Lloyds List: Pipelines and politics

EXTRACT: There is increasing nervousness about western dependence on Russian oil, for so many different reasons. Last winter’s dispute with the Ukraine, the present difficulties over the Druzhba pipeline through Belarus, and the problems Shell faced with Sakhalin underline vulnerabilities. From a nation where there was an improving commercial climate, Russia is becoming one in which it is seen to be increasingly difficult to do business.

THE ARTICLE

Published: Jan 12, 2007

THERE is no shortage of energy in the world, said an eminent oil company chief executive not long ago the problem is that the energy is ‘increasingly discovered in difficult places’. Indeed it is the access to energy, as much as the oil and gas itself, which will increasingly occupy political and management minds.

There may be a mild winter in the North this year, and with it a slump in demand and oil prices, but there has been something of a stark reminder of Europe’s vulnerability in the Russian spat with Belarus. Pipelines are looked on with approval for their safety and simplicity, and their inability to collide with ships or run aground, but they are far from problem-free. The international pipeline and its complications broadens the debate from oilmen to include politicians, and when there is bad blood between them, interference with the energy flowing across a country to a third party is a temptation which seems difficult to resist.

There is increasing nervousness about western dependence on Russian oil, for so many different reasons. Last winter’s dispute with the Ukraine, the present difficulties over the Druzhba pipeline through Belarus, and the problems Shell faced with Sakhalin underline vulnerabilities. From a nation where there was an improving commercial climate, Russia is becoming one in which it is seen to be increasingly difficult to do business.

There are no easy answers. The pipelines are an alternative to the passages through the Turkish and Danish straits for Russian oil, neither of which offer a trouble-free solution. The Kremlin seems to have calculated its position carefully, and clearly understands that alternative sources of energy are not easy to find for the west. There are problems everywhere, from the dangers of offshore West Africa to the febrile political position of Venezuela and the fact that so much of the product from the safer areas of the Gulf has been long spoken for.

As for pipelines, perhaps their usage genuinely does need to be reassessed. How should ‘rent’ for a pipeline across a third party country be gauged? It is surely not unreasonable that contracts of such importance to the energy exporting country should be treated in a less cavalier fashion by politicians wanting to make a point. But to what extent should the cost of using the pipeline reflect the changing value of what is passing through it? But there is an urgent need for an accommodation with Russia, even though the Kremlin is clearly fully aware of its leverage, and its hand on the valves.

Above us the waves

Perhaps we owe an apology to the crew of the nuclear attack submarine USS Newport News . There they were, idling along at a perfectly reasonable depth in the Straits of Hormuz, the crew happily doing whatever they do to while away the time aboard these terrifying fighting ships. Then, in a twinkling of an eye there is an enormous roaring noise overhead, and a shape the size of a medium-size island rushes past at 15 knots, displacing about 300,000 tonnes of sea above them.

Before the helpless hydroplane operators can react, their boat is sucked upwards by a ferocious venturi effect, like a glider caught in a cumulonimbus updraught, the bow clouting the stern of the gigantic VLCC Mogamigawa in way of a ballast tank, spilling a great deal of miso soup aboard the tanker and frightening them all half to death. It probably wasn’t exactly a life-enhancing experience aboard the Newport News , either.

As an explanation of this collision that given by the US spokesperson seemed to be plausible enough. One vaguely wonders why such a phenomenon was not well understood by the bold submariners and a sudden burst of speed applied to take the boat clear of the ‘speeding’ tanker, which seems to have been navigating in a quite exemplary fashion.

One hopes that the premature ageing of the tanker master will have been recognised and appropriate compensation awarded to he and his watchkeepers for their fright. Knock knock who’s there?

Mogamigawa collision Back

Lloyd’s List

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