May 25, 2014

EIA Reduces California Shale Estimates by 96%

Visions of US energy independence have been widely adopted over the last several years, with a major contribution expected from the development of the Monterey Shale deposits in central California. But according to this report from the Los Angeles Times, the U.S. Energy Information Administration will be reducing estimates of the recoverable oil by 96%, from 13.7 billion barrels to 600 million barrels.

The significance of this dramatic revision is shown by the effusive estimates that had previously gained wide acceptance. In May 2013, National Geographic wrote: “According to U.S. government estimates, as much as 15.4 billion barrels of oil could be locked within the Monterey shale. That would be more than double the amount of oil reckoned to lie within the Bakken shale, the booming play that has made North Dakota the nation's number 2 oil-producing state behind Texas. It's more than five times the oil of Texas' thriving Eagle Ford shale. Indeed, Monterey holds more than half of the undeveloped, technically recoverable shale oil resources believed to exist in the continental United States.”

It seems reasonable to conclude from this that the new estimate for the Monterey Shale reduces U.S. recoverable shale oil resources by 50%. Poof!
Federal energy authorities have slashed by 96% the estimated amount of recoverable oil buried in California's vast Monterey Shale deposits, deflating its potential as a national "black gold mine" of petroleum.
Just 600 million barrels of oil can be extracted with existing technology, far below the 13.7 billion barrels once thought recoverable from the jumbled layers of subterranean rock spread across much of Central California, the U.S. Energy Information Administration said.
The new estimate, expected to be released publicly next month, is a blow to the nation's oil future and to projections that an oil boom would bring as many as 2.8 million new jobs to California and boost tax revenue by $24.6 billion annually.
The Monterey Shale formation contains about two-thirds of the nation's shale oil reserves. It had been seen as an enormous bonanza, reducing the nation's need for foreign oil imports through the use of the latest in extraction techniques, including acid treatments, horizontal drilling and fracking.
The energy agency said the earlier estimate of recoverable oil, issued in 2011 by an independent firm under contract with the government, broadly assumed that deposits in the Monterey Shale formation were as easily recoverable as those found in shale formations elsewhere.
The estimate touched off a speculation boom among oil companies. The new findings seem certain to dampen that enthusiasm.
Kern County in particular has seen a flurry of oil activity since 2011, with most of the test wells drilled by independent exploratory companies. Major oil companies have expressed doubts for years about recovering much of the oil.
The problem lies with the geology of the Monterey Shale, a 1,750-mile formation running down the center of California roughly from Sacramento to the Los Angeles basin and including some coastal regions.
Unlike heavily fracked shale deposits in North Dakota and Texas, which are relatively even and layered like a cake, Monterey Shale has been folded and shattered by seismic activity, with the oil found at deeper strata.
Geologists have long known that the rich deposits existed but they were not thought recoverable until the price of oil rose and the industry developed acidization, which eats away rocks, and fracking, the process of injecting millions of gallons of water laced with sand and chemicals deep underground to crack shale formations.
The new analysis from the Energy Information Administration was based, in part, on a review of the output from wells where the new techniques were used.
"From the information we've been able to gather, we've not seen evidence that oil extraction in this area is very productive using techniques like fracking," said John Staub, a petroleum exploration and production analyst who led the energy agency's research.
"Our oil production estimates combined with a dearth of knowledge about geological differences among the oil fields led to erroneous predictions and estimates," Staub said.
Compared with oil production from the Bakken Shale in North Dakota and the Eagle Ford Shale in Texas, "the Monterey formation is stagnant," Staub said. He added that the potential for recovering the oil could rise if new technology is developed.
A spokesman for the oil industry expressed optimism that new techniques will eventually open up the Monterey formation.
"We have a lot of confidence in the intelligence and skill of our engineers and geologists to find ways to adapt," said Tupper Hull, spokesman for the Western States Petroleum Assn. "As the technologies change, the production rates could also change dramatically."
Rock Zierman, chief executive of the trade group California Independent Petroleum Assn., which represents many independent exploration companies, also sounded hopeful.
"The smart money is still investing in California oil and gas," Zierman said.
"The oil is there," Zierman said. "But this is a tough business."
Environmental organizations welcomed the news as a turning point in what had been a rush to frack for oil in the Monterey formation.
"The narrative of fracking in the Monterey Shale as necessary for energy independence just had a big hole blown in it," said Seth B. Shonkoff, executive director of the nonprofit Physicians Scientists & Engineers for Healthy Energy.
J. David Hughes, a geoscientist and spokesman for the nonprofit Post Carbon Institute, said the Monterey formation "was always mythical mother lode puffed up by the oil industry — it never existed."
Hughes wrote in a report last year that "California should consider its economic and energy future in the absence of an oil production boom from the Monterey Shale."
The 2011 estimate was done by the Virginia engineering firm Intek Inc.
Christopher Dean, senior associate at Intek, said Tuesday that the firm's work "was very broad, giving the federal government its first shot at an estimate of recoverable oil in the Monterey Shale. They got more data over time and refined the estimate."
For California, the analysis throws cold water on economic projections built upon Intek's projections.
In 2013, a USC analysis, funded in part by the Western States Petroleum Assn., predicted that the Monterey Shale formation could, by 2020, boost California's gross domestic product by 14%, add $24.6 billion per year in tax revenue and generate 2.8 million new jobs.  

