anybody see the artlicle on Money Morning or the daily Reckoning about Russia's stranglehold on Europe's gas. Seem's like HOG was one of the asx listed companies he was referring to. Here it is for those that missed it.
Russian Exile: How Europe Will End the Kremlin's Natural Gas Monopoly
Russia controls the European gas market. The map below shows the gas pipelines running from Russia, into Western Europe, and South and East Asia:
For years, Europe has been at the mercy of Russian gas suppliers. And in 2006, Europe bore the brunt of a pricing dispute when Russia simply turned the gas off. Nothing flowed through the pipes.
Again, in 2009, Russia switched off the flow of gas, but this time, only to the Ukraine over another pricing dispute. Other parts of Europe received limited amounts of gas.
And just to prove a point, in February - in the middle of a cold snap during a mild northern winter - the Russian state-owned gas company, Gazprom decided that it would only supply the amount of natural gas it was contractually bound to.
Sergi Komlev, head of contracts and pricing at Gazprom Exports, told the Financial Times: 'Gazprom has agreed contractual volumes that it is obliged to supply, to the month and the day. We are fulfilling these obligations but our customers want more volumes than we are obliged to supply.' It didn't matter if people were cold, or unable to cook. The company would only supply what was required, rather than what was needed. Chances are Gazprom could have met the extra demand if they wanted to. It was a big 'stuff you' to the freezing Europeans.
However, Gazprom will only have itself to blame in the future when it has one less customer.
Ukraine is Open to Foreign Investment
Last July, a Russian research paper commented on how many European companies wanted to end Russian natural gas dominance: 'The attitude in Europe towards the prospects for Russian imports seems to be periodically changing from a perceived dominance of Russian gas imports for years to come and a threat to a European energy security.' The thing is, European countries have their own significant 639 trillion cubic feet (tcf) deposit. So why don't they develop that?
Simply because of the cost.
Take the Ukraine for example. It has a 38 tcf reserve of natural gas. But Russia offered the Ukrainian government lower than market gas prices for use of the Ukraine pipelines.
That was up until 2008. And then the price started to climb.
Right now, the Ukraine government pays about USD$516 per 35,314 cubic feet of Russian gas. Enough to fill a full-size blimp. Funnily enough, when this price was set last year, it was almost USD$200 above the market price of Russian gas. The Ukrainians were getting stooged on the price...
And so, the Ukraine government complains about the high price. The Russians happily offered to lower the price. But, only if Ukraine handed them full control of the gas pipelines.
Handing over control of the pipelines is something the Ukraine wouldn't do. Instead, they chose to develop its potential 100-year gas reserve.
Just last week, the country opened its borders to international bidders to explore and develop some of the vast gas deposits.
There's no news on which company was successful, but Chevron Corp, Royal Dutch Shell and Exxon Mobil Corp all placed offers to secure a permit for exploration.
Why only now are these big boys moving in? Vitaliy Radchenko, an energy researcher at CMS Cameron McKenna in Kiev said, 'Up to now most foreign investors have been cautious in embracing Ukraine. The country's unstable political climate, excessive red tape and high corruption levels have kept foreign business away.' What's changed? Simply put, the government no longer wants to buy something from its neighbours when it can develop its own resource.
Radchenko said, 'For years key policy makers in Ukraine were betting on the fact that somehow they would get the cheap Russian gas. Now it's clear that this is over, so that puts a lot of pressure on the system to change.' Profiting From European Explorers
You see, the situation in the Ukraine isn't unique. Many European nations can no longer risk their energy future and energy security on Russia.
And the best part is, you can take advantage of this.
In fact, there are a handful of Australian listed companies with opportunities in Europe already.
Kris Sayce, editor of Australian Small-Cap Investigator has been watching these stocks for a while. And he thinks now is the time to take advantage of the opportunity in Europe: 'I'm betting on Europe eventually getting its act together and figuring out that it can no longer rely on the Middle East and Russia for its energy supply.' He told subscribers in the April issue: '...I believe Europe is due to embark on a huge re-evaluation of its energy strategy. And I believe gas will be at the forefront of that strategy.' If you're keen to see how Kris plans to take advantage of the growing natural gas movement in Europe click here.
