UE: MEPs, Piebalgs discuss common Russia, Ukraine Belarus approach

by Kostis Geropoulos

For the European Union, energy today is as important as coal and steel used to be for the founding fathers, German Chancellor Angela Merkel was quoted as saying by members of the delegations for relations with Russia, Ukraine and Belarus in a joint meeting with EU Energy Commissioner Andris Piebalgs at the European Parliament in Strasbourg last week.

The problem with energy now, and especially oil and gas, is that, unlike coal and steel back then, the EU doesn’t have enough. The 27-country bloc imports 82 percent of its oil and 57 percent of its gas from third party states. In 25 years this percentage will rise to 93 percent of its oil and 84 percent of its gas.


Russia is a key energy supplier to the EU, especially for gas, and a good part of these supplies transit through Ukraine and Belarus. Therefore, it was not surprising that MEPs and officials, especially those that fear energy dependence on Russia, packed a well-hidden conference room at the Salvador de Madariaga wing in the European Parliament to discuss security of energy supplies and developments in EU energy relations with these three countries.

Though Russia, Ukraine and Belarus are different, there are many things which make sense to have a joint approach, at least on some crucial issues, when dealing with these three countries.

Polish MEP Bogdan Klich, chairman delegation for relations with Belarus, said the EU has recently received signals about the willingness of the Belarus authoritarian regime to engage in an energy dialogue with Brussels. “But, when we exchanged views recently with the representatives of (foreign policy chief Javier) Mr. Solana, we concluded that there shouldn’t be any compromise on values with Belarus.”

Regarding Ukraine, he said the political crisis has slowed down EU-Ukraine cooperation in energy. “To resolve this political crisis it is one of the preconditions for a fruitful energy dialogue with this country,” Klich said.

Romanian MEP Adrian Severin, chairman of the delegation to the EU-Ukraine parliamentary cooperation committee, told the joint meeting the EU needs a strategy on energy inside the EU as much as it needs a strategy in dealing with these three countries. “We cannot have to my mind an external strategy or a joint foreign policy in terms of energy if we don’t have a joint or a harmonised internal policy in the field of energy,” he said.

Severin said the EU-Russia relations need reciprocity and urged Russia as a supplier to behave in a way which is consistent with the market rules and not to use these resources to promote its geopolitical agenda.

Dutch MEP Ria Oomen Ruijten, chairwoman of the delegation of the EU-Russia parliamentary cooperation committee, said Russia already has a big impact on the European energy market. “We are missing our treaty, and, in the meantime, long-ranging contacts are negotiated by our Member States with Russia for the years up to 2010-2025. The only thing that we can do is that in the upcoming Partnership (and Cooperation) Agreement (PCA) we negotiate a new basis for our energy politics,” she said.

After the debate, Commissioner Piebalgs told New Europe the EU needs energy included in basic treaties of the European Union. He said the EU will be able to speak with one voice on energy. “We should not be too pessimistic because the councils of the Member States are of the same line and the bigger divergence we have had was about Nabucco with Hungary and it was shorted out. Hungary continues to support it,” he said.

He said he hopes Russia-EU talks on the new PCA that includes energy will start soon to replace the current pact. Poland vetoed the talks over the Russian ban on meat. “It is a test for the strength of the European Union and I believe that if we will be strong in support of Poland, the Russian authorities will understand that banning Polish meat makes no legal and no political sense, so, in this way we can move in negotiations about a post PCA agreement that is beneficial not only to the European Union but also Russia as well. I believe we will have this treaty,” he said, smiling. “I don’t know how much time it will take, but it’s not too long.”



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AUSTRALIA: Envestra Expects A$150 Million Gain From Origin Energy Option

by Angela Macdonald-Smith
Envestra Ltd., Australia's biggest natural gas distributor, said it expects to have a gain of about A$150 million ($124 million) in the year ended June 30, from the exercise of a put option by Origin Energy Ltd., a shareholder.


Excluding one-time gains, Envestra may record a ``small loss'' for the year, compared with an earlier forecast of a ``modest'' profit, the Adelaide-based company said today in a statement to the Australian Stock Exchange.










Origin Energy sales revenue up 5%

Energy utility Origin Energy has posted a five per cent rise in sales revenue in its third quarter to $118 million, with total production up six per cent to 20 petajoules of energy.



Origin said the higher production reflected its development program and contributions from coal-seam gas and the BassGas project, which more than offset declines in some traditional areas.

Year-to-date production is running nine per cent higher than the previous corresponding period. Sales volumes are 10 per cent higher and sales revenues are 11 per cent higher.

The BassGas project completed a 19-day shut down in late February/early March 2007 to resolve a production constraint due to plant amine and dehydration systems issues and to improve LPG extraction performance.

"At the end of the month sales gas production had been tested to close to design rates and LPG extraction achieved design levels," Origin said.

"New optimum operating conditions are being developed and the full outcome of the rectification program will be assessed during April-May 2007.

