External dimension of the EEP Filip Černoch cernoch@jTLail.muni.cz 100* EU28 import dependence External dimension should: • Secure stable and reliable supplies of energy at affordable prices. • Improve relationship between consuming countries, producers and transit countries. Strengthen the negotiating position of the EU by 'speaking with one voice'. 90* 80* 70* 60* 50* 40* 30* 20* 10* O 1995 O 2000 2005 O 2010 O 2015 O 2016 0% Total Solid Fuels of which Petroleum of which Natural Gas Hard Coal and Products Crude and NGL Security situation in general • Import dependency fluctuates between 52% and 55% between 2005 -2014. • In 22 MS, net import dependency decreased in this period due to the RES (Austria, Estonia, Ireland, Italy, Latvia, Portugal, Spain) and decreasing consumption. • In some others increse due to the decreasing domestic produciton (Denmark, Poland, UK) or closure of nuclear plants (Lithuania). = While import dependency on fossil fuels has been increasing, their share within the energy mix is gradually decreasing. 3 Coal security and supplies Main source for electricity. Environmental problems (CCS), problems with state aid. Hard coal Net import dependency for hard coal 55.7% in 2005 and rose to 67.9% by 2014. During this period indigenous production fell by nearly 40%. Net import stable, but accounts for a growing proportion of consumption. The Czech Republic the only net exporter in the EU. In 2014, even Poland, the EU largetst coal producer, became a marginal net importer. Brown coal Not traded internationally, imports to EU negligible. Indigenous production. = not a security issue. SoSl - A3: net import dependency - Hard Coal absolute change 2005-2014|pp] Mt IT. d 3 si Š Í Í Í ÍM ^ lH _ d e*> o? , _f J; r-j 150% 100% 50K ON -5Ü':1-: tu2a 31 Bíi DK QE EE IE EL ES FR HR IT CY LV LT Lü hü MT NL AT PL FT RO SI SK Fl SE UK 2005 «2014 5 Oil security and supplies Dependency increased from 81.3% in 2005 to 87.9% in 2014. In this period indigenous production fell by almost a half. Due to the falling consumption decreasing, imports are still covering a growing proportion of demand. Difficult to replace (transportation, petrochemistry) = oil considered as a (limited) security (dependency on exporting countries) problem. Also problem of competitiveness — European refineries face substantial restructuring (low margins and low utilisation rates) - decreasing regional demand and increased competition from Middle East, Asia, USA (EU imports diesel and jet fuels, exports gasoline) 15 of them closed between 2008-2014 — 8% decrease in processing capacity of the EU. 6 SoSl - A2: net import dependency - Crude oil and NGL a bsolute change 2Q0S-2Q14 |pp| 7 Z ■- J- : ■- d JS |S ijff jfi H = 150% 100% 50% 0'. -50% -100 -150% i Jin nun iiiujjjji. EU23 BE BG CZ D* Of EE IE EL ES FR HR IT CY LV LT LU HU MT NL AT PL PT HO SI 5K Fl SE UK 7 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 Nuclear security and supplies In 2015 128 reactors in 14 states. In France, Hungary and Slovakia nuclear provide more than 50% of electricity. In 2015, 90% of the natural uranium came from outside of the EU. 39% from Russia. Nuclear energy not considered 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 nuclear-bomb technology. Fabrication. High energy content of fuel — Temelin (2xl055MW) — about 4m2/y. Megatons to Megawatts. 9 Purchases of Natural Uranium by ED utilities by origin, 1992-2014 jtU) 2005 2.796 change 2005-2014 i -34.9% -62,9% -63.7% 4S.2% 7840% -100.0% ■ Russia ■ Other CIS ■ Australia ■ Niger + Gabon (*) ■ Canada ■ South Atrica + Namibia HJ ■ Heu feed {**] Other +- undetermined ■ USA Malawi Re-enriched tails (*}:Gctbcm has ceased uranium production since 1999 (**} HEU=highly enriched uranium natural uranium Included in fuel loaded in the EU reactors by source, 2015 savings from MOX 6.0% reprocessed uranium ■ 1.7% uranium originating in the EU (approx annual production) ■ 2.3% uranium originating outside the EU ^^^H 90.0% Gas security and supplies Only two remaining exporters — Denmark, the Netherlands. (+ Norway). Net import dependency for gas exceeds 90% in 16 MS, about half of which are fully reliant on imports (100% net import dependency). Two producing countries (the Netherlands, Romania) recoded significant improvement — their output decreased, but it was offset by a bigger decrease in consumption. 