Ottawa to Push For Petro-Canada, Gazprom Gas Deal
Canada will support a major deal that envisages sending Russian natural gas to North America in tanker ships, in a vote of confidence for the Kremlin at a time when Russia is struggling to defend its reputation as a reliable energy supplier.
Finance Minister Jim Flaherty, making his debut on the world stage after his appointment less than a week ago, met with his counterparts in the Group of Eight industrialized countries over the weekend in Moscow. Energy security led their agenda, and Russia took pains to persuade the other G8 members that it was justified in cutting the gas flow to Ukraine last month.
Mr. Flaherty said afterward that Canada agrees with Russia's basic approach to energy security. He also endorsed a $1.3-billion (U.S.) deal currently being negotiated between Calgary-based Petro-Canada and OAO Gazprom, Russia's state-controlled gas giant. Such diplomatic support would be crucial in a country where major energy deals require the Kremlin's approval.
Politicians across Europe expressed concern about their countries' reliance on Russian gas after a price dispute resulted in Gazprom reducing the gas supply on Jan. 1, which dropped the pressure in European pipelines in the dead of winter. Asked whether those recent events have given Canada any reason to worry about doing business with Gazprom, Mr. Flaherty repeated: "It's a good development with respect to energy security and supply."
Petro-Canada has been negotiating with Gazprom for at least two years about a plan to build a liquefied natural gas terminal at Ust-Luga, near St. Petersburg.
The project could give Canada and the United States a supply of energy from outside of the Middle East, as tankers would carry the liquid gas from northern Russia to a terminal in Cacouna, Que.
Russia would get its first major link to the North American market, where natural gas reserves are quickly depleting. A report by the U.S. Department of Energy predicts that Canada's natural gas reserves will be used up within seven or eight years.
But recent events in Russia should give Canada pause when considering its new business partner, said Anton Oleinik, an assistant professor at Memorial University of Newfoundland and senior research fellow at the Russian Academy of Sciences in Moscow. Mr. Oleinik recently edited a book about Russia's economy. Titled, The Institutional Economics of Russia's Transformation, it focuses in part on the way that Russian business doesn't operate by the same rules accepted in the West. Any major energy project must somehow participate in the Russian system of corruption, blackmail, and paying for protection, Mr. Oleinik said.
Investing so heavily in a liquefied natural-gas conversion facility would also leave the Canadian side vulnerable if the Russians decide to change the rules, Mr. Oleinik added, because the assets are difficult to convert for other uses.
Interfax, the Russian state news agency, quoted unnamed sources at Gazprom on Jan. 19 saying that Petro-Canada has the best chance of getting a deal with Gazprom to ship liquefied natural gas. Competing projects would send the liquid gas to sea ports in the Gulf of Mexico and the U.S. West Coast.
At the meeting of G8 delegations on Saturday, Russian Finance Minister Alexei Kudrin said his counterparts seemed sympathetic to his argument that recent gas disruptions in Europe were caused by Ukraine siphoning the Russian supply.
The ministers talked about ways of preventing such a scenario from happening again, and also about the economic problems caused by rising energy prices.
A joint statement said energy security will be the focus of the G8 summit in June. "Market mechanisms are vital to the functioning of the global energy system," the statement said.
For its part, Russia promised to break Gazprom's monopoly on gas exports and increase the number of links to its vast energy supplies, citing the liquefied natural gas project as an example.
"Decentralization of production and decentralization of supply helps us to prevent the increase in prices," Mr. Kudrin said.
Russia has reaped huge economic benefits from rising energy prices, and Moscow's actions have generally strengthened -- not loosened -- state control over the energy industry.
Mr. Kudrin described lower prices as a "mid-term to long-term goal," and he declined to set a date for opening gas exports to competition.
TheGlobeAndMail
Finance Minister Jim Flaherty, making his debut on the world stage after his appointment less than a week ago, met with his counterparts in the Group of Eight industrialized countries over the weekend in Moscow. Energy security led their agenda, and Russia took pains to persuade the other G8 members that it was justified in cutting the gas flow to Ukraine last month.
Mr. Flaherty said afterward that Canada agrees with Russia's basic approach to energy security. He also endorsed a $1.3-billion (U.S.) deal currently being negotiated between Calgary-based Petro-Canada and OAO Gazprom, Russia's state-controlled gas giant. Such diplomatic support would be crucial in a country where major energy deals require the Kremlin's approval.
Politicians across Europe expressed concern about their countries' reliance on Russian gas after a price dispute resulted in Gazprom reducing the gas supply on Jan. 1, which dropped the pressure in European pipelines in the dead of winter. Asked whether those recent events have given Canada any reason to worry about doing business with Gazprom, Mr. Flaherty repeated: "It's a good development with respect to energy security and supply."
Petro-Canada has been negotiating with Gazprom for at least two years about a plan to build a liquefied natural gas terminal at Ust-Luga, near St. Petersburg.
The project could give Canada and the United States a supply of energy from outside of the Middle East, as tankers would carry the liquid gas from northern Russia to a terminal in Cacouna, Que.
Russia would get its first major link to the North American market, where natural gas reserves are quickly depleting. A report by the U.S. Department of Energy predicts that Canada's natural gas reserves will be used up within seven or eight years.
But recent events in Russia should give Canada pause when considering its new business partner, said Anton Oleinik, an assistant professor at Memorial University of Newfoundland and senior research fellow at the Russian Academy of Sciences in Moscow. Mr. Oleinik recently edited a book about Russia's economy. Titled, The Institutional Economics of Russia's Transformation, it focuses in part on the way that Russian business doesn't operate by the same rules accepted in the West. Any major energy project must somehow participate in the Russian system of corruption, blackmail, and paying for protection, Mr. Oleinik said.
Investing so heavily in a liquefied natural-gas conversion facility would also leave the Canadian side vulnerable if the Russians decide to change the rules, Mr. Oleinik added, because the assets are difficult to convert for other uses.
Interfax, the Russian state news agency, quoted unnamed sources at Gazprom on Jan. 19 saying that Petro-Canada has the best chance of getting a deal with Gazprom to ship liquefied natural gas. Competing projects would send the liquid gas to sea ports in the Gulf of Mexico and the U.S. West Coast.
At the meeting of G8 delegations on Saturday, Russian Finance Minister Alexei Kudrin said his counterparts seemed sympathetic to his argument that recent gas disruptions in Europe were caused by Ukraine siphoning the Russian supply.
The ministers talked about ways of preventing such a scenario from happening again, and also about the economic problems caused by rising energy prices.
A joint statement said energy security will be the focus of the G8 summit in June. "Market mechanisms are vital to the functioning of the global energy system," the statement said.
For its part, Russia promised to break Gazprom's monopoly on gas exports and increase the number of links to its vast energy supplies, citing the liquefied natural gas project as an example.
"Decentralization of production and decentralization of supply helps us to prevent the increase in prices," Mr. Kudrin said.
Russia has reaped huge economic benefits from rising energy prices, and Moscow's actions have generally strengthened -- not loosened -- state control over the energy industry.
Mr. Kudrin described lower prices as a "mid-term to long-term goal," and he declined to set a date for opening gas exports to competition.
TheGlobeAndMail
posted by Ottawa Gas Prices | 4:11 PM
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