blog2008

Harris upbeat on Gateway

Kitimat Sentinel
August 20, 2008

Public consultation on Enbridge’s Gateway pipeline project is set to begin in September.

The 1,150 km pipeline would run from Kitimat to Strathcona Country, just outside Edmonton.

The twin pipeline would transport oil to Kitimat to be loaded in oil tankers heading to California and Asia.

Condensate, used to dilute the heavy oil so it can be piped, would be imported through here and piped to customers in the oil sands.

Ex-Skeena MLA Roger Harris is Enbridge’s vice-president of communications and aboriginal partnerships and last week he outlined progress on the project at a Prince George Chamber of Commerce meeting.

He explained the proposed route for the project would follow Highway 37 North from Kitimat before veering east and passing just north of Burns Lake, south of Fort St. James, north of Bear Lake, south of Grand Prairie, south of Mayerthorpe and into Strathcona Country.

The project involves driving three tunnels totaling 12 kilometres in length through the Telkwa Pass.

Harris said his focus is making sure the project benefits Northern BC.

In 2005, Enbridge estimated the project would cost $4 billion. “It’s safe to say that number has changed significantly,” Harris acknowledged, saying current estimates were in the $6 billion to $8 billion range.

“We’re working to finalize that number now.” he said, adding, “This will be one of the largest and most complex pipeline projects in North America.”

The project is estimated to employ about 5,000 people over 12 construction sites and see $2.7 billion in wages spent in Northern BC.

Enbridge shelved the project in 2005 because of a lack of commercial support, Harris said. This time Enbridge has secured 10 commercial partners interested in using the pipeline to ship to international markets.

Condensate is currently imported at Kitimat by Encana and is sent by rail tankers to Edmonton, he added.

Harris said six teams in BC and Alberta are working with 50 First Nations along the route to sign consultation agreements.

And by the end of August Enbridge will have signed 10 agreements to fund research and consultation capacity with First Nations.

“We are going to be offering an equity package to First Nations. We’re thinking 10 per cent,” Harris said.

“That would make First Nations owners in this project and meet their long-term benefits. We’re bringing an entirely new approach.”

Harris said Enbridge is urging the federal government to begin its consultation process with First Nations groups like the Carrier Sekani Tribal Council.

Open houses on the project will run September to November. Enbridge anticipates going to regulatory review in 2009, completing that process by 2012 and finishing construction by 2015.

Moscow transforms real-world game of RISK

SHAWN MCCARTHY AND MATTHEW CAMPBELL
Globe and Mail
August 15, 2008

In early 2002, some 200 U.S. Special Forces soldiers landed in the former Soviet republic of Georgia to train the Georgian army in anti-terrorism techniques, including how to protect a planned oil pipeline from secessionist or anti-Western saboteurs.

With strong encouragement from Washington, Georgia was finalizing a deal with its neighbours, Azerbaijan and Turkey, and Britain's BP PLC [BP-N] to build a $3.9-billion (U.S.) pipeline from the oil-rich Caspian region to the Turkish port of Ceyhan on the Mediterranean Sea.

The 1,768-kilometre, somewhat-circuitous route bypassed major U.S. rivals in the region, Russia and Iran, as well as Armenia, the traditional enemy of Turkey and Azerbaijan.

The Baku-Tbilisi-Ceyhan (BTC) project, completed in 2005, entailed tremendous commercial risk because the three participants were involved in violent struggles with neighbours or internal separatist groups, and the pipeline would be vulnerable to sabotage. Under the agreement with BP, each country was to provide security within its borders and be responsible for losses should the pipeline be shut down as a result of political violence.

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It was part of the United States' effort to reduce Russia's dominance of the region's booming oil trade, and by doing so to encourage the development of independent-minded states on its rival's southern flank.

Now, with its invasion of Georgia, Moscow has dramatically transformed the real-world game of Risk that is being played out in the region.

For more than a decade, Russia watched while the U.S. and Europe played the new “great game” of energy geopolitics in its own backyard. It was 10 years ago this weekend that Russia plunged into financial crisis by devaluing the ruble and defaulting on its mounting debt.

With the Georgian invasion, the Kremlin has sent notice that it now controls the Risk board. And that it is willing to use its armed forces to back up what it regards as its national interest in neighbouring states.

At stake is control over one of the world's most promising new sources of crude oil – one that could rival the impact of the North Sea a generation ago. The U.S., in particular, has worked strenuously to minimize Russia's influence over this energy development.

“While it is early days to say what the security situation is going to look like in Georgia longer term, the events of the past few days deal a blow to the U.S.'s plans to support existing and new oil and gas routes that bypass Russia,” Tanya Costello, Eurasian director with the political risk consultancy, Eurasia Group, said yesterday.

For BP, the Russian invasion of Georgia could turn into a nightmare if it forces it to keep closed two oil pipelines that pump more than a million barrels a day of high-quality oil into world markets. They represent an overall revenue stream of $100-million (U.S.) a day among the oil company and its partners.

But then, BP recognized the risks before going into the project and insured against losses with host governments and export credit agencies. David Kirsch, an analyst with Washington-based PFC Energy Group, said multinationals like BP have no choice but to operate in extremely risky areas. “You go where the oil is,” he said.

However, the Russian economy may also pay a price over the conflict, which further tarnishes its reputation as a safe, reliable economic partner and has provoked confrontation with the United States.

Ms. Costello said the Georgian war – which was motivated by political rather than energy concerns – has added to the nervousness of foreign investors, who dominate the Russian stock market.

In recent months, Russian markets have been rattled by the battle between BP and its Russian partners, who received government support for control over joint venture TNK-BP, as well as government threats to prosecute companies that raise prices too aggressively.

“What happened in Georgia has come on the back of other events in Russia that have increased market concerns,” she said. “Together, these are increasing the risk perception around the Russian market.”

Moscow's aggressiveness and lawlessness has clearly turned off some Western investors. “Take all the money you want to lose to Russia and you won't be disappointed,” quipped Toronto business leader Seymour Schulich, who has spent a lifetime in global businesses.

