Page 6 - AsiaElec Week 48

AsiaElec COMMENTARY AsiaElec
China to help pay for Power of Siberia’s con- struction, but these funds never arrived. Instead it was forced to cover the project’s entire $55bn cost internally.
The project’s budget was initially less than half this sum, but soon ballooned, with analysts pointing to Gazprom’s opaque mechanism of awarding contracts to construction companies owned by Kremlin insiders, the so-called stoli- garchs, as the cause.
The gas firm is now seeking to buy out some of these companies. Gazprom will close a deal to buy 100% of the company’s largest subcontrac- tor Stroygazmontazh that did much of the work on the Power of Siberia, controlled by stoli- garch Arkady Rotenberg for RUB70bn-95bn ($1.1bn-$1.5bn), according to reports by RBC business portal and Vedomosti daily citing unnamed sources.
Power of Siberia will also take a considerably long time to ramp up to full capacity, reaching this point only in 2025. Gazprom is required to supply at least 5bcm of gas from the pipeline in 2020, 10bcm in 2021 and 15bcm in 2022 under its contract with CNPC, while the Chinese firm’s minimum offtake is 85% of delivered volumes. How quickly supplies increase will depend on demand in China, as well as how cheaply the country can procure supplies from elsewhere, including LNG. At the same time the Chinese domestic gas distribution pipeline network
needs to be developed as it has never had a northern supplier before and so much of the infrastructure has yet to be built.
“The launch is positive for the company, as it opens access to the fast-growing Chinese market, while exports to Europe are flat lining,” VTB said, estimating that Power of Siberia sup- plies would make up 14% of Gazprom’s overseas shipments by 2025.
Gas customers
China already buys Russian gas from the Yamal LNG project in northern Siberia. Once Power of Siberia is running at full capacity, it could become Russia’s second-biggest gas customer after Germany, which took 58.5bcm of Russian gas last year. Beijing and Moscow have discussed additional supplies via proposed pipelines through Russia’s Altai region and via Mongolia, but new supply deals still need to be finalised.
At the same time, Gazprom is preparing to launch two more major pipeline projects in Europe – the Nord Stream 2 to Germany and the Turkish Stream (aka TurkStream) to Turkey – in order to scale back gas transit via Ukraine. Turk- ish Stream is slated for launch in January, while Nord Stream 2 is expected to come on stream later in 2020.
Nord Stream 2 fell behind schedule because of Denmark’s delay in issuing a construction permit, which was finally granted in October.™
RETAIL
Shell completes takeover of Australia’s ERM Power
AUSTRALIA
ROYAL Dutch Shell gained a significant foot- print in Australia’s power supply market by con- firming the takeover of ERM Power, enabling it to offer a “one-stop energy shop” in the country’s energy market.
In August, Shell offered A$2.45 ($1.66) per share to take over 100% of ERM Power in a deal valued at A$617mn ($419mn).
ERM is Australia’s second-biggest power retailer to businesses and industry.
Greg Joiner, VP of Shell Energy in Australia, is set to become CEO of ERM Power and is to oversee its rebranding as Shell Energy.
“At Shell, we aim to make electricity a signif- icant business for us. This means being involved at almost every stage of the integrated power system, from generating electricity, to buying and selling it, storing it and supplying it directly to customers,” said Shell integrated gas and new energies director Maarten Wetselaar.
Shell is set to gain 25% of the country’s
commercial and industrial retail market, second only to Origin Energy, as well as two gas-fired power stations.
Shell wants to use its global scale in oil and gas to build a power business as the world rap- idly shifts toward cleaner energy. It aims to boost annual spending on the strategy to $2-3bn by 2025. The company has identified Australia as one of its core markets for “emerging power”, it said, and ERM will become the company’s core power platform in that market.
“This acquisition aligns with Shell’s global ambition to expand our integrated power busi- ness and builds on Shell Energy Australia’s exist- ing gas marketing and trading capability,” Shell Australia’s country chair Zoe Yujnovich said in August.
ERM was founded by Australian energy mogul Trevor St Baker, who owned a 27% stake and who said in August that he was in favour of a sale at A$2.45 ($1.66) per share.™
P6
w w w . N E W S B A S E . c o m Week 48 04•December•2019