Saturday, March 25, 2023

Hydropower Plant At Center Of National Security Controversy In Georgia

  • Georgia's Namakhvani hydropower plant project has faced controversy, with Western-funded NGOs accused of aiding Russia-sponsored protests against it.

  • The Georgian Dream party has used the issue to promote its ultimately unsuccessful "foreign agent" legislation, which aimed to label foreign-funded NGOs and media outlets as "foreign influence agents."

  • The project's investor pulled out, resulting in a setback for the Georgian government's goal of energy independence, and international mediation failed when the Turkey-based company refused to participate.

The leaders of Georgia's ruling party have been pushing a seemingly paradoxical allegation: that Western-funded NGOs supported what the party calls a Russia-sponsored protest movement against the construction of the Namakhvani hydropower plant (HPP) in western Georgia.

After the protests mired the project in controversy in mid-2021 the Turkish investor pulled out and it was shelved. It was a setback for the Georgian Dream government, which had argued that the dam would have served to secure the country's "energy independence," reducing reliance on Russia. 

Georgian Dream parliamentary faction head Mamuka Mdinaradze referred to the case in early March when the party was promoting its ultimately unsuccessful "foreign agent" legislation. "Do you remember the campaign against Namakhvani HPP? We all have information that there were Russian interests, huge Russian finances directed to obstruct the construction of Namakhvani HPP."

Mdinaradze went on to say that the local NGOs funded by Georgia's "partner countries" and organizations based there were supporting the anti-HPP campaign and argued that creating a relevant registry would shed light on such practices. 

Such allegations have become routine in the attempts of Georgian Dream leaders to justify to the public their now-dead foreign agent bills, which would have labeled foreign-funded NGOs and media outlets as "foreign influence agents." The party had to kill the legislation on March 10 amid massive protests fueled by Western warnings that its passage would have undermined the country's EU integration goals, and fears that it copied Moscow's undemocratic practices.

But with or without a foreign agent law, Georgian Dream leaders look determined to stigmatize certain groups that get foreign -- particularly Western -- funding. The allegations towards the anti-Namakhvani HPP movement stand out as a rare example in the party rhetoric where alongside the West, the main culprit is Russia -- Georgia's key security threat. (Many believed the bills would have had no effect on those suspected of receiving indirect funding from Moscow, like the far-right violent group Alt-Info.)

Dato Chipashvili, a program coordinator at the Georgian watchdog NGO Green Alternative, told Eurasianet that the move against the Namakhvani protesters was a "primitive" attempt by the ruling party to make the bills seem like they would apply to Russian, not just Western, money. 

Green Alternative is among the NGOs that have studied the Namakhvani HPP issue for years. According to Chipashvili, the ruling party falsely blames the "blocking" of the project on the protests, ignoring the fact that it was the company in charge that refused to take part in the internationally moderated mediation back in 2021. 

Chipashvili says that mediation -- initiated by the government itself -- had made important achievements in securing an international review of the project, but the company, Turkey-based Enka Renewables, instead chose to pull out of the contract. It then went into arbitration.

Intense locally-led resistance erupted in western Georgia after Enka started preparatory works for the construction of the Namakhvani HPP cascade in 2020. The protests brought together environmental and safety concerns, on the one hand, and worries that the investor contract was agreed to the detriment of the state interests, on the other. 

In Georgia's polarized political scene, the protests were a rare instance of diverse social groups uniting around a single policy issue. That unity died after the protest leaders joined the notorious 2021 anti-Pride rally that led to homophobic pogroms.

There was similar unity in favor of the Namakhvani project between pro-government and opposition figures, who both made accusations (without providing evidence) that the protests were sponsored by Moscow to undermine the country's energy independence. Those allegations have now resurfaced in the context of the discussion on the foreign agent bills -- this time for the purpose of denigrating the prominent NGOs that aided the cause.

Varlam Goletiani, the leader of the anti-HPP movement, defended NGOs, and the movement's cooperation with them, during the discussions on the bills. 

Certain types of professional expertise can only be found in the NGO sector, he said in a March 5 livestream. According to Goletiani, several NGOs helped with legal, human rights, and environmental expertise while publicly funded institutions and experts shied away from speaking their minds due to the fear of persecution. 

The foreign agent bills aimed to ensure that "this sort of professional opinion no longer exists," Goletiani said.

In 2021, Goletiani's movement published audit findings in response to allegations about Russian funding, saying they largely relied on the donations of Georgian emigres. 

