Smoking gun – Russia’s plan to dominate energy markets

I came across an article on RosBusinessConsulting titled Russia floods global markets with O&G that supports my theory that at least some of more crafty segments of the world’s oil and gas providers recognize the return on investment (ROI) available to them from steady efforts to stoke irrational fears about the use of nuclear energy.

For example, this paragraph appears near the top of the article.

Experts warn that Russia’s reliance on mineral resource exports may backfire on the country, when the prices drop one day thus wreaking havoc on budget revenue. Thus far, luck has been on the country’s side as global developments have been pushing fuel prices up. The average price of Urals blend oil was $109.3 per barrel in 2011, up 39.8% from 2010. Oil prices rose sharply on the back of uprisings in the Arab world, the war in Libya as well as an earthquake in Japan, which destroyed the Fukushima nuclear power plant causing an environmental disaster and giving rise to serious misgivings about the safety of nuclear power, the most promising alternative to hydrocarbons nowadays.

(Emphasis added.)

I don’t believe in luck or in the use of the passive voice; it is clear that knowledgeable people can run the numbers and choose to use their influence to ensure that press coverage reinforces those “serious misgivings”. How many times has Apocalyptic Arnie (Gundersen) and his fear mongering associates appeared on Russia Today, aka RT, as well as on other ad supported media channels?

Russia is also smart enough about the dependence its export customers have on Gazprom’s pipeline gas to ensure that it is profitably priced with a contracted link to the market price of oil.

High oil prices have driven gas prices higher. The price of Russian gas reached $436 per 1,000 cubic meters ($12.35 per MMBTU) as of December 31, 2011, up 38.7% year-on-year, the Economic Development Ministry estimated. The average contract prices for Russian gas at the German border went up 28.9% to $381.50 per 1,000 cubic meters ($10.80 per MMBTU), according to IMF.

Geopolitical factors have been keeping oil price high in early 2012. The eventuality of sanctions on Iran and Syria enable analysts to forecast that oil prices will spike to $150 or even $200 per barrel. Gas prices pegged to oil prices are also set to soar.

(Conversion to US standard trading units for natural gas prices added.)

Please note the prices in the above quote; Europeans are paying 3-4 times as much per unit of heat for natural gas as North American customers. That makes the German, Swiss, and Italian move away from nuclear energy even more questionably; they do not have the same “low carbon” alternative power supply option that we do here. No wonder the German environment minister proudly spoke about the opening of a new lignite (brown coal) fired power plant.

Perhaps there is a good reason why so many European industrial firms are relocating production facilities to lower power cost regions like Alabama and South Carolina where there are new nuclear plants under construction.

The energy strategy from the world’s chess playing capital is not a single dimensional focus on hobbling nuclear energy’s ability to compete for its customer base, but also includes efforts to stimulate and sustain conflicts in the political areas that are important to the oil and gas industry. Not all of those important areas are hydrocarbon supply basins; some, like Syria, Georgia, Pakistan, Afganistan and Ukraine host key segments of transportation pipelines. (For an entertaining, but scary, analysis of world pipeline politics, I highly recommend listening to NoAgenda show episode 426.

Here is the final quote that leads me to believe that the current government in Russia is skillfully playing the board in the “The Great Game” and hoping that no one notices its strategic efforts.

Meanwhile, Natural Resources Minister Yury Trutnev predicts that oil and gas resources will last for 100-150 years, after which the mankind (sic) will have to search for alternative resources.

(Emphasis added.)

Anyone who makes that prediction is trying to fool others into a false sense of complacency that includes ignoring other obvious issues with continuing to depend on hydrocarbon suppliers to fuel our modern society. If anyone disagrees with this being labeled as a smoking gun, please explain your logic.

About Rod Adams

30 Responses to “Smoking gun – Russia’s plan to dominate energy markets”

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  1. Daniel says:

    Rod,

    I am glad you are addressing the European situation. You raise interesting points, but at the end of the day 2/3 of european nations are net importers of energy. That’s right and sickening and the same time. (Especially for Italy, Greece and Spain: Wake up guys!)

    While Germany’s neighbours are planning for some nuclear capacity, Germany is plainly threatening them to pursue all international legal means to stop nuclear expansion around its borders. Germany has officially gone ballistic. The greens over there have committed Hara Kiri. They do not know it yet, but they will at the next election.

    Now there is something to be said. The dream of education and jobs in the service economy has ran its course for the western world. We can see that this paradigm is starting to run dry in Europe.

    We must take this knowledge and kick the manufacturing curve again with sophisticated software, new products and cheap energy. This is where we must position ourselves. The western world has to start manufacturing again and leverage the education infrastructure that we have to this end. And cheap energy. Lots of it.

