External dimension of the EEP Filip Černoch cernoch@jTLail.muni.cz EU-27 Energy Import Dependency Bv Fuel ImpailDtptndtncylM 1 *»S MM JOOi 2010 2011 TotJ 4U» «.71* SJLUfc SJjolfc suit SoMfwHl 21.»** »i* »J> «1.1% jgj** M«temi*iilftBdim 74-1* JUM tU» M.-9%. EJ-27 Enerrjy Import OppencJencv - Bv Fuel. [<#>> TotJ Solid Fuels pietrofeun and Pioducli ■ IMS ■ 200Ö ■ 2O0S ■ 20O9 ■ SO10 ■ 201 1 bhimitiHid«^ April miH::Hjiiiiamitt ie* 13 - No 1 Energy 'from abroad' • To secure stable and reliable supplies of energy at affordable prices • To improve relationship between consuming countries, producers and transit countries • To strenghten the negotiating position of the EU by 'speaking with one voice' • Limited supranacionalisation — energy security as an issue of high politics. Issues outside of the reach of the EU. Weak position of EC • Not clearly defined area — only vague and rather supportive powers of the European Commission • Increasing importance due to the disintegration of Soviet Union, accession of new MS, Russia-Ukraine disputes... 3 Powers and tools of the EC • Support of diversification • Diversification of fuels • Diversification of suppliers • Diversification of transit routes • Strategic reserves of oil and gas • Export of energy acquis communautaire via network of bilateral, multilateral and global treaties covering (to some extent) energy issues • IEM 4 Coal security and supplies 17,5% of the total primary energy supply From 2002 slowly decreasing with return to the growth from 2009 Main source for electricity In 2013 65% of total consumption of hard coal imported from outside of the EU. Brown coal produced and consumed locally Still substantial indigenous production — security benefit Environmental problems (CCS) EU focuses on environmental impacts and state aid = not a security issue Coal production in major producing countries, 1990-2012 1990 1994 1998 2002 2006 2010 IM> IW IW8 2002 2006 2010 ■ Czech Republic Germany Greece ■ Poland ■Spain United Kingdom Bulgaria Romania ■Estonia* ' Data for Estonia is for oil shale. Sources: IEA (2014a), Energy Balances of OECD Countries, OECD/IEA, Paris, IEA (2014b), Energy Statistics of Non-OECD Countries, OECD/IEA, Paris. 6 Nuclear security and supplies 27% of the total electricity generated in the EU. 56 NPPs (131 reactors) in 14 MS Nuclear energy not a security problem: Diversification of supplies Mining (1/2 half of the production from Canada, Australia, Niger, Kazakhstan, Russia, Namibia) and yellow cake production Enrichment (to raise the proportion of the uranium-235 isotope). Countries with A-bomb technology Fabrication High energy content of fuel — Temelin (2xl055MW) — about 4m2/y Megatons to Megawatts 7 Oil security and supplies 32% of the total primary energy supply Indigenous production of crude has been falling faster the decline in consumption. (Norway?) = oil considered as a security (dependency on exporting countries) problem Also problem of competitiveness — European refineries face substantial restructuring (low margins and low utilisation rates) due to the decreasing regional demand an increased competition from Middle East, Asia, USA 15 of them closed between 2008-2014 — 8% decrease in processing capacity of the EU Inreasing dependence on import of oil products 8 Crude oil production, 1990-2012 180 160 140 120 100 S 80 60 40 20 0 1990 1992 1994 996 1998 2000 2002 2004 2006 2008 2010 2012 * Others includes other EU member states which produced crude oil each year. In 2012: Belgium, Estonia, Finland, Ireland, Luxembourg, Portugal, Slovenia, Sweden, Cyprus**, Latvia and Malta did not produce crude oil. Imports of crude oil to the EU by country of origin, 2012 Russia Norway Saudi Arabia Libya Nigeria Kazakhstan Iraq Azerbaijan Algeria Angola Mexico Others Source: Eurostat, May 2014 10 Primary Russian Qil and Gas Pipelines to Europe (U) — Oil pipeline ■ Proposed oil pipeline - Gas pipeline Proposed gas pipeline Russian-dominated pipeline0 -—* Tanker te mn inal '> Kr ■ 'fit t i Siberian basin Oil security and supplies Difficult to replace — mainly in transport and petrochemistry Support of usage of RES instead of oil Bio fuels - Energy and climate package - 10% of bio fuels (RES) in transport in every MS by 2020. Later on strenghtened RES electricity in energy sector 12 Oil security and supplies EU oil consumption by sector, 1990-2012 Power generation 1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012 Notes: TPES by consuming sector. " Other transformations includes refining and energy-own use. ** Industry includes non-energy use. Commercial includes commercial and public services, agriculture/fishing and forestry. 