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Blue Corridor Rally 2013 Hansa: Ready, Steady, Go!

Gazprom Export Global NewsletterAugust 2013 | Vol. 6 | Issue 4

Page 12

Page 9

Page 8

Competition and Liberalization of the European Energy Sector

Natural Gas—a Strong Partner for a Successful

Energy Turnaround

© Gazprom Export

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BLUE FUELGazprom Export Global Newsletter

Publishers Contact Info:www.gazpromexport.com | newsletter@gazpromexport.com +7 (499) 503-61-61 | comm@gazpromexport.com

To Our Readers: 2013 Summer Update ..................................Pg. 4

The Golden Age of Gas on the Move ......................................Pg. 5

Blue Corridor Rally 2013 Hansa: Ready, Steady, Go! .............Pg. 8

The Eighth CNG Filling Station of Gazprom Germania Launched at the German Baltic Sea Coast .............................Pg. 8

Q&A on Arbitration ..................................................................Pg. 9

Natural Gas—a Strong Partner for a Successful Energy Turnaround ...............................................Pg. 9

GECF Summit in Moscow Stands for Oil-Indexed Prices .......Pg. 11

Competition and Liberalization of the European Energy Sector ..............................................Pg. 12

Football for Friendship ...........................................................Pg. 13

Collaboration with Adeli Foundation for Disabled Children ..........................................Pg. 14

Music Unites ..........................................................................Pg. 15

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In the first seven months of 2013, Gazprom’s gas supplies to Europe have grown by 12 percent against the level of 2012. This is not more than just seasonal hike but a trend. The year-on-year gap has been growing every month, with outstanding results in July 2013, due to the 13.5 bcm gas supplied to European clients by Gazprom Export. This is a record high figure compared to the “normal” July sales of about 9.5 to 10.5 bcm reached during the three preceding years.

What is behind this trend? The most obvious explanation of the impact is the change in weather. Gas being consumed in Europe, mostly in heating, is a highly seasonal dependent, with higher-than-average offtake in winter months and below-average in summer. To shave off these peaks, the gas transportation system incorporates underground storages (UGS).

These facilities serve a double function. They procure and keep in extra storage gas for the colder days, and also protect the load of the pipelines in summer when consumption falls, but the UGS can be refilled for future offtake. The cool spring of 2013 meant that earlier stored gas was extracted over a longer period of time. This had postponed the beginning of the storage filling operations. This caused a delay that has to be made up before the heating season starts. The rationale of the current high offtake is based on the natural cycle of gas consumption and the delayed UGS refilling operations.

Yet, there are other trends that need a more sophisticated clarification. After the first half of 2013, Russia was the only major player exporting gas to Europe that recorded an increase in sales, while Algeria, Libya, Qatar and Nigeria reported a decline, along with European suppliers like Norway and the UK.* The only other exception to the rule was the Netherlands, which kept gas sales growing (and decreased their imports from Russia).

What is the driver behind such a development? For the record, despite the usual decrease in consumption during summer, spot prices in Europe are still circling around an average of $350/tcm, which is less than $40 below the average Gazprom contract price. The spread is thin, which is strange enough because spot prices do not reflect supply and demand balance and are basically determined by Gazprom’s long-term contract prices (minus the price of flexibility). The added flexibility, priced as one cycle of storing, costs no less than $70/tcm. This means that spot market prices are higher than they could have been, providing an extra margin for wholesale buyers and resellers. Then why would Algeria, Libya, Qatar, Nigeria, UK and Norway report a decline is sales despite lucrative prices?

The following are additional questions to keep in mind:

1. Is the continental spot market considered too risky? Does it scare off suppliers, despite the offered extra profit?

2. Are consumers keeping their spot prices high due to their appetite for even more gas procured in advance?

3. Is there a limited number of suppliers to Europe and can they meet the actual demand for gas?

4. Are LNG cargoes being lured to premium markets in Asia?

Whatever the result of the deliberations, the current state of play highlights the unique feature of the European gas market design —it is a hybrid-working model, where the long-term contracts still perform as a leading actor and hubs with spot market prices are left with the role of supporting actors. Together, they source gas and service gas to the European consumers in a rather harmonious tandem mode that shows defiance to those who wish to break them apart.

