Monthly Archives: January 2012

Europe’s Old Guard Pushes Back, Pt. 1: Trial and Treason

Over the last few months, there have been countless stories demonstrating the difficulty much of the Northern Mediterranean faces when it comes to introducing and actually implementing political, economic and cultural change. At the heart of too many of these stories is the region’s aging population, not because they may be more politically conservative and less eager to embrace necessary change – though they very well might. Instead, it seems they are the ones with the largest slices of the populations invested in the past – those with the most to lose should existing systems be scrapped in favor of more efficient but ultimately unfavorable solutions or those whose egos would be most called into question if national governments finally confessed that they were misguided or simply unsustainable. It can be difficult to admit that you got it wrong and in top-heavy countries like Spain, Italy, Greece and even Germany, getting some momentum behind questioning the status quo can be downright impossible. Recently, there have been a few stories coming to light that do well to demonstrate this challenge, as countries’ old guard have begun pushing back against reform efforts, occasionally in transparently desperate ways.

In Athens, amid loud charges that any call for greater oversight or financial transparency is a conspiracy by EU powers to consolidate power in Brussels, this push back has even resulted in charges of treason. Brought into the Greek government to provide a semblance of order after the country’s deficit was found to be double original reports, Andreas Georgiou set about trying to create what he hoped would be a functional, honest and ultimately boring Hellenic Statistical Authority or ELSTAT. Once the head of the International Monetary Fund, Georgiou was offered up as a technocratic solution to investor worries about the validity of Greek economic information, meant to calm nerves by offering the clearest picture of Athens’ fiscal standing and how much help was actually needed.

Once in place, Georgiou found the task to be far more difficult than first thought but after some effort, he was able to present a firm deficit number with 15.8 percent of GDP, up from the 13.4 percent the statistics office had previously offered up. Sure it was higher than what was expected but it provided a firm place to start working. The reaction from the country’s old guard – namely the ones who had previously and erroneously reported the rate to be around 6 percent – was not what he expected, but possibly should have. According to a Planet Money report, the office first demanded that the report should have been subject to a vote by a statistics department board and union, suggesting perhaps that the figure was up for discussion. Following a possible hacking of his computer, Georgiou was informed that he would face treason charges for actions against the state and could face life imprisonment. For providing a figure that called into question the absolute authority of a body already shown to have provided dangerously faulty economic statistics, Georgiou could face a lengthy stint in prison.

For some the charges fit into a larger narrative of EU overreach, with the new figure meant to allow for greater oversight from Brussels and forced, painful austerity measures but the message of the charges was clear – despite being at the helm when the country got into this mess – when these grand mistakes were made – we are not to be questioned.

Not relegated to financial problems, this old-guard push back can be seen in Spain with the on-going trial of Judge Baltazar Garzon. The controversially crusading judge, who has previously gone after Augusto Pinochet, members of Galician drug smugglers and the Basque separatist group ETA, finally pushed too far when he aligned himself with family rights groups intent on pursing investigations into disappearances during the years under Francisco Franco. First joining with the groups in 2008 as a part of a push to excavate mass graves believed to exist from the Franco period, Garzon immediately ran into resistance from members of the government who pointed to mass immunity agreements passed during Spain’s transition to parliamentary democracy in the late 1970s. Not only that, these campaigns would be chasing ghosts as many, if not most of the perpetrators in question were long since dead.

At first persuaded against continuing thanks to political pressure in 2008, Garzon again took up the mantle and opened an investigation into the death of 114,000 people during the Franco period. As an investigating magistrate, Gazon can initiate cases rather than just oversee them. In response, the political pressure has evolved into charges out outright abuse of power, perverting the course of justice and most recently, of accepting bribes while on sabbatical at New York University. The message seems clear – do not question the actions of our recent past – there are to many with investments in keeping the past where it belongs.

I know it may strike some as a stretch to connect these stories but I believe that both demonstrate an unwillingness by the old guard to face up to the questionable actions of some to the detriment of the country. If these events are not addressed, is it fair to expect them to be avoided again in the future? And should that old guard retain the ability to bury those events firmly in the past?

Image: Baltazar Garzon in El Mundo

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Shale, Energy and North Africa’s Future

As countries across North Africa work towards rebuilding both customer confidence and hydrocarbon operations following the political and financial instability of 2011, some are looking past traditional options to test the limits of the region’s shale potential.

