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Britain Is Doomed To A Winter Of Discontent

Britain is doomed to a Winter of Discontent, warns Ukraine’s gas king

Ukraine’s pipeline chief has a stark winter warning for Britain: the geopolitics of Europe’s escalating gas war with Russia are intractable, and the coming supply crunch is likely to force brutal demand destruction in industry and homes.

Yuriy Vitrenko, head of the Ukrainian energy and pipeline nexus Naftogaz, said that Western capitulation to Vladimir Putin’s gas blackmail would embolden Russia to launch a full-scale war on former Soviet territory.

He warned that the Kremlin has taken advantage of an acute global gas shortage to weaponise flows to Europe. “Last year Gazprom booked 65bcm (billion cubic metres) of transit through Ukraine and this year it is only 40bcm. That’s why you are not getting your 25bcm of gas. It’s as easy as that,” he told The Daily Telegraph.

The alleged aim is to force German regulators to nod through a “quick and dirty” approval of the ultra-political Nord Stream 2 pipeline; or, failing that, to secure emergency “pre-certification” flows, which establish an irreversible dependency on the new Baltic route. Both options deprive Ukraine and Poland of self-defence leverage and change the balance of power in Eastern Europe.

“They had planned to ship 25bcm through Nord Stream 2 this year and didn’t expect it to be held up. So now they are withholding the gas. If that is not a gas war, I don’t know what is,” he said.

Britain is just as exposed as the rest of Europe to this Gothic drama, even though it buys very little gas directly from the Russian state monopoly Gazprom. “We have an integrated European gas market. Russian gas that goes to Germany or the Netherlands can go on physically to the UK. Prices are the same and they’re going up for the entire European market together,” he said.

“Nord Stream 2 is clearly not compliant with the letter and spirit of EU rules so they need to put pressure on the regulator, basically the German authorities. But it is part of a bigger geopolitical game: Putin is testing the Biden administration. It’s a very Soviet tactic, they were always testing the West like that,” said Mr Vitrenko.

Gazprom supplied normal volumes to Europe over the first half of the year but that was not enough to prevent stocks falling to drastically low levels following a wet, cold spring and the V-shaped economic recovery that caught forecasters off-guard.

Flows through the Ukraine pipeline system then dropped abruptly at the end of June, just at the moment when surging East Asian and Chinese demand was soaking up the global supply of liquefied natural gas.

Gazprom has since been working to rule, delivering basic contract volumes but not the usual season top-up flows. It booked almost no extra capacity for July, August, September, and now October. It has booked minimal amounts through the Polish Yamal pipeline, another twist that is seriously alarming markets.

Gazprom says it has made up much of the shortfall to Europe with extra flows through the southern Turk Stream pipeline, which opened last year. Whether this comes close to compensating is hotly disputed.

Mr Vitrenko says the Kremlin was emboldened after President Joe Biden overrode US Congressional sanctions against Nord Stream 2 and subsequently agreed to a fig-leaf deal with Germany’s Angela Merkel that gave Moscow what it wanted. “The Russians perceived it as a chance to increase pressure. Right after they started to withhold gas and prices sky-rocketed,” he said.

Mr Biden was arguably playing the “reverse Kissinger” card, hoping to dial down tensions with Moscow and head off a deeper strategic alliance between Vladimir Putin and China’s Xi Jinping. But the accord has been bitterly criticised, decried as a latter day Yalta that throws Ukraine to the wolves.

Gazprom has made clear that Europe’s gas woes could end quickly if Nord Stream 2 is given the green light. Export chief Elena Burmistrova says the company “would be able to cover additional demand” once certification goes through. Kremlin officials have made similar noises.

Mr Vitrenko warned that giving in to energy blackmail would be to trade an immediate fuel crisis for an even bigger geopolitical crisis down the road. “If there are no longer any physical flows through Ukraine there will be a full-scale war between Ukraine and Russia,” he said.

Once Mr Putin is able to ship all his export gas to Europe via Nord Stream and other pipelines under his control, there will no longer be a deterrent. “Russia has a myriad of opportunities to provoke a war: by controlling separatists in the Donbas; or by creating a water supply crisis in Crimea, and claiming that it is intervening to prevent a humanitarian catastrophe,” he said.