*Data sources: IEA, Eurostat, national statistic offices, Wood & McKenzie, Lloyds.

To Our Readers: 2013 Summer Update

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Experts from the United Nations Development Program (UNDP) predict the world population to grow from 6.1 billion in 2000 to 7.8 billion by 2030 and to 8.9 billion by 2050. According to the UN, the largest growth between 2000 and 2030 may happen in Asia (925 million more people) and in Africa (600 million more people). Europe, on the contrary, is the only part of the world where, if the current socio-economic trends persist, population could shrink by 8 percent (58 million people).

Population growth translates into further global economic development complemented, among other things, by rising demand for transportation services, equipment and motor fuel, which in turn will result into heavier environmental burden.

By 2030 global on-road vehicle population may raise from the current 1.0 billion to 1.5 billion units. According to ExxonMobil, demand for motor fuel in the transportation sector of the world economy in 2000 - 2030 may grow by 56 percent and reach 70 million bpd of oil equivalent with road freight transport fuel consumption accounting for more than half of that growth (22 million barrels per day).

The growing use of alternative transportation fuels is one of the global development trends. International Energy Agency (IEA) estimates that by 2035 hybrids may account

for 20 percent of new on-road vehicles, electric cars will be at 4 percent (presumably plug-in vehicles only), while natural gas vehicles (NGVs) will account for 3 percent of the vehicles. Biofuel will remain a ‘political’ rather than truly commercial fuel. The US National Intelligence Council unequivocally defines the current price of biofuel as non-competitive. In many countries, biofuel is subsidized from the taxpayer’s pocket.

Natural gas has a unique blend of environmental, technical, and economic advantages, which none of other alternative fuels can boast of. This valuable blend allowed natural gas to victoriously march into the motor fuel market during the past decade.

From 2004 to 2013, the global NGV population grew by 4.5 times—from 3.9 to 17.4 million units. According to International Gas Union, the number of methane-powered vehicles could reach 50 million units by 2020. The number of natural gas vehicles may start sky-rocketing between 2015 and 2016.

The global network of CNG filling stations is developing. NGVs are now serviced by more than 22,000 CNG filling stations and 9,500 vehicle refueling appliances (home fill).

The demand for natural gas by motor transport in the past decade kept growing at an average pace of 17 percent per year, and exceeded 30 Bcm in 2012. According to some

The Golden Age of Gas on the MoveSergey Sakharov – Head of Department, Gazprom Export Eugene Pronin – Chief Specialist, Gazprom Export, Chairman, IGU WOC5

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estimates, natural gas may account for 4 percent of the global motor fuel balance by 2040. Moreover, there will be a steep growth in demand for LNG for marine bunkering after 2020—from 0.2 to 4.5 Bcf per day.

For the period of 2004 to 2013, the composition of the global NGV fleet had no significant changes. Passenger cars and trucks (categories M1 and N1)—private and commercial - make up the bulk of NGV fleet: they steadily account for 92 to 93 percent. The majority of these vehicles are not OEMs (built by Original Equipment Manufacturer), but converted (retrofitted) ones. It is most likely that by 2020 conversion may deliver more than 50 percent of the global NGV population. However, the share of OEMs will keep progressively growing.

There have been recent growth trends for buses (categories M2 and M3) and trucks (categories N2 and N3) running on methane. Most of OEM heavy duty vehicles use liquefied natural gas (LNG). Compressed natural gas (CNG) continues to be a popular energy carrier for city buses

The Golden Age of Gas on the MoveContinued from page 5

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Passenger Car Buses Trucks Others

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and communal vehicles, while intercity coaches and long-haul trucks increasingly switch to LNG.

There are various criteria for assessing the world NGV market.

NGV population is the key indicator for automotive industry, component manufacturers, conversion and maintenance providers. By this criterion, the world leaders are Iran (3.3 million cars), Pakistan (2.8 million cars), Argentina (2.2 million cars), Brazil (1.7 million cars), China

and India (1.5 million cars each). In Europe, Italy is leading with its national NGV fleet of 750,000 units.