First initiated in Tunisia in the Spring of 2010, North Africa’s shale efforts have slowly spread across the region, adopted by both established oil and gas producers and those who see little potential for traditional measures. The push towards exploring the area’s deep-set shale reserves came as the success of such efforts in the United States and studies showing widespread potential across the globe began to spur investor excitement. As time allowed closer inspection of the geological variances of the Maghreb states and their true shale potential, a clearer picture of what shale deposits could mean for the region has emerged.

These efforts come just as similar efforts in more mature shale markets are running into often debilitating challenges. Building on environmental worries related to the practice of fracking, public and political movements have successfully stalled efforts in the United Kingdom, France and parts of Germany as the uncertainty about the effects of the practice have added to concerns about project costs. This environment led European Union Energy Chief Gunther Ottenger to suggest the possibility of a community–wide regulatory system on shale efforts, inviting a pledge to veto any such legislation from Poland’s government, who has led the way towards introducing shale projects to the European marketplace. Meanwhile, in the birthplace of the fracking process, US President Barack Obama accompanied his support for further shale projects with an appeal for energy companies to disclose the ingredients of fracturing fluids, which have been protected information until now. However, these worries and protest movements have done little to damper enthusiasm among North African actors, as they continue to move shale projects forward.

Building on the region’s first shale effort in March 2010, Tunisia are continuing to work with early partners France’s Perenco and Canada’s Cygam in their exploration efforts, though last year’s political transition slowed the effort’s momentum. While both firms have worked to assure their Tunisian partners of their intent to stay put, lingering questions of instability, including the recent kidnapping of a mayor near the vital Ghadames Basin do little to help calm project partners.

Hailed as the country with the most shale potential thanks to the accessibility and quantity of reserves in the Ghadames Basin it shares with Tunisia and the Illizi Basin, Algeria has moved to attract foreign partners for shale efforts. According to Reuters, estimates suggest up to 1,000 trillion cubic feet of natural gas, trapped in shale rock about 1000 meters beneath the ground.  Facing a steady decline in the production levels of more mature oil and gas options, Algeria’s actions suggest a long-term approach to energy alternatives that included a heavy dependence on non-traditional resources such as shale.

Algeria and their state-backed firm Sonatrach have worked to secure working partnerships to help move their shale efforts forward, beginning with the signing of a MOU with Italy’s Eni last year. The Spanish giant has also looked to expand their resource base after Libya’s production all but halted amid political violence last year. Eni’s MOU with Sonatrach is meant to both lend the company’s shale extraction expertise to Algeria and help the company ensure a more dependable natural gas source for export-heavy Italy. After investing billions in hopes of solidifying Libya as a consistent source of oil and gas for the domestically barren Italy, the country lost nearly a third of their energy imports as political protests turned into violent conflict earlier this year. While Eni stands as Algeria’s largest shale partner, Sonatrach have announced that they will continue seeking shale partnerships with other international firms.

Even in Morocco, where domestic energy resources have remained elusive to the leadership of King Mohammad VI, one company has bet that the company’s true potential lies far deeper. Following four years of testing and coming in the latter half of a 3 year Memorandum of Understanding with the government of Morocco, London-based San Leon announced this month that they were ready to begin production at a site in the southern part of the country. Hoping to replicate their efforts in Poland, San Leon entered the northwest African nation five years ago to begin initial testing in the Tarfaya Oil Shale Field Pilot Project. San Leon recently announced that they had achieved “connectivity” between two wells in their Tarfaya oil shale project, suggesting progress in the country, though the Irish firm’s pace has worried some as their share price shrunk 59 percent over the last year. Despite overlapping basins deemed positive, Libya is the only country in the region to receive little attention by shale actors, as alternative efforts have been overshadowed by the substantial promise of traditional energy projects.

