missiles. The missiles have a 1 megaton impact, some 75 times the Hiroshima A-bomb of 1945. Solovtsov is an outspoken critic of the US decision to forge ahead with its anti-missile defense, which is a Rumsfeld priority. The Russian general announced that the Topol-M was, ‘capable of piercing any missile defense system,’ and was immune to electromagnetic blasts used by current US missile defenses. For military experts that is impressive.

Russia announced it has also formed 20 new nuclear missile units, its largest increase of nuclear spending since the 1962 Cuba Missile Crisis.

Meanwhile, The Times is saying that we need to "Find a couple of spare planets or face global oil war".

THE world faces the real threat of a new conflict over oil as China competes with existing world powers for scarce resources to feed its growing economy, according to a report published today.

The State of the World 2006, released by the Worldwatch Institute, says that last year China became the second- largest importer of oil, after the US, while consuming 26 per cent of the world’s steel, 32 per cent of rice production,

37 per cent of cotton and 47 per cent of cement. China is set to become the world’s largest carmaker in the coming decade.

While environmentalists are concerned about the impact on the world’s climate and the drain on its resources, strategists fear that the competition for energy, particularly oil, could destabilise the planet. According to the report, China was nearly self-sufficient in oil in the mid-1990s. But over the past decade its consumption has doubled and it has now overtaken Japan as the second-largest importer of oil, with 3.2 million barrels a day in 2004.

It predicts that if the economies of China and India continue to grow at their current rate, the world will not be able to produce enough oil to meet demand by 2050, when consumption will have grown from the current 85 million barrels a day to 200 million barrels. “Few geologists believe that output will reach even half those levels before beginning to decline,” the report says.

As a result China is already looking for new oil suppliers from Siberia to Sudan, often dealing with notorious regimes, such as the junta in Burma. Of even greater concern is the possibility that open conflict could break out between nations competing for resources or trying to protect their supply lines, such as key trade routes, currently patrolled by the US Navy.

The report draws the parallel between Japan in the 1930s and China today. It recalls that it was Japan’s inability to secure its oil supplies from South-East Asia that prompted its entry into the Second World War. Today Beijing is strengthening its Navy to protect its energy supplies, shipped at great distances from the Middle East, Africa and Latin America.

Reports from Nigeria say that Shell is considering evacuations from their oil fields in the delta.

Royal Dutch Shell is considering evacuating all its workers from swamp areas in the western side of Nigeria's delta where militants have staged four attacks in five days, a senior industry source has said.

The impact of such a move on Shell's 380,000 barrel-a-day oil output from the Warri region was unclear, the source said because evacuation did not always mean halting production. About three-quarters of the Warri region's output is from the swamps where militants gain easy access to production platforms by boat, he said.

Shell, the largest oil producer in Nigeria, pulled out about 330 workers from four platforms in the swamps after a militant attack on the Benisede flow station in which at least six people died.

The Energy Blog has an update on Biodiesel from Algae processes.

A Cristian Science Monitor article gives an update to the Greenfuels Technologies Corporation CO2 mitigation/algae production system. Geenfuels process, invented by MIT scientist Issac Berzin, grows algae in clear plastic tubes placed in the exhaust stream of emissions from power plants. The CO2 in the exhaust plus photosynthesis grow the algae which absorbs the CO2 and nitrous oxide in the exhaust stream. The algae then can be harvested and used to produce biodiesel and the remaining solids can be further processed to produce ethanol.

The company has received $11,000,000 in venture capital financing since the last report. A field trial at an undisclosed power plant is underway. Next year, GreenFuel expects two to seven more such demonstration projects, scaling up to a full production system by 2009. Technology to produce ethanol from the residue is new. Berzin estimates that just one 1,000 MW power plant could produce 40 million gallons of biodiesel and 50 million gallons of ethanol a year. Such a facility would require a "farm" of 2,000 acres of algae growing tubes. There are about 1000 power plants in the U.S. with enough acreage for a "farm."

GreenShift Corporation has licensed a competing CO2 mitigation/algae production system from Ohio University. They claim that their system requires a smaller footprint because their tubes can be taller and have more surface area. GreenShift is also building a series of biodiesel plants which could process their algae and has a process to convert ethanol waste to biodiesel.

