Massenbach-Letter: NEWS 23.09.16

Massenbach-Letter. News

· Kemp:La Nina forecast downgraded

· The lithium supply battle starts to heat up

· Russia: Siberian spring

· Carnegie Moscow: Russia’s Militant Anti-Atheism

· Kinderehen in Deutschland.

· Joerg Barandat Blog: WATERINTAKE 4/2016

· Frankreich wählt HK416 von Heckler&Koch als neues Sturmgewehr

Massenbach*Carnegie Moscow: Russia’s Militant Anti-Atheism

Public expression of atheism can now get a Russian citizen punished by the state. The jailing of a young blogger in Yekaterinburg is symptomatic of a culture of intolerance in which church and state work hand in hand.

In contemporary Russia, expressing anti-religious views is now the equivalent of what was called “anti-Soviet activities” twenty-five years ago.

Alarming evidence of this new reality came with the news on September 2 that Ruslan Sokolovsky, a twenty-two-year-old video blogger from Yekaterinburg, had been given a two-month prison sentence for playing Pokémon Go in an Orthodox church and putting out vocally anti-religious videos. Sokolovsky was accused of extremism and “offending the feelings of believers” (an article that was recently added to the Criminal Code and used to imprison members of the punk rock music group Pussy Riot).

The press secretary of the regional Interior Ministry directorate, Valery Gorelykh, had jumped the gun and, without waiting for the court ruling, had declared indignantly that people who play Pokémon Go in “holy places” should go to prison for five years and not three.

By punishing the young blogger, the Russian state moved one step toward being an ideological theocracy. It was striking out at a young man who was abiding by his constitutional rights to freedom of speech, freedom of religion, and freedom to not have a religion, as well as by the principle of the separation of church and state. In May this year the head of the Russian Orthodox Church, Patriarch Kirill, had already made clear his sentiments toward the constitutionally protected concept of human rights when he condemned what he called the “heresy” of some human rights.

The “feelings of believers” are now privileged in Russia, but not the feelings of atheists, who might be offended, for example, when regional administrations demand that government employees contribute money “voluntarily” for the construction of churches. This is just one example of how the church and the state now unite in joyful harmony—in violation of the Constitution.

The establishment of the Russian Orthodox Church is gradually taking on the functions of the state, and the security arm of the state is protecting the Orthodox establishment. Long ago in world history, church law was inseparable from secular law. The Kirov district court in Yekaterinburg, which arrested Sokolovsky, effectively returned Russia to the Middle Ages by using secular law as church law.

As a result of this case, Pokémons have unwittingly become a litmus test for freedom in Russia and turned into symbols of anti-state activities.

In contrast to the Orthodox Church, in July this year the Grand Choral Synagogue in St. Petersburg awarded a successful Pokémon hunter a bottle of kosher wine. The synagogue is a holy place, too, correct? But no one was insulted and no one was arrested.

Apparently, the vengeful Old Testament god of the Jews is more merciful than the god worshipped in the harmonious Russian Orthodox Church. This has nothing to do with insulting anyone’s feelings. This is a sign of whether a particular religious establishment lives in the modern world or in the Middle Ages.

An arrest like this was possible because, since June 2012, Russia has passed more than 30 laws that expand the authority of law enforcement bodies and restrict the rights of the civil society. But the main point here is that an atmosphere of intolerance has been cultivated in Russia in recent years in which politicians can be assassinated and young people who stand up for their personal values can be jailed. A culture of denouncing others to the state has not yet returned fully in Russia, but it inevitably will, because it has become an instrument of state policy, the way it was for many decades of the country’s history.

Denunciations are rewarded and exploited by the state. When the Anti-Maidan Movement wrote a denouncement of an independent polling organization, the Levada Center, the Ministry of Justice acquiesced and conducted a probe into the center—which has now been declared a “foreign agent” under new legislation. The blogger Sokolovsky was arrested after a journalist from the Ura.ru online portal proposed an investigation as to whether his activities violated the feelings of believers. The Ura.ru journalist was not just doing his job; he was snitching.