The Obstacles that Remain

For all the interest in the region’s predicted shale potential, a number of obstacles towards profitable operations remain, which have undoubtedly increased with the political instability of the last year. In addition to countries now faced with re-building confidence among foreign investors following the ousting of long-standing governments in 2011, many face significant funding deficits needed to support the high infrastructure costs associated with shale efforts. Largely lacking the access to the equipment, technology and personnel needed to reach and exploit shale projects, North African states will need the support of international partners to move these projects forward. In addition to signing cooperation agreements with firms from across Europe, some states are looking to the US State Department’s Global Shale Gas Initiative for guidance and aid, though political divisions and uncertainty about regional stability have kept that support

Image: Arabian Oil and Gas

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The Euro Crisis and Why It Should Matter to You, Part III – Contagion

As finance ministers and heads of state from across Europe continue to meet in tense rooms across the continent, all hoping to find some way to bring back Greece from the brink and save the Euro and possibly the community as it exits today, the drama of it all remains quite distant to too many. So what if Greece crumbles and reverts back to the drachma? What does it really matter if the Greek government place more importance on their own electoral future than actually instituting the reforms necessary to guarantee the funds needed to keep the country afloat? Why should I care if the EU sees fit to let one of their own drift away? In a word, contagion.

With an economy that is dwarfed in size with its EU neighbors and a level of individual debt that is unlikely to cause too much worry among its many creditors, Greece could probably collapse without much effect were it to exist in a vacuum. But it doesn’t. For Americans, this would individually mean a likely loss of the $6.2 billion US banks currently have on the books from Greece. Hardly an amount to dismiss but compared with the rest of Europe, its likely manageable. However, should the country be allowed to fail, a few things would likely happen, not least a significant loss of confidence in the stability of the Euro and really the European Union project. If they would allow Greece to fail in the face of the first real stress test of the new economy, who would be next? Would all eyes turn to the next in line? Would that loss of confidence spur sell-offs and quick exits from economies already struggling to put their affairs back in order? Spain is already reeling from daunting unemployment rates (nearly 23 percent) and the dismal news that their economy shrank 0.3 percent in the last quarter of 2011, so what would happen if the country’s remaining strength was sapped as investors far and wide ran for the exits? And Ireland? Or Portugal?

For now, many are looking to Italy for the effects of contagion, not least because Italy’s standing as the world’s 7th largest economy and one of the EU’s most important makes it all the more frightening to imagine it moving into a position where borrowing becomes a crippling handicap. Its already moved into that territory more times than anyone is comfortable, giving the world a glimpse of what a regional slowdown or collapse would look like.

So, what would it mean for those outside of the community? For Americans at least, it would mean the kind of stress on US lending institutions that the country’s slow recovery would not prefer to see. If Greece defaults, it may only mean $6.2 billion but looking down the road, there is Italy with its $34.8 billion, Spain with $49.6 billion, Ireland with $39.8 billion and just for the cherry on top, Portugal with its $3.9 billion. Sure, this is a doomsday scenario but taken together, the effect could be lightening fast and disastrous. Short of creating the kind of fire walls German seems to be having so much difficulty in putting into action, the contagion could be quick and deadly, putting the brakes on any US recovery.

The symptoms are widespread and difficult to address, especially with government officials from Athens to Berlin unwilling to budge in either direction, but ultimately the consequences will be for us all. I’d like to think I can hit on all the relevant points about why this all matters beyond Europe but I would like to point to a far more useful and informative resource; the recent edition of This American Life which sidestepped the pleasant story telling last week and turned the whole hour over the Planet Money team to provide a superb rundown of how it all began and how it could end.

Image: Globedia

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Iran Steps Up Pressure on EU Customers After Embargo

With the EU embargo on Iranian oil passed and the prospect of sharp declines in deliveries looming, many fragile, export-heavy Southern European economies are struggling to find alternatives before the planned July 1 deadline. However, an angered Tehran has warned that Iran could force the EU’s hand and shut down exports immediately, making the search for new sources of crude all the more difficult.

Passed on Monday the 23rd, the EU embargo was supported by US officials who had long pushed for a stricter response to Iran’s nuclear program and what they suggest is an effort to weaponize their efforts. The move came after the US ratcheted up pressure on the Iranian government to abandon their nuclear program, introducing their own sanctions aimed at the country’s central bank, which handled oil revenue, according The Hill. After pressuring European allies to introduce similar efforts, the US welcomed the news of the passage of the sanctions in Brussels, though they were ultimately passed with an extension that would allow those countries with a heavy dependence on Iranian crude to secure alternatives.