The Herald has an article called "A power station in every home" which looks at some of the obstacles hindering wider take up of solar power in the suburbs.

While delegates to the inaugural meeting of the Asia-Pacific Partnership on Clean Development and Climate were rubbing their foreheads in Sydney last week, not everyone was waiting for the Government's lead on climate change. At ground level, individuals are finding personal solutions.

"We are doing home renovations and extensions, and we are going to invest so much in our house, I thought we should invest in free power too," dela Russo says. But she also concedes she feels great instead of guilty using so much power to cool down the stuffy, weatherboard cottage. And nowadays, when she stares out of the train window on her way to work she doesn't just see the same blank expanse of baking surburban rooftops, she sees wasted opportunities for solar power.

Bob Crooks covered much of the roof of his Northbridge home with photo-voltaic panels three years ago because, he says: "The sun is there and it's free - if you are prepared to make the initial outlay. But I was also making a bit of a statement. I wanted to reduce my own contribution to greenhouse gases."

Last year was Australia's hottest on record and summer peak power demands now exceed winter peaks, mainly because of the consumer stampede towards residential air-conditioning. More than 60 per cent of Australian dwellings are now air-conditioned, compared with 33 per cent in 1994. And last month was Australia's sunniest on record; an average of 10.4 cloud-free hours of sun a day were recorded in December.

But for the 900,000 or so air-conditioners bought a year only 1300 or so homeowners Australia-wide invest in photo-voltaic systems. Australia has about 30,000 solar buildings, in the main in remote areas with no access to the power grid, and most solar use is for hot water, now installed in about 4 per cent of homes.

Solar power seems like a logical power solution, especially for western Sydney where hectares upon hectares of rooftops could be turned into mini-power generators. Since 1950 Sydney's population has doubled, but its power consumption has increased 12-fold, pushing the grid close to collapse, especially on summer afternoons when the air-conditioners all kick in at once.

Australia's overwhelming reliance on coal-fired power stations means growing electricity demand is translating directly into increasing greenhouse gas emissions, a fact clearly laid out in the tonnes of CO2 per household on the back of power bills.

Grid-connected solar systems mean homeowners can effectively sell their power by (sunny) day and buy it back at night, cutting electricity bills or doing away with them altogether and reducing or erasing their own environmental footprint.

But there are two decisive, connected issues - price and community attitudes.

For a basic one-kilowatt start-up system, the dela Russos paid more than $14,000, and received a rebate of about $3700 through the Australian Greenhouse Office. That's only enough extra power to cut their bill by 30 or 40 per cent. Crooks paid more than $40,000 for a much larger system capable of producing all his electricity, but qualified for almost $14,000 in subsidies before rebates were reduced in 2003.

Australia's electricity is among the cheapest in the world and NSW enjoys some of the cheapest power in Australia. This means solar grid-connect systems won't realistically pay for themselves for decades.

MonkeyGrinder points out there is a lot of "do as I say, not as I do" in the air.



MonkeyGrinder and Bart at Energy Bulletin have also noted the problem with prolonged peak oil blogging - it does tend to burn you out after a while (especially given that we all seem to do it as a night time hobby rather than a day job).

A couple of us at Energy Bulletin have been feeling the same way: the web is awash with articles on peak oil and climate change. It's impossible to keep up with it all. How can we best focus our efforts -- and not burn out?

While the structure adopted by Energy Bulletin, The Oil Drum and PeakOil.com (multiple editors and contributors) is one way of coping with the problem, it obviously isn't quite enough - but perhaps its just a matter of getting a larger pool of editors at a given site.

The other alternative (which was implemented during one design iteration of the much missed Flying Talking Donkey) is to build a single page view of the latest peak oil news from selected sites by integrating their RSS feeds into one portal style interface. This version of FTD included about 10 key sites into his single page portal which I thought worked really well. I don't think that design required any ongoing maintenance either, so presumably it could be resurrected on Blogger and then just left in place - then when individual sites take a break you don't really notice and no one needs to spend any time on a coordinating role. How about it Tim ?

And to close, MonkeyGrinder also notes that our future may hold green ham and eggs rather than Dr Suess' complementary vision of breakfast...