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This Week In Energy: Low Oil Prices Not The Only Threat To US Energy

This Week In Energy: Low Oil Prices Not The Only Threat To US Energy

Urgent Note: This week, our analyst Dan Dicker provides key insights into the companies now considered to be the walking dead in the energy space. The debt burdens of these companies make for a bleak outlook, and this information is need-to-know for all investors, so they can spot the trend that is taking these companies down and protect their own investment portfolios accordingly. Dan’s report is a must read for those interested in the bigger picture of the low oil price situation and you can receive it for Free – just click here and start a 30 day free trial to Oilprice Premium.

With the war against the Islamic State (IS) raging in Iraq and Syria, and getting too close to Turkey for comfort, experts in the US are wondering if the next terrorist attack on American soil might target the 182,000 miles of pipelines carrying oil, chemicals and other hazardous liquids, 325,000 miles of bulk natural gas pipelines, and 2.2 million miles of natural gas distribution pipelines.

These millions of miles of critical infrastructure make for easy targets. All it requires is that the digital intruder gets close enough to privately owned pipelines that the government doesn’t have much control over.

As noted earlier this week by Bloomberg, a 2008 attack on Turkey’s portion of the Baku-Tbilisi-Ceyhan (BTC) pipeline is now being viewed as a model for future calamity in the US. The pipeline—majority owned by BP—saw digital intruders inject malicious software into the control network and then tamper with the system to cause an explosion. It’s only now that investigators realize that it was a cyberattack.

Michael Rogers, director of the National Security Agency and commander of the U.S. Cyber Command, told the House Intelligence Committee last month that “it is only a matter of the ‘when,’ not the ‘if,’ that we are going to see something dramatic" in a cyberattack on the country's critical infrastructure, according to Bloomberg.

For Europe, though, the problem is not about having too many pipelines to protect against cyber threats; rather it’s about scrambling for enough pipelines delivering natural gas.

Earlier this month, Russia announced it was scrapping the massive South Stream pipeline project and trading it in for a smaller pipeline with Turkey. The European Union had objected to South Stream, leading most recently to Bulgaria—desperate for cheap gas— indefinitely postponing its agreement on the South Stream, but now Eastern Europe will find itself scrambling for gas. Particularly hard hit will be southeastern Europe. Without South Stream, this area will have to get Russian gas through Ukraine, and with winter descending and the Ukraine-Russia crisis still in full force, Southeastern Europe may very well freeze.

Talk in Europe now is about getting gas from Azerbaijan, but with the supergiant Kashagan field offline and not expected to be back online until 2016, Europe is still some way away from accessing Azeri gas through the BTC pipeline, though Azerbaijan has noted recently that it would be willing to send its gas to “friendly” countries.

At the end of the day, Europe has realized only too late that its failure to make any real attempt to diversify gas supplies was a strategic mistake that will come with a very high price.

In Israel, leaks (not potential cyberattacks) are stealing the headlines after a massive leak of oil into the desert has led to the banning of operations for a major pipeline company until it can be cleared for another permit.

Last week, the Eliat Ashkelon Pipeline Company (EAPC) took responsibility for a major technical problem that led to the leak of some 3 million liters of oil into the desert, badly damaging the Evrona Nature Reserve. The EAPC’s Trans-Israel pipeline is a major oil conduit between the Mediterranean and the Red seas.

It gets even more interesting when one considers that this pipeline started out as a joint project between Iran and Israel dating back to 1968, but was scrapped, in terms of joint development, due to the Islamic Revolution in Iran between 1978 and 1979. The pipeline has remained a legal battle between the two countries ever since, and in 2013, a Swiss arbiter ruled in favor of Iran, saying Israel owed Iran $100 million over the project.

By. James Stafford of Oilprice.com




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