Further, the extension to July 1st was meant to allow European firms, such as Italy’s Eni, to pursue and collect unpaid debts from Iranian companies or the government. In the case of Italy, newly appointed Prime Minister Mario Monti appealed for a special exclusion of a billion euro contract between Eni and Iran, arguing that the loss in revenue would hinder the country’s efforts to rebound from its current economic crisis. Representatives from the United Kingdom also issued appeals for exceptions, including a BP-led collaborative project with an Iranian firm to produce natural gas in the north Caspian Sea. The project is aimed at reducing dependence on Russian product.

However, just days after the Brussels announcement, the Iranian parliament announced that they would speed through a bill aimed at shutting down exports to EU member states immediately.

“We want to cut oil exports to Europe next week for which we are preparing a double-urgency bill,” said Hossein Ibrahimi, a member of the parliament’s national security committee in the Financial Times.

The legislative move follows Tehran’s warning that any future efforts to limit Iranian oil sales would result in the forced closure of the Strait of Hormuz, halting the passage of one-fifth of the world’s oil in tankers from reaching western markets, according to the AFP.

This new pressure has left some countries, including Spain, Italy and Greece, short on time when it comes to nailing down fuel options should Tehran follow through. So far, options have included increasing imports from Russia, Saudi Arabia and Iraq, though it is yet unclear whether these countries will be able increase production and delivery to meet the shortened deadline without impacting the market with a shortfall.

While representing just 5.8 percent of Europe’s total oil imports in 2010, Iranian crude provided 14.6 percent of Spain’s demand, 14.0 percent of Greece’s and 13.1 percent for Italy, making a sudden shutdown of imports all the more impactful across Southern Europe. Complicating the situation still further, those countries most affected by the embargo are the same EU member states struggling with dire economic outlooks for the New Year. Any additional increases in costs or energy deficits could serve to exacerbate already daunting financial pressures. While Saudi Arabia has suggested that they have ample reserves to address any Iranian reduction, cooperation from Russia may be a little more difficult for EU customers as the country’s leadership has expressed concerns about the actual embargo.

“It is obvious that what is happening here is open pressure and diktat, an attempt to ‘punish’ Iran for its intractable behaviour,” the foreign ministry said in a statement, according to New Europe. “This is a deeply mistaken line, as we have told our European partners more than once. Under such pressure Iran will not agree to any concessions or any changes in its policy.”

Further alternatives for Southern European customers exist with an increase in production in a post-conflict Libya, however significant obstacles still hinder the country’s ability to ensure adequate delivery. According to the country’s National Oil Corporation, production has reached 1.3 million barrels a day after the country’s civil war halted all production early last year. Although they have assured customers and foreign investors that they will soon reach and surpass pre-conflict levels of 1.6 million bpd, concerns about security, stability and infrastructure deficits remain. While Libyan exports could help ease the impact of an Iranian shutdown, it would not likely be enough to address all the needs of Spain, Italy and Greece

Could it Backfire?

While the pending deadline is causing additional stress across Europe, ultimately, analysts have suggested that any move on the part of Tehran to force the stoppage would mean worse news for Iran than any EU states, even those searching for other options. According to a Financial Times report, if enacted, the early ban would force the National Iranian Oil Corp to find new customers for up to 600,000 barrels of oil per day, inviting the possibility of heavy discounts to entice new clients in Asia. Dependent on oil revenue for up to 80 percent of government spending, Iran would likely find it difficult to lose customers for very long.

Image: Iran Review

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EU Offshore Rules Face Tough Road Ahead

A year and a half after the Deepwater Horizon spill in the Gulf of Mexico led to calls for stricter offshore regulations in European waters, proponents continue to push for greater oversight and a more restrictive drilling environment. However, despite proclamations of support and proposals from the EU, advocates face stiff opposition from political and industry leaders across the Mediterranean.