Energy exports as a path to EU membership?

After the project's termination, Georgian government leaders promised to build Namakhvani and other large energy projects with more active state involvement. While the share of Russian imports in Georgia's electricity consumption remains insignificant, authorities have claimed they still need more power generation through large projects to keep up with Georgia's growing economy.

But those arguments in favor of larger HPP projects are not based on any specific strategic planning, Chipashvili of Green Alternative argues.

According to the expert, Georgia has undertaken responsibility under the Association Agreement with the EU and as a member of the EU-led Energy Community since 2017 to come up with a strategic plan for energy policies. The country is currently developing a National Energy and Climate Plan, which is to be approved by the Energy Community and which is to determine the best way for the country to boost its energy independence, he saysSuch decisions "must be based on specific research and planning, including strategic planning and this is precisely the process that is underway," Chipashvili says.

The plans to boost power generation, including through reviving controversial large HPP projects, also come as the country tries to build energy ties with the EU. This includes work on a prominent underwater cable project to facilitate electricity exports from the South Caucasus to Europe, and recurring high-level meetings focused on energy cooperation. 

And the government has been open about its ambitions to export Georgian-generated electricity to Europe, which is seeking to diversify its energy sources as it distances itself from Russia. This has led to speculation that the Georgian authorities seek to take advantage of the country's newfound geopolitical importance to get EU membership candidate status while circumventing the challenging path of democratic reforms that Brussels has laid out. 

EU ambassador Pawel Herczynski, however, dismissed such hopes earlier, saying that "in order to cooperate economically, we don't need Georgia's membership" in the EU.

By Nini Gabritchidze via Eurasianet.org

Ominous Oceans: Shadow Tankers Endanger Global Waters

  • A shadow fleet of oil tankers from sanctioned countries like Iran, Russia, and Venezuela raises safety and environmental concerns.

  • Reduced oversight and aging vessels contribute to increased accident risk.

  • At least eight accidents or near misses involving these tankers were recorded in 2022.

A growing number of oil tankers, part of an unofficial "shadow" fleet, are transporting oil from countries impacted by Western sanctions. These tankers, moving oil from Iran, Russia, and Venezuela, have raised concerns about increased accidents and potential environmental damage, according to an analysis by Reuters based on ship tracking, accident data, and interviews with over a dozen industry experts.

The number of ships participating in this parallel trade has surged in recent years due to a rise in Iranian oil exports and restrictions on Russian energy sales caused by the ongoing conflict in Ukraine. Eric Hanell, CEO of Stena Bulk, a tanker operator, said, "The risk of having an accident is definitely going up."

Major certification providers, engine manufacturers, and insurers have withdrawn their services from these tankers, reducing vessel safety and seaworthiness oversight. This has alarmed some industry insiders, who worry that this clandestine trade may undermine decades of efforts to improve shipping safety following disasters like the 1989 Exxon Valdez spill in Alaska.

According to the analysis, there were at least eight accidents, near misses, or groundings involving tankers carrying sanctioned crude or oil products in 2022, the same as the previous three years combined. These incidents accounted for a small fraction of the 61 total accidents recorded in the shipping industry last year.

Jan Dieleman, president of Cargill's ocean transportation division, expressed concern over the lack of oversight and maintenance on these vessels, saying, "We do not have visibility on maintenance and safety as no one is really boarding the ships and doing checks - that is missing."

Estimates of the size of the shadow fleet range from over 400 to more than 600 ships, or about one-fifth of the global crude oil tanker fleet. Andrea Olivi, head of wet freight at commodity trader Trafigura, said their data showed around 650 units currently in operation.

The U.S. Treasury and State Department did not immediately respond to requests for comment.

Among the eight incidents reported in 2022, the Linda I tanker was detained in southern Spain carrying Russian oil. The Spanish Merchant Fleet authority confirmed the incident, citing deficiencies and a series of faults with the vessel's navigation system.

In eastern China, the Arzoyi tanker, which analysis from advocacy group United Against Nuclear Iran (UANI) showed was carrying Iranian oil, ran aground, causing a minor oil spill. Off the coast of Cuba, the Petion tanker, transporting Venezuelan crude, was involved in a collision with another tanker.

According to data provider VesselsValue, 774 of the 2,296 tankers in the global crude oil fleet are 15 years old or older. While the exact number of older vessels in the shadow fleet is unknown, they are generally believed to be less safe and well-maintained.