But the country's vast energy and mineral wealth, and its booming construction and retail sector, amount to a lure that is too enticing for many to pass up, regardless of the widespread criticism.

Inbound direct investment in Russia totalled $45-billion in 2007, and is not expected to be dramatically affected by domestic squabbles or Russia's foreign adventure.

“I don't think direct investors will be so easily deterred and they will still be seeking opportunities across all different sectors of the Russian economy, including energy,” Ms. Costello said.

Despite setbacks, most of the international oil companies continue to operate profitably in Russia. BP has made enormous returns from its TNK-BP partnership, even as its battle with its Russian billionaire partners heated up and its executives either fled the country or were expelled for overstaying their visas. Fadel Gheit, an analyst with Oppenheimer & Co. in New York, said BP has already earned back its investment in the joint venture, though it may still lose out if forced to unload its interest in a fire sale.

PUTIN'S HAND

Western governments and producers regard the Caspian-Central Asian region as they had viewed Russia not so long ago – an important source of production growth outside the cartel of the Organization of Petroleum Exporting Countries, and an attractive area for investment by their multinationals.

But as the West has had to reconsider Russia's role in the global energy picture over the past five years, it will now have to recalibrate its assessment of the security of supply from the former Soviet states.

Moscow's aggressive energy policy in seeking to dominate energy trade in its “near abroad” – as it calls the former Soviet republics – is consistent with the approach taken to the oil and gas industry by former president Vladimir Putin. In bare-knuckle fashion, Mr. Putin reversed a decade of wide-open capitalism to reassert the dominant role of the Russian state, heavily dependent on oil and gas for revenue.

Mr. Putin “intended to reorganize the Russian oil and gas industry to enhance the power of the Russian state,” says Martha Brill Olcott, an expert on Russia with the Carnegie Endowment for International Peace. “Only then, after the reorganization was complete and the state's capacity to protect the national interests in this strategic sector was reaffirmed, would Western firms be invited to participate in the Russian market.”

As rising oil prices strengthened the Kremlin's hand, the former president, who still wields considerable power as Prime Minister, acted to correct what he viewed as the unacceptable status quo in the energy sector.

His government reined in the freewheeling Russian businessmen known as oligarchs, most famously through the controversial prosecution of OAO Yukos chief executive officer Mikhail Khodorkovsky. Yukos' assets were later sold at bargain prices to state-owned companies.

He changed the advantageous terms for Western companies operating in his country, annulling exploration licences won by Exxon Mobil Corp. and Chevron Corp. in the Sakhalin offshore, and then forced Royal Dutch Shell PLC to sell its Sakhalin holdings to state-owned OAO Gazprom.

He unilaterally raised previously subsidized natural gas prices to former Soviet republics such as Ukraine and Belarus, raising the threat of disruptions to gas exports that flow through those states to Europe.

Mr. Putin's assertiveness was fuelled by Russia's growing economic clout, which resulted from rising oil and gas prices. Russia remains the world's second-largest producer of oil, at close to 10 million barrels a day, and the largest producer of natural gas.

When he took power in 1999, crude prices averaged $10 a barrel and Russia was virtually bankrupt. Since then, Russia has averaged 7-per-cent economic growth a year – 8 per cent in 2007 – and has run a string of budget surpluses that last year topped 3 per cent of gross domestic product.

As a result, its foreign reserves grew from $12-billion in 1999 to $470-billion at the end of last year, a measure of economic strength equalled only by countries such as China, India and the oil producers of the Middle East.

The added riches stoked Russia's ambitions to be an energy superpower. To bolster its presence in energy markets, Moscow not only boosted the government's role domestically but has also sought to dominate the export of oil and, especially, natural gas, from its southern neighbours.

The transportation issue is both economic and political: Russia reaps huge revenues and more control over export prices by having its state-owned firms deliver crude and gas from competitors in the Caucasus and Central Asia. At the same time, control of those exports gives the Kremlin massive political leverage over Europe.

“Russia knows they are providing huge amounts to natural gas to Europe – that they have a stranglehold on Europe,” said Oppenheimer's Mr. Gheit. “There is no question in my mind that Russia is going to play its energy card as much as it can.”

Few analysts believe this week's invasion of Georgia was motivated by Russia's energy ambitions, but it clearly supports the Kremlin's goal of exercising more clout in the broader region.

As a result of the invasion, Georgia's reputation as a safe alternative for transporting crude oil and natural gas is threatened, and Central Asian producers will have to reconsider the risk involved in their various plans for getting their oil and natural gas to Western markets.

“There are certainly very strong parallels between the development of Russia's domestic policy and its projection of influence over the other former Soviet countries,” Julian Lee, a senior analyst with London-based Centre for Global Energy Studies, said in an interview. “Russia has always felt it would like to exert a high degree of control over the development of the oil and gas industries of both Central Asia and the Caucasus, as well as its own.”

Stephen Blank, a professor of national security affairs at the U.S. Army War College in Carlisle, Pa., highlights the American distrust of Russia's energy policy in the region, though he added those energy goals were of secondary importance in the current crisis. “Russia's energy objective is to monopolize all Caspian energy flows to Europe, so that it can then blackmail Europe and force political changes to European policy,” Prof. Blank said.

It can then play that energy card to block further NATO expansion to its borders, to prevent criticism of its anti-democratic government, and to win support for the foreign ambitions of its state-owned companies, he added.

PIPELINE POLITICS

The United States has long viewed the Georgian energy corridor as the linchpin of its policy of encouraging independent, pro-Western states to develop in the former Soviet states in the Caspian and Central Asian regions.

At a meeting of the Organization for Security and Co-operation in Europe in Istanbul in 1999, then-U.S. president Bill Clinton lobbied hard and won agreement from Azerbaijan, Georgia and Turkey to proceed with the Baku-Tbilisi-Ceyhan (BTC) pipeline project.

The deal represented a major victory for U.S. foreign policy.

The high stakes in the “new pipeline politics” had been clearly spelled out two years earlier – somewhat undiplomatically – by Sheila Heslin, who had earlier served on Mr. Clinton's National Security Council as director of Russian, Ukrainian and Eurasian affairs.