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Louis Sahagun, “U.S. officials cut estimate of recoverable Monterey Shale oil by 96%,” Los Angeles Times, May 20, 2014.

See also Josie Garthwaite, “Monterey Shale Shakes Up California's Energy Future,” National Geographic, May 27, 2013.

For an extensive report by J. David Hughes of the Post Carbon Institute, see Drilling California: A Reality Check on the Monterey Shale, December 2013. And see here for an earlier report by Hughes on the extravagant projections for the recovery of oil from shale deposits.

May 24, 2014

Clinton In a Bind Over Keystone

Hillary Clinton, a presumptive candidate for president in 2016, has not yet declared herself on the Keystone pipeline. As Politico reports, she is in a deep bind over the issue, in that support for the pipeline would hurt her in the Democratic primaries and opposition would hurt her in the general election. Politico assesses the dilemma thusly:

If she supports the pipeline, she’ll run afoul of the Democratic Party’s increasingly vocal environmentalist base, as well as climate-minded donors like billionaire Tom Steyer, who has ties to the Clintons. That could provide an opening for a liberal opponent in the 2016 primaries, similar to the way Barack Obama outflanked her with the anti-war left in 2008.
But if she opposes Keystone, she’ll go up against labor unions that welcome the project’s promise of thousands of jobs — along with moderate Democrats and, according to polls, most of the American public.
Clinton has offered no public comments about the pipeline in 3½ years, and until now people in her circle have declined to address it too. But people close to Clinton told POLITICO this week that she won’t weigh in on the project anytime soon, saying it would be inappropriate for her to appear to push either Obama or Secretary of State John Kerry on an issue that’s still under review. . . .
But some in the party are worried. “The nightmare is that Democratic primary voters would put withering pressure on her to come out against the pipeline in the primary, a position that would be a huge liability in the general election,” said former Clinton administration climate aide Paul Bledsoe, who thinks Obama should approve Keystone. “As a general election issue, it’s a no-brainer.”
That pressure is going to increase, said one person with close ties to the environmental movement. “Once Obama makes a decision, then the pressure on HRC will amp up on [Keystone] from mainstream enviros,” the person said in an email. “In the meantime, if I’m Martin O’Malley, Bernie Sanders or any other person running for POTUS regardless of HRC, I would come out loud and hard against [Keystone] as a way of rallying true believers in early states,” especially Iowa and New Hampshire.
Another potential rival in 2016 is Vice President Joe Biden, whom a Sierra Club activist quoted last year as saying during a rope-line greeting that he opposes the pipeline. Biden’s office declined to confirm whether he said that, but it became instant lore among climate activists.
Some Keystone opponents already distrust Clinton based on her one public comment about the pipeline — off-the-cuff remarks at a San Francisco speaking engagement in 2010 in which she said the department was “inclined” to green-light the project.
“We’re either going to be dependent on dirty oil from the Gulf or dirty oil from Canada … until we can get our act together as a country and figure out that clean, renewable energy is in both our economic interests and the interests of our planet,” said the then-secretary of State, whose department was studying the Alberta-to-Texas pipeline’s potential environmental impacts.
Her husband, former President Bill Clinton, also indicated he favors the pipeline during remarks in 2012 that still appear in pro-Keystone television ads.
Some Keystone opponents have repeatedly accused the State Department of favoritism toward the project, including during the years when she was secretary. Climate activist Bill McKibben, co-founder of the group, also blamed her for the disappointing outcome of international climate negotiations in 2009 in Copenhagen, Denmark, which he called “certainly the biggest foreign policy fiasco of the first Obama term.”
“And she wanted to approve Keystone before there was any data on it,” McKibben said. “So I’d say there’s no huge reservoir of trust just yet.”
Other environmentalists point to the fact that Clinton has made climate change a major theme of several of her speeches in recent months. During March remarks in Arizona, for example, she called for a “mass movement” to tackle the issue.
Privately, Clinton allies said those comments reflect concerns she’s heard from people, some of them donors, about moving the issue to the forefront. . . .
Bledsoe said one person who can take Keystone off Clinton’s plate is Obama, who could neutralize the issue by approving the pipeline.
“Of all the reasons to approve Keystone, clearing the way for Hillary Clinton may be the most salient,” Bledsoe said. “If Obama denies the permit, Keystone will become a massive litmus test issue in the Democratic primary for the left and a huge rallying cry for Republicans in the general election.”
But environmental activists say they’ll continue pushing Clinton to take a stance. Neutrality is an “untenable” position for Clinton, Friends of the Earth President Erich Pica said.
“She’s going to have to have a position on it,” he said in an interview. “She can’t urge young Americans to rise up and lead on climate change if she herself isn’t willing to take controversial positions on projects that exacerbate climate change.”
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Andrew Restuccia and Maggie Haberman, “Hillary Clinton’s  Keystone headache,” Politico.

