25 May 2007

How Big Is My Penis in This?

For fear of debating why Russia and Europe are going through a monumental spat and who benefits and why, at the moment it would appear that comparative penis size is the Russian blog meme du jour.  As the ever acerbic Copy Dude (what did you do wrong to be de-CIS'ed?) puts it, this is the moral equivalent of Haze Homeful of Freshness Awards

copydude » A Fistful Of Winceyette:
A Fistful Of Winceyette

sleepwalkers

I am reminded that it’s time for the Fistful of Euros Satin Pyjamas Awards. When I worked in advertising, I used to promote the Haze Homeful Of Freshness Awards, which was a real mouthful too. But if you squirted your house daily with Haze, so that your eyes were red and streaming with CFCs when our mystery sniffer called, you could be the lucky winner.

It was always a golden rule of direct marketing that there should be consolation prizes. Obvious rationale: more prizes, more interest. So it was disappointing to see that only one blog per category will win the Satin Pyjama. There will be no scrapping over places for Winceyette or Polyester sleepwear.

Given the current acrimony over blog rankings, it’s rather brave of Fistful to introduce fresh controversy. Why are blogs grouped geographically rather than by genre? Specifically, how can the academic ‘European Tribune‘ hope to compete with ‘My Boyfriend’s A Twat‘ ?

Siberian Light chimes in with some more rankings.  Mental masturbation.  Particularly as this list includes the "never knowingly correct" Edward Lucas.  Edward has at last found his metier and was today writing in the Daily Mail (the link is to his own blog where, without much success he tries hard to downplay the fact that an Economist journalist is writing in the Daily Mail and yet still claiming that he means it.)  I assume that much of what he has written comes from the heart as the application of the head would have resulted in a different story.

Whilst the Ruminator was also bizarrely nominated for the Pajama awards, I have voted for English Russia as I would rather see pictures of cars in holes in the road than read my own drivel on energy security and other strange Russian goings on.

For those who know me, life is returning to normal - I'm blogging again - I wasn't going to bore you with nappy tales - but to be honest its more interesting and insightful than the Russian blogosphere.


Technorati Tags: ,

10 May 2007

Energy Fiction

Sitting in a cafe in London between meetings consuming coffee and an overly detailed read of the FT. Today's version seems to be full of energy related pieces, which by there very nature include Russia. The key piece of rubbish is entitled Politics and Easy Profits Signal Global Oil Crunch (no link love as I am writing this on my handheld.)
 
The piece is, in effect, the executive summary of a study by PFC Energy, an energy consultancy that has not done a good job of diversifying its client base from the majors. The sub-title of the study should probably be "nasty countries like Russia and Venezuela won't let us make a profit out of their oil." The essence is that increasing control of national resources by national companies (NOC) means that the world will be short of produced oil because they don't have your best interest at heart whereas BP, Shell and Exxon are your best friend. For evidence of big oil as your best friend please refer to Exxon Valdez, Prudhoe Bay and Texas refinery. The solution to this problem is to liberalize national resources, as Kazakhstan has done, and allow the majors replace their depleting reserves.
 
The concept of produced oil, as opposed to reserves, allows the oil industry to avoid peak oil discussions by putting the blame on not-our-friend governments and the NOC's. Peak oil reserves versus plateau production is a semantic game which seeks to get to the source reason for plateauing production levels. All you and I need to know is that the finding and production cost of every new barrel of oil is much greater than the last one.
 
Whilst I have a certain sympathy with PFC's view that the NOC's are enjoying the good times and not investing for the future the basic criticism of Russia is fairly hard to square with Q107 oil production up 6% versus 1Q06. On the gas front this is the argument I deploy when discussing the surplus of demand over supply for domestic gas and GAZP. However, as I will increasingly argue gas and oil are different sides of the same energy coin.
 
One of the other pieces of fiction peddled by PFC , inter alia, is that only the majors can manage the technical complexity of big complex projects. For further evidence see Sakhalin II and Shell and doubling of the cost base. This confuses technical complexity which is increasingly managed by service companies and project management. I will not deny that the NOC's will steal more (note the comparitor) but it does not make them worse.
 
There are other benefits to opening up your natural resources to the majors - no one mentions Giffen, bribery and Mobil. Nor for that matter the disappearance of the owner of the 10th largest bank in Kazakhstan (google gorst kazakhstan banks) though I am sure that Registan has it covered.