At the time, Western oil firms were making major investments in the energy-producing states of Azerbaijan, Kazakhstan and Turkmenistan, but export routes were still under discussion.

Washington's fear was that the former Soviet producers would be forced to market their oil and gas through Russia and Iran, thereby conferring both economic and political clout on America's rivals. (Even then, the U.S. was enforcing sanctions against Iran over its nuclear program.) In a New York Times opinion piece, Ms. Heslin wrote that “the consequences would be dire” if Russia and Iran locked up the main pipeline routes for the Caspian and Central Asian resources.) At the time, Shell was planning to build a $2.5-billion natural gas pipeline from Turkmenistan through Iran to Turkey. An oil pipeline was already under construction that would move crude from Kazakhstan's rich Tengiz field to Russia's Black Sea port of Novorossiysk.

A second oil pipeline was being considered, and it would be routed either directly through Iran, or by a more circuitous path through Georgia. Ms. Heslin said vital American interests required Washington to ensure the Georgian route won out.

Washington's staunchest ally for the Georgian route – in addition to Tbilisi itself – was Azerbaijan, which was already sending crude exports through a Russian-controlled pipeline but wanted to diversify and did not trust Iran.

When the agreement was struck in 2003, the BTC pipeline had generous backing from Western governments, including the World Bank's International Finance Corp., the European Bank for Reconstruction and Development and seven national export credit agencies.

The BTC pipeline opened in 2005, complementing the smaller Baku-Supsa line that BP also operates and the Russian line that ends in Novorossiysk.

This week, BP was forced to shut down the Baku-Supsa line, which delivers 100,000 barrels a day of oil from Azerbaijan to the Black Sea port of Supsa. The company said it was planning to reopen the line as soon as possible.

The larger BTC pipeline had been shut down last week as a result of apparent sabotage by a Kurdish separatist group. BP is hoping to reopen the line after Turkish officials complete repairs next week, assuming the situation in Georgia has stabilized.

Georgian officials – backed up by Western press reports – claimed Russian bombers had targeted the buried BTC pipeline, but BP said it saw no evidence to support those allegations. Analysts said they did not expect Russia to deliberately target the Georgian pipelines, noting that the Kremlin is eager to bolster its claim that it is a reliable energy partner.

NO TEARS IN MOSCOW

Fallout from this week's Georgian war may, however, affect future decisions regarding pipeline routes, and persuade Central Asian states – which have better relations with Moscow than either Georgia or Azerbaijan – that the risks of partnering with those U.S.-friendly states is too great.

Those decisions will not only affect Europe's dependence on Russia for its gas supplies, but will directly affect the return on investment of international oil companies that are operating in Azerbaijan, Kazakhstan and Turkmenistan.

Those states are expected to contribute major growth in non-OPEC global oil and gas production. Azerbaijan and Kazakhstan are expected to boost crude production from 11/2 million barrels a day two years ago to 21/2 million currently, to up to six million barrels a day within the next 15 years.

“What is really at stake is the unrestricted access of Caspian oil to world markets,” said the Centre for Global Energy Studies' Mr. Lee. “If, as a byproduct of the conflict in Georgia, people become more wary in the future of expanding the capacity of the export corridor through Georgia, then there will be no tears shed in Moscow.”

Eurasia Group's Ms. Costello said the key to future projects through Georgia will be the degree to which the country returns to normal after the Russia occupation of up to a third of its territory. Serious and continuing instability in Georgia could force producers like Kazakhstan and Azerbaijan to rely more heavily on Russian export routes.

Russian President Dmitry Medvedev said Russia's sole motivation for its incursion was to defend the residents of separatist Georgian enclaves, South Ossetia and Abkhazia, from Tbilisi's aggression. The Kremlin has long denied it covets “energy superpower” status or that it uses energy as a political weapon. It insists it remains a dependable supplier of energy to world markets.

By yesterday, a de facto ceasefire was in effect, though Russian troops remained in Georgian territory beyond the disgruntled enclaves where they had previously maintained a peacekeeping force. With U.S. Secretary of State Condoleezza Rice at his side, Georgian President Mikheil Saakashvili signed a ceasefire that would require Russian forces to withdraw to South Ossetia and Abkhazia, though not out of the country completely.

Short of a continuing crisis, the regional oil producers are likely to continue developing non-Russian export routes to reduce their dependence on their aggressive northern neighbour.

Kazakhstan already exports 60 per cent of its oil through Russian pipelines, but Moscow is blocking expansion of a line owned by a broad consortium that delivers Kazakh oil directly to Russian terminals on the Black Sea. Instead, it would force Kazakhstan to blend its high-quality crude with lower-grade Russian oil in the line controlled by state-owned Transneft.

There has been some speculation about building a pipeline across the Caspian Sea to link Kazakh production with an expanded BTC line, but both Iran and Russia – which have sea coasts on the Caspian – would have veto rights over those plans.

Instead, Kazakhstan is likely to ship the oil across the sea by tanker, and then feed it into pipelines leaving Azerbaijan.

European consumers are also hungrily eyeing Turkmenistan's growing natural gas production, as a way to reduce reliance of Russian exports, which account for 25 per cent of European demand and much greater than that in key markets like Germany.

But natural gas is more difficult than oil to transport because it cannot be loaded on tankers or rail cars. There are proposals to build a sub-Caspian pipeline and then ship the gas into central Europe, a project known as Nabucco.

Analysts say the Nabucco project faces commercial obstacles that are more problematic than the political resistances of Russia, largely because Russia and even China would provide greater prices – net of transportation – on gas sales from Turkmenistan than the Central Europe market could offer.

So while oil producers may succeed in diversifying their export routes, natural gas suppliers will remain beholden to Russian and its monopolist, state-owned Gazprom.

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It is largely about oil pipelines

EDITORIAL
Globe and Mail
12-Aug-2008

As Russia's unnecessary, immoral and illegal military campaign in Georgia grinds onward, the world should not be fooled by President Dmitri Medvedev's claim that his troops are fighting "to restore peace to South Ossetia."