May 18, 2014

Crimea's Oil and Gas

This piece by William J. Broad of the New York Times, "In Taking Crimea, Putin Gains a Sea of Fuel Reserves," details the implications of Russia's annexation of Crimea for the exploitation of the Black Sea's fossil fuel reserves. (May 18, 2014)

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When Russia seized Crimea in March, it acquired not just the Crimean landmass but also a maritime zone more than three times its size with the rights to underwater resources potentially worth trillions of dollars.

Russia portrayed the takeover as reclamation of its rightful territory, drawing no attention to the oil and gas rush that had recently been heating up in the Black Sea. But the move also extended Russia's maritime boundaries, quietly giving Russia dominion over vast oil and gas reserves while dealing a crippling blow to Ukraine's hopes for energy independence.

Russia did so under an international accord that gives nations sovereignty over areas up to 230 miles from their shorelines. It had tried, unsuccessfully, to gain access to energy resources in the same territory in a pact with Ukraine less than two years earlier.

"It's a big deal," said Carol R. Saivetz, a Eurasian expert in the Security Studies Program of the Massachusetts Institute of Technology. "It deprives Ukraine of the possibility of developing these resources and gives them to Russia. It makes Ukraine more vulnerable to Russian pressure."

Gilles Lericolais, the director of European and international affairs at France's state oceanographic group, called Russia's annexation of Crimea "so obvious" as a play for offshore riches.

In Moscow, a spokesman for President Vladimir V. Putin said there was "no connection" between the annexation and energy resources, adding that Russia did not even care about the oil and gas. "Compared to all the potential Russia has got, there was no interest there," the spokesman, Dmitry Peskov, said Saturday.

Exxon Mobil, Royal Dutch Shell and other major oil companies have already explored the Black Sea, and some petroleum analysts say its potential may rival that of the North Sea. That rush, which began in the 1970s, lifted the economies of Britain, Norway and other European countries.

William B. F. Ryan, a marine geologist at the Lamont-Doherty Earth Observatory of Columbia University, said Russia's Black Sea acquisition gave it what are potentially "the best" of that body's deep oil reserves.

Oil analysts said that mounting economic sanctions could slow Russia's exploitation of its Black and Azov Sea annexations by reducing access to Western financing and technology. But they noted that Russia had already taken over the Crimean arm of Ukraine's national gas company, instantly giving Russia exploratory gear on the Black Sea.

"Russia's in a mood to behave aggressively," said Vladimir Socor, a senior fellow at the Jamestown Foundation, a research group in Washington that follows Eurasian affairs. "It's already seized two drilling rigs."

The global hunt for fossil fuels has increasingly gone offshore, to places like the Atlantic Ocean off Brazil, the Gulf of Mexico and the South China Sea. Hundreds of oil rigs dot the Caspian, a few hundred miles east of the Black Sea.