Beginning late last summer, environmental and political groups across the Mediterranean began calling for local bans on offshore drilling efforts and new rules associated with safety and compensation following the Deepwater spill. Driven by fears about how a similar event could impact the Mediterranean, groups successfully lobbied for localized moratoriums on drilling in Italian waters and further reviews of existing projects, including BP’s efforts in Libya. Led by EU Energy Commissioner Gunther Oettinger, proponents of a stricter approach to offshore efforts pushed for a complete revision of EU regulations on the topic and the introduction of new industry observers. The campaign resulted in the passage of a draft resolution by the European Parliament in October that included would increase the area subject to protection 16-fold, from 22km from shore to 370km as well as increasing the amount companies would pay for clean-up efforts. The new offshore rules would impact 90 percent of oil and over 60 percent of gas produced in the EU and Norway, according to Bloomberg, though it did stop short of calling for an outright moratorium.

Although the resolution easily passed the EU parliament, setting it up for the approval of all member state governments and application within a year or two, the resolution faces stern opposition from political and industry figures.

The leadership of France’s Total blasted the introduction of new rules to the region, advocating that UK rules on offshore activities take precedent over any novel approaches from the EU.

“In the UK the standards are the best in the world…. We have to be very careful to take the best but not to introduce bureaucracy into the process,” said Total’s senior vice president for Northern Europe Patrice de Vivies, according to Reuters.

Further afield, the new regulations could run afoul of new and revived drilling campaigns in the eastern and southern Mediterranean, including projects initiated by Cyprus, Israel, Greece and Libya. While ostensibly out of European waters, efforts in Libya would be impacted by overlapping issues, making the introduction of much-needed oil and gas efforts difficult to achieve.

Image: Rff.org

 

 

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Are Germany’s Demands Even Good for the Med?

As Spain’s new government settled in to the reality that 2012 may just be worse than they dared dream it could be – with unemployment hitting 22.8 percent today – Prime Minister Mariano Rajoy appears to have realized that straight cuts and deficit reduction may not be the only path to recovery. Indeed, Rajoy now joins a host of Mediterranean leaders who are withering under the deficit demands of the EU’s strongest and most influential figure, Germany’s Angela Merkel. They want to get things under control, they insist, but all austerity and no efforts to spur growth are leaving them stagnant and facing increasingly frustrated populations. Making matters worse, they are facing a growing chorus of critics who suggest that the very cuts so vital to Merkel’s plans for recovery and assurances of fiscal support are actually making growth harder to achieve. At this week’s World Economic Forum in Davos, both George Soros and IMF Chief Christine Lagard echoed those sentiments with what could be construed as appeals for Merkel to back off and let a more collaborative approach take over, with the IMF head noting, Resorting to across-the-board, across-the continent, budgetary cuts will only add to recessionary pressure.”

For Rajoy and heads of state like Italy’s Mario Monti, the situation has left them appealing to Merkel directly, asking her to ease up on deficit cutting demands to allow for some efforts to spur growth when their countries need it and jobs most.

The Guardian’s Giles Tremlett reported, “While Rajoy, who met German chancellor Angel Merkel in Berlin on Thursday, publicly maintains his target of reducing the deficit to 4.4% from more than 8% last year, his ministers are letting it be known that they want the EU to ease up on deficit targets which require severe adjustments. Rajoy himself has pointed out that the EU’s target for 2011 supposed not only that last year’s deficit would be 6%, but also that growth this year would reach 2.3%.”

However, despite such appeals, Merkel appears unmoved while the debate continues to build around her. Still, its worth asking how long she can hold out until she begins to feel the pinch as sustained unemployment and negative economic growth in the southern states continue to weigh down Germany’s flagship economy.

 

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North African States Search for Vital Energy Stability

Eager to rebound from the halt in production in output brought on by last year’s sweeping political transitions, North African states are stepping up efforts to quell worries about security and stability. However, despite their best efforts, some actions are being met with obstacles that include financial challenges and even violence. A recent report in The Wall Street Journal suggested that the instability in the region, as well as the uncertainty about the viability of Iranian oil, had sent large consumers like China in search of new sources of oil and natural gas.

“China is making good progress toward diversifying its oil supply,” Gordon Kwan, a Hong Kong-based energy analyst at Mirae Asset Securities told the WSJ. “If they were to concentrate on just one or two countries that just accidentally went out of production, [global] oil prices could easily double.”