  2. David says:

    You know, the nice thing about Nuclear Power is that it can create inexpensive power where ever it is located. So, while one state pays outrageous prices for electric, others can have inexpensive power.

    Moving factories tend to make a clear point to politicians.

    I am horribly frustrated at the constant move toward higher energy prices. I have watched the trees burn when the price of propane went up because it was being used as a transportation fuel. Poor people could not pay the price of cooking gas, and turned to the trees in their area to cook their food. This real and immediate devastation of the environment could be prevented with inexpensive Electricity.

    Japan’s move away from Nuclear means more deforestation in Asia.

    • Daniel Doiron says:

      @ David,

      In a not too distant future, I can see industrial parks owning and operating arrays of SMRs and guaranteeing businesses a fix price on electricity consumption with known escalating clauses.

      Of course this will take creativity but mega cities like New York could pull these things out with the right leadership at the local level. New closed loop energy partnerships between State-Municipalities could help differentiate local economies to supply flex manufacturing goods to the local markets.

      Shipping our stuff from China or India can be neutralized with cheap energy. If the transportation costs and the time to market can be leveraged for certain strategic manufacturing goods, hey who knows.

      There has to be some smart cookie somewhere to pull this off.

      The Western World has to start making things again. Create new markets, new products where it would be advantageous to build here.

  3. CaptD says:

    Nice Pro Nuclear article Rod….

    Who questions our Elected Leader’s motivation and or sanity?

    At some point, one must ask themselves when is gross denial,
    … Best left for a trained mental profession­al?

    Case in Point, Japan is now suffering with a Trillion Dollar Nuclear Eco-Disaster, yet some commenting consider that it, in effect, is “no big deal”:

    Polluted Ocean, N☢ Problem, it will get better after a while….
    Polluted Fields, N☢ Problem, they can remove the upper layer
    Polluted Air, N☢ Problem, they can wear paper masks for a while
    Polluted Food, N☢ Problem, they can mix the good to dilute the bad
    Polluted Homes, N☢ Problem, they can power wash them clean
    Polluted Schools. N☢ Problem, they can clean them
    Polluted Cities, N☢ Problem, they can return soon…

    With answers like these from too many Leaders & Nuclear Profession­als, perhaps you would consider a followup article, asking this question:

    “What exactly would it take for you to STOP supporting­, all land based Nuclear Reactors like Germany is now doing and end this nuclear nightmare?”

    • Daniel says:

      @ Captd

      You should be more worried about the benzene levels that can be found in the Gulf of Mexico sea food following the oil spill of a few years ago.

      Now, that would be a just cause.

    • John Tucker says:

      “Trillion Dollar Nuclear Eco-Disaster”

      Yen perhaps. Around 15 billion US.

    • David says:

      Hi Capitan D,

      Well, what would convince me is massive numbers of deaths – actually having people die from radiation spread over perhaps about 10 to 20 miles in the radius of a Nuclear Power plant. At this point we have NO deaths from the “disaster” which in my mind really does not make it a disaster. Just a bad problem to deal with. Bohpal was a disaster. The tsunami was a disaster. This is a problem that can be worked out.

      You see, I don’t hear pro-nukes saying “no big deal” but I do hear them saying “wow, this is NOT a disaster.” Somewhere between – an expensive problem to be solved but one that can be dealt with, with minimal effect to human life.

      The fact of the matter is that radiation is the only type of “pollution” that goes away with time. That is the very nature of radiation. In this case, the mitigating steps you mention are fairly minor compared to the massive rebuilding that is taking place due to a 8.9 earthquake and many massive aftershocks, as well as a series of tsunami itself.

      The real disaster is what the effect around the globe will be on the horrible decision by Japan to shut down Nuclear power. The price of power will rise and the poorest of people will burn down trees to cook their food. I have watched this happen before and it will happen again. Talk about environmental disasters. Raise the price of energy and see what happens to the environment.

  4. SteveK9 says:

    Russia is building more nuclear reactors at home and abroad than any nation other than China. In fact, in terms of building abroad they are the most successful nation in the world … either building or planned in China, India, Turkey, Ukraine, Belarus, Vietnam, Iran, Bulgaria, Kazakhstan, probably in the Czech Republic, Slovakia, and Armenia. Russia is doing more to promote nuclear technology than any country in the world.

    If their neighbors are idiots and want to pay them for methane and oil, one can hardly blame this on a nefarious Russian plot.

    • Daniel Doiron says:

      @ Stevek9

      Ressources rich countries (Russia, Iran, Arab Emirates) see a fantastic business opportunity.

      They have the oil and they can sell it to the stupid white man at a hefty price by taking advantage of the atom developed by the western world.

