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Analysis: Energy dependence and supply in Central and Eastern Europe

Miklós Losoncz, The Analyst via EurActiv
[EurActiv editor:]In this article, economist Miklós Losoncz of Hungary’s GKI Economic Research Co. looks at the Central and Eastern European countries’ energy status and prospects. The article was published in The Analyst, a new quarterly focussed on the key political, economic and social developments in Central Eastern Europe.

The countries of Central and Eastern Europe (CEE) recently experienced discontinued or mainly in the post-soviet states weakened political influence from Russia. This came long with their transition to market economies and Western-style democracies, and their accession to the European Union, their increased focus on the EU.

However, dependence on Russian energy in these states remained unchanged, especially in the case of natural gas and oil. In fact, with energy demands expected to rise as domestic production drops, these countries will be increasingly dependent on imports in the long term.They can only tangibly reduce their energy dependence on Russia, and geographically diversify their gas and oil imports, at the expense of costs so big as to be irreconcilable with economic rationality.

Such moves can hardly be justified in a period when political relations between the EU and Central-Eastern European countries, on the one hand, and Russia on the other, are basically amicable. Especially when Russia itself is dependent on energy exports and the accompanying foreign exchange revenues in order to modernise its economy. This fact gives the relationship a quality of mutual dependence.
(15 May 2006)

Energy News from Africa
Various, allAfrica

Uganda: Frequent Power Cuts Push Food Prices Up

Nigeria: Fuel Scarcity Hits Abuja, Lagos, Others

Ethiopia: Trouble Brewing in Country’s Gas Fields

(May 2006)

Chadians Struggle Despite Oil Wealth

Joe Bavier, Voice of America
Three years ago, Chad joined a handful of African nations as an oil exporter. Today, it exports around 170,000 barrels a day and has, so far, received around $400 million in oil revenues.

The World Bank estimates that the new income will boost Chad’s annual budget by 40 to 50 percent during the next 25 years.

But since production began, the population has grown even poorer. In 2002, Chad ranked eighth to last on the U.N human-development index. Today, it is among the bottom five.

“We do not have anything here,” says Dankor. He says the “suffering you see here, its even worse than it was before.”

In Africa, for ordinary citizens oil has usually been more of a curse than a blessing. Nearby Nigeria is among the worlds top 10 oil producers and is sub-Saharan Africa’s sole OPEC member country. But production in its oil-rich Niger Delta has become synonymous with armed conflict, corruption and environmental destruction.

Things were meant to be different in Chad.

In 1998, the government agreed to set aside the majority of its oil revenues to pay for social projects as part of a deal with the World Bank to fund the construction of a 1,070-kilometer-long pipeline to neighboring Cameroon.

Ten percent of revenues were to be held in a trust fund for future generations. Eighty percent of royalties and 85 percent of dividends were to pay for education, health, rural development and infrastructure and environmental projects. Five percent of royalties were destined for reinvestment in oil-producing areas.

But last December, Chad’s parliament voted to change the law. Government officials said they needed more control over the money to carry out immediate poverty reduction projects and to combat a growing rebel insurgency in the east.
(15 May 2006)
Related: When two poor countries reclaimed oilfields, why did just one spark uproar? (Monbiot in the Guardian).

The great oil race:
Cheney discovers U.S. is losing out to China

Insight on the News
Vice President Dick Cheney has been entrusted with a task regarded as vital to bolstering the Bush administration’s sagging political popularity: the search for additional crude oil in order to help stabilize U.S. gasoline prices over the next few months.

Mr. Cheney was recently sent to Central Asia and other regions to coax allies to significantly increase supplies to stabilize U.S. gasoline prices for the summer. Administration sources said Mr. Cheney has run into significant difficulties as he has found that many of the potential suppliers have become committed to China.

“We’re in a race with China and so far we’re losing,” an administration source familiar with Mr. Cheney’s trip said.

…The sources said Mr. Cheney, who has long-time contacts in the industry, has been designated to find oil supplies both for the short- and medium-term.

They said Mr. Cheney’s visit to Central Asia was based on the assessment of the U.S. intelligence community that Middle East oil supplies will become increasingly precarious after 2008.

The administration has determined that gasoline prices will become a major issue in congressional elections in November. A May poll taken by AP and Ipsos reported that 23 percent of respondents approve of the president’s handling of gasoline prices, the lowest rate in the survey.
(May 2006)
Insight on the News is published by News World Communications like its sister publication The Washington Times.

Ecuador moves against US oil giant Occidental

Various, Herald Sun
ECUADOR began today to take over operations of US oil giant Occidental Petroleum Corp, the latest move in Latin America against foreign energy producers after nationalisation in Bolivia and growing state intervention in Venezuela.

Ecuador revoked Occidental’s contract yesterday after accusing it of transferring part of an oil field without authorisation. Occidental said it has complied with its obligations and still hopes to settle.

Occidental share prices fell by 2.35 per cent today as company executives held talks with Ecuadorean energy officials, who were escorted by police into the company’s Quito headquarters.

President Alfredo Palacio has been under pressure from Indian groups in the oil rich Amazon to expel Occidental, who accuse the firm of exploiting natural resources with no benefit for Ecuadoreans. Occidental had also become a lightening rod for criticism of US “imperialism”.

…Analysts warned against pointing the finger at Mr Chavez as the culprit in Ecuador and said moves against foreign producers were often due to high energy prices worldwide.

“Each country has its own reasons to do what it is doing,” said Rob Cordray, director of Houston consulting group PSC Energy.

“This is something that is happening everywhere, not only in Latin America. Oil companies are profiting a lot and the governments want to get a bigger part of it.”

Ecuador today ruled out any nationalisation of the oil industry. Officials say the country will receive an extra $US100 million per year in oil revenues due to the Occidental contract cancellation.

Energy Minister Ivan Rodriguez said Ecuador is studying the possibility of a joint venture with other Latin American state oil companies to operate Occidental’s oil fields.

Occidental is Ecuador’s largest investor and extracts 100,000 barrels of oil per day, about 20 per cent of Ecuador’s total production.
(17 May 2006)
Related from:Ecuador not planning oil nationalization (AP)

Chavez May Price Oil Exports in Euros

Associated Press via MSN Money
LONDON (AP) – Venezuela’s president Hugo Chavez said Tuesday that he would consider pricing his country’s oil in euros instead of dollars in line with a similar declaration made by Iran.

Earlier this month Iran’s state television reported the country’s Oil Ministry granted a license for its first euro-denominated market.

“That is an interesting proposal made by the president of Iran,” Chavez told Britain’s Channel 4 news. “We are free to choose too between the dollar and the euro.”

If the market were to succeed — or if Iran simply demanded payment for its oil in euros — commodities experts said it could lead central bankers around the world to convert some dollar reserves into euros, possibly causing a decline in the dollar’s value.
(16 May 2006)