Analytics, Energy, EU – Baltic States, Transport
International Internet Magazine. Baltic States news & analytics
Thursday, 10.04.2025, 04:29
End of fossil fuels: warning to the Baltic States
Print version |
|---|
Recent gas supply for Lithuania goes in sharp contrast with what
other Nordic region states are doing. Thus according to the US embassy in
Vilnius, the gas supply contract between Lietuvos Duju Tiekimas (Lithuanian
Gas Supply, or LDT) and the US Cheniere Energy was going to
stay and being commercially feasible. Besides, Lithuania also receives LNG from
Norway's Statoil and another American supplier, the US Koch
Supply& Trading.
Gas shipment to the Baltics will go on: the market situation and its
development, according to Lithuanian officials, is showing “expected increase
in amount of these shipments” said Lithuanian Energy Minister Z. Vaiciunas. Thus, more shipments of liquefied natural gas (LNG) from the US are expected
to follow after the first-ever LNG cargo was delivered to Klaipeda from across
the Atlantic on 21.08.2017.
Both Energy Minister Vaiciunas and Lietuvos Energija CEO D. Misiunas
said that US LNG is currently cheaper than Gazprom’s gas, but they do
not predict that Russian gas will be forced out of the market. At the same
time, there is a visual increase for Russian gas supply in Central and Western
European states: export has increased by over 16% in Germany, by about 75% in
Austria, by about 27% in Slovakia and Check Republic. As to the Baltic States,
the demand for gas increased, correspondingly, by 90% in Estonia, 75% in Latvia
and by 125% in Lithuania.
http://www.baltic-course.com/rus/good_for_business/?doc=132272
Some experts say that the “alarming situation” is due to so-called
over-contracting in European gas supply: i.e. more supply offers than the real
consumption. Thus, before 2008 (i.e. before the crisis), gas consumption exceed
the available supply offers; hence future supply contracts were done in line
with the predicted extensions. Presently, most countries are re-assessing their
gas supplies and needs with changes in structural energy mix and
renewables.
Another trend in a Nordic state
Oil prices have
started to recover after an extended downturn, strengthening profit
at major oil producers in the second quarter of 2017 and opening the door
to more mergers in the sector.
Big energy companies like BP,
Chevron and Total have wrestled in recent years with a sharp decline in oil
prices: a barrel of crude now sells for around $52, less than half its peak in
early 2014.
As the price of oil fell to less
than half of what it was at its recent peak, so did the oil industry’s cash
flows. But after much adjustment by oil companies, and even a complete
reworking of their businesses, the first quarter of this year saw a return to
positive cash flow. Over the last two and a half years, the oil industry has
experienced its deepest downturn since at least the 1990s.
If history is any guide, after
every oil bust comes a recovery, if not a boom; this time a recovery has been
tentative, at best.
The oil companies in the
Baltics and around the world initially sought to bolster earnings by cutting
jobs and investment, but have since gone further by embracing new technologies
and construction methods. As a result, operating costs have fallen and cash
flows have firmed. As recently as 2015, it cost $97 for big energy companies to
break even on a barrel of oil, after expenses, investments and shareholder
dividends, according to an analysis by RBC Capital Markets, an investment bank.
That figure has now nearly been halved. Such adjustments have ensured that if
oil prices do rise, profits at major oil and gas companies will rise. The shift
was borne out in the latest batch of results, with Chevron, Exxon Mobil, Royal Dutch Shell and Total all reporting much healthier earnings.
Nevertheless, the Danish
container shipping company A.P. Moller-Maersk agreed to sell
its oil and gas business to the French energy giant Total for about $5 billion.
Maersk often said that it planned to spin off or sell its oil business as it
focused on its transport and logistics services operations. Besides, the Danish
energy policy is based on renewables: by 2050 the country will end up using any
fossil fuels.
Chairman and chief executive of
Total, Patrick Pouyanné,
said in August 2017 that the company would “take advantage of the low-cost
environment” to start new projects and seek acquisitions.
The proposed deal with Maersk
values the Danish company’s oil and gas business at $7.45 billion, including
debt.
Continue reading the main story.
“This transaction delivers an
exceptional opportunity for Total to acquire, via an equity transaction, a
company with high quality assets which are an excellent fit with many of
Total’s core regions,” Mr. Pouyanné said.
Under the terms of the deal, the
Danish company would receive 97.5 million Total shares, or about 3.8 percent of
the French company. Total would also assume $2.5 billion in debt as part of the
transaction.
Maersk’s main shareholder also
has the possibility of a seat on Total’s board of directors. The deal is
subject to regulatory approval and to a consultation process with Total’s
employees. It is expected to close in the first quarter of 2018. As part of the
transaction, Total would also assume decommissioning obligations of $2.9 billion, Maersk said in its own statement.
The Danish company added that
it would seek to return a “material portion of the value” of the shares it
received from Total in the form of extraordinary dividend, share buyback or
distribution of Total shares by 2019.
Spreading global influence: a deal with Iran
The French company said the purchase of a
Danish oil/gas producer in a relatively safe part of the world was part of a
“balancing of country risks” just months after Total
signed a deal with Iran to lead a natural gas project in the Persian
Gulf.
The agreement with Tehran could open Iran’s huge energy reserves to international markets. But it also exposes Total to a high degree of risk, particularly if President Trump reneges on the Iran nuclear deal, or if Washington imposes further sanctions on Tehran.
Total wants to sign an agreement in Tehran committing his company to lead a natural gas project in the Persian Gulf that could open Iran’s huge petroleum reserves to international players.
Under the terms of the deal, Total will invest $1 billion in the first phase of development of part of the South Pars gas field. It will form a partnership with the China National Petroleum Corporation and the Iranian company Petropars.
«The Baltic Course» Is Sold and Stays in Business!