There is a clear message in Sokolovsky’s story: if you openly express atheist views, you can now end up in jail. Sokolovsky is defenseless before the church-and-state behemoth. The Russian Orthodox establishment has mostly kept silent, although priests in Yekaterinburg have offered to teach the video blogger about the errors of his ways. The political class is also silent—it is deathly afraid of people such as Sokolovsky, imagining each of them to be the personification of the revolutionary Maidan phenomenon.

The most that the young blogger can be thankful for is that one church official, Vladimir Legoida, speaking on behalf of the Moscow Patriarchate, explained that the Russian Orthodox Church “is not out for blood.”

This article originally appeared in Russian in Gazeta.

http://carnegie.ru/commentary/2016/09/12/russia-s-militant-anti-atheism/j5b6?mkt_tok=eyJpIjoiT0RKak9XUTNPRFV5TWpOaSIsInQiOiJRMXJvNTFvMXpqWTVDSGxtUm9XTWdGOUhVekpWMG5oMDVoU2NlUGl6V0JBQnFiU3hMWW5hc2ZGOU1tREVidjVKdlBVbmJiQkNjbjhoelo1b1Y4ZVwvMklQXC9RNTBtZmxWNk5zYzRJWW15RzBFPSJ9

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From our Russian news desk:see attachments.

· A Journey Through Shari’a Law: Justifying Jihad and Punishment

· New Syria Ceasefire: Same Old Story – Who are the terrorists?

· After Brexit: An Uncertain New Reality – Brexit and Russian Integration

· A Subtle Approach: Lavrov and Kerry’s Agreement

· Defence

· Germany

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Policy= res publica

Freudenberg-Pilster* Kinderehen in Deutschland.

Union will Jugendämter zu Anzeigen zwingen

Datum: 24.09.2016 11:39 Uhr

Jugendämter sollen verpflichtet werden, Kinderehen anzuzeigen, sobald sie von ihnen Kenntnis haben. Das fordert eine Sprecherin der Unionsfraktion. Kinderehen in Deutschland sollen so schneller aufgehoben werden können.

Junge vollverschleierte Bräute in Afghanistan

Bisher werden im Ausland geschlossene Kinderehen in Deutschland dann nicht anerkannt, wenn ein Partner jünger als 14 Jahre ist.

Berlin. Um wirksamer gegen Kinderehen in Deutschland vorzugehen, sollen nach dem Willen der Union die Jugendämter derlei Ehen vor Gericht bringen. „Wir wollen erreichen, dass künftig die Jugendämter dazu verpflichtet werden, als Antragsteller Kinderehen vor Gericht zu bringen, sobald sie davon Kenntnis haben“, sagte die rechtspolitische Sprecherin der Unionsfraktion, Elisabeth Winkelmeier-Becker (CDU), der „Rheinischen Post“ vom Samstag.

„Das Gesetz muss so eindeutig gestaltet sein, dass derlei Ehen schnell aufgehoben werden können“, sagte sie. Das Aufhebungsverfahren zum Beenden der Ehe dürfe nicht davon abhängen, dass einer der Ehepartner selbst vor Gericht ziehe, sagte die CDU-Expertin. „Meist sind die in die Ehe gedrängten jungen Frauen betroffen. Ihnen ist das nicht zuzumuten“, sagte Winkelmeier-Becker. Daher solle auf die Jugendämter zurückgegriffen werden.

Ausnahmen oder einen Ermessensspielraum der Richter solle es bei der Entscheidung vor Gericht nur dann geben, wenn die Ehefrau schon nahe an der Volljährigkeit sei. „Wir haben einen ambitionierten Zeitplan und wollen im November ein entsprechendes Gesetz in den Bundestag einbringen. Das sollte möglichst schon ab Januar in Kraft treten“, sagte Winkelmeier-Becker.