Nations divide up the world's potentially lucrative waters according to guidelines set forth by the 1982 Law of the Sea Treaty. The agreement lets coastal nations claim what are known as exclusive economic zones that can extend up to 200 nautical miles (or 230 statute miles) from their shores. Inside these zones, countries can explore, exploit, conserve and manage deep natural resources, living and nonliving.

The countries with shores along the Black Sea have long seen its floor as a potential energy source, mainly because of modest oil successes in shallow waters.

Just over two years ago, the prospects for huge payoffs soared when a giant ship drilling through deep bedrock off Romania found a large gas field in waters more than half a mile deep.

Russia moved fast.

In April 2012, Mr. Putin, then Russia's prime minister, presided over the signing of an accord with Eni, the Italian energy giant, to explore Russia's economic zone in the northeastern Black Sea. Dr. Ryan of Columbia estimated that the size of the zone before the Crimean annexation was roughly 26,000 square miles, about the size of Lithuania.

"I want to assure you that the Russian government will do everything to support projects of this kind," Mr. Putin said at the signing, according to Russia's Interfax news agency.

A month later, oil exploration specialists at a European petroleum conference made a lengthy presentation, the title of which asked: "Is the Black Sea the Next North Sea?" The paper cited geological studies that judged the waters off Ukraine as having "tremendous exploration potential" but saw the Russian zone as less attractive.

In August 2012, Ukraine announced an accord with an Exxon-led group to extract oil and gas from the depths of Ukraine's Black Sea waters. The Exxon team had outbid Lukoil, a Russian company. Ukraine's state geology bureau said development of the field would cost up to $12 billion.

"The Black Sea Hots Up," read a 2013 headline in GEO ExPro, an industry magazine published in Britain. "Elevated levels of activity have become apparent throughout the Black Sea region," the article said, "particularly in deepwater."

When Russia seized the Crimean Peninsula from Ukraine on March 18, it issued a treaty of annexation between the newly declared Republic of Crimea and the Russian Federation. Buried in the document - in Article 4, Section 3 - a single bland sentence said international law would govern the drawing of boundaries through the adjacent Black and Azov Seas.

Dr. Ryan estimates that the newly claimed maritime zone around Crimea added about 36,000 square miles to Russia's existing holdings. The addition is more than three times the size of the Crimean landmass, and about the size of Maine.

At the time, few observers noted Russia's annexation of Crimea in those terms. An exception was Romania, whose Black Sea zone had been adjacent to Ukraine's before Russia stepped in.

"Romania and Russia will be neighbors," Romania Libera, a newspaper in Bucharest, observed on March 24. The article's headline said the new maritime border could become a "potential source of conflict."

Many nations have challenged Russia's seizing of Crimea and thus the legality of its Black and Azov Sea claims. But the Romanian newspaper quoted analysts as judging that the other countries bordering the Black Sea - Georgia, Turkey, Bulgaria and Romania - would tacitly recognize the annexation "in order to avoid an open conflict."

Most immediately, analysts say, Russia's seizing may alter the route along which the South Stream pipeline would be built, saving Russia money, time and engineering challenges. The planned pipeline, meant to run through the deepest parts of the Black Sea, is to pump Russian gas to Europe.

Originally, to avoid Ukraine's maritime zone, Russia drew the route for the costly pipeline in a circuitous jog southward through Turkey's waters. But now it can take a far more direct path through its newly acquired Black Sea territory, if the project moves forward. The Ukraine crisis has thrown its future into doubt.

As for oil extraction in the newly claimed maritime zones, companies say their old deals with Ukraine are in limbo, and analysts say new contracts are unlikely to be signed anytime soon, given the continuing turmoil in the region and the United States' efforts to ratchet up pressure on Russia.

"There are huge issues at stake," noted Dr. Saivetz of M.I.T. "I can't see them jumping into new deals right now."

The United States is using its wherewithal to block Russian moves in the maritime zones. Last month, it imposed trade restrictions on Chernomorneftegaz, the breakaway Crimean arm of Ukraine's national gas company.

Eric L. Hirschhorn, the United States under secretary of commerce for industry and security, said sanctions against the Crimean business would send "a strong message" of condemnation for Russia's "incursion into Ukraine and expropriation of Ukrainian assets."

Alexandra Odynova contributed reporting from Moscow.