“If there is a war we’re afraid that all we’ll hear from European politicians are expressions of ‘deep concern’ but Russia is not afraid of ‘deep concerns’,” he said.

Counter-pressure against Russia is building. Over 40 Euro-MPs have called on Brussels to investigate Gazprom for alleged price manipulation. The International Energy Agency (IEA) has issued a rare statement saying Russia “could do more to increase gas availability to Europe” and should attend to its reputation as a “reliable supplier”.

Not everyone agrees that Gazprom can produce more gas quickly after running down investment in drilling and exploration. The old Cenomanian fields of Western Siberia dating back to the 1970s are in terminal decline. “Gazprom is firing on all cylinders to satisfy growing demand at home and abroad,” said Vitaly Yermakov from the Oxford Institute for Energy Studies.

“It cannot wave a magic wand and deliver extra gas to any place in Europe that requires it on short notice. No matter how hard Gazprom tries, it cannot single-handedly balance such a huge market as Europe,” he said. Russia needs to refill its own depleted inventories. Stocks were just 25bcm in late June, far short of the 75bcm deemed the safe threshold for the long winter.

Mr Yermakov says the whole structure of Russia’s industry is changing as the centre of gravity moves to new Arctic fields in the Yamal Peninsula. More gas is earmarked for Asia over time. Russia cannot quickly replace the 40bcm slide in Dutch output from the Groningen fields over the last five years.

It makes commercial and ecological sense for Gazprom to supply Europe through the upper Baltic route rather than piping the gas through leaky Soviet infrastructure into the Ukrainian nexus, which also entails extra transit fees. This transition creates a mismatch: the old Soviet system is in decay but the new Yamal system is not yet fully up and running.

Expert opinion is split. Most analysts agree with the IEA that Russia has been playing games with gas supply. “They could easily have pushed another 5bcm so far this year via Ukraine,” said Prof Thierry Bros, a former gas strategist at the French economy ministry and now at Sciences Po.

Prof Bros said storage in Europe would still have been low but at least within historical bands, eliminating some of the panic premium currently driving gas prices.

Mr Vitrenko said the argument that Gazprom cannot produce more contradicts the stated rationale for the Baltic pipeline. “If that were the case, you wouldn’t need Nord Stream 2 at all. Russia can easily ramp up production, not overnight perhaps, but I can remember times when daily flows through Ukraine were three times as much,” he said.

Whatever the commercial arguments, no major European state is likely to take Moscow’s word at face value after the invasion of Crimea. Gazprom has long served as an instrument of Kremlin geostrategy. The new Turk Stream infrastructure has dual military usage, with a sonar surveillance system installed.

Many in Europe clearly wish to secure gas whatever the political price. They are pushing for immediate pre-certification flows through Nord Stream 2 before the industrial core of the Ruhr Valley starts to shut down, and aborts the economic recovery.

But events in Washington have again intruded. The US House of Representative passed a fresh amendment last week demanding the reimposition of sanctions. If the Senate follows suit, the White House may be forced to act. “No one will buy gas from Gazprom going through Nord Stream 2,” said Mr Vitrenko.

Mr Vitrenko said the mix of tightening US policy, a Polish legal challenge within the EU and Mr Putin’s behaviour are all now conspiring to block the pipeline for the foreseeable future. The Greens may soon be in the German government. They want to axe Nord Stream 2 altogether.

“It’s now very unlikely to happen. German regulators know it would just be too noticeable. They have a rule of law in their country, and others do care, so they can’t just ignore it,” he said.

It could be a long painful winter for Europe and the UK. Utilities are turning frantically to biomass, booster compressor stations, and coal where they can, and potentially even to oil substitution in power plants. “Everything comes into play at these prices,” said Mr Vitrenko.

In the end there may have to be price rationing, nature’s cure in the energy markets. “Many industries are just switching off, as we are seeing with companies in the UK. Households adjust their consumption. They’ll be emergency measures by European governments,” said Mr Vitrenko

How long will this stand-off last? “Frankly, I don’t know. It is difficult to predict what is inside Mr Putin’s head,” he said.