Anfang September hatte erstmals eine Bund-Länder-Arbeitsgruppe zu Kinderehen getagt. Sie berät darüber, inwiefern die Vorschriften zur Ehemündigkeit im deutschen Recht geändert werden sollen. Außerdem soll die konkrete Praxis der Anerkennung von Auslandsehen mit minderjährigen Partnern thematisiert werden. Dieses Problem hatte sich durch den Zuzug von Flüchtlingen verschärft.

In Deutschland sollen Ehen nicht vor der Volljährigkeit geschlossen werden. Ausnahmen sind möglich, wenn einer der Partner volljährig, der andere mindestens 16 Jahre alt ist. Komplizierter ist die Rechtslage beim Umgang mit im Ausland geschlossenen Ehen. Bisher werden Kinderehen in Deutschland dann nicht anerkannt, wenn ein Partner jünger als 14 Jahre ist. Bei Ehen, die mit 14-Jährigen oder älteren Minderjährigen geschlossen wurden, haben die Gerichte bislang einen Ermessensspielraum.

http://www.handelsblatt.com/politik/deutschland/kinderehen-in-deutschland-union-will-jugendaemter-zu-anzeigen-zwingen/14595426.html

****************************************************************************************************************** Politics: From Vision to Action

Barandat* In eigener Sache – erlaube mir auf eine Neuerscheinung hinzuweisen:

Wegweiser zur Geschichte: Irak und Syrien. Im Auftrag des ZMSBw hrsg. von Bernd Lemke unter Mitarb. von Stefan Maximilian Brenner, Paderborn: Schöningh 2016, 296 S., 16,90 €, ISBN 978-3-506-78662-3

… Das Zentrum für Militärgeschichte und Sozialwissenschaften fügt den bereits für zahlreiche Länder und Regionen vorliegenden Bänden der Reihe »Wegweiser zur Geschichte« nun eine Publikation für diese Schlüsselgebiete hinzu

http://www.mgfa.de/html/einsatzunterstuetzung/irakundsyrien

https://www.schoeningh.de/katalog/titel/978-3-506-78662-3.html

Mein Beitrag darin:

Barandat, Jörg: Wasser – Lebensspender und politisches Konfliktthema, S. 217ff

Blog: Joerg Barandat- WATERINTAKE 4/2016 ( https://udovonmassenbach.wordpress.com/2016/09/24/joerg-barandat-waterintake-42016/ )

Reuters: RPT-COLUMN-The lithium supply battle starts to heat up: Andy Home

(Repeats Sept. 20 column. The opinions expressed here are those of the author, a columnist for Reuters.)

By Andy Home

LONDON, Sept 20 The lithium rush is on.

Not a day goes by without an exploration company telling us about an exciting development on their property, which is now a lithium prospect irrespective of what minerals were originally being hunted.

Today it is the turn of Premier African Minerals, providing "a positive update on its 2,500-meter drilling programme at the company’s Zulu Lithium Project near Fort Rixon in Zimbabwe".

Tomorrow it will be someone else.

Everyone, it seems, is trying to jump on the lithium bandwagon, fuelled by Tesla and other electric auto pioneers and propelled by rapidly rising prices and the promise of more to come.

It is a boom. Whether it turns to a bust is a hotly discussed topic across social media and internet forums.

Sceptics point to past excessive exuberance in metallic bubbles such as rare earths as a warning of what may lie in store.

And there is an obvious analogy. While no-one doubts lithium’s demand prospects, the big unknown is how much supply will be there to meet it. Too little or, as turned out to be the case with rare earths, too much?

Key to answering that question will be the behaviour of the big four producers that currently dominate the lithium supply landscape.

Some of them are now starting to make their moves, first and foremost by extending and tightening their grip on the lithium supply chain.