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h/t Johnson's Russialist

May 4, 2014

Austria and Bulgaria Defy EU over Russia's South Stream

The following report details how Austria and Bulgaria, with the implicit support of Germany, have defied the EU’s attempt to thwart Russia’s South Stream natural gas pipeline. Henning Gloystein of Reuters explains how “Side deals with Moscow thwart drive to wean Europe off Russian gas” (May 4)

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While officials in Brussels were calling for Europe to reduce its dependency on Russian natural gas and negotiate with Moscow as a bloc, Austria was quietly bypassing the European Commission to cut its own bilateral deal on building a pipeline.

The deal on the South Stream pipeline, which will be built under the Black Sea to Bulgaria and on to central Europe, shows the European Union's difficulty in creating a unified energy policy on Moscow during the Ukraine crisis.

While EU officials are calling for Europe to wean itself off Russian gas, private and state-owned firms, with the support of politicians, are pushing ahead with projects to buy ever more.

Austrian energy firm OMV agreed last week with Russia's state-controlled Gazprom to bring the South Stream pipeline to Austria's Baumgarten gas hub, outmanoeuvring Italy which had wanted it to end there.

The deal is also likely to please some in neighbouring Germany, as the gas will now be delivered closer to customers.

It shows that when it comes to natural gas diplomacy, European countries still have their own competing interests which are difficult to unite under an EU flag.

The timing of the deal, which coincided with Europe announcing new sanctions on a list of Russians designed to push the Kremlin to reduce its support for separatists in Ukraine, could hardly have been more at odds with official EU policy.

The Commission had put the approval process for South Stream on hold after Russia annexed Ukraine's Crimea region in March, hoping the delay would push Moscow to stop what the West says is its intervention in Ukraine.

Brussels says South Stream does not comply with its regulations on ownership and pipeline access. But Austria and Russia have circumvented this by announcing that their deal is based on a bilateral agreement between the countries rather than an EU accord.

South Stream's main purpose, like the German-Russian Nord Stream pipeline under the Baltic Sea, is to circumvent Ukraine. This would ensure that disputes between Moscow and Kiev do not interfere with the flow of Russian gas to Europe, much of which crosses Ukraine in existing pipelines.

"If we agree to South Stream, Europe will sell the rope with which Russia will hang Ukraine, and it will also agree to increase its energy dependency on Russia," said Frank Umbach, at the European Centre for Energy and Resource Security (EUCERS), a research team at King's College London.


Austria was motivated to push for the South Stream deal after it lost out to Italy in a competition last year over a separate pipeline bringing gas to Europe from Azerbaijan.

OMV's Nabucco pipeline project was dropped in favour of the rival Trans-Adriatic Pipeline (TAP) to Italy. That derailed years of Austrian lobbying, which the EU had initially backed, for Nabucco to bring the Azeri gas to central Europe.

"Current international developments show once again that in the long-term we don't only have to diversify our energy sources, but also our routes," said Austrian economy and energy minister Reinhold Mitterlehner. "Should the South Stream pipeline end in Baumgarten, we will get closer to this target."

Gazprom sources said they had been approached during the last four weeks by Austria, and a deal was put together as fast as possible.

Gazprom and OMV aim to get the remaining permits by the end of next year and start delivering gas by 2017.

"For Russia, this project is a clear signal to Ukraine that it intends to avoid any future disputes or supply disruptions," said Friedbert Pflüger, director of EUCERS. "The reference to a 2010 bilateral agreement for regulatory approval demonstrates Moscow's intention to circumvent the EU's regulations that would make the realisation of the project more difficult."


The Gazprom-OMV agreement continues Russia's strategy of making bilateral deals that undermine the Commission, the EU's executive arm, which wants to build up a European front on energy supplies.

Bulgaria, which imports almost all its gas from Russia, also backed South Stream last month in defiance of Commission calls that member states should not enter bilateral deals with Gazprom without its approval.

"South Stream is a project of strategic importance. Now they (the European Parliament) want to stop South Stream. How are we to develop? This crisis at the moment shows that we do not have security of natural gas supplies for Bulgaria," energy minister Dragomir Stoynev said.

Quietly supporting smaller EU member states such as Austria and Bulgaria is Germany, where the government has said it sees Moscow as a reliable gas supplier and industry has made big investments in securing Russian gas.

Germany is by far Gazprom's biggest customer in the EU, paying around $15 billion a year for Russian gas.

After years of lobbying by former German chancellor Gerhard Schroeder, the Nord Stream pipeline began operations in 2011.

Schroeder chairs Nord Stream's board and has been an outspoken critic of moves to isolate Russia diplomatically. He drew strong criticism in the German press last week for bear-hugging President Vladimir Putin during a visit to Russia.