"Production during the month of April has been purposefully constrained and further work is being undertaken to optimise stable gas production on an ongoing basis."

Meanwhile, Origin's Kupe gas project in New Zealand remains on schedule for first gas in the first half of 2009.

At Origin's Otway gas project in Victoria, offshore activities are complete and the onshore plant is mechanically complete, with pre-commissioning activities underway.

"Gas will be introduced into the plant in early June and sales will follow once commissioning is complete," Origin said.

At 1454 AEST Origin's shares were up two cents at $9.00.

The AGE



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ALASKA: U.S. Seeks More Energy Drilling Off Alaska, Virginia

The U.S. Interior Department today recommended expanded oil and natural gas drilling on 48 million acres in the Gulf of Mexico, off the coast of Virginia and in parts of Alaska including Bristol Bay.

The proposal, first unveiled in February 2006, follows U.S. Congressional efforts to respond to rising energy prices. The five-year drilling plan would give offshore energy producers, such as Anadarko Petroleum Corp. and Apache Corp., access to more resources. Congress last year approved drilling in 8.3 million acres in the Eastern Gulf of Mexico.

The plan opens 32 million acres off the coast of Alaska, including parts of Bristol Bay, a major salmon fishery. U.S. Interior Secretary Dirk Kempthorne said the Bristol Bay lease sale would take place near the end of the five-year period to allow time for a review of potential impacts on wildlife.

``There's a question about a particular species, the right whale,'' Kempthorne said today at a press conference in Washington. ``It might take three and a half years, and I don't know what the outcome will be, but we're going to undertake it.''

The proposal would also allow drilling off the coast of Virginia on the outer continental shelf, provided Congress chooses to end a decades old drilling moratorium. Kempthorne said he has discussed the idea with Virginia Governor Timothy Kaine and members of the state's Congressional delegation. The plan includes a 50-mile buffer zone off the Virginia coast and a no- drilling zone near the Chesapeake Bay to protect shipping routes.

Drilling Off Virginia

Virginia, ``at some point, may make the decision that they would like to further this concept,'' Kempthorne said. ``It doesn't mean that that is the final outcome.''
Parts of the plan prepared by the U.S. Minerals Management Service, a division of the Interior Department, already face opposition in Congress. Representative Maurice Hinchey last week introduced a bill that would reinstate a Congressional moratorium on drilling in Bristol Bay, an area environmentalists say is among the world's richest salmon fisheries.
``The Interior Department's own economic projections make it clear that oil and gas drilling in Bristol Bay would only bring in a fraction of the $2 billion a year currently generated from the bay's fisheries,'' Hinchey, a Democrat from New York, said in a statement last week. ``The need for oil and gas drilling in Bristol Bay simply doesn't exist.''

Since the Bush administration recommended greater access for drillers last year, public comments have been ``overwhelmingly positive,'' said Tom Moskitis, a spokesman for the American Gas Association. President George W. Bush placed part of the Eastern Gulf of Mexico covered in today's proposal off limits in July 2001 after his brother, then Florida Governor Jeb Bush, raised concern about the impact on tourism.

Congress Controls Process
``We support wholeheartedly the entire plan, including the Virginia part,'' Moskitis said. ``People have got to remember the Virginia and Alaska portions are still subject to the annual Congressional appropriations process.'' Congress uses its appropriation powers to enforce drilling moratoriums by extending or withholding funds for the Minerals Management Service to drill in designated areas.

The proposal schedules a lease sale off the Virginia coast in late 2011, depending on whether the Congressional moratorium is lifted. Companies may explore resources off the coast of Virginia with seismic measuring equipment but may not drill until the Congressional ban and a Presidential moratorium are lifted, said Johnnie Burton, director of the Minerals Management Service.

There are 1.7 billion acres in the U.S. outer continental shelf providing 20 percent of domestic gas supplies and more than 25 percent of oil, Kempthorne said. The five year plan proposes 21 lease sales beginning later this year in the Western and Central Gulf of Mexico.

More Balance
``We would just like to see more balance rather than the drill-first approach we've been seeing,'' said Tyson Slocum, director of the energy program at Public Citizen, an advocacy group in Washington. ``I would rather us come up with some demand reduction strategies. We're pretty darn inefficient.''

Last week, the gas association, when recommending more drilling, said high U.S. natural gas prices since 2000 have led to a steep decline in demand by homeowners. Gas futures in New York have averaged $5.70 per million British thermal units since 2000, more than double the average in the 1990's. Today's drilling proposal largely mirrors the draft announced last year, Moskitis said. Gary Strasburg, a spokesman for the minerals services, declined to offer further details ahead of a scheduled afternoon press conference. Earlier this year, the Bush administration raised the royalty rate for producers drilling in federal waters by 33 percent to 16.7 percent. At the same time, Bush also lifted a presidential ban on drilling in Alaska's Bristol Bay.
Absent intervention from Congress, the leasing program goes into effect on July 1.

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