One of China’s losses in the region came from the production shutdown in Libya, which remains a thorn in the side of the country’s largest clients. Although the country’s transitional government has worked to restart production efforts and promote a new sense of security for foreign workers to return, some obstacles remain. So far, Libya has been unable to reopen the vital Ras Lanuf refinery despite assurances that it would already be up and running. However, despite delays, the government has worked to ease worries by saying it will be functioning within months and will be able to double its capacity within twenty-four months, according to Reuters Africa.

In Cairo, the country’s transitional government has sought out ways to combat a series of attacks on vital pipelines in the Sinai Peninsula, which began shortly before the ousting of long-standing president Hosni Mubarak. The attacks have repeatedly shut down the country’s exports to Israel and Jordon, reducing much needed revenue for the country’s new government and sending their trading partners in search of new sources of natural gas.

Image: Ahram.org

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New Med Landscape Spurs Pipeline Reevaluation

A new political and economic landscape across the Mediterranean region has led to a revaluation of existing and upcoming pipeline projects with some receiving a fresh look from political leaders and investors.

Economic shifts across Southern Europe and long-awaited political transitions across North Africa over the last year have forced many in the Mediterranean region to rethink their dependence on transport lines and where oil and gas deliveries will come from in the coming years. Political strife turned violent in Libya, Tunisia and Egypt resulted in complete pipeline shutdowns at several points during 2011 leaving customers to the north uncertain about the future of their energy needs. Heavily dependent on Libyan products and exports from Algeria, shipped through a Tunisian hosted pipeline, Italy in particular faced potential reserve deficits over the last year. Further east, attacks on pipelines in the Sinai Peninsula left heavily dependent Israel and Jordon to explore alternative options for their natural gas needs. This new environment has allowed for consideration of other projects in the region as energy customers seek stability for the years ahead.

“Widespread instability across the Middle East and Africa region has raised important questions about the long-term impact on upstream investments, oil and gas production and hydrocarbon exports in the region,” wrote Abdalla Salem El-Badri, Secretary General of the Organization of Petroleum Exporting Countries (OPEC) in an October opinion piece for The New York Times. A recent report in The Wall Street Journal suggested that the instability in the region, as well as the uncertainty about the viability of Iranian oil, had sent large consumers like China in search of new sources of oil and natural gas.

“China is making good progress toward diversifying its oil supply,” Gordon Kwan, a Hong Kong-based energy analyst at Mirae Asset Securities told the WSJ. “If they were to concentrate on just one or two countries that just accidentally went out of production, [global] oil prices could easily double.”

A Fresh Look

A long delayed direct connection between Algeria and Italy has received new attention since political instability in Tunisia and Libya led Italian leaders to rethink the reliability of their existing transport lines. The result of an MOU signed in 2007, bringing to together the interests of Algeria’s state-backed Sonatrach, Euro energy firms Edison, Enel and Hera, the 900km Galsi pipeline would mark the second such project linking the North African nation with Italy, via a landing in Sardinia. However, unlike the Trans Mediterranean pipeline, the Galsi would carry an estimated 8 billion cubic meters of gas northwards upon completion directly from country to country, skipping a passage through Tunisia. Held up due to issues of funding and government support, the Galsi has earned the support of Italian industry and political leaders eager to reduce their dependence on transport lines through the potentially volatile Tunisian territory.

The new pipeline would become the country’s fourth connection to the European marketplace, joining the Transmed, Maghreb-Europe Gas and MedGaz pipelines, the last of which came on line in mid-2011 though Spanish dips in demand have kept it from running at full capacity. Following delays and outright production stoppages resulting from political strife in Libya, the end of 2011 saw a return to service for the country’s Greenstream pipeline. According to the UPI, Italy imported 1.5 billion cubic feet of natural gas in November despite a reduction in the country’s demand.

Both the Galsi and MedGaz pipelines will play a large part in Algeria’s efforts to greatly increase production and exports over the coming year. Having spent the last year addressing corruption at the country’s state-backed energy firm Sonatrach, a shift in sector leadership and finding ways to quell the sort of public protests that led to political changes in neighboring Libya and Tunisia, Algeria are now focused on expanding their energy industry through infrastructure investment and greater use of new transport lines.