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British Airways grounds aircraft, apologises for hitch

British Airways has grounded its aircraft at the Murtala Muhammed International Airport, Ikeja, due to a technical fault.

The airline has, however, apologised for the flight disruption.

The airline’s Regional Commercial Manager, Nigeria and Ghana, Mrs Tutu Otuyalo, told journalists on Friday that the carrier had apologised to passengers.

She said that the airline would  take up the costs of accommodation and meals for affected passengers.

Otuyalo said that the majority of passengers had been accommodated on other flights, while the carrier’s team continued to work hard to book the remaining customers on a flight as soon as possible.

“We will cover accommodation and meal costs for the customers.

“We would never operate a flight unless it is safe to do so. Most of the affected passengers have been re-accommodated to other flights.

”We have been in contact with our customers to apologise for the delay in their flight caused by a technical issue with the aircraft,” she said.

Some of the affected passengers have been endorsed on available carriers such as Virgin Atlantic and Delta Airlines.

Recall that British Airways flight number BA 74, which was scheduled to depart  Lagos for Heathrow, London, at 10.50 p.m. on Wednesday,  suffered a hitch as the scheduled aircraft developed a technical problem.

The flight was rescheduled and later cancelled due to the technical problem.

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NERC approves N21b for purchase of meters

Govt directs electricity companies to charge Nigerians per hour

The Nigerian Electricity Regulatory Commission (NERC) has announced the approval of N21 billion for 11 electricity Distribution Companies (DisCos) to provide meters for customers.

This announcement was made in NERC’s ORDER NO: NERC/2024/072 on The Operationalisation of “Tranche A” of the Presidential Metering Initiative Under the Framework of Meter Acquisition Fund.

”The order signed by NERC Chairman, Mr Sanusi Garba and Commissioner Legal,  Dafe Akpeneye, shall become effective from June 2024 and may be amended or revoked by subsequent orders issued by the commission.

“The commission hereby approves the  sum of N21 billion apportioned pro rata to contribution by the DisCos as Tranche A of the MAF scheme.

”Attached to this order as Schedule 1 is a breakdown of the funds available for each DisCo for the purchase of end-use customer meters.

”All the meters to be procured and installed under the MAF framework shall be at no cost to the customers of the DisCos,” it said.

According to NERC, it introduced the Meter Asset Provider (“MAP”) Regulations 2018 and subsequently, the Meter Asset Provider and National Mass Metering (“MAP&NMMR”) Regulations in 2021 to address metering challenges in the Nigerian Electricity Supply Industry (“NESI“).

NERC said that the regulations provided several options for metering end-use customers but the interventions, though significant, had not resulted in the closure of the national metering gap which currently stood in excess of seven million customers.

”The inability of distribution companies (DisCos) to raise financing in the form of debt or additional equity was identified as the major constraint in the acquisition and deployment of end-use meters and other capital investments.

”The Meter Acquisition Fund (MAF) scheme was therefore, developed and approved by the commission, primarily to address the challenges of DisCos creditworthiness inhibiting the deployment of end-use meter in NESI.

”By creating a credible revenue stream from the market funds on the back of which long term financing may be secured by the utilities,” it said.

NERC said that the management of Fund Manager (FM) based on terms and conditions, negotiated by the DisCos and approved by the commission.

According to the commission, the federal government approved the Presidential Metering Initiative (PMI) with the overarching objective of closing the metering gap in the NESI within three years leveraging on smart metering technologies for data analytics.

The MAF shall form one of the revenue streams for the repayment of the long tenor financing for metering.

The order also revealed that the commission approved the deregulation of meter prices under the MAP scheme vide Order NERC/2024/040 to ensure an efficient pricing of meters while responding more quickly to changes in macroeconomic parameters.

“The order provides that all prices of meters under the MAP scheme shall be determined through a transparent and competitive bidding process by eligible MAPs.

