EC Grants "Conditional" Support to East Med Pipeline
A pragmatic approach from all the stakeholders is required for the East Med pipeline to move ahead and overcome difficulties that could hinder the project, said experts on the third panel at the 2030 EU Energy Security conference in Brussels. In this sense, the message is clear. The European Commission is ready to give a hand to the project connecting East Mediterranean riches to Italy through Greece, but that hand is not unconditional.
A combination of financial and technical assessments, to be carried out in the coming months, will tell whether the project is feasible. These studies will have a significant role in the EC’s decision to grant a significant “political support” to the project. The EC has already shortlisted the pipeline as a Project of Common Interest (PCI), but the selection does not automatically make the project eligible for funding.
TOUGH MARKET CONDITIONS?
According to Greece’s Energy Minister Yannis Maniatis, the pipeline could ship between 8-12 bcm of gas at a cost ranging between 3.5 and 5 billion euros depending on the final route.
On the sidelines of the conference on Wednesday, other experts questioned the numbers presented by Maniatis, adding that commercial viability is a thorny issue for the project, given low oil prices and possible LNG imports from the United States in the near future.
“Something has to change” Brendan Devlin, Advisor at the DG Energy, told Natural Gas Europe referring to current market conditions.
During his presentation, Devlin made clear that the European Commission will play its cards to help the project, but commercial assessments remain a key element of the jigsaw.
“The European Commission will certainly help” Devlin explained, adding that this support will depend on further analysis.
On the other hand, interconnectors with immediate effects are more likely to move on in the short-term.
Devlin referred to the pipeline connecting Bulgaria to Serbia, explaining that it would not imply huge costs for any country. Similar low-cost projects could easily get through the second phase of the selection process and obtain a slice of the Connecting Europe Facility’s €5.85 billion budget. Interconnectors are the most likely projects to get funds, as they would increase energy security with a limited financial impact. This is particularly important given the lack of cash and the current economic strain.
“It is not a good idea to over-invest in infrastructures” Devlin added in his remarks, also reminding how the history of the European Union is littered with failed energy projects.
ENERGY SECURITY vs AFFORDABILITY vs GEOPOLITICAL CONSIDERATIONS
As said, the debate about the East Mediterranean has to be factual. At the same time, European authorities are called to set up their priorities, as affordable-energy rationale might conflict with energy security needs.
“You have to fix priorities and I am not sure the priorities have been fixed… We have to think about the priorities” Patrick Gougeon, Director of the ESCP Europe London Campus, said in his speech.
According to the economist, given the difficulty of predicting energy prices, Europe should set up long-term policies and projects to be protected by the on-going high volatility.
Reminding how “oil and gas prices are political prices,” Gougeon added that Turkey plays a key role.
“Nothing can be done without Turkey” said the ESCP Professor.
On Tuesday, reports underlined that the meeting about the Eastern Mediterranean project did not register the presence of any officials from Turkey. Indeed, European Commissioner Maros Sefcovic met only with officials from Greece and Cyprus. Apparently, Israeli Energy Minister Silvan Shalom did not fly to Brussels due to the political situation in Israel, while Turkey was not part of the group of countries promoting the project.
After the meeting with Greek Minister for Energy Yiannis Maniatis and Cyprus’ counterpart Yiorgos Lakkotrypis, Sefcovic welcomed the project with cautious optimism. His approach during the press conference on Tuesday was another indication of the future strategy of the European Commission.
SO WHAT? ANY WAY FORWARD?
Sefcovic seems to be walking in the right direction. The kind of wishful thinking that brought to many failed energy projects have to give way to more pragmatic evaluations, which should take into consideration geopolitical aspects and commercial viability, along with some broader considerations.
Firstly, Europe has to find a way to stop the rise in populism, making the most of its limited funds. Brussels has to use its budget to avoid social and political unrest, energy projects included.
Secondly, Brussels has to find a way to give more space to regional and national needs. A senseless centralisation of the decision making power, with Germany dramatically standing out, is not a solution, unless the problem to solve is the survival of the European Union itself. In this sense, also "peripheral" countries should have some voice in the decision-making.
Thirdly, energy policies and project have to be coherent with the European Neighbourhood Policy (ENP). That is why, in one way or another, Turkey should be added to the equation to avoid endless confrontation that could push new energy projects into the same category of the Nabucco and the South Stream project.
Sergio Matalucci
Sergio Matalucci is an Associate Partner at Natural Gas Europe. Follow him on Twitter: @SergioMatalucci