Eastern Promise

Driven by the potential of new natural gas efforts in the eastern Mediterranean, Greek natural-gas supplier Depa have conducted a preliminary study into the feasibility of a pipeline linking Cyprus and Greece. While the report found that the pipeline was possible, it may run into opposition from regional leaders as claims to Eastern Mediterranean natural gas reserves have become the focal point of political infighting between Cyprus, Turkey, Israel and Lebanon. Depa have also begun exploring the possibility of a liquefied natural-gas terminal as an alternative, according to a report in Business Week.

The focus on the Eastern Mediterranean centers on the Leviathan Basin, inviting both conflicting claims to the area’s natural gas potential and a host of new transport and production project proposals from all sides. With the potential to allow for greater energy independence for countries like Israel, the Basin could serve to further reduce demand for products transported through volatile North African pipelines, including the Egyptian lines that have suffered from continued attacks since the ousting of President Hosni Mubarak.

Image: Iraq Business News

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Morocco Sees Energy Boost with Circle But Wants and Needs More

 

This month’s announced completion of the Sebou (DRJ)-Kenitra pipeline by Circle Oil signals the Irish company’s continuing focus on Morocco despite weak interest in the country from many other international firms. The natural gas pipeline, which spans 55kms and has a capacity of 23.5 million standard cubic feet per day, connects the country’s Rharb Basin with consumers across the country. Allowing for greater connectivity between the efforts of Circle’s wholly owned subsidiary, Circle Oil Maroc Ltd, and local customers, the pipeline was hailed by the company as a positive next step in promoting projects in the Lalla Mimouna and Sebou permits. Circle’s local partners hold a 75 percent stake in the pipeline, with the remaining 25 percent controlled by Morocco’s National Office for Hydrocarbons and Mining (ONHYM).

Despite strong efforts by the ONHYM recently to garner further international attention to oil and gas efforts in Morocco, including the promotion of 22 new blocks for development in the final months of 2011 and support for offshore exploration investment, many companies have kept their distance. Most recently, the ONHYM has sought to promote the country’s offshore area as potentially similar to wells off the coast of Nova Scotia, suggesting that since the areas once sat next to each other millions of years ago, they likely share geological characteristics.

However, Circle has sustained its local presence with their efforts in the Rharb Basin, a 60 percent interest in the Oulad N’zala Permit Concession and a new push towards exploiting the country’s shale projects in Tarafaya over the last year.

The Sebou (DRJ)-Kenitra Pipeline announcement comes after the successful completion of 2-D and 3-D seismic acquisition programs in the Lalla Mimouna and Sebou permits, signaling further intent to expand the company’s local presence. According to a company release, the pipeline has been connected to seven of the area’s ten wells with the potential to produce, most of which date back to drilling efforts in 2008-9 and 2010-2011. The eight-inch pipeline is currently under-going pressure testing and is expected to be online by early February.

Image: Arabian Oil and Gas

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EU Embargo Weighs Heavily on Med States

As European Union officials gear up for the expected passage of an embargo on oil imports from Iran in response to the country’s continued push to develop a nuclear program, some states are struggling to find alternatives for when the deliveries finally stop.

Under pressure from the United States, which halted all energy imports from Iran in 1979, EU actors have signaled their intent to introduce the sanctions following a meeting scheduled for the 23rd of January. According to Reuters, the embargo would prohibit member states from concluding new oil contracts with Iran or renewing any that are due to expire. The halt in energy imports is expected to impact both the Iranian economy and the European energy market, with many states relying on product from Iran despite a steady easing of trade agreements in recent years. However, despite strong support from the UK, France and Germany to implement the embargo, some states are seeking alternative approaches, especially those already reeling from weakened economies and threats to energy trading partners.

Among those, three of these states have launched efforts to delay, curtail or customize the actual implemented embargo to allow for more time to find alternative resources or protect amounts owed by Iran to domestic firms. In addition to targeted delays of application, states have sought the approval to keep receiving payments related to existing debts. According to EU data provided by Reuters, Italy, Greece and Spain take in about 500,000 bpd our of the 600,000 total coming into the European Union from Iran. Weighed down by dour growth estimates for the new year and massive spending cuts to meet EU demands, these three countries would stand to suffer most from any decrease in available energy products.

So far, the three countries have won approval to at least escape the embargo for the first six months of this year to allow them to seek out product alternatives, including increased input from Saudi Arabia. However, any such cooperation is likely to enflame the already tense relationship between OPEC members.

 

 

 

 

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