The Russian assault has very little to do with Georgian President Mikheil Saakashvili's ill-advised decision to send troops into that troubled region, and owes much more to Moscow's determination to control energy supplies in the Caucasus and strengthen its position as a near-monopoly supplier to Europe.

Georgia is a crucial transit point for oil and gas. Three major pipelines connecting energy sources in the Caucasus and Central Asia to European markets pass through its territory. One of these, the South Caucasus pipeline, is an important part of the plan for the Nabucco pipeline to Austria, which would deliver natural gas directly to the European Union, bypassing Russia entirely, if built.

The Russian government, which controls Gazprom, the world's largest gas company, has tried frantically to cajole its European customers into ignoring Nabucco and investing instead in its own new pipelines.

That arm-twisting has been unsuccessful in blocking the Nabucco plan, which has firm backing from the EU and could vastly reduce its dependence on Moscow for energy. But even if the result of the war in Georgia is not the overthrow of the Saakashvili government, it is likely to make pipeline investments there look very risky indeed. The outsized Russian response to Mr. Saakashvili's provocation, which is beginning to look like a full-scale invasion, must be understood in this context.

To suggest that Russia would ignite a regional war for the sake of controlling energy supplies might seem fanciful, were it not for the extraordinary connections between the Kremlin and the energy industry, and the centrality of its operations to Russian policy.

Mr. Medvedev was the chairman of Gazprom's board until late 2007. The current chair is also Russia's deputy prime minister.

About a tenth of Russia's tax revenue comes directly from Gazprom, which is one of the world's largest corporations. The company also has a habit of cutting supplies to states with which the Kremlin has disagreements in the dead of winter, as it has to Georgia and Ukraine.

The stakes of the Georgian conflict for energy security, to say nothing of the suffering it has caused, make it imperative that the West find a way to respond, although it is not clear how.

European governments, dependent on Russian energy supplies, are wary of antagonizing Moscow by protesting too loudly. In Washington, meanwhile, one of the most unilaterally minded administrations in recent history can hardly expect that pieties about maintaining international order will be taken seriously by Russia. And a military intervention is, obviously, out of the question.

Aside from putting what little pressure it can on Russia to stop its operations in Georgia, the West's only recourse may be to redouble its efforts to find new ways of getting energy to Europe in the medium term, and reducing oil and gas dependence in the long term.

In attacking Georgia, Russia has crossed a line. Rewarding its transgression by acceding to the Kremlin's plans for an energy monopoly in Europe would encourage even worse behaviour in the future.

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True lies and foreign wars

RICK SALUTIN
Globe and Mail
August 15, 2008

Since the Second World War, the "good war," people seem to demand unambiguously just wars. So each new conflict provokes attempts to find parallels to Hitler and the Nazis. In the Persian Gulf war, Bush the elder called Saddam Hussein worse than Hitler. The Bosnian war had camps, emaciated prisoners and alleged genocide. Now, in Georgia, President Mikhail Saakashvili says Russian troops are "pushing people into concentration camps" with "World War II-type and Baltic-type ethnic cleansing." He told Katie Couric the Russians are "an insult to humanity." In other words, inhuman monsters like guess who. Russia replies that Georgia attacked first with a "blitzkrieg."

It doesn't really work since the Nazis were pretty much sui generis in their technologized savagery and racist justification. Ethnic cleansing, for instance, used to be called population transfer and was common. It is cruel and despicable, but it's not Auschwitz. Such acts are frequent in foreign policy, routinely cloaked by attempts to claim moral status that are obviously hypocritical. Take the Georgia conflict. Russia supports autonomy in the ethnic regions of South Ossetia and Abkhazia, but denies it for Chechnya. The U.S. backs separation for Kosovo, but rejects it in the Georgia cases. It praises democracy in Georgia, but in Iraq ignores a democratically elected government's call for it to leave. And Georgia's President is a democrat who suppresses protest in his streets. The claims about fighting the good fight are fig leaves, even Hitler mouthed them. South Ossetia's beleaguered 70,000 people? Barely table stakes for some real politics. What are the true stakes?

These tend to appear lower down in the stories and press releases. Georgia's leader, says Reagan-era official Paul Craig Roberts, is a "U.S. puppet." He studied in the U.S. on State Department fellowships, worked at a New York law firm, his government's election was subsidized by the U.S. National Endowment for Democracy and George Soros's Open Society Institute. He put a George W. Bush Boulevard in his capital. He admits this "is not about Georgia ... It is about America, its values." The U.S.? It wants to ring Russia militarily and move Caspian oil through Georgia so as to bypass Iran and Russia. Russia wants to assert itself in the 'hood, like any great power. It uses autonomy movements in Georgia as "daggers" to threaten the U.S. oil strategy, says energy expert Michael Klare. It differs from the U.S. mainly in that the U.S. considers the Caucasus, the Mideast and the rest of the world all as its "sphere" of "national interest." None of this involves confronting a new Hitler, it might as well be the Boer War or the Indian mutiny. Welcome to the 19th century.

When it comes to foreign policy, Noam Chomsky says, the rule is, all governments lie. There may be exceptions, but not among big powers. Does this mean a nasty retreat to cynicism? It seems counterintuitive to never trust anyone. But governments aren't individuals, they're institutions. You aren't giving up on "people," you're adopting a stand toward public bodies. Start from honest skepticism, and you might get somewhere.

Even the Second World War wasn't so unambiguous. It was hardly "good," in its barbaric course and deathly results. It had to be fought at that point, but it could have been avoided if the West had acted earlier - far earlier than Munich. Instead, Hitler was indulged, in the hope that he'd destroy the "contagious" example of Soviet communism. When the Allied powers did go to war, it was mainly for traditional geopolitical reasons -- Hitler had overreached -- although war was justified by pointing at Nazi atrocities, much as the Kaiser was vilified in the First World War. Hitler was bad but they weren't so good. It was another foreign-policy lie, although in Hitler's case, a true one.