Industry participants also expressed concerns about ship-to-ship (STS) transfers involving these tankers, which pose significant safety and environmental risks. 

Trafigura's Olivi said, "The risk of a major pollution incident is very high."


The New ‘Wild West’ In Oil Shipping

  • Reuters: the shadow fleet at present entails between 400-600 vessels worldwide, which is around 20% of the total tanker fleet globally.

  • Demand for shipping of Russian energy products has led to a major surge in the use of older tankers.

  • Vortexa: Greek ships dominate the transportation of Russian crude oil.

The Russian invasion of Ukraine has not only led to an increase in the shipment of sanctioned crude oil and petroleum products by a shadow fleet, but it is also escalating overall maritime security risks. 

A report by consultancy Vortexa indicates a renewed increase in Greek-owned vessels transporting sanctioned Russian crudes and products. Simultaneously, tanker experts are warning of a Wild West situation in maritime traffic, as a shadow fleet of uninsured tankers is sailing in international waters. Reuters reports that maritime security is under threat, as uninsured or shadow vessels are running aground or experiencing near collisions worldwide. 

At present, an oil tanker has run aground offshore eastern China, while a collision between tankers has been averted near Cuba. Reuters analysis shows that a shadow fleet of hundreds of extra ships is sailing the seas, partly already linked to the opaque Iranian oil exports but now being supported by the demand for Russian energy shipping.

 Statements made to Reuters by Eric Hanell, CEO of tanker operator Stena Bulk, indicate that “the risk of having an accident is definitely going up.” The risks of collisions by unreliable vessels due to a lack of certification or engine maintenance have increased as leading insurers and services companies are no longer wanting to work with ships carrying crude oil and petroleum products coming from Russia, Iran, and Venezuela. Reuters analysis based on ship-tracking information and Lloyd’s List Intelligence data on vessel incidents shows that eight groundings, collisions, or near misses involving tankers carrying sanctioned products were reported in 2022, which is the same as the whole period of 1999-2021.

According to Reuters, the shadow fleet at present entails between 400-600 vessels worldwide, which is around 20% of the total tanker fleet globally. Trafigura's Andrea Olivi, head of wet freight, even states that, according to them, it is now at 650 units. The main risks at present are related to ship-to-ship transfers, which are widely used by the shadow fleet at present. Claire Jungman of US advocacy group United Against Nuclear Iran (UANI) reports that Iran's shadow fleet has increased from 70 in November 2022 to 300 vessels right now. The latter could be correct, considering Iran's increased oil exports in recent months. Vessel data provider VesselsValue indicated that 774 tankers out of 2,296 worldwide are 15 years or older.

According to a report by independent consultancy Vortexa, Greek ships dominate the transportation of Russian crude oil. Vortexa suggests that Greek ship owners have taken advantage of the ban on Russian oil exports, which came into effect on December 5, 2022. Although the current practice is not illegal, tanker owners can transport Russian crude oil if they agree to a price cap. Greek owners reduced their involvement in the wake of the December 5 ban, but their participation has almost returned to pre-ban level


However, pressure is mounting on Greek owners, as Ukraine is openly pressuring well-known Greek shipping companies like TMS Tankers, Dynacom Tankers, Minerva Marine, Thenamaris, and Delta Tankers. These companies have even been added to the War and Sanctions website created by the Ukrainian government. On Monday, S&P Global Market Intelligence identified 1,900 vessels at risk of Russian sanctions, with the majority being Greek-owned. Since 2023, over 150 of these high-risk vessels have made port calls in Russia, the majority of which are also Greek-owned. Furthermore, Greek vessels are overwhelmingly involved in Ship-to-Ship operations in the Peloponnese region.

By Cyril Widdershoven for Oilprice.com

Little-Known Traders Now Rule Russian Oil Markets

  • Six little-known companies based in Hong Kong and Dubai now dominate Russian oil trade.
  • Nord Axis, a company that was incorporated just a year ago in Hong Kong, emerged as the biggest buyer, moving 521,000 barrels of Russian crude per day.

  • Energy Intelligence: Russia’s crude and condensate production increased 2%, with oil production clocking in at 10.73 million b/d.

