Birth of a New Ukrainian Nation? Interview with Robert Bensh
Ukraine's Crimean Peninsula is now Russia's. It was done with an impressively
organized non-violent military operation, and supported by the foregone conclusion
of a referendum on independence from Ukraine. One Ukrainian soldier was reportedly
killed on 18 March, after Russian President Vladimir Putin signed the treaty
to annex the Crimea and troops moved to take over a Ukrainian military facility
in Simferopol. The US has imposed largely symbolic sanctions on Russian officials
who have no American assets to freeze and would be fine foregoing trips to
the US, but the game is over.
Ukrainian troops have been ordered to disengage entirely, and Russia will
keep its tanks from rolling into Eastern Ukraine. We'll hear a lot of rhetoric
for the next six months before Crimea is forgotten. From an energy perspective,
the Crimea is not a major loss for Ukraine, and now it's up to the new government
to get real shale development in motion, and for Turkey to face up to its own
strategic realities and join forces with Ukraine to harness LNG potential,
according to Ukraine energy expert Robert Bensh.
Robert Bensh is an energy and energy
security expert who has led oil and gas companies in Ukraine for over 13 years,
and served as an advisor to former energy minister and former vice-prime minister
Yuri Boyko on issues of Western capital markets and political systems.
In an exclusive interview with Oilprice.com from
Kiev, Bensh discusses:
- Why the Crimea game is over
- What Russia isn't likely to roll into eastern Ukraine
- What Ukraine is losing from an energy perspective
- How Russia's moves are strengthening Ukrainian resolve
- How the annexation of Crimea has heralded a new patriotism in Ukraine
- Why a lot rests of Ukraine's next move on shale
- What opening the Bosporus to LNG would mean for Ukraine
- Why Turkey should be watching very closely
James Stafford: Now that Russia has annexed Crimea, are there fears
that it won't stop there, and that we could see Russian tanks entering Eastern
Ukraine?
Robert Bensh: The reality is that this game is over. The Crimea is
Russia's and everyone's let it go. Ukrainian troops are actively disengaging
with Russian troops, even with Russian speakers in general. They will not engage,
and in return, Russia will not attempt to move further into Ukraine.
If Russia rolls into Eastern Ukraine--even if they don't kill anyone--we know
that Poland, Romania, possibly Hungary, possibly Slovakia and definitely the
Baltic states will invoke Article 5 of the NATO agreement. And when that happens,
General Martin Dempsey, chairman of the US Joint Chiefs of Staff, has already
stated that if NATO were called in, the US would stand behind it and support
it militarily. The rhetoric has been pretty high, but it's just that--rhetoric.
James Stafford: So the game is over, and Crimea is gone. What does
this mean for Ukraine from an energy perspective?
Robert Bensh: With Crimea, Ukraine loses some prospective offshore
oil and gas territory in the Black Sea, but it doesn't lose any shale. All
the shale is in Ukraine's east and west.
But things are going to get tricky now. One of the bigger developments is
likely to be the Russian nationalization of Chornomornaftogaz, Ukraine's state-run
gas company in Crimea. This, in turn, would impact Exxon Mobil's proposed agreement
for offshore Black Sea exploration. Exxon never signed the agreement because
the Maidan protest movement was blowing up and they didn't want to give anything
to [now ousted] Ukrainian President Viktor Yanukovych, and rightfully so. But
what happens next with that potential deal is up in the air.
Interestingly, I think we still have Ukrainian gas prices effective in Crimea
but they would fall under Russian law. This is all completely new territory.
This isn't Africa, where something like this is par for the course. High-level
government officials here have not been through this before so it's a very
unique, unwanted challenge. It's upsettingly interesting.
James Stafford: What does this mean for Ukraine's pipeline system?
Robert Bensh: Ukraine's pipeline system would continue to belong to
Ukraine unless Russia took over all of Ukraine. To get control of the pipeline
system you have to roll up to the Ukrainian borders, side to side. And it's
hard for me to believe that NATO wouldn't react to something like that. It's
hard for me to believe that NATO wouldn't respond to Russia taking over the
Donbass, Ukraine's heavy industry heartland.
The Russian annexation of the Crimea isn't going to have a major effect on
pipeline gas on either side. Gazprom executives aren't exactly losing sleep
over what could add up to the gain of Crimea and the loss of Ukraine. Russia
already ships almost half of its gas to Europe via pipelines that bypass Ukraine,
and in 2015, if Gazprom's South Stream pipeline comes online as planned, it
will be shipping a lot more gas to Europe without Ukraine.
James Stafford: How critical, then, will Ukraine's development of its
shale assets be to forging energy independence, and what needs to happen next?
Robert Bensh: We could see some positive developments courtesy of the
Russian maneuvering. There may be more impetus to invest in Ukraine's shale
development once the dust settles on the Crimea debacle. We'll hear a lot of
rhetoric for the next six months or so, but then the Crimea incident will be
largely forgotten.
Ukraine is a great place to operate, and now it will be more transparent,
so the sector should be opened up to more investment, which will happen as
energy independence assumes a higher priority on the government's agenda. The
country has 14 per McF gas prices, which is very attractive. But Ukraine has
to take the first step--and there is a lot to do.
Clearly, Ukraine cannot be happy with the progress made by Shell and Chevron
in the shale development process. The process has been open and transparent,
but only on two enormous blocks. To truly get shale development in the country,
Ukraine needs to auction off multiple blocks of shale acreage, and the best
way to do that would not be through a data-room process in Kiev, but in Houston
or Denver, where a majority of the shale industry is located. Ukraine needs
about 15-20 oil and gas companies developing shale, not just Shell and Chevron.