The Stakes Could Not Be Higher. Everything Hinges on Stopping Coal

COMMENT: George Monbiot is a writer of urgency. But this essay may be one of his most urgent yet. His thesis: burning coal for electricity generation in a business-as-usual world either stops, or the apocalypse is upon us. "I no longer care whether or not the answer is nuclear."

Coal's panacea is carbon capture and sequestration (CCS), but Monbiot calls it "alchemical dust," and says a House of Commons environmental audit committee examined the proposition that carbon prices will rise sufficiently to pay for CCS - "and found that it was nonsense."

Politicians are in the pockets of industry, says Monbiot, and "won’t stand up to business, even when the future prospects of mankind are at stake. If fear is the only thing that moves them, we must present them with a greater threat than the companies planning new coal plants. We must show that this issue has become a political flashpoint; that the public revulsion towards new coal could help to eject them from office. You could do no better than joining us at Kingsnorth [site of a new coal-fired plant] this week."

[More about Kingsnorth here: http://www.guardian.co.uk/global/2008/aug/01/kingsnorthclimatecamp.activists]

Here in British Columbia, nobody is building a new coal-fired plant. We're so virtuous, we don't have anything to blockade, like Monbiot has Kingsnorth. Sure.

BC continues to purchase a lot of electricity generated from coal. I haven't been very sympathetic to arguments that we should stop doing that, because it is so much cheaper than the renewable alternative. But I get the point. In 2004, Powerex, BC Hydro's energy trading subsidiary, contracted for all the power from a new coal-fired generation plant in Hardin, Montana. As far as I know, we're still doing that. BC energy policy wouldn't allow that plant to operate in BC. Gee, that's so California of us. Or it was.

The BC climate action initiatives are focussed on the 66 megatonnes (MT) of greenhouse gases we produce every year in the province. But the carbon tax doesn't apply if you buy your jet fuel or Bunker C here in BC, but burn it over the Prairies or the Pacific. Now here's the big deception, or if you think that's too strong a word, here's the big avoidance of responsibility:

Natural gas - BC produces and exports a lot of natural gas, about 1.1 trillion cubic feet per year. When that is all burned, and it is almost all burned, some in BC, mostly in the US, it produces almost as much greenhouse gas as that 66 MT that the government has its/our eyes on.

Coal - BC produces and exports a lot of coal, about 27 million tonnes of it each year. When that is all burned, and it is all burned, virtually all of it beyond BC's borders, it produces almost as much greenhouse gas again.

So, the government has us looking at just one-third of our global contribution to global warming. We shouldn't be talking about 66 MT, we should be talking about 200 MT.

(Oh, gosh. We haven't even talked about the import economy, where all of the plastic widgets we buy in WalmartHomeDepotCanadianTireCostcoFutureShopSuperstoreRona are shipped in from Asia, with a carbon footprint that even Premier Campbell's Pacific Gateway project would blush about.)

Let me see if I can rescue this from an aimless rant and bring it back to a point. Monbiot is out on a protest blockade at Kingsnorth. He says this may be the bottom line that will terrify politicians to do the right thing. We have no Kingsnorth. But we have Deltaport, which is half coal exports, and half container imports. We have the TeckCominco acquisition of Fording last week, and the statement that there's 100 years of continuing coal production in the asset. We have Harding, WestPac LNG, Kitimat LNG, and the provincial government raking in billions in unprecedented sales of gas rights in northeast BC. It's business-as-usual happening all around us. I fear we're distracted, arguing about the carbon tax and cap'n'trade. Angels. Head of pin...

Arthur

The Stakes Could Not Be Higher. Everything Hinges on Stopping Coal

The climate camp must succeed. In the absence of political backbone, our only hope is an avalanche of public revulsion

by George Monbiot
The Guardian
August 5, 2008

As soon as I have finished this column I will jump on the train to Kent. Last year Al Gore remarked: “I can’t understand why there aren’t rings of young people blocking bulldozers and preventing them from constructing coal-fired power plants.” Like hundreds of honorary young people, I am casting my Zimmer frame aside to answer the call.

Everything now hinges on stopping coal. Whether we prevent runaway climate change largely depends on whether we keep using the most carbon-intensive fossil fuel. Unless we either leave it - or the carbon dioxide it produces - in the ground, human development will start spiralling backwards. The more coal is burnt, the smaller are our chances of future comfort and prosperity. The industrial revolution has gone into reverse.

It is not because of polar bears that I will be joining the climate camp outside the coal plant at Kingsnorth. It is not because of butterflies or frogs or penguins or rainforests, much as I love them all. It is because everything I have fought for and that all campaigners for social justice have ever fought for - food, clean water, shelter, security - is jeopardised by climate change. Those who claim to identify a conflict between environmentalism and humanitarianism have either failed to read the science or have refused to understand it.

Our government could lead the world in one of two directions. Roughly one third of our power stations will come to the end of their lives by 2020. It could replace them with low-carbon plants or it could repeat - this time in full knowledge of the consequences - the disastrous decisions of the past. E.ON’s application to build a new coal-burning power station at Kingsnorth is the first for many years. At least five other such proposals hang on the outcome. Between them they would account for 54 million tonnes of carbon emissions a year: as much as the entire economy would produce if the UK, in line with current science, were to cut its emissions by 90%.

The government seems determined to make the wrong decision. It has inherited the party’s traditional love for coal, but, being New Labour, now supports the bosses instead of the workers, and has colluded with them to make the case for a new generation of power stations. It has one justification for this policy: that one day dirty coal will be transformed into clean coal by means of carbon capture and storage (CCS). All that is needed to effect this transformation is a sprinkling of alchemical dust, in the form of the future price of carbon. The market, it claims, will automatically ensure that coal plants bury their carbon dioxide, as this will be cheaper than buying pollution permits.