Historically, giant commodity traders such as Switzerland's VitolGlencore, and Gunvor as well as Singapore’s Trafigura have dominated the global oil trade while smaller trading desks that lack the wherewithal and deep infrastructure networks of the giants usually feed on crumbs. The same case applied to the Russian market before Russia invaded Ukraine, with Trafigura moving ~850,000 barrels of Russian crude per day at its peak. But the oil hegemony has now been severely disrupted thanks to Russia’s war. Bloomberg has reported that six little-known companies based in Hong Kong and Dubai now dominate Russian oil trade with the traditional leaders no longer in the picture.

According to Bloomberg, Russian customs data for the final four weeks of 2022 shows that Nord Axis LtdTejarinaft FZCO,QR Trading DMCCConcept Oil Services LtdBellatrix Energy Ltd and Coral Energy DMCC together handled about 1.4 million barrels a day of Russian crude oil. That’s more oil than what the commodity giants typically handled before the war in Ukraine, and enough to meet the entire needs of countries such as the UK and Italy.

Interestingly it’s Nord Axis, a company that was incorporated just a year ago in Hong Kong, that emerged as the biggest buyer, moving 521,000 barrels of Russian crude per day. Nord Axis was virtually unknown in the oil market until it bought Trafigura’s stake in Rosneft’s flagship oil project Vostok Oil in July. Dubai-based Tejarinaft FZCO was the second largest buyer after it purchased 244,000 barrels a day from Rosneft while Dubai-based QR Trading DMCC was the third-largest buyer, moving 199,000 barrels a day from Surgutneftegas PJSC. Other top buyers were Hong Kong’s Concept Oil Services Ltd (152,000 b/d), Hong Kong-based Bellatrix Energy Ltd (151,000 b/d) and Dubai’s Coral Energy DMCC (121,000 b/d).

Source: Bloomberg

It’s not clear how these traders were able to finance the large flows of Russian oil, with Bloomberg estimating it was worth more $2 billion over the month of December. 

Even more perplexing is the fact that Nord Axis, QR Trading DMCC and Bellatrix Energy Ltd were unknown entities before the west abandoned the Russian energy markets. Bloomberg has established that Bellatrix received loan facilities from Russian banks including Rosneft-owned Russian Regional Development Bank and Russian Agricultural Bank, though calls or emails to these traders, their banks and Russian oil producers have gone unanswered.

Knowing who the big names are is an important step in understanding how oil markets are responding to the price cap and wider sanctions,” Steve Cicala, co-director of the Project on the Economic Analysis of Regulation at the National Bureau of Economic Research, has told Bloomberg.

Meanwhile, other experts have decried the opacity of Russian oil markets, “We’re coming to this with a lot of humility and we’re just asking that everyone else can adopt the same level of uncertainty. These are really opaque markets, the data’s not great on it. Let’s just acknowledge that from the outset when we’re making conclusions,” U.S. Assistant Treasury Secretary Ben Harris has told Bloomberg.

Russian Oil Flows Holding Up, But Not Forever

Last year, against all odds, Russia managed to grow its oil output despite being hit with tough sanctions, a plethora of oilfield service companies exiting the country as well as the refusal by western countries to buy its crude for the most part. 

Indeed, Energy Intelligence reports that in 2022, Russia’s crude and condensate production increased 2%, with oil production clocking in at 10.73 million b/d, above Russia's ministry for economic development forecast of 10.33 million b/d. 

Russia managed to pull off this feat mainly by offering huge discounts to buyers like China and India, with Bloomberg's oil strategist Julian Lee reporting that the two were receiving discounts of $33.28 per barrel, or about 40% to international Brent crude prices oil at the time.

But Moscow cannot continue defying the odds indefinitely. BP Plc (NYSE: BP) has predicted that the country’s output is likely to take a big hit over the long-term, with production declining 25%-42% by 2035. BP says that Russia's oil output could decrease from 12 million barrels per day in 2019 to 7-9 million bpd in 2035 thanks to the curtailment of new promising projects, limited access to foreign technologies as well as a high rate of reduction in existing operating assets. 

In contrast, BP says that OPEC will become even more dominant as the years roll on, with the cartel’s share in global production increasing to 45%-65% by 2050 from just over 30% currently. Bad news for the bulls: BP remains bearish about the long-term prospects for oil, saying demand for oil is likely to plateau over the next 10 years and then decline to 70-80 million bpd by 2050.

That said, Russia might still be able to avoid a sharp decline in production because many of the assets of oil companies that exited the country were abandoned or sold to local management teams who retained critical expertise. 