However, if one looks at the number of NGVs (all categories) per every 1,000 people, it appears that the undisputed champion in this discipline is Armenia. According to available statistics, there are 80 NGVs per 1,000 people in Armenia. In Argentina, it is 54 units, in Iran 42 units, Bolivia 24 units, Pakistan 13 units, Italy 12 units, and Uzbekistan 10 units. The global average is 2.7 NGVs per 1,000 people.

For CNG and LNG equipment manufacturers, the size of the network of CNG and LNG filling stations is the most convincing indicator. The filling station leaders are Pakistan (3,000 stations), China (2,800), Iran (2,000), Argentina (1,900), Brazil (1,800), USA (1,400), Italy and Germany (900).

For gas industry sales of methane is naturally the main yardstick to measure development of NGV market. The top 10 global leaders are Iran (5,760 million m3), Thailand (3,422), Pakistan (2,949), Argentina (2,603.6), India (1,958.5), Brazil (1,700.2), South Korea (1,116); Bangladesh (1,098.6), USA (930.2), and Italy (870).

Gazprom Export is interested in the development of European NGV market. According to reasonably conservative forecasts, gas consumption in the European automotive and sea transport sectors may reach up 43 Bcm by 2020. This includes 13 Bcm of LNG.

The above does not mean that Gazprom is not interested in other regional NGV markets. Further development of technologies to produce, transport and dispense LNG (including small-scale LNG) would help supply natural gas fuel even to off-grid customers.

Environmental security continues to be the dominant driver of revolution towards alternative transportation fuels. In most cities, automotive emissions account for 70 to 80 percent of the total pollutants. Keep in mind the mutual negative impact of large cities. For example, emissions from megalopolises with a population of over 5 million people could travel by air to a distance of 300 km, cities with population of 1 to 5 million

people send their emission to a distance of 200 km, and those with population of 0.5 to 1 million people to a distance of 100 km. Cities with smaller population also do pollute both their own atmosphere and that of the neighbors. Emissions do not recognize national or municipal boundaries. Toxins from Brussels urban agglomeration (1.8 million people) reach France, Luxembourg, Germany, the Netherlands, and even England depending on the wind direction. These countries in turn send their emissions to Brussels and neighborhoods.

Speaking about the environmental aspects of introducing natural gas in transport, it should be noted that Gazprom is not just calling on others to move over to methane, but sets the example. As part of the Year of the Environment declared at Gazprom, subsidiaries of the company in the first half of 2013 alone have added 515 NGVs to their methane fleets, thus making the overall pool of CNG vehicles at Gazprom to exceed 4,000 units and become the largest corporate NGV fleet in the world.

Price is also important when choosing an alternative to mineral oil fuel. A 10-year retail price picture for Europe shows that natural gas is much cheaper than conventional gasoline and diesel fuel. This trend will continue in the foreseeable future. Natural gas is by 30 to 60 percent cheaper than diesel fuel, which is the main carburant for municipal passenger buses and communal. A transition to the use of cheaper fuels will at least curb the aggravation of the financial burden on municipal budgets.

Gazprom Export is ready to develop infrastructure and provide foreign consumers with the cleanest, safest, most abundant and economic hydrocarbon fuel of the 21st century.

€ 0.93

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€ 1.02

€ 1.26

€ 0.38

€ 0.70

€ 0.72

 €  0.20    

 €  0.45    

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 €  0.95    

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 €  1.45    

2004  Y   2009  Y   2013  Y  

Premium Gasoline (US$ litre) Regular Gasoline (U$S litre)

Diesel (U$S litre) CNG (U$S Nm³і)

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Blue Corridor Rally 2013 Hansa: Ready, Steady, Go!When the first Blue Corridor natural gas vehicle rally was held in 2008, there were 9.5 million natural gas vehicles (NGVs) around the world. Since then, the use of natural gas in transportation has almost doubled. Today, there are more than 17 million NGVs, of which roughly 12 percent are operating in Europe. For the sake of promotion of the environmental and economic benefits of NGVs, we are hitting the road again with the seventh Blue Corridor rally.