01 May 2007

Seeding the Parade

However shitty and miserable the weather is it does not rain before midday on 1 May.  Parade over, like magic the first drops of the rain pattered on the windscreen of the taxi taking me to the delights of spring in London.

Energy Policy and Swiss Bank Accounts

OK, I don't know that they are in Switzerland, but you get my drift.

It's quite likely that I owe Jerome an apology for mischaracterizing his review of the Economist article yesterday.  If you have the patience to read to page 21 (of 22) of his article "Gazprom as a Predictable Partner.  Another Reading of the Russian-Ukrainian and Russian-Belarussian Energy Crises." (which can be found somewhere at www.ifri.org) he unequivocally acknowledges Russia's most significant energy issue;
"The real long term worry is the inability of Russia to produce enough oil and gas for its own internal demand as well as for Europe's growing needs." 

This may well be a divergence from his previously held views, it also goes further than mine.  Russia does not lack reserves.  For all the right economic and risk/reward reasons there has been precious little investment in exploration since the collapse of the Soviet Union, and for reasons of cash in the decade prior to its collapse.  The low-hanging fruit has had (more) modern extraction techniques applied to them and they are reaching, have reached or are beyond plateau production.  Every barrel of oil equivalent from now on requires real lon-term cash investment, not just cash flow expropriation.  Fifth Directorate Thugs are not well-schooled in the long-term. Why should they be when emerging market investors (viz LSE) are so happy to uncritically reward short-termism (Sir Nigel Rudd,  you are right) and there is so much cash floating around in lucrative transit trades (see below). So as I have written both here and elsewhere the issue is not reserves of either oil and gas but investment in them and, to expand on the headline, an investment climate that rewards long-termism in the natural resource sector.

One, of the many, difference between continental Europeans and the anglo-saxon world is the placing of conclusions at the end of worthy articles.  The assumption being that you have both the time and the inclination to wait to the end to be told the conclusion.  The more time-constrained anglo-saxons tend to conclude first and hope that you might just honour them with a cover-to-cover read.  In true continental European style I am hiding the conclusion at the end of this post.

Western commentators on Russian energy politics frequently (always?) confuse personal wealth grabbing with national policy.  National policy is a smoke screen for cash generation justifies by nationalism.  Empirical evidence points to personal wealth creation usurping the original point of nationalizing.  Jerome would point you to the more recent spats with Ukraine and Belarus which are about dividing the spoils and not about energy policy;  80-90% of all Russian gas headed of Europe transits Ukraine.  The December 2005, and subsequent 2006, Ukraine/GAZP/Turkmen gas deals played magical games with numbers whereby GAZP pays nothing to transit gas through Ukraine provided that it sells gas at sub-netback parity rates i.e. RosUkrenergo pays European prices, minus the sum of  transit fees on all gas transiting its territory.  Except that the transit fees on all gas transiting Ukraine accrues to individuals and not to GAZP (Bill are you listening). In addition to which the replacement of Yeltsin-era Red Directors (Vyakharev et al) with Fifth Directorate Thugs means that the institutional memory has been lost and any form of industrial competence has been buried under a pile of personal wealth creation.  As opposed to personal wealth creation competing with industrial competence.

And so, finally, to the point.  If Russia's energy policy is not driven by policy but by personal wealth creation what does that mean for Russia and Europe's energy policy?  Actually it's a little scary.  If you can drag yourself back to the quotation at the top of the page someone is going to be short of gas, and maybe oil, in the medium term.  Continental Europe has been building gas-fired power stations a plenty - they are cheaper and cleaner than their competitors, except of course nuclear which is either cleaner or very, very dirty.  Russia is amongst the worlds most inefficient energy users - it starts with the apartment fortichka and goes downhill from there - and it's energy base in European Russia is predominantly gas-fired.

The gap between Gazprom and Central Asian production in 2010-15 and European and domestic demand is expected to be 100 billion cubic meters p.a. (about $100bn in revenue terms.)  We are assured that GAZP relies on the European market today (which it does).  But if domestic prices achieve netback parity in 2011 (current assumptions) why go through the hassle of exporting gas when it can be sold in Russia's borders.  Because there is little rent on domestic sales - that's why.  Always assuming the same guys are in charge of course.

So Europe should be concerned. So should Russia - because no one actually knows whose Swiss bank account will need to be filled in 2011.