Last month the House of Commons environmental audit committee examined this proposition and found that it was nonsense. It cited studies by the UK Energy Research Centre and Climate Change Capital which estimate that capturing carbon from existing coal plants will cost €90-155 (£71-£122) per tonne of CO2. Yet the government predicts that the likely price of carbon between 2013 to 2020 will be around €39 (£31) per tonne. Even E.ON believes that it won’t rise above €50. “The gap between the carbon price and the cost of CCS,” the committee finds, “is enormous.” The energy minister, Malcolm Wicks, confessed to MPs: “I hope that the strengthening of carbon markets … will bring forward a sufficiently good price for carbon that it will provide some of the financial incentive for CCS. Will it be enough? I do not know.”

This is the sum of government policy: to cross its fingers and hope the market delivers. If it approves a new coal plant at Kingsnorth, it will do so on the grounds that the power station will be “CCS-ready”. CCS-ready seems to mean nothing more than this: that there is enough space on the site for a carbon capture plant, should the developer deign one day to build it. The committee warns that this meaningless promise could be used “as a fig leaf to give unabated coal-fired power stations an appearance of environmental acceptability”.

The government has already shown us what it wants to do. In January, Gary Mohammed, a civil servant at the Department for Business, emailed E.ON to ask whether he should include CCS as a condition for approving its new coal plant. (This gives a fascinating insight into how government works: companies are asked to write their own rules.) E.ON replied that the government “has no right to withhold approval for a conventional plant”. Six minutes later Mohammed answered thus: “Thanks. I won’t include. Hope to get the set of draft conditions out today or tomorrow.”

There is a simple means by which the government could ensure that our future electricity supplies would not commit the UK to stoking runaway climate change. It would do as California has done and set, by a certain date, a maximum level for carbon pollution per megawatt-hour of electricity production. This would have to be a low one: perhaps 80kg of CO2. Then, in line with the government’s precious principles (or absence thereof), it could leave the rest to the market. I have now reached the point at which I no longer care whether or not the answer is nuclear. Let it happen - as long as its total emissions are taken into account, we know exactly how and where the waste is to be buried, how much this will cost and who will pay, and there is a legal guarantee that no civil nuclear materials will be used by the military. We can no longer afford any rigid principle but one: that the harm done to people living now and in the future must be minimised by the most effective means, whatever they might be.

But I believe the likely response would be more interesting than this. Several recent studies have shown how, through maximising the diversity of renewable generators and by spreading them as far apart as possible, by using new techniques for balancing demand with supply and clever schemes for storing energy, between 80% and 100% of our electricity could be produced by renewables, without any loss in the reliability of power supplies. Unlike CCS, wind, wave, tidal, solar, hydro and geothermal power are proven technologies. Unlike nuclear power, they can be safely decommissioned as soon as they become redundant.

A policy like this requires both courage and vision. So look at the current cabinet - Brown, Straw, Darling, Hutton, Blears, Kelly, Hoon - and weep. Every man and woman with backbone was purged from this government years ago, leaving those who know how to appease the interests that might threaten them. These people won’t stand up to business, even when the future prospects of mankind are at stake.

If fear is the only thing that moves them, we must present them with a greater threat than the companies planning new coal plants. We must show that this issue has become a political flashpoint; that the public revulsion towards new coal could help to eject them from office. You could do no better than joining us at Kingsnorth this week.

monbiot.com

© Guardian News and Media Limited 20

Gas pipeline gigantism

By Robert M Cutler
Asia Times
Jul 17, 2008

MONTREAL - Ground was broken in Kazakhstan last week for construction of that country's segment of a natural gas pipeline from Turkmenistan to China, set to be the longest and most expensive such pipeline in the world - its length is usually given as 7,000 kilometers, and although this looks like a rounding-up of a distance exceeding 6,500 km it may when work is finished be a more accurate figure than the most recent construction estimate of US$26 billion.

Skeptics about this pipeline remained even after groundbreaking for the Turkmenistan segment in August last year. However, with the Kazakhstan ceremony following by a scant two weeks a similar groundbreaking in Uzbekistan, the conclusion seems unavoidable that this pipeline will be built.

The idea for the pipeline was first sketched on maps as early as 1993 when Western companies began to survey possibilities for energy development in Central Asia following the disintegration of the Soviet Union. However, the sheer scale of the project, together with the self-imposed isolation of Turkmenistan under its former president Saparmurat Niyazov, who died in December 2006, made it for a long time a non-starter.

Nevertheless, it was Niyazov who in April 2006 signed a framework cooperation agreement in Beijing with Chinese President Hu Jintao. By July last year, an agreement was signed between the Chinese National Petroleum Company (CNPC) and the responsible state agency of Turkmenistan, this time witnessed by Niyazov's successor, Gurbanguly Berdimuhammedov (sometimes spelt "Berdymukhammedov" in English-language media).

The Turkmenistani segment is projected to run 188 km from the Bagtiyarlyk cluster in the eastern part of the country, on the right bank of the Amu Darya River, to Malai on the border with Uzbekistan, then 525 km across Uzbekistan and another 1,293 km through Kazakhstan, before passing into China, where it will run "at least 4,500 km" to Shanghai and Guangdong province.

Inside China, this would almost certainly entail construction of a second West-East Pipeline, parallel to one opened several years ago from Xinjiang to Shanghai.

The contract between Turkmengaz and CNPC is not a public document, so the price agreed is not precisely known, nor are terms for its adjustment over time. However, well-connected foreign journalists in Ashgabat (neither Russian nor Chinese) have reported that this price is said to be "over $100" per thousand cubic meters.

According to press reports, the Chinese side will conduct the geological exploration and development of the gas fields that will supply the pipeline. Chinese experts have already told the press that the Bagtiyarlyk fields together hold 1.6 trillion cubic meters of gas. A first phase will be opened for up to 10 billion cubic meters per year (bcm/y) from the already-operating Bagtiyarlyk fields of Samantepe and Altyn Asyr, which are together expected to supply 13 bcm/y to the completed project.

After this quantity reaches 10 bcm/y, the second phase will be inaugurated, adding 17 bcm/y from deposits that the two countries will develop under the terms of the July 2007 production sharing agreement.

The precise pipeline route has not been made public, but the most reasonable scheme involves expanding the volume of the Bukhara-Tashkent pipeline within Uzbekistan then taking it through Almaty, Kazakhstan, to Alashankou on the border, where an existing Kazakhstan-China oil pipeline from Atasu also crosses into China.

