Russia spearheads common energy market for Eurasian Union


A view of a pipeline at the Bilche-Volytsko-Uherske underground gas storage facility, Lviv region, Ukraine, May 21, 2014. The issue of Ukraine was also discussed at the World Energy Summit in Astana, Kazakhstan this week.

Russia spearheads common energy market for Eurasian Union

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ASTANA – The mutual responsibilities of the energy producers, transit states and consumers as well as the situation in Ukraine, US and European Council statements about economic sanctions against Russia were the focus of the 7th Astana Economic Forum in Astana this week, which included a world energy summit “Energy in Transition Period: Opportunities and Emerging Risks”.

The World Energy Summit, one of the central events of the industry’s international community, was held by the World Energy Council for the first time in the Commonwealth of Independent States (CIS).

The summit was held behind closed doors but at a press conference before the meeting of top delegates, Russia’s deputy Energy Minister Yuri Sentyurin addressed energy co-operation in the framework of the Eurasian Economic Union (EEU).

Sentyurin told reporters what had been done and what was being done to create a common energy market for the EEU members. “As regards the interaction of Russia and Kazakhstan within the EEU, there is a system of legal agreements in place that regulate joint production and transmission of electricity. All these documents remove the discrimination that existed before in the electricity supplies from one country to another,” Sentyurin said.

In particular, Gosduma has approved a so called “adequacy principle” which allows to supply electricity to a partner country on the same terms as in the domestic market.

“Now, thanks to this principle, there is no barrier for the electricity generated at the Ekibastuz power plants (in the north of Kazakhstan – note by author) to Belarus through Russia,” Sentyurin.

He added that all those changes were reflected in an updated version of the “Energy Strategy of Russia till 2035”.

According to Russia’s deputy energy minister, a common market and the new conditions within the EEU will undoubtedly provide more opportunities for mutually beneficial co-operation.

“Our ministry is considering a new project to supply Russia’s crude oil through Kazakhstan to China. The project is initiated by Rosneft, a company working in that direction. The project seems promising to us,” Sentyurin said.

He confirmed that the volume of transit may reach approximately seven million tonnes of Russian crude per year.

“The project is currently under consideration, and it is difficult to say at the moment when exactly we can transport our crude to China. But that Kazakhstan is geographically on that route is obvious, and we can use its infrastructure through the EEU. Currently, the experts are working on feasibility studies for this transit,” Sentyurin said.

According to his information, energy-hungry Pakistan and India are interested in this project as well.

“The colleagues from India who are working on the TAPI project (Turkmenistan-Afghanistan-Pakistan-India) are proposing to consider a gas pipeline from Russia through Central Asia to Southern Asia. As you can see, this is an absolutely new approach which is becoming available not just to us but to the other EEU countries,” Sentyurin concluded.

Meanwhile, Society of Geologists and Oilmen of Kazakhstan Chairman Baltabek Kuandykov told reporters at the same forum that Project Eurasia may further expand energy cooperation considerably, while integration within the EEU will provide a vital boost to the entire oil business.

The government of Kazakhstan first talked about the project “Eurasia” last fall, at a regular KazEnergy forum. The project involves large-scale explorations of deep horizons of the Caspian depression both in Kazakhstan and Russia, right on the border of Europe and Asia.

According to expert evaluations, the resource potential of the Caspian region, especially that of the Caspian Depression, is approximately 40 billion tonnes of fuel equivalent. It is forecasted that about twenty major fields may be found there, with hydrocarbon resources of over 300 million tonnes. If implemented, Project Eurasia may double Kazakhstan’s hydrocarbon reserves.

“The plan is to set up an international consortium before the end of this year to implement Project Eurasia. It is expected that four to six major and well-known companies will make the consortium,” Kuandykov said.

According to him, not just one, but two consortia are being considered. The first will be responsible for the geophysical work, the second – for the drilling of deep wells.

“Since 30% of the Caspian Depression is in the territory of Russia, and 70% – in Kazakhstan, we are talking with the Russian colleagues about including other foreign companies in the consortium for implementation of Project Eurasia,” Kuandykov said.

They have already talked to US major Chevron, Anglo-Dutch Shell, China National Petroleum Corporation (CNPC), Russian oil major Rosneft, and France’s Total. However, everybody is waiting to see what exactly the government of the country will offer them.

Kuandykov said he believes that Kazakhstan’s government should provide preferences and incentives for the investors to join the project considering that the project is not for production of, but just for searching for, hydrocarbons, which is practically scientific research.

“Having studied USA’s and China’s experiences of financing the development of shale deposits, we are now preparing a proposal package for the government. One of the preferences that we are proposing is to award to the Project Eurasia members in the future without a tender oil-bearing blocks that may be found in the deep horizons,” Kuandykov said.

In addition, according to him, an idea is under consideration that the proposed consortium should work on a principle of state-private partnership, meaning that the government should bear a part of the costs.

“Once the government approves all the incentives and preferences, we will gather the investors and tell them about it. After that, Project Eurasia is expected to start in 2015,” Kuandykov said.

Overall the Astana summit was expected to address all the current challenges, including the proposed economic sanctions against Russia, and the existing sanctions against Iran, World Energy Council head Mari Jose Nadeau said. The WEC was established in 1923 at an initiative of the business and energy circles of Great Britain and some other industrialised nations of Europe and North America. “I hope that such way of resolving issues will become an example to follow,” he said.

An international energy authority, a winner of the Pulitzer Prize, and the author of an international bestseller “Mining: World History of the Struggle for Oil, Money and Power,” Daniel Yergin, agreed with her.

“A dialogue is necessary to bring all the parties to a conflict or an issue to a negotiation table to discuss how to stabilise the relations, and how to reach a consensus. A dialogue is especially important in energy, as any controversy there does nothing but paralyse the life of the modern cities and industries, of the regular people,” Yergin said.

See also:

Putin: “Dasvidaniya” EU, “Ni Hao” China

Gazprom says China, Russia sign 30-year natural gas supply deal

EU can’t broker Russia-Ukraine gas deal yet

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