This year, focus is on the Baltic region, to revive memories of trade routes and business relations of the legendary Hanseatic League. From the 3 to 19 October, NGVs supported by Gazprom Group, E.ON Ruhrgas and other companies of the region will drive along more than 3,900 kilometers of roads from St. Petersburg, Russia to Finland, Sweden, Denmark, Germany, Poland, Lithuania, Latvia and Estonia, finishing in Narva. Nine round table discussions are to be held in the cities along the route, bringing together industry representatives, policymakers, environmentalists, media, and auto enthusiasts.

The marquee event will be the round table in Hamburg, Germany—in the country that maintains leadership in car manufacturing and marine ports infrastructure. Symbolically, the date of the event, 10 October, marks the celebrations of the long term gas supply contract concluded 40 years ago between Germany and the former Soviet Union. The contract changed the European energy landscape and set the basis for a long-term successful cooperation. It is a special occasion for both Gazprom Group and E.ON Ruhrgas since after all these years marked by success, new joint initiatives in gas technologies, like NGVs, are being developed and launched together to meet the new challenges.

The Baltic Sea region is a real challenge and an opportunity for environmentally friendly fuels. On the one hand, municipalities already have shown great interest in employing the eco-clean buses and trucks, and the interest received a powerful backing last year when the brand new Solbus Solcity LNG was

presented at the test drives in Poland and Latvia. On the other hand, the strict emission standards to be imposed on the marine fleet of the Baltic focus attention on alternative fuels. And in this area LNG has every chance to play the leading role. It’s planned that the first ever large scale passenger LNG ferry, already braving the seas, will also be part of the gas-powered tour, bringing the rally from Finnish Turku to Stockholm.

The Blue Corridor Hansa rally, already the seventh in a row, builds on the success of the 2012 Rally, which crossed 6,000 kilometers

Gazprom Germania GmbH is further expanding its CNG station portfolio and contributing to creation of the “blue corridors” across Europe, connecting more natural gas filling stations in Germany and Russia so that natural gas vehicles (NGVs) have more options for refueling.

On the 1 August, Gazprom Germania opened its eighth compressed natural gas (CNG) filling station with a new site in Ribnitz-Damgarten (Mecklenburg-Western Pomerania), an attractive vacation region on the Baltic Sea.

This is the first CNG filling station project implemented in cooperation with Aral—German petrol station brand of BP, which is the biggest fuel station provider in Germany.

Gazprom Germania is actively involved in the development of the German gas fuel market. Beginning from 2011, the company expands its network of natural gas filling stations in Germany. By the end of 2014, the number of these fuel stations is planned to reach 15.

The Eighth CNG Filling Station of Gazprom Germania Launched at the German Baltic Sea Coast

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Blue Fuel: How do you interpret the recent decision passed by the Vienna arbitration court regarding the case with RWE Supply & Trading CZ?

Answered by Tatiana Strizhova, Head of Legal Directorate, Gazprom Export

The modifications to the price formula made by the Tribunal in its recent decision on price revision under the contract with RWE Supply & Trading CZ (“RWE”) were far from the extent requested by RWE.A spot NCG component was introduced in the indexation formula by reducing the existing shares of other components of the formula. However, the price formula remained indexed to oil to a large extent. As a result, the new formula which took effect in May 2010, does not lead to the lowest price in GPE’s sales portfolio. The tribunal rejected all the excessive and unjustified claims made by RWE and amended the price with a professional approach to the specifics in the case, taking full account of the important differences between gas purchased under long-term take-or-pay contracts and gas procured from

traded gas markets. The tribunal recognized that no high spot indexation could be introduced to the formula without damaging the balance of interests between the parties under the contract.Gazprom Export attaches the highest importance to long-term relations with its partners and is always willing to negotiate and find a compromise on any possible commercial disagreements, as expected in a professional business world. Just a few of our partners have started formal arbitration proceedings on price against us. Unfortunately, reaching an amicable commercial agreement with RWE proved to be impossible, despite all our efforts. RWE was not ready to make any single step towards an amicable agreement, and continued to uphold an inflexible “all-or-nothing” approach demonstrating an unwillingness to negotiate and compromise. The fault for failing to find an agreement is entirely theirs. The results of the arbitration confirms that endeavours of professional commercial companies to settle amicably without waiting for an arbitral award is totally justified and reasonable.

and witnessed roundtables in 11 major European cities, including a keynote event with the European Union officials in Brussels. Passenger cars, trucks and buses running on natural gas from major European manufacturers were on display at stops along the rally route. The tour started in Moscow and stops included Minsk, Warsaw, Ostrava, Prague, Paris, Brussels, Berlin, and Poznan. The rally emphasized that the huge traffic flows between western and eastern Europe can

have low emissions only if “blue corridors” were established across Europe that have sufficient infrastructure enabling NGVs to be used over the entire distance. A special priority is the creation of an LNG corridor for heavy-goods vehicles.