This new gas pipeline, originally projected to carry 30 bcm/y, will be constructed to carry 40 bcm/y, if not still more in subsequent stages, although China is set to receive only 30 bcm/y. The other 10 bcm/y will be generated and at least partly consumed in Kazakhstan.

At first glance, this may look like a concession that Kazakhstan was able to extract in return for granting transit rights, but that is not the case. CNPC had earlier started negotiations to import gas from Kazakhstan with the country's national energy trust, KazMunaiGaz.

The first phase of that project was assigned the figure of 10 bcm/y, and the Turkmenistan pipeline is, formally speaking, an extension or add-on to the Kazakhstan-China negotiations. A second stage of the Kazakhstan-China pipeline was to have increased Kazakhstan's own exports to China to 30 bcm/y. Possibly some of this will now be consumed in the already populous and still-growing province of South Kazakhstan.

That is why Kazakhstani sources have been speaking of the possibility of China constructing feeder lines "from western Kazakhstan". The supplementary Kazakhstani gas could likely come either from the Karachaganak deposit, where production has been in thrall to Russian limitations on volumes receivable by the transborder Orenburg processing plant in southern Siberia; or it could come from the associated gas in the offshore Kashagan deposit, where China was rebuffed a few years ago when it tried to purchase a share of the Agip KCO consortium to be directly involved in Kashagan's development.

Most likely, at least in the beginning, it will come from Chelkar, in the Aktobe region in western Kazakhstan, where CNPC has been already active for nearly a decade. From there, a feeder pipeline would logically descend southwards to Kzyl-Orda and then to the major city of Shymkent (South Kazakhstan province), thereafter rejoining the extension of the Bukhara-Tashkent pipeline to Almaty and beyond.

Importantly, China has explicitly linked this geo-economic investment to its geopolitical aims, by eliciting from Turkmenistan the statement at the time of the 2007 signing that Chinese interests would not be threatened from its territory by third parties. This represents a promise that Ashgabat will think hard and long before allowing a US military presence in the country under the new Berdimuhammedov regime.

Robert M Cutler is senior research fellow, Institute of European, Russian and Eurasian Studies, Carleton University, Canada.

(Copyright 2008 Asia Times Online (Holdings) Ltd. All rights reserved. Please contact us about sales, syndication and republishing.)

Russia takes control of Turkmen (world?) gas

By M K Bhadrakumar
Asia Times
July 29, 2008

From the details coming out of Ashgabat in Turkmenistan and Moscow over the weekend, it is apparent that the great game over Caspian energy has taken a dramatic turn. In the geopolitics of energy security, nothing like this has happened before. The United States has suffered a huge defeat in the race for Caspian gas. The question now is how much longer Washington could afford to keep Iran out of the energy market.

Gazprom, Russia's energy leviathan, signed two major agreements in Ashgabat on Friday outlining a new scheme for purchase of Turkmen gas. The first one elaborates the price formation principles that will be guiding the Russian gas purchase from Turkmenistan during the next 20-year period. The second

agreement is a unique one, making Gazprom the donor for local Turkmen energy projects. In essence, the two agreements ensure that Russia will keep control over Turkmen gas exports.

The new pricing principle lays out that starting from next year, Russia has agreed to pay to Turkmenistan a base gas purchasing price that is a mix of the average wholesale price in Europe and Ukraine. In effect, as compared to the current price of US$140 per thousand cubic meters of Turkmen gas, from 2009 onward Russia will be paying $225-295 under the new formula. This works out to an additional annual payment of something like $9.4 billion to $12.4 billion. But the transition to market principles of pricing will take place within the framework of a long-term contract running up to the year 2028.

The second agreement stipulates that Gazprom will finance and build gas transportation facilities and develop gas fields in Turkmenistan. Experts have estimated that Gazprom will finance Turkmen projects costing $4-6 billion. Gazprom chief Alexei Miller said, "We have reached agreement regarding Gazprom financing and building the new main gas pipelines from the east of the country, developing gas fields and boosting the capacity of the Turkmen sector of the Caspian gas pipeline to 30 billion cubic meters." Interestingly, Gazprom will provide financing in the form of 0% credits for these local projects. The net gain for Turkmenistan is estimated to be in the region of $240-480 million.

From all appearance, Gazprom, which was headed by Russian President Dmitry Medvedev for eight years from 2000 to May 2008, has taken an audacious initiative. It could only have happened thanks to a strategic decision taken at the highest level in the Kremlin. In fact, Medvedev had traveled to Ashgabat on July 4-5 en route to the Group of Eight summit meeting in Hokkaido, Japan.

Curiously, the agreements reached in Ashgabat on Friday are unlikely to enable Gazprom to make revenue from reselling Turkmen gas. Quite possibly, Gazprom may now have to concede similar terms to Kazakhstan and Uzbekistan, the two other major gas producing countries in Central Asia. In other words, plain money-making was not the motivation for Gazprom. The Kremlin has a grand strategy.

Coincidence or not, Russian Deputy Prime Minister Igor Sechin traveled to Beijing at the weekend to launch with his Chinese counterpart, Vice Premier Wang Oishan, an energy initiative - a so-called "energy negotiation mechanism". The first round of negotiations within this framework took place on Saturday in Beijing. There has been an inexplicable media blackout of the event, but Beijing finally decided to break the news. The government-owned China Daily admitted on Monday, "Both China and Russia kept silent on the details of the consensus they reached on energy cooperation in the first round of their negotiation in Beijing on the weekend."

Without getting into details, China Daily merely took note of the talks as "a good beginning" and commented, "It seems that a shift of Russia's energy export policy is under way. Russia might turn its eyes from the Western countries to the Asia-Pacific region ... The cooperation in the energy sector is an issue of great significance for Sino-Russian relations ... the political and geographic closeness of the two countries would put their energy cooperation under a safe umbrella and make it a win-win deal. China-Russia ties are at their best times ... The two sides settled their lingering border disputes, held joint military exercises, and enjoyed rapidly increasing bilateral trade."