James Stafford: What are the prospects for getting liquefied natural
gas (LNG) to Ukraine?
Robert Bensh: If you can get it through the Turkish-controlled Bosphorus
Strait, you would have an endless supply of LNG going to Ukraine. The US now
is pushing very hard to open up new LNG facilities in the US to get US shale
gas/LNG shipped to Ukraine--but that won't happen for five years, if it happens
at all. Ukraine can't wait for that.
But the moment you have access to the Bosphorus you have LNG delivery in Ukraine
approximately a year after that. There has been a lot of conversation between
the Ukrainian and Turkish governments. It's all rhetoric on both sides, from
my point of view. Until the Turks are shown that LNG is a safe commodity to
pass through the Bosphorus, which it is; until they're shown undeniably from
a third party, that's when they will sign off.
LNG is safe and we have a study to show that. At present, LPG [liquid petroleum
gas] passes through the Bosphorus, and LPG is significantly more dangerous.
From an environmental standpoint, oil is significantly more dangerous than
gas. Let's not forget that naval warships also pass through the Bosphorus,
which is by far the most dangerous thing that is ever going to pass through
this strait.
One thing the study shows is that LNG passes through the Houston ship channel,
Rotterdam port, Chesapeake bay, ports of New Jersey--all without incident.
I'm very respectful of those who are wary of LNG passing through the Bosphorus,
but this fear is not based on fact. It's based on what they believe, and we
have facts that prove otherwise; and at that point we would hope that the larger
potential here for all involved would outweigh these erroneous beliefs.
James Stafford: How would Ukraine receive gas coming through the Bosphorus?
Robert Bensh: Given that Crimea no longer exists--at least from a Ukrainian
perspective--an FSRU [floating storage and regasification unit] would sit off
the coast of Odessa, most likely, or around that region, which would still
remain in the Ukrainian Black Sea. That's where you would gasify the LNG and
put it into the Ukrainian pipeline system.
James Stafford: Does Ukraine have this capability yet?
Robert Bensh: Ukraine already has an FSRU, for all intents and purposes.
The only thing we are waiting on is access to the Turkish-controlled Bosphorus.
At that moment, Ukraine's purchases the FSRU and then we're only about a year
away from LNG gas sales. It's that close. This was all done under former
energy minister and former vice-prime minister Yuri Boyko. The only thing
Boyko was missing was access to the Bosphorus. The barge is ready. The facility
exists and is waiting to be purchased from a Houston-based company. There are
traders with LNG just waiting for an order.
James Stafford: Should Turkey be taking notes here on what is happening
in Ukraine with Russia?
Robert Bensh: Ultimately, I think Turkey has to look at Ukraine and
realize that it is in the same strategic position with regard to energy independence.
Turkey should be using Ukraine as a very real example as to why they need energy
independence. They should focus on crude oil from Iraqi Kurdistan, development
of Turkish shale assets, a complete break-up of the state-run oil company,
TPAO, and transshipment of LNG through the Bosphorus.
James Stafford: You've talked before about the possibility of Russia's
actions actually facilitating Ukraine's move toward signing a trade agreement
with the European Union. Is there any room for more optimism over this, and
possibly other internal political matters for Ukraine?
Robert Bensh: Yes. Russia's actions have given Ukraine significant
resolve to sign the trade agreement with Europe. Prior to Russia's occupation
of Ukraine, there were a lot of Ukrainians in government and business who were
willing to sit on the fence, or even gear themselves more toward Russia, with
whom they felt more comfortable, especially in eastern Ukraine. However, the
violation of Ukraine's sovereignty, the threat of recession, and the complete
halt of work being done in the country has pushed even the most cynical businessperson
or politician toward signing an association agreement.
I don't meet many Ukrainians who think Ukraine should be part of NATO, but
that could change with the annexation of Crimea. The Maidan protest movement
was effective in giving the public a voice toward removing what they believed
to be a corrupt and unjust government. What's happening now is that the Russian
move is further escalating Ukrainian patriotism. Indeed, it is creating fervent
Ukrainian patriotism. I've been here for some 15 years, and I've never seen
anything like it. I've never seen the country so united before. For me, this
seems to be the birth of a new Ukrainian nation at this point.
I've never seen so many 22-40-year-olds completely charged and excited about
their country and wanting to be a part of their government. I'm an American--we're
extremely patriotic. Canadians are patriotic, Russians are patriotic. Ukrainians
weren't, and I've never seen Ukrainian patriotism higher than right now. And
as a visitor to this country I find it quite heartening.
James Stafford: How would you measure the Obama administration's response
to this crisis?
Robert Bensh: Well, I'm not a politician. I'm a businessman on the
ground. For 14 years, I've been very critical of how the US has handled relations
with Ukraine. We've had good ambassadors here, some better than others. While
I think the US was slow to respond to the Maidan protest movement, and at points
in time did not approve of how the administration was handling the situation
in Maidan, I am exceedingly proud of this current US ambassador, Geoffrey Pyatt,
and how he is handling himself. Even the Ukrainians on both sides of the fence
respect him, which is really hard.
I believe that Obama has been quite measured in his response; maybe not the
way I would have responded, but I am very proud of how my country is dealing
with the situation. I think we all have to recognize that Putin is a very unique
world leader. Even other world leaders, such as German Chancellor Angela Merkel,
are having a hard time discussing this current situation with Putin. I respect
that.
Source: http://oilprice.com/Interviews/What-the-Loss-...bert-Bensh.html
Interview by James Stafford of target="_blank" Oilprice.com