Learn more about the rally and the NGVs, check out for more information on the upcoming tour and the exciting benefits of natural gas and see the news and reports at www.bluecorridor.org.

Q&A on Arbitration

In March 2011, a devastating earthquake shook parts of Japan, which was one of the biggest natural and environmental catastrophes in the region. The nuclear power station Fukushima Daiichi located on the northeast coast was hit by a tsu-nami, leading to large amounts of radioactive materials leaking from the plant and contaminating the surrounding area.

The Fukushima nuclear catastrophe also had its consequences in Germany. Shortly after the disaster, the German government fundamentally changed its position on nuclear energy; an accelerated phasing out of nuclear power by the year 2022

Natural Gas—a Strong Partner for a Successful Energy Turnaround By Rainer Seele, Chairman of the Board of Directors of Wintershall

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became, as it were, the “second consensus on nuclear power.” The idea that nuclear power could be a technology that would bridge the gap and pave the way toward the era of “renewables” was off the table in a flash.

Enormous financial burden of the energy turnaround The early exit from nuclear power represented a profound turning point for the energy supply system in Germany. The so-called “energy turnaround,” meaning the long-term changeover to renewable energies in the energy supply, can only be realized if all the stakeholders make a concerted effort. The expansion of the grid and infrastructure, as well as subsidies and investments in building renovations, incurs enormous costs. German Environment Minister Peter Altmaier has put the financial burden at up to one trillion euros—a massive sum of money, the composition and source of which is not yet known.

Supply shortages remain, energy costs riseThe share of electricity generated from renewable sources in the energy supply will, without doubt, rise in the future. Yet the constant expansion of renewable energy sources brings considerable challenges with it: supply shortages caused by the volatility remain, and the cost apportionment of green electricity will lead in the long term to rising electricity prices—which will put consumers and Germany at an economic and competitive disadvantage. Flexible and affordable solutions are required.

Natural gas: Climate-friendly, flexible, competitiveTherefore, the energy turnaround offers a major opportunity for Wintershall and for our numerous joint ventures with Gazprom. This is because natural gas is the most climate-

friendly fossil fuel, has a wide range of applications and is very competitive.

It is paradoxical that despite the increasing volume of green electricity in Germany, greenhouse gas emissions that are harmful to the climate actually rose last year. The main reason for this was because coal was cheap, which made generating electricity from coal commercially attractive again and led to state-of-the-art gas-fired power stations being switched off because it wasn’t commercially viable to run them. Yet there are on average 50 percent more emissions when coal is used to produce electricity than with electricity generation using gas.

Policymakers must, without delay, create a new market structure that makes the operation of these climate-friendly gas-fired power stations—which can respond flexibly and quickly to fluctuating renewable electricity generation—commercially viable. This is the only way to achieve ambitious climate targets long term.

In addition to electricity generation, natural gas plays an important role in the heating market in particular. Since almost 40 percent of our energy requirements and a third of the CO2 emissions released nationwide are attributable to the heating market, a restructuring of the sector is advisable. The duties of policymakers are also clear in this regard: They have to boost the financial incentives for renovating heating systems significantly, and the issue of energy efficiency must finally be approached systematically. Natural gas-based solutions represent an ideal prospect for the restructuring of the heating market in a way that protects the climate.

Finally, energy in Germany must stay affordable. The energy turnaround must not be allowed to become a competitive disadvantage for German industry. Energy prices are an issue that always affects the industrial future of a national economy. Competitive electricity prices are therefore crucial for Germany’s energy- intensive industry.

