Today, the super-giant Shtockmann natural-gas field under the Arctic sea—Russia's only big hydrocarbon discovery since Soviet times—has just been mothballed due to the towering cost of extracting the undersea gas. At the same time, worldwide demand for Russia's gas has plummeted. And meanwhile, the government has punctured investor confidence by pressuring BP, one of the few major foreign investors left in Russia's energy sector, to hand over a giant Siberian gas field to a government-owned rival. It's time for Moscow to kiss goodbye those dreams of energy hegemony.
One problem is that the recession has eviscerated European demand for Russian natural gas (consumption dipped by 7 percent in 2009). Another is that demand in the United States for imported natural gas has fallen off too. Thanks to shale gas and other unconventional sources like tar sands, the U.S. is now close to self-sufficient in natural gas. It's a nightmare for Shtockmann, where the business plan hinged on freezing the product into liquified natural gas, or LNG, for export to the United States.
That made the Shtockmann field, with reserves of 3.7 trillion cubic meters, seem less like the strategic future of Russian natural gas and more like an M&M that fell behind the couch—tasty, but not strictly necessary and very hard to reach. The $20 billion cost of extracting the deep-buried gas in the harsh conditions of the Arctic has proved prohibitive for Gazprom and its minority partners, Total of France and Statoil of Norway.
That's a problem for Gazprom, which was the main cudgel of Putin's foreign policy just four years ago, when he played one European country against another in their eagerness to lay Gazprom pipelines across their territory. Now the European market seems oversupplied. More worrying still, Gazprom's traditional suppliers (gas fields in the Central Asian nations of Turkmenistan and Kazakhstan) have begun opening their own direct pipelines to China, where gas consumption has a future. And though Gazprom still controls about 17 percent of the world's proven natural-gas reserves, many of its existing fields are beginning to run dry. Getting at the remainder—for instance at the Bovanenkovo field in the remote Yamal Peninsula in Siberia—will need massive investment of cash and know-how. Who wants to sink in that kind of money with no guarantee of returns?
That's why the latest attack on BP is so strange—and so dumb. A time of falling demand, unstable energy prices, and investor nervousness about emerging markets might seem like a bad moment to crack down on one of the few large foreign investors in Russia's energy sector. But that hasn't stopped Russia's Natural Environment Inspectorate, or RosPrirodNadzor, from threatening to throw BP off the giant Kovykta gas field in Eastern Siberia. The official reason for the threat is alleged environmental infractions—the same reasons cited by the Russian state when Royal Dutch Shell was persuaded to sell Gazprom its stake in an oilfield in Sakhalin two years ago for below market value. But the real reason seems to be that the state oil company Rosneft has its eye on BP's field. _Newsweek
The end of the Putin model?
Taking the "R" out of BRIC
The mainstream media is hesitant to present the whole sordid story: Russia's population collapse due to an abysmal national health infrastructure, and very low birth rates. The influx of fast-breeding and violent Muslim immigrants from the Caucasus and Central Asia. The rusting away of Russia's industrial and military infrastructure. And much more bad news for Russia.
Al Fin has been telling you all of this for years. The mainstream media -- being composed of unintelligent and indoctrinated products of a lobotomised academic culture -- will never quite catch up to a reality foreseen long ago by brighter lights.
But Russia, and much of Europe, are losing population too quickly to maintain what is left of a former greatness. Outsiders are pouring through the breech in the defenses. Very little time remains. They should use it wisely.
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