      I can smell the shift in hegemony and economic power at the planetary level from here.

    • Rod Adams says:

      @SteveK9

      Feel free to believe that the idiotic reaction in Russia’s neighbors is completely spontaneous and that Russia would prefer to sell nuclear reactors to selling massive quantities of oil and gas. Before you do that, I suggest that you run a few numbers to understand the scale of the income that Russia is getting from selling oil & gas at excessive prices compared to the income that comes in from selling reactors.

      • SteveK9 says:

        Appreciate that. But, although they make a lot more money with fossil fuels. They are clearly not dragging their feet in any way on promoting nuclear. In fact, one of the reasons countries like Belarus, Turkey and others can build reactors is that Russia is financing them completely. They are clearly taking an active role in promoting the technology.

        Nations act in their perceived interest. Russia is not a charity. But, they are not making it difficult for the Czech Republic to build reactors, even though the purpose is to reduce reliance on Russian gas.

        What is your opinion? Why do they do it? In some places like Turkey you could even argue there is a quid pro quo (gas pipeline), but that is not true everywhere.

  5. Gunnar Littmarck says:

    I wrote about this interview with Kirill Komarov:
    http://www.rosatom.ru/en/presscentre/interviews/5b2e7b004afcc2279f9dffd50cfb612c

    The strategy is clear. What about the worlds first nuclear fuel bank?

    But I don’t fear them I think they just want to make max money.

    Maybe you have to live in deep communism to realize the value of capitalism?

    Our politicians are however very naive as yours in US.

    • Rod Adams says:

      @Gunnar Littmarck

      Where are you located?

    • Michael R. Himes says:

      Finland in a joint venture with Russia will build two nuclear powered icebreakers. Floating nuclear plants will join the northern oil and gas exploration and support ongoing mineral mining in the north. It would seem that Russian nuclear plants will exceed hydro electric project power output for the first time. Russian aluminum pot lines are now nearing normal operation after a hydro electric project accident.

      To what extent fusion hybrid fission reactors are being developed by Rosatom is a matter not being reported in the Russian press. However, research at the Sarov nuclear research facility would indicate marine fusion reactors are under development. Could it be that the Submarine Sarov is testing such a reactor? The term “Balanced Mix” of hydrocarbon and nuclear is a balancing act indeed. Can Vladimir Putin keep fusion power in the military domain or will it’s obvious simplicity and economy leak to the public domain?

    • George Carty says:

      “Naive”? I’d prefer “bought”…

  6. Pete51 says:

    Nord Stream AG operates a natural gas pipeline between Russia and Germany. The Chairman of the Board is Gerhard Schroeder, former German Chancellor. When Schroeder was in political office, he set up the first German nuclear power shut down schedule, which would shut down all of the plants by 2021. Angela Merkel temporarily suspended the plan. But after Fukushima, Schroeder’s nuclear shut down plan is back on, and perhaps even accelerating. Nord Stream, and presumably Schroeder, look to make more money if Germany replaces its nuclear plants with gas plants. I don’t necessarily blame Russia for this. It is the Germans who lost their wits.

    http://en.wikipedia.org/wiki/Nord_Stream_AG

    • Rod Adams says:

      @Pete51

      As you illustrate, Schroeder is a key player, but he WORKS FOR THE RUSSIAN state owned natural gas company. (Gazprom is a major investor in Nord Stream AG.)

      I believe Schroeder was rented by Gazprom long before he lost his job as chancellor. He is German in name only.

      • Rod Adams says:

        Discovered an interesting connection while re-reading the Schroder entry on Wikipedia:

        “In January 2009, the Wall Street Journal reported that Schröder would join the board of the oil company TNK-BP, a joint venture between oil major BP and Russian partners.”

        TNK-BP is partially owned by a consortium called AAR (Alpha Access Renova). http://www.aar.ru/en/investments/tnk-bp.html

        Len Blavatnik is the primary owner of the Access component of that consortium. He also sits on the Board of Directors of the New York Academy of Sciences, which still stubbornly refuses to repudiate its decision to publish the decidedly anti-science book titled “Chernobyl: Consequnces of the Catastrophe for People and the Environment”.

        Hmmmm.

      • George Carty says:

        As I said before, Germany’s WWII guilt is the only reason why Gerhard Schröder isn’t viewed in the same light as Vidkun Quisling…

      • Joris van Dorp says:

        Hi Rod,

        Yes, the ‘Schroeder connection’. When I first stumbled into this strange history, I put it on multiple websites and fora. Almost no reactions. When I tell this to people in relation to energy questions in europe: people shrug. There is so much apathy and disinterest that general people just accept it and don’t care about how Europe’s security is being undermined. It was an educational experience. One thing I learned: no use counting on public indignation or public self interest about their energy future. (At least in Europe). To wake up the average European about the EU energy security, there has to be a major disruption and/or major prolonged energy price spike. Before that happens, the standard reaction to anything will be apathy. Even including such things as Gerhard Schroeder’s treason and the selling-out of european energy security under the guise of ‘energiewende’ and ‘atomausstieg’.