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Natural Gas—a Strong Partner for a Successful Energy Turnaround

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GECF Summit in Moscow Stands for Oil-Indexed PricesOn 1 July, the second Summit of Gas Exporting Countries Forum (GECF) took place in Moscow. Heads of state and high representatives of GECF member and observer states as well as international organizations such as the International Energy Agency (IEA) and the Organization of the Petroleum Exporting Countries (OPEC) attended the Summit.

The Summit adopted the Moscow Declaration, which is focused on priorities in cooperation on international gas markets. Member states unanimously affirmed to strengthen GECF, enhance global-scale coordination to protect the interest of the Forum, preserve principles of international trade as well as uphold the fundamental role of long-term gas contracts, and continue to support gas-pricing based on oil and oil products indexation.

GECF members supported the notion that abandoning the basic principles of long-term contracts would not only deal a blow to gas producers, but would ultimately create big losses for customer countries and undermine their energy security.

In the Moscow Declaration, member states declared common determination to enhance the global-scale coordination of actions to protect the interests of gas exporting countries in all areas, including interactions with regulatory authorities of gas consuming countries. The goal is to preserve and enhance the principles of international gas trade, such as risk sharing mechanisms that have proven to be effective and have allowed for the continued development of natural gas worldwide.

The Moscow Declaration also stresses the importance of upholding the fundamental role of long-term gas supply

contracts in financing large-scale gas projects along the value chain and in providing mutually acceptable solutions for security of demand and supply. The Declaration will continue to support gas pricing based on oil and oil products indexation to ensure fair prices and stable development of natural gas resources, and will foster the consistent growth of natural gas usage as an abundant non-renewable source of energy to increase its share in the world primary energy mix. Finally, it will promote the expansion of natural gas utilization in different forms, including as a motor fuel and raw material.

Background Gas Exporting Countries Forum (GECF) is an assembly of the world’s leading gas producers. The main target of cooperation between member states is security of demand and supply. Russia highly values its involvement in the GECF, which was established to coordinate the interaction of member countries.

The GECF was established on 1 October, 2009, when the Agreement entered into force (after being ratified by five countries that signed it).

The member countries of the Forum are: Algeria, Bolivia, Egypt, Equatorial Guinea, Iran, Libya, Nigeria, Oman, Qatar, Russia, Trinidad and Tobago, United Arab Emirates and Venezuela. Iraq, Kazakhstan, the Netherlands and Norway enjoy the status of observers. The Forum’s headquarters is based in Doha, Qatar.

Extraordinary Ministerial Meeting of GECF. Moscow, June 29Second Summit of the Gas Exporting Countries Forum. Moscow, Kremlin. July 1, 2013.

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Competition and Liberalization of the European Energy Sector Failure or a “renewable” dead end? Tamas Leszak, Editor and Journalist at Napi Gazdasag (Daily Economics), Hungary

The European Union (EU) has the right and a clear obligation to step up against the negative effects of the global tendencies in the energy sector, but the old ambitions and methods cannot serve this goal. A sector that is continuously facing many different challenges cannot be helped only by competition or liberalization—which in many countries has serious limitations.European energy policies are influenced by many opposing sides. The EU member states have a quite ambivalent relationship with the free market, social issues and corporate ownership in the industrial sector. Competition and liberalization issues are the top priorities of the EU energy strategy, but consumer prices often have a political flavor, especially in the eastern parts of the continent.

In more and more countries, the call for consumer price reductions should be interpreted as a part of election campaigns. In some cases this calls for lower prices combined with unprofessional demagoguery sparked by local political circumstances and the symptoms of the crisis. This is a consequence of the forced mix of politics, security of supply considerations and the wealth of a given country.

At this point the EU has to have a right and obligation to act as a counterbalance to national narrow-mindedness—even if the implementation of the directives and common policies is only possible through small steps, hampered by more and more political and economic barriers. In general, achieving the EU 20-20-20 goals seems more than difficult, but there are signs that

common policies are slowly starting to change things.

EU member states have many common rules that aim to open and improve the competitiveness of the internal energy market. Interconnecting energy markets offers a greater potential to reduce prices by means of competition, but other challenges loom, such as climate change, which is often “swept under the carpet,” dependence on (gas) imports and the pricing issue which have been raised in almost every country with renewed enthusiasm in the recent years.