CONSOLIDATION AND CONTROL IN AUSTRALIA

Greenbushes in Western Australia is the world’s largest hard-rock lithium resource and it was at the heart of the last major consolidation wave among the lithium establishment.

Its joint owners are Tianqi Lithium and Albemarle. The former snapped up the previous owner Talison Lithium in 2013 and then sold a 49 percent stake to Rockwood Holdings, which was itself subsumed into Albemarle in 2014.

Now both partners seem intent on extending their footprint along the downstream supply chain.

Tianqi has just announced its intention to build a A$400 million ($306 million) plant, also in Western Australia, to convert the mine’s output into high-grade lithium hydroxide, the form of the metal needed for automotive and energy storage batteries.

Albemarle, which had been toll-refining its share of Greenbushes‘ output at Jiangxi Jiangli facilities in China has signed a definitive agreement to buy out the Chinese company.

The transaction, expected to close in the first quarter of 2017, will "accelerate our strategic goal of capturing 50 percent of the growth in the lithium industry".

CONFUSION IN CHILE

Tianqi’s ambitions extend beyond controlling its own Australian supply chain.

It has thrown its hat into the ring for the 23 percent stake up for sale in SQM, another member of the lithium establishment with brine and conversion operations in Chile.

It’s a bold move. There is both "complexity and uncertainty around the transaction", as another Chinese bidder, Ningbo Shanshan, noted with considerable understatement in explaining why it withdrew from the running.

A history of political scandal, a long-running stand-off with CORFO, the Chilean development agency that controls the rights to the brine deposits in the Atacama desert, and a government investigation make for a highly inflammatory cocktail.

Tianqi’s bid for the SQM stake, however, is a very clear statement of intent to rise up the four-strong hierarchy of established producers.

The fourth member of the establishment is FMC. It alone has stayed out of the recent investment fray, choosing, for now at least, to go down the organic growth route.

FLEXING CAPACITY

This flurry of activity reflects both an internal establishment battle for market position and the build-out of defences against the hordes of new and would-be producers trying to grab a slice of the lithium action.

Implicit in the latter ambition is the ability of the big four to increase production and retain market share.

Both Tianqi’s new Australian plant and Albemarle’s swoop on Jiangxi Jiangli are predicated on an expansion of activities at the Greenbushes mine.

Also In Cyclical Consumer Goods

Talison doesn’t currently disclose either capacity or production levels at Greenbushes but it’s studying an expansion which would double both, Chief Financial Officer Lorry Mignacca told Reuters.

Engineering studies on the expansion are due to be completed by the end of this year or early 2017 with any expansion timed to complement Tianqi’s proposed start-up in 2019.

There is similar flex within Chile, albeit one that is currently constrained by the dark political web surrounding SQM.

For its part FMC seems confident it can triple its hydroxide capacity by redirecting existing lithium resource towards battery-use products.

It’s a stance that has raised a few eyebrows among the lithium cognoscenti but FMC claims "our manufacturing network is highly flexible, which allows us to increase capacity or accelerate expansion plans as customer needs warrant".

NEWCOMERS

Meanwhile, the first wave of challengers to the big four is arriving.

Orocobre is currently ramping up production at its Salar de Olarez brine operations in Argentina.

Extracting lithium with the right purity and, equally importantly, with the required tight levels of impurity is a tricky business and Orocobre has experienced its share of teething problems since first production began last year.

But the company is guiding towards production of 15,000 tonnes of lithium carbonate in the financial year to June 2017, up from 6,900 tonnes in the first year of operations.

And more, many more are coming behind Orocobre.

What price lithium will command by the time they arrive is the big unknown.

Can the establishment lift production enough to deter the incomers? Or will it collectively fail to meet lithium’s expected super strong demand growth with all the bull market implications such a shortfall would entail?