“A competitive bidding process was held on  May 21, 2024 based on the provisions of Order NERC/2024/040 where a total of 24 ( MAPs participated across the 12 DisCos.

”A total of 44 bids were submitted for 10meters specifications,” it said.

NERC said the deployment of funds under the MAF scheme would accelerate the deployment of meters and a closure of the current metering gap.

”Thereby reducing commercial and collection losses to DisCos, enhancing quality of service and improvement of customer satisfaction,” it said.

NERC also noted that while the NESI is expected to leverage on the revenue stream under the MAF framework to raise substantial capital funding for metering, there was an imperative to accelerate a closure of the metering gap for all customers.

”Currently classified under tariff Band A for the purpose of revenue protection and facilitating demand side management for the affected customers.”

NERC said that the DisCos should utilise the first tranche (Tranche A) of disbursement from the MAF scheme based on contributions made by DisCos as at the April 2024 markets settlement.

It said that attached to this order as Schedule 1 was to procure and install meters for unmetered Band ‘A’ customers within their franchise areas.

The commission said DisCos shall, within 14  days from the effective date of the order, conduct a transparent and competitive procurement process, for meter price determination, selection and engagement of MAPs/LMMAs for the metering of end-use customer meters under the MAF scheme.

”The order also directed that a report containing details of the process undertaken for the selection of MAPs/LMMAs including meter price, meter specifications.

”And the list of customers to be metered shall be sent to the commission for approval, within 20 days from the effective date of this Order.

” Upon approval of the commission, the DisCo shall enter into contracts with selected MAPs/LMMAs on one of the following terms,”it said.

The commission said that where an Advance Payment Guarantee (APG) issued by a commercial bank in the country is provided by a qualifying MAP/LMMA, 30 per cent of the contract sum shall be paid by the FM on behalf of the DisCo to the MAP/LMMA.

” Upon execution of the contract. A further two milestone payments shall be made upon the completion of 60 per cent of contracted quantities and 100 per cent of the contract respectively, with the funds advanced against bank guarantee amortized over the payments.

“Where the MAP/LMMA do not request an advance payment, the milestone payments shall be made upon the verified installation of 20, 60 and 100 per cent respectively of the contracted volume of meters.

”A vendor may, at his option, defer payment until the completion of the installation of the contracted volumes.

“DisCos shall ensure that all the necessary resources and network clearance required by the MAP/LMMA to install meters based on installation plans are provided and/or completed,” it said.

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Nigeria’s public debt now N121trn – Debt Management Office

exchange rate

The Debt Management Office (DMO) says Nigeria’s total public debt has reached N121.67 trillion within three months.

The Cable reports that this figure represents an increase of N24.33 trillion or 24.99 percent from the N97.34 trillion as of December 2023.

Nigeria’s public debt profile consists of the federal and subnational governments’ domestic and external debt stocks — the 36 states and the federal capital territory (FCT).

According to the DMO, the increase was primarily due to new domestic borrowing by the federal government to partly fund the deficit in the 2024 budget as well as disbursements by multilateral and bilateral lenders.

“Total domestic debt was N65.65 trillion (USD46.29 billion) while total external debt was N56.02 trillion (USD42.12 billion). Excluding naira exchange rate movements in Q1 2024, only the domestic debt component of total public debt grew from N59.12 trillion on December 31, 2023, to N65.65 trillion on March 31, 2024.

“The increase was from new borrowing to part-finance the 2024 Budget deficit and securitization of a portion of the N7.3 trillion Ways and Means Advances at the Central Bank of Nigeria.

“Whilst borrowing, as provided in the 2024 Appropriation Act, will continue, we expect improvements in the government’s revenue to enhance debt sustainability.”

On June 13, the Minister of Finance and Coordinating Minister of the Economy, Wale Edun, announced the approval of two major “financial support packages” by the World Bank — valued at $2.25 billion. In May, the Bureau of Public Enterprises (BPE) said the federal government has secured a $500m World Bank loan to boost electricity distribution in the country.

Prior to this, the federal government had received $750 million from the World Bank for humanitarian and social reforms and $1.5 billion for its economic stabilisation plan.

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