Politicians usually consider the interconnection of electricity and gas markets, an improved consumer rights framework, smart grids and smart metering, and transparent communication as key to reaching the aforementioned targets. At the same time another important challenge is the elimination of national price controls. These measures are not only expensive, but also distract public opinion from the importance of investments into efficiency and competition—the absence of which results in a higher energy bill for every consumer in the longer term.

European energy policy has failed and is in fact self-destructive according to Gerard Mestrallet, CEO of French GDF Suez, who spoke earlier this year on behalf of eight energy companies, arguing that the EU energy policies have to be redefined, both in terms of goals and content. The companies say that the EU, despite its noble targets, does not perform well neither in terms of climate protection nor in increasing competition or improving security of supply.

Indeed, the goals that were set several years ago have long been overridden by the current market situation. The shale gas revolution in the US made the price of coal decrease, while keeping (cleaner) gas power plants running has become almost completely uncompetitive in Europe. Coal

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imports from the US into the EU have never been as high as they are now, although coal-based generation of electricity is not pushing the industry towards a carbon free and greener future. At the same time high gas and low electricity prices force the operators of the more effective gas power plants—which can also meet the emission targets more easily—to stop their units, almost completely.

The joint statement of the energy firms—even considering their obvious market interests—has a point when arguing that the lack of transparency and the regulatory uncertainty hinder the much needed investments in the European energy sector. European leaders should understand that the money spent on European policies fostering the use of carbon-free and green technologies cuts back competitiveness of the EU producers who are driven into an unfavorable position compared to those countries that take advantage of the current energy market trends.

A deteriorating sector facing the challenges outlined here cannot be helped only by competition or liberalization, which in many countries has limits.

The European governments struggling with the financial crisis and harmed by political promises do not wish to sacrifice more money on energy investments. This unwillingness to make investments also holds true for the companies. At the same time the EU guidance is not enough to ensure that investments are made at the required level. It is not unthinkable that in such an environment, the objectives foreseeing (costly) renewable energy production and generous state subsidies will have to be reviewed.

An indisputable effect of liberalization is that under certain conditions and at a certain time the cost of energy could be significantly reduced. However the tensions between the national and EU levels, as well as politically-driven increases in fiscal revenues and social components in price-setting mechanisms eliminate the benefits of competition. Günther Oettinger, the EU energy chief, has told the UK paper Guardian that there should be no new taxes on energy within the EU if the continent’s industrial sector is to remain competitive. And this does not merely concern the energy sector but all the manufacturers and every sector that uses energy.

In the US, the shale gas boom has driven gas prices down to less than a fifth of the European equivalent. The International Energy Agency (IEA) expects the demand for energy in Europe to decline by 1.7 percent this year, after a 3.9 percent drop last year. Meanwhile global demand is expected to increase showing that the EU could get into an even worse situation than it is now.

One thing is certain, old ideas and top level directives will not be enough to break the spell of shale gas and national politics in the liberalized energy markets of Europe. That is why many experts agree that the most important factor in EU competitiveness is nothing more than the price of energy. While governments do not want to spend more money in the energy sector they have a strong will to control industrial, social and financial sectors through price decreases. European goals alone are not enough to attract sufficient investments—that is why the green objectives and state subsidies will have to be reviewed in the near future.

The first Football for Friendship International Children’s Forum, organized by Gazprom’s social project, was held at Gazprom’s headquarters on 25 May. The meeting was led by Alexander Medvedev, Deputy Chairman of the Gazprom Management Committee and Director General of Gazprom Export, and Franz Beckenbauer, an official ambassador for the project and German football legend.

“Our project aroused keen interest worldwide. According to the responses from the media, the football community and participants themselves, it is easy to see that this is a good and important initiative. We have already received a lot of new requests from children and youth teams from different parts of the world to take part in the project. There is no doubt that we will continue developing this project and we hope that yet more boys and girls for whom football became a part of their lives long ago will get involved in the project,” Medvedev said.

During the meeting participants stressed that the Forum had been the key event of the project. Taking part in the Forum were Russia, Bulgaria, Germany, Greece, Hungary, Serbia, Slovenia and the U.K. Young sportsmen discussed ways of promoting the values most important for their generation in their countries.

