Streetwise Professor

October 26, 2008

Just Wonderin’ . . .

Filed under: Economics,Energy,Politics,Russia — The Professor @ 4:37 pm

How Gazprom’s financial travails will affect the prospects for Nordstream and South Stream.   Not too favorably, I’d wager.   (Though that depends on whose perspective you take.   Here, by “favorable” I mean “increasing the odds of completion.”)   By the same token, Europe and the US don’t have the money to throw at Nabucco, and are, shall we say, otherwise occupied with their own issues.   Thus, for the near future the Gas Wars may become just another Frozen Conflict.

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  1. They are expensive projects (about 15-20bn Euros each), but they are spread over a decade or so and a strategic investment. They might be cooled somewhat but very much doubt frozen.

    Comment by Da Russophile — October 26, 2008 @ 6:39 pm

  2. If Gazprom doesn’t find hundreds of billions to develop new natural gas fields, it may not have any natural gas to pump down these pipelines, even if it does find the cash somewhere to build them.

    Comment by Michel — October 26, 2008 @ 6:46 pm

  3. But, as an indication of how pressing its circumstances are, Gazprom is so strapped for cash that it is fading the Kovykta trade. According to the FT article, “[t]he credit crunch and the fall in oil prices are forcing Gazprom to focus on the development of gas production and infrastructure in Russia with projects that will show results more quickly.” Nordstream and Southstream are expensive (already way over budget) and long term, without immediate payoffs in prospect. I doubt that they’ll been anywhere near the front of the line for funding. (Esp. now that some of the partners that Gazprom has peeled off to support Southstream, notably Hungary and Austria, are in a world of hurt.)

    The next paragraph is also interesting: “[Gazprom] is also facing a subtle change in the political landscape, in which its grip on Russia’s gas industry has been challenged following the appointment of Igor Sechin, chairman of rival Rosneft, as deputy prime minister in charge of the energy sector.” I would only quibble that “subtle” is not the appropriate adjective, especially when Sechin is involved. This relates to some of my earlier opinions on the prospects for intense infighting between big, politically connected companies, notably Gprom and Rosneft, that are strapped for cash as the oil price decline hammers their cash flows.

    The ProfessorComment by The Professor — October 27, 2008 @ 9:26 pm

  4. I agree with you. Putin could barely keep the lid on open conflict between competing clans when the petrodollars were pouring in, what will he do now? It is going to be increasingly difficult now that the “players” understand that the money is running out.

    Comment by Michel — October 28, 2008 @ 10:25 am

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