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Wednesday, March 19, 2008

January in Energy,2008

Little bit late, but there are so many things to read and publish. So in this edition:
For more, read below. My comment are after the articles as usual.

Gazprom looms large on EU's gas supply horizon

30 January 2008

Russian energy giant Gazprom has secured further pipeline deals with individual EU member states and announced its ambition to move into the UK market this week, casting further doubts over the EU's ambition to "speak with one voice" on external energy matters.

Russia's state-owned energy giant Gazprom, believed by many to be an extension of the Kremlin that is being increasingly used for political leveraging, made international headlines this week (28 January) with its intention to acquire 15% of the UK gas market by 2011, a tenfold increase compared with current holdings.

The move would allow Gazprom to provide gas directly to UK consumers, reflecting the company's wish to become a powerful actor in the EU's energy market rather than a mere external gas supplier, an ambition that may be complicated by Brussels' plans to demand 'reciprocal' treatment for EU firms with similar ambitions in Russia's energy market.

In separate deals concluded on 25 January, Gazprom also acquired the entire Serbian oil and gas sectors, as well as a 50% stake in the Central Europe Gas Hub through a deal with Austria's OMV. The latter deal brings Gazprom one step closer to realising the 'South Stream' pipeline project, a direct competitor to the Nabucco pipeline project. Nabucco is a showcase 'European' pipeline deal that continues to face obstacles despite recent pledges for financial backing by Germany and France (EurActiv 17/09/07).

Meanwhile, EU Energy Commissioner Andris Piebalgs on 29 January defended the controversial Nord Stream pipeline as a "project of European interest".

In addition to concerns about the environmental impact of the pipeline, which would bring Russian gas directly into Germany via the Baltic seabed, Poland and the Baltic states have expressed their frustrations about being bypassed by the project and have proposed an alternative land route.

Ukrainian Prime Minister Yulia Tymoshenko also chimed into the EU's gas supply debate during a visit to Brussels on 29 January. Tymoshenko informed journalists about her country's intention to seek closer energy ties with the EU and revise a current pricing agreement with Gazprom in order to secure higher transit and gas storage fees in response to higher gas prices.

However, there are concerns that the move may upset the stability of Europe's gas supplies, as the agreement on low transit fees was part of a 2006 deal with Gazprom that signalled the end of controversial gas supply disruptions (EurActiv 05/01/06). source

My comment: Russia is here to stay. I don't know when people in Brussel will accept it, but it's high time for them to cut the whining and get realistic. Russia will supply Europe with oil and gas, so better get the most out of it, then hide your head into the sand. And last but not least, Russia got only 49% of South Stream in Bulgaria. Yay, for us.

Energy and climate change take centre stage at EBS

29 January 2008

The 6th European Business Summit, to take place on 21-22 February in Brussels, will focus on "greening the economy" and finding "new energy for business," organisers have announced, one week after the Commission published ambitious climate and energy proposals.

"Climate change and energy are the hot topics today, at political level and in corporate boardrooms," said Conference Director Wytze Russchen on Monday (28 January), adding that the EBS sought to "respond to the interests" of the European business community.

The annual event - often referred to as the EU equivalent of the Davos summit - is organised by EU employers' association BusinessEurope and the Federation of Enterprises in Belgium (FEB), with the support of the Commission and the Slovenian Presidency of the EU.

It will gather high-level EU policymakers as well as key figures from the European business community around four plenary sessions and eleven workshops on themes ranging from energy liberalisation to Europe's position in the global race towards a low-carbon economy.

The event comes at a time when energy and climate change have made their way to the top of the EU political agenda, with a new package of proposals on renewable energies and CO2 emissions reduction presented by the Commission last week (EurActiv 24/01/08).

The EU business group had expressed concerns about the proposals, saying they were "not satisfactory" and that "high renewable targets" would have "strong direct and indirect impacts on energy-intensive industries" such as steel and chemicals.

Rudi Thomaes, CEO of the Federation of Enterprises in Belgium, said the Commission's package was "highly ambitious" and represented "a huge challenge for Belgian companies" as he considers the potential for renewable energies in Belgium to be "low".

However, he endeavoured to strike a positive note as well, saying the Commission's proposals "shouldn't be seen solely as a threat but also as a window of new opportunities."

EurActiv is associated with the event as a knowledge partner, together with INSEAD, a business school. The programme of the thematic workshops and plenary sessions can be consulted and discussed online on EurActiv's blog platform, Blogactiv.euexternal . A dedicated section on greening the economyexternal has been put together especially for the EBS.source

My comment: Exactly my point. This is a window of new opportunities. Climate problems are not going to simply disappear (well, unless we don't disappear) so why not grasp the chance and simply use it to make more money.

Eight EU states oppose unbundling, table 'third way'

1 February 2008

France, Germany and six other member states have submitted proposals outlining a 'third option' for energy liberalisation. The full document, seen by EurActiv, argues that the Commission's proposals to unbundle vertically-integrated energy firms will not achieve their desired effect in terms of more grid investments and lower energy prices.