The Forum held in May in London united 31 children’s and youth football teams from eight countries. The London Forum resulted in signing an Open Letter addressed to Joseph Blatter, President of FIFA, Michel Platini, President of UEFA and Jacques Rogge, President of the International Olympic Committee outlining eight principles of football that the Football for Friendship participants are committed to: traditions, peace, friendship, victory, equality, health, justice and devotion.

Football for Friendship

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“I would like such concepts as equality and mutual respect to be of crucial importance for football players and sports fans as well. It is wonderful that not only do the young participants of the Football for Children project follow these ideas, but they also

promote them among their peers. Making the most important human values more popular among children and teenagers who are keen on football—that is how we see our task. And the Football for Children project successfully copes with it,” said Beckenbauer.

Continued from page 13Football for Friendship

Collaboration with Adeli Foundation for Disabled ChildrenFor three years in a row, Gazprom Export has been developing a project dedicated to supporting children who suffer from cerebral palsy, one of the most severe and widespread diseases.

About 13 in every 1,000 children suffer from this disease in Russia. Regular medical rehabilitation measures are the only means of improving the condition of such children. Besides the socialization and adaptation of the child, involvement in an active life and the expansion of interests and scope of communications all play an important role.

As part of the charity program, Gazprom Export offers support to the Adeli Foundation for children with cerebral palsy. The funds provided by our company are used to buy medical equipment and specialized suits to facilitate the recovery of the motor function in young patients, which are then transferred to rehabilitation centers in different cities.

Training sessions for professionals and parents of children with cerebral palsy are regularly held at Adeli Training Rehabilitation Center. Targeted assistance is offered to children with cerebral palsy whose families are in a difficult financial situation.

Franz Beckenbauer and Alexander Medvedev.

BLUE FUELAugust 2013 | Vol. 6 | Issue 4

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Music UnitesIn Geneva, at the Palais des Nations (Palace of Nations), where the UN European branch is located, the International Children’s Chamber Orchestra concert was held under the direction of the renowned Russian violist and conductor Yuri Bashmet. The best young soloists from 12 countries performed a complex and multifaceted program that included works by Grieg and Massenet, Haydn and Rossini, Telemann and Britten, Tchaikovsky and Rimsky-Korsakov. The concert was warmly welcomed by the audience and the hall exulted with a continuous ovation.

“This is a very important event. Switzerland has held a lot of major festivals, the concert life is exuberant, and the audience is spoiled with such a treat,” said Yuri Bashmet at the press conference, explaining that this is only the third performance of the children’s orchestra. For the first time, the disciples of the distinguished violist showed their skill at the Town Hall Square in Vienna. Last February, the young talents also took part in the Sochi festival.

“For many young musicians, this was the first performance in their life. They experienced what it is like to play in such a magnificent hall with outstanding acoustics,” said the maestro. In total, the orchestra consists of 28 musicians between the ages of 11 to 16 coming from Russia, Latvia, Poland, Estonia, France, Austria, Georgia, Greece, Israel, Palestine, Slovakia, and the Czech Republic.

The tribune of the Assembly Hall was chosen as the venue for the concert. This is the largest hall of the Palace of

Nations, which houses annual sessions of the World Health Organization and the International Labour Organization. Children with violins, cellos and double basses looked quite unusual at the stage, which is usually occupied by the heads of state, ministers and other officials.

In his speech before the start of the concert, General Director of the European Office of the United Nations in Geneva K.Tokayev emphasized the importance of music as a tool of diplomacy. “Probably, the countries that these young musicians represent on the international stage differ in their views, but these children do not differ being united by music,” he said.

“This is an international assembly of musicians and international by its nature art. Today’s performance serves as another symbol of art and culture being a vital instrument in securing harmony, alongside with diplomacy,” Russian Permanent Representative to the United Nations and other international organizations in Geneva Alexey Borodavkin said.

The Children’s International Chamber Orchestra was founded in 2012 in Austria on the basis of the summer academy of arts, organized by the Austrian public social fund “Energy for Life” with the support of the largest energy companies in Russia and Austria: Gazprom Export, GWH, EconGas, etc.

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