Bolstering the Black Sea, Saving South-east Europe (in Energy Security)
The European Energy Security Strategy, adopted by the European Community last year, is needed for because, “We import half of our consumption in gas and are very dependent on external supplies,"said Federico Tarantini, International Relations at European Commission, in a speech outlining European energy policy in South-east Europe and the Black Sea region at the Black Sea Oil & Gas Summit held in Vienna, Austria.
Of that dependence, he continued, "This, by itself, is not a big problem if you have a very diversified array of suppliers, it could be okay, but we are dependent on one single supplier, Russia, when it comes to gas and oil in particular: 40% of gas and one-third of oil supplies.”
The Strategy, he explained, focuses on gas because of recent history, specifically prices and recent geopolitical developments. “Six member states are completely dependent 100% on Russian gas for their imports, and three of these six rely on gas quite heavily for their primary energy needs.”
He reported that in March the European Council had performed a study of the energy security situation in the EU towards coming up with a plan to reduce dependence. The Community adopted two documents in May, the European Energy Strategy communique and the Staff Working document, an in-depth study of the energy security situation in Europe. The main elements, he said, include short term to try and increase the capacity to overcome disruption during the current winter and to strengthen energy mechanisms between member states and beyond as well as protecting specific infrastructure.
“In the long term, moderating energy demand has always been a priority for the Commission and the EU,” he explained. “You likely know our targets for 2020/2030. It's very important to reduce gas dependency and special emphasis should be placed on the heating sector.”
The objective in the Balkans and South-east Europe, he said, is to create in the long-term a pan-European, single marketplace that goes beyond EU borders.
This requires, according to him, a common energy framework/energy policy, trading legislation and also needs institutions that are strong and competitive.
Towards this, Mr Tarantini spoke of two initiatives.
The first, the Energy Community, he said, is an international treaty signed in 2005 between the EU and non EU members who are contracting parties from South-east Europe, “whose objective is creating a stable regulated market environment in order to attract investment, but it's also about improving the security of supply of all parties and the environment situation.”
This he said, entails creating a regulated market first, then a pan European market for competition to exploit economies of scale.
Bulgaria and Romania, he recalled, had been contracting partners, but became EU member states; new countries have joined, like Ukraine and Moldova; Georgia is in negotiations; meanwhile Turkey, Armenia and Norway are observer countries to the Community.
“The center of gravity of this treaty has moved East and now it's very relevant to the vast majority of Black Sea countries which are involved in this framework.”
Regarding the content of the Treaty, he said it means committing to a big chunk of EU energy legislation, including the 2nd and 3rd Energy Packages as well as environmental rules and competition provisions.
He explained, “The main directives are concerning sustainable energy, some energy efficiency legislation and also some security of supply – like oil stocks and energy statistics legislation.” It also aims at attracting investment, he said, adding that the Energy Community Projects of Common Interest had been drafted, providing a list of the top priority projects for the region which have cross-border dimensions, among them electric and gas infrastructure.
While the Treaty, he said, had been meant to last until 2016, in 2013 it was extended to 2026.
“There is vast consensus on the fact that we needed to find ways of adding better implementation of the regulatory commitments and attract more investments,” he explained, adding that the elements were highly interrelated.
According to Mr. Tarantini, leading a well functioning, full integrated internal market is also key; efficiency on delivering security of supply is also crucial.
“Here, we need both dimensions to ensure the implementation of the internal market legislation, but also to improve, upgrade existing infrastructure, we have the Projects of Common Interest, which comprise 250 projects that are backed by EUR 6 billion for financing a part of these projects,” he said.
Increasing energy production in the EU with a focus on renewables is also a priority.
“There is still unexplored potential for hydrocarbons production that can at least compensate in part for declining production in mature fields,” he stated, adding that some member states have the possibility to engage in unconventionals exploration.
Mr. Tarantini said energy technology is very important in the long run, that it is part of European industrial policy. “It's also about having growth and jobs in the EU.”
The diversification of external supplies and infrastructure of gas is possible via the huge resources from a variety of countries.
“The Southern Gas Corridor is the main tool to get these resources to the EU, but there is still unexploited potential there beyond the Shah Deniz field,” he explained, mentioning gas sources from places like Turkmenistan, Iran or Iraq. The second way of diversifying external supplies of gas, he said, is by looking at Eastern Mediterranean/North Africa sources. He said the Commission is developing quite a lot of activities there following a conference.
“And, finally, speaking with one voice when it comes to external energy policy.”
The main short-term initiative, he said, is the stress test, launched in 2014, involving EU member states, Energy Community countries and candidates. He explained, “The idea is to run hypothetical scenarios on gas restrictions from Russia in the current winter.” There are four scenarios, he said.
Each member state and contracting parties of the Community had to see how they would cope with the situation and drafted a report submitted to the Commission in October, he recalled.
In an “umbrella report” a recommendation for how to improve the situation was included as well as regional focus groups like one for the Balkans and South East Europe. “They are the most vulnerable region in terms of security of supply, so we have the regional report with regional recommendations and countries receive recommendations,” explained Mr. Tarantini.
When it comes to the Black Sea region, there are two relevant focus groups: the European Commission Group and the South-east Europe Focus Group.
Under the worst case scenario, there would be a disruption of 9 BCM for the region, which comprises all the EU and Energy Community members but Ukraine, which is in a unique situation.
Among the conclusions of the stress test, Mr. Tarantini said, “First of all, a preparative approach would have greatly helped in reducing any disruption. In most cases we're seeing just a negative effect in terms of cost; in others more serious disruption, but a comparative approach which is not something the South-east Europe has taken into consideration, would help to alleviate the problem.”
The second recommendation, he said, is allowing the market to work, before any intervention. Fuel switching is also included.
In the long-term dimension, Mr. Tarantini spoke of the European Energy Security Strategy, which includes key infrastructure projects to be completed by 2020, amongst them the Southern Gas Corridor.
“We need to have the necessary infrastructure with flexible energy systems. We should look at how to improve and upgrade the existing grid if we have to make it more flexible,” he opined, adding that this could be in the form of interconnection of existing pipelines and reverse flow.
As the Black Sea region is dependent on external supplies, such efforts are all relevant to the area, according to him.
He reported, “The Commission has also worked to facilitate the agreement on reverse gas flows and to mediate and reach an agreement with Ukraine-Russia in order to avoid this difficult scenario I've been speaking about.”
Energy efficiency, he added, has a “lot of potential,” as does supply-side action.
“The Black Sea region is endowed with hydrocarbons and in sustainable energy resources,” he observed.
Still, in terms of infrastructure development, Mr. Tarantini said that significant upgrades are needed for a more secure energy system in the region. That, combined with a common regulatory framework, he said, will make for an even more secure energy system.
-Drew Leifheit