What we’re seeing now are just the opening strategic moves in a battle that will be waged for many years to come.

http://www.reuters.com/article/lithium-supply-ahome-idUSL8N1BW3GP

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COLUMN-La Nina forecast downgraded as trade winds remain moderate: Kemp – Reuters News

21-Sep-2016 10:53:57 ( John Kemp is a Reuters market analyst. The views expressed are his own.)

By John Kemp

LONDON, Sept 21 (Reuters) – Sea surface temperatures in the central Pacific have been significantly below the seasonal average for the last 10 weeks, consistent with the formation of mild La Nina conditions.

But U.S. government forecasters have cut the probability of La Nina occurring this winter to 36 percent, down from an estimated probability of 76 percent at the time of their May forecast (http://tmsnrt.rs/2cGjeuX).

The U.S. government now predicts conditions this winter are likely to be neutral, with neither La Nina or El Nino evident, and puts this probability at 56 percent, up from 21 percent in May.

Surface temperatures in the central Pacific have cooled but not as fast or as far as expected earlier in the year, which has caused the forecast probability of La Nina developing to drop (http://tmsnrt.rs/2cOC4vQ).

Many other phenomena associated with La Nina are either absent or only weakly present, which has also caused forecasters to downgrade their predictions.

Some models indicate a borderline La Nina this winter. But the consensus among U.S. forecasters is for neutral conditions based on the lack of significant support from other indicators.

The National Oceanic and Atmospheric Administration dropped its “La Nina watch” in September, having been on the lookout since April, according to the agency’s latest forecast (“El Nino/Southern Oscillation diagnostic discussion”, NOAA, Sept. 8).

EL NINO

The term El Nino, meaning the boy, and referring to the infant Jesus, was originally employed by fishermen to describe an unusual warm southward current appearing each year in the cold waters off Peru just after Christmas.

Every few years, the current is unusually intense and reaches further south, bringing heavy rains along the normally arid coast.

Years in which the warm current was unusually strong were known historically as anos de abundancia, or years of abundance ("El Nino, La Nina, and the Southern Oscillation", Philander, 1990).

The existence of the seasonal El Nino warm current was formally reported by scientists in the 1890s but it was not until the 1950s and 1960s that it was realised the warm surface waters extended far out into the ocean.

In fact, the exceptionally warm waters associated with anos de abundancia in Peru extend as far as the date line and are associated with unusually weak trade winds as well as heavy rainfall in the central Pacific.

El Nino has come to describe the presence of unusually warm waters throughout a stretch of the central and eastern Pacific and the associated weather phenomena over a much wider area.

The U.S. government now defines El Nino as sea surface temperatures at least half a degree Celsius warmer than the seasonal average, persisting for at least three months, in a specific region of the central-eastern Pacific.

The critical area of the ocean stretches from 120 degrees to 170 degrees west of Greenwich and straddles the equator from 5 degrees south to 5 degrees north.

Sea surface temperature anomalies in this area, known as Nino region 3.4, are the most closely correlated with all the other phenomena associated with El Nino.

Oceanographers later came to realise El Nino was the warm phase of an irregular cycle of sea surface temperatures. The cold phase came to be called La Nina, the girl.

La Nina, the opposite of El Nino, is associated with colder-than-normal waters off the coast of Peru stretching towards the date line and trade winds that are even stronger than usual.

SOUTHERN OSCILLATION

The Southern Oscillation was discovered separately by Gilbert Walker, working as director-general of the Indian Meteorological Department in the early 20th century.

Walker noted how pressure changes over the Pacific and Indian oceans were inversely correlated with one another as well as linked to the occasional failure of the Indian monsoon.

Walker observed that when atmospheric pressure at sea level was high in the Pacific it tended to be low in the Indian Ocean and vice versa, a cycle he named the Southern Oscillation.

The pressure swing was historically measured at observatories located at Darwin in Australia and Tahiti in the Pacific, both slightly south of the equator, but chosen for convenience because they are on land.