13 Gas security and supplies 23,9% of the total primary energy supply Peak in demand in 2010, now plateaued (slightiy decreasing) Dependence on fixed pipelines — low flexibility Ensuring security of gas supply and limiting import dependency a priority = a high security concerns ' A growing competition due to LNG, higher exposure to price differentials between Asia, North America and the EU 14 Natural gas production, 1990-2012 Denmark 1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012 * Others includes other EU member states which produced gas in each year. In 2012, Belgium, Estonia. Finland, Luxembourg, Portugal. Sweden, Cyprus**, Latvia. Lithuania and Malta did not produce gas. 15 Gas imports to the European Union, 2012 ■ Russia ■ Norway Algeria Qatar ■ Nigeria Libya ■ Trinidad and Tobago ■ Peru ■ Egypt ■ Not specfied Source: Eurostat 2014. Primary Russian Oil and Gas Pipelines to Europe (U) Gas security and supplies A high security concerns In power generation could be replaced by RES or coal or nuclear Indigenous production? (still substantial reserves in the North Sea) + unconventional sources (shale gas) 18 Natural gas supply by sector, 1990-2012 1996 1998 1990 1992 1994 Notes: TPES by consuming sector. " Other transformations includes refining and energy-own use. 2000 2002 2004 2006 2008 20H Power generation Other transformations' Industry** Transport Residential Commercial**1* 2012 19 Unconventional gas Abundant reserves — in the Netherlands, UK, Denmark, Romania, Poland, France, Germany, Bulgaria, Sweden, Spain • Europe (470 tcf) vs. USA (1685 tcf) Environmental concerns • Gas itself is clean, but the exploration could be a problem • Consumption of water — 280 OOOhl/one dril. 0,5 — 2 % of this water consists of drilling chemicals • 2-4 ha/one drilling pad (up to 30 drills) 3-6km between pads • Trafic — one dril = 700-2000 trucks (one every 4 min. during construction) • Earthquakes (seismic activity) 20 Powers and tools • Support of diversification • Diversification of fuels • Diversification of suppliers • Diversification of transit routes • Strategic reserves of oil and gas • Export of energy acquis communautaire via network of bilateral, multilateral and global treaties covering (to some extent) energy • IEM 21 Pipeline gas and LNG In 2013 19 LNG terminals. Since 2008 new terminals in France, UK, the Netherlands and Italy. Three new commissioned (Lithuania, Poland — NS interconnection, France). Financial support from the EU funds TPA applied 23 Import terminal Small scale LNG production/LNG storage accessible for ships Export terminal R R R R F4R « R R R R RUSSIAN FEDERATION R R R R n R R R RR R* R R R R R MEDtTFRR ANEAN SEA R MEDITERRANEAN S£A Powers and tools • Support of diversification • Diversification of fuels • Diversification of suppliers • Diversification of transit routes • Strategic reserves of oil and gas • Export of energy acquis communautaire via network of bilateral, multilateral and global treaties covering (to some extent) energy • IEM 25 Primary Russian Oil and Gas Pipelines to Europe (U) Russia-Ukraine gas crisis 2009 • 1.1.2009 Russian exports to Ukraine cut off, problems in 16 EU MS and Moldova for 2 weeks (7.-20.1.2009). Part of the Balkans in a humanitarian emergency, economic damages • 15% of EU supplies via the Brotherhood pipeline • The missing 5bcm could be replaced by supplies in the EU gas market (storages in Germany, Austria and Italy), but there were no interconnections • Wake up call for the EU, investments to reverse flows, storage capacities, debate about new import pipelines 27 Nord Stream Gazprom compressor station near Vyborg, Russia Nord Stream (2 lines of 55 bcm/y) is not restricted by TPA but both OPAL (50 % of its 35 bcm/y) and NEL (35 % of its 20 bcm/y) are Supported by the EU (just fraction of costs) Switzerland South Stream • 63 bcm/y. Controlled by Gazprom Export • Two legal issues: • Unbundling (OAO Gazprom and OOO Gazprom export + South Stream Bulgaria legal entities) • TPA — different Powers and tools • Support of diversification • Diversification of fuels • Diversification of suppliers • Diversification of transit routes • Strategic reserves of oil and gas • Export of energy acquis communautaire via network of bilateral, multilateral and global treaties covering (to some extent) energy • IEM 30 Activities of the commission - reserves • Strategic reserves of crude oil and petroleum products — Directive 2009/119/EC — MS are obliged to ensure a total level of oil stocks corresponding to the 90 days of average daily net imports or to the 61 days of average daily inland consumption, whichever of the two quantities is bigger • Regulation No 994/2010 concerning measures to safeguard security of gas supply • resolves the situation in case when the single largest gas infrastructure of country fails, which is the so called N-l scenario. In such case, the regulation obliges the MS to ensure the supply for protected customers (mostly households + hospitals...) 