South Stream's proposed 2,500 km (1,500 mile) route would stretch from Russia under the Black Sea through Bulgaria and Serbia to Hungary and now Austria.

Germany's BASF, the world's biggest chemicals company, is a partner in South Stream through its gas supply subsidiary Wintershall.

The head of BASF's advisory board is Eggert Voscherau, brother of Henning Voscherau, who is chairman of South Stream Transport's board of directors and a prominent former politician of Schroeder's Social Democratic Party.

A government adviser in Berlin, speaking on condition of anonymity said Berlin was happy that the new pipeline was now going to Austria rather than Italy: "Bringing South Stream's gas to Austria is far better for Germany's industry and gas security than pumping it far to the South to Italy."

Source: Johnson's Russia List, May 4, 2014
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Update: The FT has further detail on the new pipeline politics:

This week, Gazprom signed a preliminary deal with the energy company OMV to build a spur of South Stream into Austria. It also announced deals with Switzerland’s Allseas Group and Italy’s Saipem to build South Stream’s submarine pipelines in the Black Sea. Many of the project’s pipes are being manufactured by the German company Europipe.
“[Russian President Vladimir] Putin is using South Stream to undermine the EU and its cohesive energy policy from within,” said Ilian Vassilev, an energy consultant and Bulgaria’s former ambassador to Russia. EU countries with interests in the project – Italy, Germany, Bulgaria, Hungary and Austria – are all reticent about imposing broad economic sanctions on Russia.

The deals with OMV, Saipem and Allseas come amid a crucial dispute in Bulgaria that cuts to the heart of whether the EU can use competition law to undermine Gazprom. Bulgaria is a key battleground because construction work is due to start there in June and its socialist government has some of the EU’s strongest ties to Russia.
The arguments centre on EU policies called the “third energy package”. These measures are intended to prevent a monopolistic supply chain and would limit the volume of gas that Gazprom could export to the EU, even to a point where the company could only supply half of the pipeline’s gas. Analysts argue this would weigh on the project’s profitability. Russian officials have stressed the importance of winning exemptions from the competition rules but Brussels is signalling that it is unlikely to grant Gazprom any leeway.

Bulgaria’s parliament has opened a new front to support Gazprom by seeking to amend its energy law and exempt the offshore pipeline from EU rules. The commission has reacted sternly to what it sees as a test of its resolve, warning Bulgaria that submarine pipelines are still subject to EU law and adding that Sofia could face “legal steps”.
The EU’s inflexibility over the third energy package is an obstacle for Gazprom as it needs to arrange financing for South Stream. The first gas supplies are due to be delivered next year. In a sign of its concern, Russia has launched a dispute over the EU’s third energy package at the World Trade Organisation.

“What they are most concerned about is that the EU can sabotage South Stream,” said Jonathan Stern of the Oxford Institute for Energy Studies, who is a member of the EU-Russia Gas Advisory Council. Russia has a key strategic interest in wanting to diversify its exports away from Ukraine. With 63bn cubic metres of planned capacity, South Stream would be able to replace almost entirely the volume of gas that currently transits Ukraine – planned at 70bcm this year,
Earlier this year, Gazprom had been on the point of winning an important exemption to the competition rules to supply extra gas to Germany. Russian officials had hoped that this was a sign that the commission could also be flexible on South Stream. But commission officials now say that decisions on exemptions from the third energy package are on ice for political reasons.

Still, Mr Vassilev said that Russia was likely to pay for South Stream from its own treasury if commercial lenders were deterred by the EU’s stance. He said that Mr Putin would seek to defend the pipeline as “a huge lever”.
“They would use state money to be seen to be in a position to ignore European Commission concerns,” he said.

Europe’s rifts are growing. Italian oil companies Eni and Saipem have important stakes in its construction, although a spur into Italy itself is in doubt. While Hungary has not rallied to defend South Stream as vocally as Bulgaria’s government, Budapest has aligned its energy policy with Moscow more closely this year by granting it a multibillion-dollar nuclear reactor deal. Serbia, which is applying for EU membership, also supports the pipeline.
Ironically, Professor Stern noted that the crisis was likely to make pipelines bypassing Ukraine, such as South Stream, even more important for European energy supplies: “We may be in a situation where we will be accusing Russia of not delivering and preventing them from delivering through these pipelines. It’s a black farce.”

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