It is unclear whether Gazprom's agreements in Ashgabat and Sechin's talks in Beijing were inter-related. Conceivably, they overlapped in so far as China had signed a long-term agreement with Turkmenistan whereby the latter would supply 30 billion cubic meters of gas to China annually for the 30-year period starting from 2009. The construction work on the gas pipeline leading from Turkmenistan to China's Xinjiang Autonomous region has already begun. China had agreed on the price for Turkmen gas at $195 per thousand cubic meters. Now, the agreement in Ashgabat on Friday puts Gazprom in the driving seat for handling all of Turkmenistan's gas exports, including to China.

Russia and China have a heavy agenda to discuss in energy cooperation far beyond the price of Turkmen gas supplies. But suffice it to say that Gazprom's new stature as the sole buyer of Turkmen gas strengthens Russia's hands in setting the price in the world gas (and oil) market. And that has implications for China. Moscow would be keen to ensure that Russian and Chinese interests are harmonized in Central Asia.

Besides, Russia is taking a renewed interest in the idea of a "gas cartel". Medvedev referred to the idea during the visit of Venezuelan President Hugo Chavez to Moscow last week. The Russian newspaper Nezavisimaya Gazeta reported on Friday that "Moscow finds the idea of coordination of gas production and pricing policy with other gas exporters to be too tempting to abandon". The daily quoted Miller as saying, "This forum of gas exporters will set up the global gas balance. It will give answers to the questions concerning when, where and how much gas should be produced."

Until fairly recently Moscow was sensitive about the European Union's opposition to the idea of a gas cartel. (Washington has openly warned that it would legislate against countries that lined up behind a gas cartel). But high gas prices have weakened the European Union's negotiating position.

The agreements with Turkmenistan further consolidate Russia's control of Central Asia's gas exports. Gazprom recently offered to buy all of Azerbaijan's gas at European prices. (Medvedev visited Baku on July 3-4.) Baku will study with keen interest the agreements signed in Ashgabat on Friday. The overall implications of these Russian moves are very serious for the US and EU campaign to get the Nabucco gas pipeline project going.

Nabucco, which would run from Turkey to Austria via Bulgaria, Rumania and Hungary, was hoping to tap Turkmen gas by linking Turkmenistan and Azerbaijan via a pipeline across the Caspian Sea that would be connected to the pipeline networks through the Caucasus to Turkey already existing, such as the Baku-Tbilisi-Ceyhan pipeline.

But with access denied to Turkmen gas, Nabucco's viability becomes doubtful. And, without Nabucco, the entire US strategy of reducing Europe's dependence on Russian energy supplies makes no sense. Therefore, Washington is faced with Hobson's choice. Friday's agreements in Ashgabat mean that Nabucco's realization will now critically depend on gas supplies from the Middle East - Iran, in particular. Turkey is pursuing the idea of Iran supplying gas to Europe and has offered to mediate in the US-Iran standoff.

The geopolitics of energy makes strange bedfellows. Russia will be watching with anxiety the Turkish-Iranian-US tango. An understanding with Iran on gas pricing, production and market-sharing is vital for the success of Russia's overall gas export strategy. But Tehran visualizes the Nabucco as its passport for integration with Europe. Again, Russia's control of Turkmen gas cannot be to Tehran's liking. Tehran had keenly pursed with Ashgabat the idea of evacuation of Turkmen gas to the world market via Iranian territory.

There must be deep frustration in Washington. In sum, Russia has greatly strengthened its standing as the principal gas supplier to Europe. It not only controls Central Asia's gas exports but has ensured that gas from the region passes across Russia and not through the alternative trans-Caspian pipelines mooted by the US and EU. Also, a defining moment has come. The era of cheap gas is ending. Other gas exporters will cite the precedent of the price for Turkmen gas. European companies cannot match Gazprom's muscle. Azerbaijan becomes a test case. Equally, Russia places itself in a commanding position to influence the price of gas in the world market. A gas cartel is surely in the making. The geopolitical implications are simply profound for the US.

Moreover, Russian oil and gas companies are now spreading their wings into Latin America, which has been the US's traditional backyard. During Chavez's visit to Moscow on July 22, three Russian energy companies - Gazprom, LUKoil and TNK-BP - signed agreements with the Venezuelan state-owned petroleum company PDVSA. They will replace the American oil giants ExxonMobil and ConocoPhillips in Venezuela.

At the signing ceremony, Medvedev said, "We have not only approved these agreements but have also decided to supervise their implementation." Chavez responded, "I look forward to seeing all of you in Venezuela."

Ambassador M K Bhadrakumar was a career diplomat in the Indian Foreign Service. His assignments included the Soviet Union, South Korea, Sri Lanka, Germany, Afghanistan, Pakistan, Uzbekistan, Kuwait and Turkey.

(Copyright 2008 Asia Times Online (Holdings) Ltd. All rights reserved. Please contact us about sales, syndication and republishing.)

Life cycle GHG emissions from LNG equal to coal: study

Figure 1: Fuel Combustion and Life-Cycle GHG Emissions for Current Power Plants. (Click chart for larger version)

A study published by Carnegie Mellon University compared the greenhouse gas emissions from the full life-cycle of coal, natural gas, liquefied natural gas, and synthetic natural gas produced from coal. The chart above summarized the study conclusions. In particular, the full life cycle of LNG, which includes liquefaction, transportation, and regasification, compares with the full life cycle of domestically sourced coal.

You can read the study here.

Comparative Life-Cycle Air Emissions of Coal, Domestic Natural Gas, LNG, and SNG for Electricity Generation
by Paulina Jaramillo, W. Michael Griffin, and H. Scott Matthews
Civil and Environmental Engineering Department, Tepper School of Business, and Department of Engineering and Public Policy, Carnegie Mellon University, 5000 Forbes Avenue, Pittsburgh, Pennsylvania 15213-3890
Published in ENVIRONMENTAL SCIENCE & TECHNOLOGY / VOL. 41, NO. 17, 2007