More modern measurements of the Southern Oscillation are usually taken by comparing sea level pressures over an area of Indonesia straddling the equator with one in the eastern Pacific (http://tmsnrt.rs/2cOBVc5).

OCEAN-ATMOSPHERE COUPLING

Jacob Bjerknes at the University of California first proposed the link between El Nino and the Southern Oscillation in 1969. The combined cycle is now normally termed El Nino/Southern Oscillation, or ENSO.

Bjerknes suggested, and it was subsequently confirmed, that dry air sinks over the cold waters of the eastern Pacific (causing local high pressure) and flows west along the equator in the phenomenon known as the trade winds.

The air is warmed and picks up moisture as it flows across the ocean until it rises and forms rainclouds over the western Pacific (resulting in lower pressure there).

Drier air then returns across the Pacific in the upper atmosphere to sink again off the coast of Peru, completing a cycle Bjerknes called the Walker Circulation (https://www.climate.gov/sites/default/files/Walker_Neutral_large.jpg).

By warming the waters off Peru, El Nino weakens the trade winds and the Walker Circulation (https://www.climate.gov/sites/default/files/Walker_ElNino_2colorSSTA_l…).

In contrast, the cold coastal waters of La Nina accelerate the trade winds and strengthen the Walker Circulation (https://www.climate.gov/sites/default/files/Walker_LaNina_2colorSSTA_l…).

The Walker Circulation is therefore dampened and amplified by the difference in ocean temperatures between the eastern and western Pacific associated with El Nino and La Nina (“The Walker Circulation: ENSO’s atmospheric buddy”, NOAA, August 2014).

TRADE WINDS, OCEAN CURRENTS

Causality also flows the other way. El Nino and La Nina are themselves initiated and amplified by the weakening and strengthening of the trade winds and the Walker Circulation.

Trade winds carry warmer surface water from the coast of Peru far out into the Pacific in a fast-flowing equatorial current that can carry water towards the date line at speeds exceeding 1 metre per second.

As the warmer surface waters are driven off by the trade winds they expose and are replaced by an upwelling of colder water from the deep ocean.

When the trade winds accelerate, as in La Nina, the waters off the coast of Peru cool even more than normal and the cold zone extends further out into the ocean. When the winds slacken, as in El Nino, the waters off the coast of Peru become warmer.

The ocean cycle of El Nino and La Nina is coupled with the atmospheric Walker Circulation and Southern Oscillation, and the two interact closely with one another.

In a typical El Nino episode, the trade winds slacken and the waters off Peru warm, causing the trade winds to slacken further and the waters to warm even more.

La Nina describes the opposite set of ocean-atmosphere interactions, with stronger trade winds cooling the eastern Pacific more than normal, which in turn drives stronger trade winds.

POSITIVE FEEDBACK LOOPS

El Nino and La Nina are examples of positive feedback mechanisms in the coupled ocean-atmosphere circulations.

El Nino/La Nina and the Southern Oscillation are instances of a complex system in which small changes in either trade winds or sea surface temperatures can trigger large climate changes through feedback.

The sensitivity of ENSO to small variances in atmospheric or oceanic conditions is one reason why the timing, strength and development of El Nino/La Nina episodes are hard to forecast.

It also explains why the accuracy of predictions deteriorates rapidly when the forecast horizon extends forward by more than a few months, which is why NOAA has had to scale back its La Nina prediction since May.

Although El Nino and La Nina are defined by reference to sea surface temperature anomalies, they are associated with a host of supportive changes in sea-level pressure, wind speed and convection.

Sea surface temperature, sea level pressure, wind speed and convection anomalies are all closely though not perfectly correlated with each other (“Why are there so many ENSO indexes?” NOAA, January 2015).

But El Nino/La Nina and the Southern Oscillation are not the only influences on ocean and atmosphere circulations in the Pacific, so positive feedback mechanisms can fail to develop or subsequently break down.