25 May 2007

How Big Is My Penis in This?

For fear of debating why Russia and Europe are going through a monumental spat and who benefits and why, at the moment it would appear that comparative penis size is the Russian blog meme du jour.  As the ever acerbic Copy Dude (what did you do wrong to be de-CIS'ed?) puts it, this is the moral equivalent of Haze Homeful of Freshness Awards

copydude » A Fistful Of Winceyette:
A Fistful Of Winceyette

sleepwalkers

I am reminded that it’s time for the Fistful of Euros Satin Pyjamas Awards. When I worked in advertising, I used to promote the Haze Homeful Of Freshness Awards, which was a real mouthful too. But if you squirted your house daily with Haze, so that your eyes were red and streaming with CFCs when our mystery sniffer called, you could be the lucky winner.

It was always a golden rule of direct marketing that there should be consolation prizes. Obvious rationale: more prizes, more interest. So it was disappointing to see that only one blog per category will win the Satin Pyjama. There will be no scrapping over places for Winceyette or Polyester sleepwear.

Given the current acrimony over blog rankings, it’s rather brave of Fistful to introduce fresh controversy. Why are blogs grouped geographically rather than by genre? Specifically, how can the academic ‘European Tribune‘ hope to compete with ‘My Boyfriend’s A Twat‘ ?

Siberian Light chimes in with some more rankings.  Mental masturbation.  Particularly as this list includes the "never knowingly correct" Edward Lucas.  Edward has at last found his metier and was today writing in the Daily Mail (the link is to his own blog where, without much success he tries hard to downplay the fact that an Economist journalist is writing in the Daily Mail and yet still claiming that he means it.)  I assume that much of what he has written comes from the heart as the application of the head would have resulted in a different story.

Whilst the Ruminator was also bizarrely nominated for the Pajama awards, I have voted for English Russia as I would rather see pictures of cars in holes in the road than read my own drivel on energy security and other strange Russian goings on.

For those who know me, life is returning to normal - I'm blogging again - I wasn't going to bore you with nappy tales - but to be honest its more interesting and insightful than the Russian blogosphere.


Technorati Tags: ,

10 May 2007

Energy Fiction

Sitting in a cafe in London between meetings consuming coffee and an overly detailed read of the FT. Today's version seems to be full of energy related pieces, which by there very nature include Russia. The key piece of rubbish is entitled Politics and Easy Profits Signal Global Oil Crunch (no link love as I am writing this on my handheld.)
 
The piece is, in effect, the executive summary of a study by PFC Energy, an energy consultancy that has not done a good job of diversifying its client base from the majors. The sub-title of the study should probably be "nasty countries like Russia and Venezuela won't let us make a profit out of their oil." The essence is that increasing control of national resources by national companies (NOC) means that the world will be short of produced oil because they don't have your best interest at heart whereas BP, Shell and Exxon are your best friend. For evidence of big oil as your best friend please refer to Exxon Valdez, Prudhoe Bay and Texas refinery. The solution to this problem is to liberalize national resources, as Kazakhstan has done, and allow the majors replace their depleting reserves.
 
The concept of produced oil, as opposed to reserves, allows the oil industry to avoid peak oil discussions by putting the blame on not-our-friend governments and the NOC's. Peak oil reserves versus plateau production is a semantic game which seeks to get to the source reason for plateauing production levels. All you and I need to know is that the finding and production cost of every new barrel of oil is much greater than the last one.
 
Whilst I have a certain sympathy with PFC's view that the NOC's are enjoying the good times and not investing for the future the basic criticism of Russia is fairly hard to square with Q107 oil production up 6% versus 1Q06. On the gas front this is the argument I deploy when discussing the surplus of demand over supply for domestic gas and GAZP. However, as I will increasingly argue gas and oil are different sides of the same energy coin.
 
One of the other pieces of fiction peddled by PFC , inter alia, is that only the majors can manage the technical complexity of big complex projects. For further evidence see Sakhalin II and Shell and doubling of the cost base. This confuses technical complexity which is increasingly managed by service companies and project management. I will not deny that the NOC's will steal more (note the comparitor) but it does not make them worse.
 
There are other benefits to opening up your natural resources to the majors - no one mentions Giffen, bribery and Mobil. Nor for that matter the disappearance of the owner of the 10th largest bank in Kazakhstan (google gorst kazakhstan banks) though I am sure that Registan has it covered.