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. ii Soil - Al; net import dependency - Natural Gas jtjMjlute change 2005-2014 [pp] -150K J Gas imports to the European Union, 2012 EU approach to external supplies • Market (legalistic) approach of the EU vs. geopolitical approach of supplying countries. • Limited supranacionalisation — energy security as an issue of high politics. Issues outside of the reach of the EU. Weak position of the 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, depletition of domestic sources... . 14 Powers and tools of the EC 1) Management of external relations and dependency • 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. 2) Improvement of the EU's internal resilience using Internal energy market mechanisms. 15 Replacement of the natural gas In power generation could be replaced by RES (?) or coal (?) or nuclear (?). In heat by coal (?) or biomass, energy efficiency Indigenous production? (still some reserves in the North Sea) + unconventional sources (shale gas). Natural gas supply by sector, 1990-2012 500 50 00 50 00 50 00 150 100 50 0 Power generation I Other transformations* I Industry1* Transport I Residential Commercial*** 1996 1990 1992 1994 Notes: TPES by consuming sector. " Other transformations includes refining and energy-own use 1998 2000 2002 2004 2006 2008 2010 2012 Unconventional gas Abundant reserves — in the Netherlands, UK, Denmark, Romania, Poland, France, Germany, Bulgaria, Sweden, Spain. Reserves up to 16 trillion m3. 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). • Not produced commercially in the EU — banned (France, Bulgaria) or tested only (Poland, United Kingdom) 17 Powers and tools of the EC 1) Management of external relations and dependency • 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. 2) Improvement of the EU's internal resilience using Internal energy market mechanisms. 18 Pipeline gas and LNG In 2017 LNG represented about 14% of EU supplies. From Qatar (41%), Nigeria (19%), Algeria (17%), Peru (7%), Norway (7%), the US (4%) and Trinidad and Tobago (3%). EU's LNG capacity sufficient to meet 43% of total demand. Noway/Russia'" Markets S-An?a LNG Pipe Source: BG Group 19 Import terminal Small scale LNG production/LNG storage accessible for ships Export terminal uUITEO KJML.DL.-V. Pi Pi PI PT PI Pi Pi RUSSIAN FEDERATION Pi PI Pi R R R R R p,R R i Pi R R PI MEDITFRR ANEAN SEA Pi MEDITERRANEAN S£A Powers and tools of the EC 1) Management of external relations and dependency • 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. 2) Improvement of the EU's internal resilience using Internal energy market mechanisms. 21 Nabucco pipeline Preparation started in 2002. In 2003 EU provided support in the amount of 50% of estimated costs of the feasibility study 2005 joint venture agreement. Preparation work collapsed in 2013, after the anouncement of Azerbaijan to supply TAP instead. 22 South Stream • Announced in 2007 with 63 bcm/y capacity. Controlled by Gazprom Export. • Legal issues related to the third package (unbundling, TPA). • Cancelled in 2014, replaced by Turkish Stream. South Stream pipeline route options Russia - Bulgaria - Serbia - Hungary - Slovenia - Italy Pipeline branches Aus,,ia ■r* J \ "f TURKEY o^-^v-^-. ' j CCÁ AEGEAN (J_— To Croatia Irom Serbia .-—j< , GREECE - i-i SEA To Republika Srpska Irom Serbia \ J1 Ot 'Lr> . - ... ,'SL.S:%% „ / * Have not yel been established 23 Nord Stream 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). □24 Powers and tools of the EC 1) Management of external relations and dependency • 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. 2) Improvement of the EU's internal resilience using Internal energy market mechanisms. 25 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...). • To be replaced by Regulation No 2017/1938 26 SoS3:N-l rul6forga5[%] absolute change 2009-2016 BE BG CZ DK DE EE IE EL ES FR HR IT CY LV LT LU HU MT NL AT PL PT RO SI SK Fl SE UK ^ 2009 ^«2016 -threshold 100% N-l formula for gas infrastructure — it measures the ability of the gas infrastructure of a country to satisfy, in the event of a disruption of the single largest gas infrastructure, total gas demand during a day of exceptionally high gas demand occurring with a statistical probability of once in 20 years, expressed as a percentage of that demand. 27 Sources • IEA (2014): Energy Policies of IEA Countries — The European Union. • EC (2017): Second Report on the State of the Energy Union.