In the current episode, the moderate cooling of waters in the eastern Pacific has not so far been accompanied by a strong and supportive pickup in pressure anomalies and trade winds (http://tmsnrt.rs/2d3J7o7).

Without a pickup in pressure anomalies and wind speeds, the positive feedback mechanisms that drive La Nina are absent or only weakly present.

The lack of positive feedback as shown in other indicators of sea level pressures and wind speeds is why forecasters have become much less confident about the emergence of La Nina during the winter of 2016/17.

(Editing by Dale Hudson)

John Kemp

Senior Market Analyst

Reuters

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*Massenbach’s Recommendation*

Russia: Siberian spring

New drilling in Soviet-era brownfields makes it unlikely that Russia will help ease the global glut.

At well pad number 258, Iosif Stefanishin watches with pride as a drill bit burrows deeper and deeper into swampy Siberian plain. This is Russia’s oil heartland, where thousands of miles of forest and mud are interrupted only by clusters of fuel tanks and shiny processing plants.

Mr Stefanishin has been drilling for oil here since Soviet times. The cluster of fields under the control of Yuganskneftegaz, the division of state oil company Rosneft where Mr Stefanishin works as a drilling supervisor, are some of the world’s most prolific. Last year, they pumped 1.25m barrels a day — one in eight barrels produced in Russia, or enough to supply the entire needs of Turkey and Poland combined.

“The market situation has changed, the equipment has changed,” he says of his years working at Yuganskneftegaz since 1986. “Our company was always good.”

But the deposits here were first extracted in the 1960s and the fields are beginning to show their age. Output at Yuganskneftegaz fell nearly 8 per cent from 2012 to a low last summer.

In response, Rosneft has embarked on a surge in drilling and investment. The 2.8km-deep well that Mr Stefanishin is overseeing will be one of 1,500 drilled in 2016; in the first half of this year, Yuganskneftegaz’s drilling rate was 148 per cent higher than the same period two years ago.

Rosneft’s new focus on its Soviet-era brownfield assets comes after the tumble in global oil prices and western sanctions forced it to temper its ambitions to develop new resources, most notably in the Arctic. But after years of under-investment in western Siberia, the effect of Rosneft’s shift on the oil markets could be significant.

Even with production from brownfield operators like Yuganskneftegaz in retreat, Russia’s oil industry, aided by investments in new projects made before the fall in oil prices and cushioned from it by the rouble’s weakness, has defied pessimistic forecasts to lift production significantly since 2014. Kirill Molodtsov, deputy energy minister, yesterday said the country had been pumping an average of 11.09m b/d so far in September — a post-Soviet high.

Output surge

With Rosneft’s new strategy, Russia is on track to challenge its record production of 11.4m b/d set in 1987. Goldman Sachs analysts predict that Russian output will increase by 590,000 b/d in the next three years.

“In the current oil price environment, Rosneft will shift its attention to better management of brownfields,” says Karen Kostanian, oil analyst for Bank of America Merrill Lynch in Moscow. “If Rosneft can indeed reverse its brownfield decline rates, then the projections of Russian oil production for the next few years are underestimates.” It could also help Moscow persuade foreign investors to buy a 19.5 per cent stake in a company — worth about $11bn at current market prices.

For Igor Sechin, Rosneft’s powerful chief executive, maximising production at its ageing brownfields marks a significant change of emphasis. Mr Sechin, a close ally of President Vladimir Putin, has had one overarching focus for much of the four years he has been in charge of Russia’s dominant state oil champion: the Arctic. In 2012, while unveiling a partnership with ExxonMobil, he described the development of Arctic oil as “more ambitious than man’s first walk on space or sending man to the moon”. Two years later he said Rosneft would “open a new oil province” with reserves equivalent to Saudi Arabia’s.

