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Will Cuba’s offshore oil discovery finally break the US trade embargo?

Associate Press via Jamaica Observer
MIAMI – America’s trade embargo with Cuba has been in place since 1961, and although it has yet to loosen Fidel Castro’s grip on power, it has cost the United States little strategically or economically.
Until now, that is.

From here on out, say a growing chorus of experts, America will pay a price for maintaining its 45-year trade ban with the communist nation – a strategic and economic price that will have negative repercussions for the United States in the decades to come.
What has changed the equation?

To be more specific, recent, sizable discoveries of it in the North Cuba Basin – deep-water fields that have already drawn the interest of companies from China, India, Norway, Spain, Canada, Venezuela and Brazil.

This, in turn, has reheated debate in the US Congress and the Cuban-American community on an old question:
Has the time finally come to shelve the embargo – given America’s need for more sources of crude at a time of rising gas prices, soaring global demand and the outbreak of war in the Middle East?
(29 July 2006)
Also at The Hindu and LA .

Russia: A New Gas Strategy Emerges

Roman Kupchinsky, Radio Free Europe / Radio Liberty
PRAGUE — A Gazprom subsidiary recently issued a report recommending a dramatic change of strategy for the Russian gas industry. It determined that Russia should decrease exports of natural gas to European markets and concentrate instead on developing new gas fields to keep up with domestic demand.

The Research Institute for the Economics of the Gas Industry, NIIGazekonomika, determined in its late 2005 report that domestic consumption of natural gas is increasing at a faster pace than projected in Russia’s two-year-old Energy Strategy.

The company, a fully owned subsidiary of Gazprom responsible for researching economic and management issues, stated that Russia should focus on developing new gas fields in the Yamal Peninsula and other locations in order to meet future domestic demand.

Failure to do so could have a seriously detrimental impact on Russia’s future economic growth, the report warns.

Threat To Europe’s Supply?

But ensuring domestic supplies would also require that Russia decrease exports of natural gas to European markets, according to the report, which notes the potential consequences for the CIS, Asian-Pacific, and European gas markets.

It appears that Gazprom commissioned NIIGazekonomika to conduct its study as part of the ongoing debate in the West and in Russia about the real state of the Russian natural-gas industry.

Gazprom’s reported lack of investment into new gas fields and pipeline construction have been widely seen as a potential danger to European energy security. Such concerns have prompted Western European governments to demand that Gazprom’s export pipelines be opened to independent gas producers to prevent future shortfalls.

Russia, however, has rejected European pressure and the State Duma recently passed legislation that further strengthens Gazprom’s monopoly on gas exports.

Gazekonomika concluded that:

— Russian domestic gas consumption is rising faster than projected in Russia’s Energy Strategy, which was announced in May 2003 and is the foundation of the country’s energy designs through 2020. The new Gazekonomika study estimates that by 2030 domestic demand will be approximately 654 billion cubic meters (bcm) per year, compared to the Energy Strategy’s estimate of 436 bcm.

— Gas-conservation technologies are not being implemented and the Russian economy remains highly energy intensive.

— A dangerously narrow gap exists between the cost of production of gas and its domestic price.
(28 July 2006)
The coverage of Russian energy supplies and policy is highly politicized, so it’s good to verify information and consult multiple sources. -BA

Learning energy efficiency in Kiev

Judy Dempsey, International Herald Tribune
YALTA, Ukraine The sudden end to the era of cheap energy in Ukraine may have a silver lining: Several of the country’s oligarchs are starting to modernize their industrial holdings, which are some of the most energy-intensive – and the most wasteful – in Europe.

“For decades, they have enjoyed cheap prices, providing them with little incentive to modernize,” said Anders Aslund, senior fellow at the Institute for International Economics in Washington. “The time has come for the heavy- industry sector to invest in energy-efficiency equipment.”

In recent interviews, owners and managers of the biggest Ukrainian iron, steel and metallurgy enterprises have said that they are spending hundreds of millions of dollars on new equipment and measures to save energy.

Their main goal is to remain competitive in the global market, according to managers and economists. But the hope, Aslund said, is that their example might spur the government to begin preparing the rest of the country for dramatically higher energy costs.

“There is waste everywhere, in industry, in the piping for domestic consumption, in the outdated energy infrastructure,” said Igor Burakovsky, director of the Institute for Economic Research and Political Consulting in Kiev. “The authorities have done nothing to address these issues, despite rising energy prices.”

The moves come after Gazprom, Russia’s state-owned energy company, ended decades of subsidized natural gas prices for Ukraine by doubling the cost of its gas exports in January, after a bitter dispute in which Gazprom briefly stopped deliveries to Russia’s western neighbors during one of the coldest winters in decades.
(27 July 2006)