In its third liberalisation 'package' proposals unveiled on 19 September 2007, the Commission left member states with two options to complete the liberalisation of the EU gas and electricity sector:

  • Forcing big energy firms to sell off their power transmission and gas storage assets in order to keep these activities fully separate from energy production ('Ownership unbundling'), or;
  • allowing firms to maintain ownership of their transmission assets but leave their management to an Independent System Operator (ISO) responsible for taking investment and commercial decisions.

The Commission has already made it clear that the ISO option is a fallback, with 'ownership unbundling' the preferred option. Such a drastic measure is necessary, according to the Commission, to guarantee non-discriminatory access to energy grids for smaller firms wishing to compete in markets dominated by vertically-integrated energy giants, such as EDF in France and E.ON in Germany.

But Germany and France vehemently oppose the Commission's plans, and have been working to elaborate alternative proposals and garner the support of other member states in order to form an eventual blocking minority in the Council.

'Effective and efficient' unbundling

The set of amendments for a third option for energy market liberalisation are proposed in a letterPdf dated 29 January and signed by Austria, Bulgaria, France, Germany, Greece, Luxembourg, Latvia and the Slovak Republic.

The letter, sent to the Commission and to the Parliament's Industry (ITRE) Committee, features only one significant change compared to an earlier draft (see EurActiv 29/01/08)

Instead of suggesting that national regulatory authorities could "oblige" Transmission System Operators (TSOs) to carry out grid and infrastructure upgrades, the new text proposes that regulators can "request" TSOs to invest "by all legal means".

Beyond this change, the proposals put forward essentially the same message: that fair competition can be achieved without full ownership unbundling or third-party (ISO) oversight by ensuring a number of safeguards concerning the independence, management and investment decisions of TSOs.

ISO not a 'genuine alternative'

The status of TSOs are at the heart of the disagreement between the eight member states and the Commission over how large, vertically-integrated energy firms should be treated during the further liberalisation of EU electricity and gas markets.

Obliging energy-producing firms to give up their transmission assets is "not compatible with constitutional law and with the free movement of capital", according to the letter, which argues that "no correlation can be found between the implementation of [ownership unbundling] and the levels of prices and investments which are actually determined by many other factors".

However, the Commission insists that energy firms cannot, in an environment of effective and fair competition, simultaneously control the means of energy production and transmission.

In the absence of full ownership unbundling, the EU executive argues that the ISO option is the minimum level of separation necessary to ensure investment and access to grids for competitors and prevent conflicts of interest.

But Germany and France, who are "deeply concerned by the negative social consequences" of unbundling, argue that the ISO option is a kind of ownership unbundling and "cannot therefore be presented as a genuine alternative". source

My comment: Mmm, reading more about the history of EU, this ISO thing reminds me of the very beginning of EU-the cartel that united France and Germany. Well, why not. Though here the goal is not uniting but hurting Russia, maybe the outcome will be surprising. Because it doesn't simply hurt big companies, but also local interests. Could it be a transition to global interests?

IEA refutes 'peak oil', points to lack of investment

1 February 2008

Insufficient investment, political instability and blocked access to key oil and gas reserves have distorted the global fossil fuel market and driven up prices, according to the International Energy Agency, which has downplayed concerns about imminent oil shortages.

For many oil companies, buying oil on increasingly volatile and expensive global crude markets is less risky than investing in new extraction facilities, the International Energy Agency's (IEA) William Ramsay said on 31 January in Brussels.

The comments were made during a conferenceexternal on the EU's external energy relations organised by the Institut français des relations internationales (IFRIexternal ).

During his presentationPdf external , Ramsay noted that the majority of the world's key oil and gas reserves are located in places either largely off-limits to investors - Saudi Arabia and Venezuela, for instance - or in places that are plagued by political instability and even violent conflict, such as Iraq or the Caspian Sea region.

As a result, the crucial supply-side investments and reserve explorations needed to respond to steadily rising global demand for oil and gas are not being made, causing disruptions in the market and leading to higher prices, he said.

Proponents of the 'peak oil' theory, however, argue that the world's oil supplies may simply be running out and that further explorations and supply-side investments can do little to correct this situation (see our LinksDossier).

EU Energy Commissioner Andris Piebalgs reflected these concerns during a 14 January speech before the Swiss Energy Congress, arguing that the coming supply crunch should inspire the EU to become less dependent on fossil fuels for its energy needs (EurActiv 16/01/08).

Ramsay also criticised Russia's state-owned energy giant Gazprom for investing more into the acquisition of 'downstream' demand-side infrastructure in order to expand its client base rather than investing in 'upstream' capacity, notably the development of new gas fields.

Gas output from the key western Siberian gas fields being exploited by Gazprom is steadily declining, leading to the likelihood of higher gas prices for consumers if new fields are not developed, Ramsay said.

But a Russian member of the audience argued that Gazprom is behaving no differently to most large, vertically-integrated EU energy firms, which prefer expanding their customer base to investing in expensive new supply capacity.source

My comment: What about Iran?

MEPs seek tougher standards and higher taxes for fuels

30 January 2008

Stricter emission limits for transport fuels could be in force by early 2009, according to Parliament's environment committee. Meanwhile, Commission plans to raise minimum taxes on petrol and diesel in order to stamp out 'fuel tourism' won the backing of MEPs but are likely to face stiffer resistance from member states.