By Alex Kimani for Oilprice.com

Total And BP Tap Wind Power To Decarbonize North Sea Oil Operations

Crown Estate Scotland has awarded offshore wind leases to 13 Companies, including BP and TotalEnergies, to support North Sea oil and gas decarbonization.

On Friday, Crown Estate Scotland, an independent commercial organization responsible for managing the British seabed, announced that it had awarded leases to 13 companies, including Big Oil's BP and TotalEnergies, and several UK renewable firms. 

The companies will develop offshore wind projects to supply power primarily to North Sea oil and gas platforms to reduce the sector's emissions.

Out of 19 bidders, the 13 selected companies will commence offshore wind development work with an initial combined investment of approximately £260 million ($317.28 million). Flotation Energy and Cerulean Winds are set to be the largest investors in this endeavor, with investments of nearly £96 million and £138 million, respectively.

BP's Alternative Energy Investments division is slated to initially invest £1,670,917, while TotalEnergies will contribute £200,000 towards developing these projects. Crown Estate Scotland aims to attract investment in innovative offshore wind initiatives in Scottish waters through a leasing process known as INTOG (Innovation and Targeted Oil and Gas). The primary goal of this strategy is to help decarbonize North Sea operations.

Crown Estate Scotland has stated that the maximum capacity for all awarded projects is 5 gigawatts (GW),  with an additional 500 MW  allocated for smaller, more innovative projects. Successful bidders will be offered a seabed lease with a term ranging from 25 to 50 years.

As a global leader in wind power, the United Kingdom experienced a record-breaking year in 2022, with wind energy supplying over 25% of the nation's electricity, according to the National Grid. 

Offshore wind, the largest renewable energy source in Britain, has the potential to power approximately 40% of UK households, as stated by the Crown Estate.

Developing offshore wind projects to provide clean energy for North Sea oil and gas platforms is a significant step towards achieving the UK's decarbonization goals. This innovative approach aims to reduce the environmental impact of oil and gas operations while simultaneously promoting the growth of renewable energy industries.

By awarding these leases, Crown Estate Scotland is fostering innovation in the offshore wind sector and reinforcing the United Kingdom's commitment to a sustainable energy future. This collaboration between major oil and renewable energy firms signifies a critical shift in the industry, demonstrating the importance of cooperation and investment in clean energy solutions.

The offshore wind leases to 13 companies, including BP, TotalEnergies, and various UK renewable energy firms, highlight the country's dedication to reducing emissions from the oil and gas sector. With an initial combined investment of around £260 million, these innovative projects are expected to contribute to the decarbonization of North Sea operations significantly. This development underscores the importance of collaboration between various energy sectors and reaffirms the United Kingdom's position as a global leader in renewable energy.

By Michael Kern for Oilprice.com 

Protests In France Force Exxon To Shut Port Jerome Refinery

An extension of the current strikes at France’s Le Havre port has cut off crude oil deliveries to ExxonMobil’s nearby Port Jerome refinery, according to the CGT trade union.

Exxon’s Port Jerome refinery—a 236,000 bpd refinery in northern France—and the Gravenchon petrochemicals plant will stop operations today, CGT said, according to Argus. The refinery was originally expected to close earlier this week as the strikes drug on, but the refinery received a shipment of crude oil from Libya.

TotalEnergies’ Gonfreville refinery also shut down earlier in the week—a refinery producing 246,900 barrels per day. Four workers from this refiner were tasked by police to release jet fuel stocks last night, intended for airports in Pa

Other refineries in France that are shuttered are Total’s 219,000 bpd Donges refinery and Petroineos’ 207,000 bpd Lavera refinery.

Strikes have shut down the refineries as French President Emmanuel Macron pushed through a controversial pension reform without a vote in Parliament under parliamentary clause 49:3. The pension reform would raise the retirement age in France by two years, to age 64.

The strikes have disrupted power supply, refining operations, and fuel deliveries for nearly two weeks. 

Apart from refining operations, the strikes have disrupted LNG imports into France as LNG import terminals have been shut down.

France has four LNG receiving terminals, Dunkirk, Montoir, Fos Cavaou, and Fos Tonkin. At least seven LNG cargoes heading to France have changed course since the strikes were implemented and are now headed to alternate ports in the Netherlands, the UK, and Spain.

The retirement-age strikes have been going on for the better part of this year, although France’s refineries have seen a multitude of closures due to strikes stemming from other issues such as pay.

Total and ExxonMobil hold most of the refining capacity in France.

By Julianne Geiger for Oilprice.com