31 Powers and tools • Support of diversification • Diversification of fuels • Diversification of suppliers • Diversification of transit routes • Strategic reserves of oil and gas • Export of energy acquis communautaire via network of bilateral, multilateral and global treaties covering (to some extent) energy • IEM 32 Instruments of the external dimension of the EU energy policy Instrument Partners Bilateral cooperation Energy dialogue Brazil (since 2007), China (since 2005), India (since 2004), Iraq (since 2010), Norway (since 2005), Russia (since 2000), The South African Republic (since 2008), Ukraine (since 2005), USA (since 2006) The bilateral agreements of different sorts treating the economic cooperation in total, including the power industry - for example Partnership and Cooperation Action (PCA), Free Trade Agreement (FTA), Stabilization and Association Agreements. EU economic partners across the world PCA agreements were signed by the majority of CIS countries and represented the foundational element of the Deep and Comprehensive Free Trade Area Agreements, that is, of the instrument set by the Eastern Partnership The memorandums of understanding associated with cooperation in the field of power industry (MoU) EU partners in the field of power industry, including Ukraine and the states from the Caspian Region The memorandums represented the first level of the intensified energy relations Instruments of the external dimension of the EU energy policy Multilateral cooperation Energy Community EU closest neighbors Currently the membership consists of the Balkan states, Ukraine and Moldavia The observing status is held by Turkey, Norway a Georgia European Neighborhood and Partnership Instrument (ENPI) 17 neighboring states Energy Charter Treaty Oil producers assembled under the OPEC Cooperation with the Gulf Cooperation Council Baku Initiative (INOGATE, Traceca) EU Assistance Program for Turkey and CIS members states (Russia is the observer) Black Sea Regional Energy Centre (BSREC) 11 states from the Black Sea Region Caspian Development Corporation (CDC) Companies from the Caspian Region Union for the Mediterranean, Barcelona Process 16 states located along the Mediterranean coastline in the North Africa, Middle 34 East and Balkan Instruments of the external dimension of the EU energy policy Global cooperation Energy Charter Treaty Signed by 51 countries worldwide In reality, a vast number of countries active in the energy market remained out of this structure (for example, Norway, Australia did not ratify the document, Russia withdrew in 2009) Kyoto Protocol Signed and ratified in total by 191 countries worldwide, excluding the USA International Energy Forum (IEF) Includes the states which represent approximately 90% of the world oil and gas demand and offer Members are the IEA and OPEC states, China, Russia G8 and G20 8 and 20 richest countries in the world 35 Export of legal framework Energy Charter • EU, CIS countries (without RF), central Asian states, Azerbaian, Georgie, Turkey • International agreement creating framework for cross-border cooperation in the energy Covers trade, transit, investments (Yukos'tax evasion), energy efficiency Legally binding with dispute resolution mechanisms • 1991 Energy Charter declaration • 1994 legally binding Energy Charter Treaty (plus Environmental protocol). Building strongly on GATT and WTO rules. 51 parties 36 Export of legal framework • Energy Community (2006) • EU, Albania, BIH, FYROM, Montenegro, Serbia, Kosovo. Moldova, Ukraine, Turkey and Norway as observers • Extending the (energy) acquis of the EU to countries of SEE. Common regulatory framework in energy (security of supply, energy efficiency, RES, third liberalisation package), environment and competition • Problems with opening of members to competition, with subsidies, unstable investment climate, insufficient measures to protect environments, state regulation of prices... 37 Powers and tools • Support of diversification • Diversification of fuels • Diversification of suppliers • Diversification of transit routes • Strategic reserves of oil and gas • Export of energy acquis communautaire • Network of bilateral, multilateral and global treaties covering (to some extent) energy • IEM External dimension and internal market • EC vs. Gazprom • September 2011 EU antitrust officials made unannounced inspections of the energy companies in 10 CEE MS • September 2012 — EC opened formal proceedings against Gazprom for allegedly violating EU competition rules (abusing its dominant position in CEE's gas supply markets) • Three potentially anticompetitive practices: • Market partitioning (destination clauses) • Barriers to supply diversification (breaching of TPA principle) • Unfair pricing (long-term take-or-pay contracts, oil indexation) Sources • IEA (2014): Energy Policies of IEA Countries — The European Union.