The European Parliament and member states are getting closer to clinching an agreement on changes to EU-wide specifications for petrol, diesel and gas-oil aimed at protecting human health and the environment, Socialist MEP Dorette Corbey said during a debate in Parliament's Environment Committee on 29 January.

"It looks like Council is moving to our direction," she said, garnering support from fellow MEPs to initiate negotiations with the Council on a first-reading deal amending the existing Fuel Quality Directive. According to Corbey, the Slovenian Presidency should decide on 5 February whether to accept the offer.

One of the main issues at stake is whether binding "sustainability criteria" should be included in the Directive, which notably aims to promote increased use of biofuels by requiring all fuel suppliers to cut greenhouse gas emissions produced by their fuels throughout their life-cycle by 10% between 2011 and 2020.

Such criteria are also being proposed in a draft directive on renewables, presented by the Commission on 23 January, but Corbey has argued that those criteria are unlikely to be in place sufficiently early to prevent fuel makers from investing in environmentally harmful biofuels, blamed for provoking food price hikes, deforestation and water shortages.

Her report further defends stronger standards than those proposed by the Commission, demanding that biofuels deliver life-cycle CO2 savings of at least 50% compared to fossil fuels - rather than the 35% suggested in the renewables directive - in order for them to count towards the EU's target of raising the share of biofuels in transport from current levels of around 2% to 10% by 2020.

In a parallel vote in the Economic and Monetary affairs committee, MEPs gave their backing to Commission plans to raise minimum taxes on diesel to the same level as those applied to petrol (EurActiv 14/03/07). The committee explained: "Since diesel and petrol have similar impacts, especially from the point of view of CO2 emissions, there is no environmental reason for the two minimum rates to differ." The measure also aims to put an end to "fuel tourism" across Europe, whereby truck drivers and coaches drive extra miles to fill up their tanks in the cheapest countries, causing extra pollution.

MEPs also suggested that countries with the highest tax rates should be prevented from increasing their taxes further until 2015 in order to accommodate recent rises in fuel price. Setting a maximum tax rate is a key demand from the road transport industry, which says no convergence in tax rates will be achieved otherwise.

"The Commission proposal has all the disadvantages of raising costs for transport operators, businesses and consumers but none of the advantages that would come from eliminating distortions of competition. Nor will it have any effect on the environment," stressed the head of EU fiscal affairs at the International Road Transport Union (IRU), Damian Viccars, who believes the "tank tourism" phenomenon is being "greatly exaggerated".

As usual with taxation matters, Parliament's role is purely consultative and member states will have to thrash out the details of the plan among themselves, with countries with low tax levels like Luxembourg and the central and eastern member states likely to put up a fight. source

My comment: If it's purely consultative, then why bothering discussing it at all.

EU falters on energy-savings objective

30 January 2008

The European Commission has issued a first, grim assessment of energy-savings plans submitted by member states last year, pointing to a lack of political commitment to reduce energy consumption at national level. But Brussels itself is being criticised for dropping the issue in favour of policies with a higher political profile.

A directive on energy end-use efficiency and energy services, adopted in late 2005, requires member states to draw up national action plans to achieve annual energy savings of 1% in the energy services sector (retail, supply and distribution of gas, urban heating and transport fuels).

The aim of the directive was to achieve an overall 9% reduction in energy consumption by 2016, with 30 June 2007 identified as the deadline for member states to submit their first national action plans to the Commission.

The targets, however, were made indicative only, meaning that they cannot be legally enforced upon EU countries.

A separate objective was agreed later on to slash the EU's overall energy consumption by 20% by 2020. The objective was the centrepiece of the Commission's energy efficiency action plan, endorsed in spring 2007 by EU leaders in Brussels. It was, however, also made non-binding on member states.

The Commission's downbeat review came as part of a package of proposals put forward last week to deliver on the EU's objective to slash emissions of greenhouse-gases (GHG) by 20% by 2020 (EurActiv 24/01/08).

According to the Commission, "the plans essentially represent a practical demonstration of the commitment of member states to energy efficiency".

But with 17 plans assessed so far, Brussels says there is a gap between words and political action taken to meet the EU objective of cutting energy consumption by a fifth by 2020. "Although the Action Plans provide some encouragement, there appears to be a gap between the political commitment to energy efficiency and the proposals aimed at facing up to these challenges".

In October last year, the Commission launched infringement proceedings against 12 member states for failing to deliver their action plans. France and Latvia face separate legal action over their failure to introduce legislation on buildings efficiency (EurActiv 18/10/07).

However, some are suggesting that the Commission itself has been placing too little attention on the 20% energy savings target because it is not legally enforceable. Indeed, the energy and climate package last week was dominated by targets on GHG emissions and renewable energies which member states agreed to make legally-binding objectives.

"The 20% energy efficiency target has somehow been dropped," commented one industry source with knowledge of the Commission's internal arrangements. source

My comment:Mmm, no comment, really, I said it so many time. Words are all we hear, but nothing happens. Then how do they expect anything to work? I'm disappointed big time.

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