        Gerhard’s brilliance was that he probably anticipated all this while he made his scheme. He knew that he would never be hung, drawn and quartered according to the normal punishment for treason in the old days. Just like the criminal banksters: they know that the public will simply shrug and move on, nomatter how extreme the treasonous activity.

        • George Carty says:

          Do you think the apathy you describe is “we don’t care”, or is it more like “we can’t do anything about it”?

          Oh, and I’m glad you too use the T-word in reference to Schröder’s actions…

          • Joris van Dorp says:

            It think a lot of people care, but they were rather counting on others (in business, government and academia) to solve these kind of problems for them.

            And I don’t know if there really is treason there of course, but if it walks like a duck, talks like a duck, and looks like a duck …

            We’ll have to see what happens to the natural gas price in europe the next few decades to really see who has been fooling who?

  7. John Tucker says:

    Russia Today is also indispensable for catching up on UFO and psychic news. Try a search.

  8. Kroll says:

    About the Russians and their involvment in european politics, theres an interesting article here:
    http://www.orlenupstream.pl/EN/Press/PressReleases/Pages/Gasprom%E2%80%99s-Polish-War-.aspx?year=2011

  9. David Walters says:

    My 2 kopeks on this…

    There is no grand contradiction between the a robust oil/gas industry and nuclear energy. For both Russia, S. Arabia and the UAE the *prime* motivation for developing a massive nuclear generation capability is tied to their slowly dwindling resources of natural gas. For them to sell it, they need to use less of it. All 3 countries use huge quantities of gas for both generation and added value refining into ammonia fertilizer. The more more non-gas generation they have, the more of the methane (in various forms) they can sell.

    But for Russia they also make money selling nukes. Notice WHERE they sell nukes too: not Europe though as noted above they are working with the Finns (and Czechs and Bulgarians as well). But they’d like to sell VVERs and later BNs to Europe.

    Why? First of all, again, there is no contradiction. The fact is that Russia’s gas is going away. They, like most nations not called the “United States of America” actually have long term energy policies that are not market driven. They think ahead, way ahead. As gas shipments will decrease over the next decade or 4, they need to robust, vertically integrated high tech, heavy manufacturing combine to last after the gas and oil is no longer exportable. Their nuclear builds, and their nuclear services industry overseas (such as repair, reprocessing, mining, etc) will last way past their exports of gas and oil. and this will new Russian Far East discoveries on the horizon.

    So, in terms of generation, yes, it’s gas vs nuclear (also coal vs nuclear) but in terms of planning, they work quite nicely together.

    David

    • SteveK9 says:

      Agree. Add Turkey, Belarus, Ukraine, Slovakia, and maybe Armenia (well I think of them as Europe). See response to Rod above.

  10. GMC says:

    I don’t know in light of the following:

    September 26, 2010 • 12:06PM
    Sergei Novikov, spokesman of Russian Atomic Energy Corporation (Rosatom), told the official Chinese news agency Xinhua, that it is willing to cooperate with China in the nuclear field. “The Chinese government has planned to build nuclear capacities up to 100 GW, that is, about 100 power-generating units. This is a huge and prospective market for us,” he said. Novikov said that Rosatom was ready to compete on this market with all major world nuclear technology suppliers. “Our advantage is that we started cooperation with China before our competitors did, and now we may present the real fruits of the cooperation.”

    October 12, 2011 • 9:53AM
    The 16th Regular Russian-Chinese Prime-Ministerial Meeting, held between Premier Wen Jiabao and Prime Minister Vladimir Putin

    “We shall develop closer cooperation in nuclear power, and I emphasize that this will be on the basis of the most advanced, modern technologies in the world, so that we shall reduce potential risks practically to zero. Our cooperation is not limited to just building plants. We have outlined coopeation in scientific research, and in preparing and implementing promising projects.”

    February 16, 2010 • 11:25AM
    The visiting Russian Deputy Prime Minister Sergey Sobyanin told RIA Novosti yesterday that Moscow and New Delhi are “working on an agreement between our states on cooperation in the field of the peaceful use of atomic energy. The agreement has already been initialed, and I am sure it will be signed during Vladimir Putin’s visit to India middle of next month.” According to Sobyanin, the development of atomic energy is one of the top priorities for India, and Russia “is ready to give it assistance in this.”

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