01 May 2007

Seeding the Parade

However shitty and miserable the weather is it does not rain before midday on 1 May.  Parade over, like magic the first drops of the rain pattered on the windscreen of the taxi taking me to the delights of spring in London.

Energy Policy and Swiss Bank Accounts

OK, I don't know that they are in Switzerland, but you get my drift.

It's quite likely that I owe Jerome an apology for mischaracterizing his review of the Economist article yesterday.  If you have the patience to read to page 21 (of 22) of his article "Gazprom as a Predictable Partner.  Another Reading of the Russian-Ukrainian and Russian-Belarussian Energy Crises." (which can be found somewhere at www.ifri.org) he unequivocally acknowledges Russia's most significant energy issue;

"The real long term worry is the inability of Russia to produce enough oil and gas for its own internal demand as well as for Europe's growing needs." 

This may well be a divergence from his previously held views, it also goes further than mine.  Russia does not lack reserves.  For all the right economic and risk/reward reasons there has been precious little investment in exploration since the collapse of the Soviet Union, and for reasons of cash in the decade prior to its collapse.  The low-hanging fruit has had (more) modern extraction techniques applied to them and they are reaching, have reached or are beyond plateau production.  Every barrel of oil equivalent from now on requires real lon-term cash investment, not just cash flow expropriation.  Fifth Directorate Thugs are not well-schooled in the long-term. Why should they be when emerging market investors (viz LSE) are so happy to uncritically reward short-termism (Sir Nigel Rudd,  you are right) and there is so much cash floating around in lucrative transit trades (see below). So as I have written both here and elsewhere the issue is not reserves of either oil and gas but investment in them and, to expand on the headline, an investment climate that rewards long-termism in the natural resource sector.

One, of the many, difference between continental Europeans and the anglo-saxon world is the placing of conclusions at the end of worthy articles.  The assumption being that you have both the time and the inclination to wait to the end to be told the conclusion.  The more time-constrained anglo-saxons tend to conclude first and hope that you might just honour them with a cover-to-cover read.  In true continental European style I am hiding the conclusion at the end of this post.

Western commentators on Russian energy politics frequently (always?) confuse personal wealth grabbing with national policy.  National policy is a smoke screen for cash generation justifies by nationalism.  Empirical evidence points to personal wealth creation usurping the original point of nationalizing.  Jerome would point you to the more recent spats with Ukraine and Belarus which are about dividing the spoils and not about energy policy;  80-90% of all Russian gas headed of Europe transits Ukraine.  The December 2005, and subsequent 2006, Ukraine/GAZP/Turkmen gas deals played magical games with numbers whereby GAZP pays nothing to transit gas through Ukraine provided that it sells gas at sub-netback parity rates i.e. RosUkrenergo pays European prices, minus the sum of  transit fees on all gas transiting its territory.  Except that the transit fees on all gas transiting Ukraine accrues to individuals and not to GAZP (Bill are you listening). In addition to which the replacement of Yeltsin-era Red Directors (Vyakharev et al) with Fifth Directorate Thugs means that the institutional memory has been lost and any form of industrial competence has been buried under a pile of personal wealth creation.  As opposed to personal wealth creation competing with industrial competence.

And so, finally, to the point.  If Russia's energy policy is not driven by policy but by personal wealth creation what does that mean for Russia and Europe's energy policy?  Actually it's a little scary.  If you can drag yourself back to the quotation at the top of the page someone is going to be short of gas, and maybe oil, in the medium term.  Continental Europe has been building gas-fired power stations a plenty - they are cheaper and cleaner than their competitors, except of course nuclear which is either cleaner or very, very dirty.  Russia is amongst the worlds most inefficient energy users - it starts with the apartment fortichka and goes downhill from there - and it's energy base in European Russia is predominantly gas-fired.

The gap between Gazprom and Central Asian production in 2010-15 and European and domestic demand is expected to be 100 billion cubic meters p.a. (about $100bn in revenue terms.)  We are assured that GAZP relies on the European market today (which it does).  But if domestic prices achieve netback parity in 2011 (current assumptions) why go through the hassle of exporting gas when it can be sold in Russia's borders.  Because there is little rent on domestic sales - that's why.  Always assuming the same guys are in charge of course.

So Europe should be concerned. So should Russia - because no one actually knows whose Swiss bank account will need to be filled in 2011.