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22 November 2014

15 November 2014

Press review 15-11-2014 - Ravished Ukraine

Petroleum prices resumed the dive this week, with Brent closing below 80 $/b for the first time in four years. For now these are still small news on the backdrop of the world Economy, gripped with recession and spreading price deflation. The nervousness of governments is palpable in many countries.

Ukraine is back to the front pages with further escalation of the conflict. Combat intensified and the western media is reporting a large scale invasion of the Donbass by Russian forces. The mere risk a full out war poses on gas infrastructure is disturbing by itself.

There is still no gas flowing from Russia to Ukraine. The European Commission is having second thoughts and is for now refusing to foot the bill. A mild Autumn is supporting this policy, but on the wake of the Russia vilification campaign, leaving the Ukrainian nationalists out in the cold is not really an option.

08 November 2014

Press review 08-11-2014 - Brent is sinking

Commodities resumed the decline this week, pretty much all across the board. The economic outlook is grim, Governments appear week, with limited options, but are still keen on cutting ties with important partners such as Russia. This price rout is looking ever similar to what took place in 2008. For the energy sector in particular, these developments come at the worst of moments.

In a striking sign of times, the Brent petroleum field in the North Sea appears to be fast reaching the end of its economic life. The petroleum extracted from this field has been the benchmarks for about half of all the petroleum traded internationally. Ironically, the benchmark seems no longer able to support itself. Soon the media might have to start referring to a different international price index.

01 November 2014

Press review 01-11-2014 - Nationalism is great in Summer

This was a busy a week, with many points of interest emerging throughout. Commodities in general kept falling in price against the US$, but the Brent index remained essentially flat.

Sunday, two thirds of Ukraine elected a new Parliament, guaranteeing the permanence of nationalist forces in power. The russophone separatist regions of Luhansk and Donetsk should held their own elections in short order, in spite of having one million refugees in Russia.

The gas supply pre-agreement drafted last week was finally confirmed. Russia dragged negotiations trying to force the EU into a parallel agreement guaranteeing payment on behalf of Ukraine. Such formality did not come to fruition, but it is clear it will be European tax payers largely paying for the gas consumed by Ukraine for the foreseeable future.

30 October 2014

Whatever happened to Ukraine's treasury?

The story of the Ukraine crisis can be told in many ways, but the gas supply is perhaps the most important starting point. Half of the gas that transits from Russia to the European Union flows through multiple pipelines striping Ukraine. The over-dependence of the country on this fuel is above all a convenience, from it obtaining a large share of its heating and electricity.

The government of Viktor Yanukovich, facing a gripping economic crisis, managed to get from Russia a reduction of the gas price to about half of that paid by costumers in the European Union. But this timely aid had a price: the definitive absorption of Ukraine into the sphere of influence of Russia and the BRICS. Reacting to this re-approximation towards Russia, various nationalist groups united against the government, paralysing the capital, boycotting negotiations with opposition parties and finally taking power in February.

25 October 2014

Press review 25-10-2014 - RIP Christophe de Margerie

The radio woke me up this Tuesday with the news of the tragic death of Christophe de Margerie. A sad reminder of the unpredictability and ultimate frailty of life. De Margerie had been a voice of striking poise and realism in the petroleum world, greatly contrasting with the hyperbolae that usually mars the business-as-usual discourse, particularly in the US. His balanced views always had an impact; when he spoke the press listened. If source rock fracturation has not yet been applied in France is in great measure due to his realistic assessment of the potential of these resources.

De Margerie understood like few that resource constraints are as much an opportunity as they are a challenge to the petroleum industry. Petroleum is not running out, rather the easier to extract reserves. This understanding is best reflected in how well the company he lead fared the past decade, par rapport to other multi-nationals.

No wonder then the posthumous praise de Margerie received from most sectors he had been involved with: politics, business, even sports. A real loss in many ways.