With ExxonMobil suspending its participation in the joint venture following US sanctions over Moscow’s actions in Ukraine, Mr Sechin has recently struck a different note. Speaking at the St Petersburg International Economic Forum in June, the Rosneft boss enthused not about the Arctic but about western Siberia’s brownfields.

“We believe that in the next 10 years the greatest potential is connected to the effective use of our unique resource base of conventional oil, including in the areas where there is existing infrastructure in western Siberia,” he said.

Rosneft’s surge in drilling at its brownfields appears to dash hopes that Russia will reduce oil production in conjunction with Opec. With its economy hurting from the fall in oil prices, Moscow has been enthusiastic about the possibility of a deal with the oil producers’ cartel to rein in production: earlier this month it agreed to co-operate with Saudi Arabia to “stabilise the oil markets”, and it is due to meet Opec countries in Algiers next week.

Mr Sechin has, however, long spoken out against the viability of a deal with Opec, and Russian observers and industry insiders are deeply sceptical that the country will modify its production, regardless of whether a deal is announced in Algiers.

The Rosneft chief presents its strategy as an implicit response to Russia’s two rival producers: the US, whose rapid increase in shale output has been the major contributor to a glut on the oil markets, and Saudi Arabia, whose decision to fight for market share helped trigger the price crash.

“The quality of the US resource base is such that it needs quite high prices to be exploited,” Mr Sechin said in St Petersburg, while the oil price tumble Saudi Arabia helped to unleash had been “quite painful” for Riyadh.

Drilling craze

The basis for Mr Sechin’s confidence is Yuganskneftegaz. Headquartered in Nefteyugansk on a tributary of the Ob river, the company was the cornerstone of Mikhail Khodorkovsky’s Yukos oil group until he was thrown in jail and his company bankrupted in 2006. Now Yuganskneftegaz accounts for 31 per cent of Rosneft’s production.

The unit’s history epitomises the changing fortunes of oil production in western Siberia. The company has struggled to maintain output, and Rosneft has replaced the management team three times in four years.

In the past 18 months, however, Rosneft has managed to stop the rot. The company is more than doubling its drilling rate, from 750 wells a year in 2014 to 1,700 a year from next year. It is also increasing the use of advanced techniques, such as hydraulic fracturing and horizontal drilling. According to Khasan Tatriev, director of Yuganskneftegaz, 13 per cent of the wells it will drill this year will be horizontal, up from 4 per cent three years ago.

The increase has not come cheap: Rosneft’s capital expenditure at Yuganskneftegaz was 79 per cent higher in the first half of 2016, at Rbs70bn ($1.1bn) than in the first half of 2014.

Vladimir Shmatovich, head of strategy at pipemaker TMK, says there has been an increase in the use of fracking across the Russian oil industry. “People are trying to suck as much as possible from existing deposits. Hydro-fracking is a natural way to do that. It’s expensive — but less expensive than drilling greenfields,” he says.

Rosneft’s investment is already showing results: Yuganskneftegaz’s monthly production has been rising steadily since the middle of last year, and since April has been rising year on year. But that is not enough for Rosneft executives, who want to boost Yuganskneftegaz’s output by almost 10 per cent by 2019, adding 120,000 b/d of production.

Central to Rosneft’s plan to revive production at Yuganskneftegaz is the development of deposits known in Russian as “hard-to-recover resources”.

The terminology is important: until 2014, such resources were often described by western and Russian companies in English as “shale”. When the US and Europe imposed sanctions restricting sales of equipment and services to Russian shale oil projects, many feared they would scupper development of such projects.

But Russian executives say only the giant Bazhenov formation, which is estimated by the US energy department to hold 75bn barrels of oil, has been affected. Meanwhile, work on other “hard-to-recover” deposits, such as the Tyumen or Achimov, has continued. Like shale, these are low-permeability formations which require horizontal drilling and fracking to exploit, but the executives say they are geologically distinct from shale and therefore do not fall under the sanctions.

09-20-16 для Машенбаха 20 сентября 2016.docx

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