Thursday, March 20, 2014

Europe needs a new energy supplier

By Ewa Krukowska

European Union leaders want a road map by mid-year for reducing reliance on Russian natural gas as they seek to punish Russia for its annexation of Crimea, according to a draft EU document.

The EU’s 28 chiefs plan to ask the European Commission, the bloc’s executive arm, to outline within three months ways to diversify energy sources away from Russia, which is the main supplier of gas and oil to Europe. The crisis in Ukraine, a transit country for Russian energy consumed by the EU, is set to dominate a two-day meeting of prime ministers and presidents in the European Council.

“Efforts to reduce Europe’s high gas energy dependency rates should be intensified, especially for the most dependent member states,” according to a draft statement to be adopted at the summit in Brussels tomorrow. “The European Council calls on the Commission to conduct an in-depth study of EU energy security and to present by June 2014 a comprehensive plan for the reduction of EU energy dependence.”

The EU’s energy dependency rate is set to rise to 80 percent by 2035 from the current 60 percent, according to the International Energy Agency. Gas from Russia accounted for almost 32 percent and oil for about 35 percent of the bloc’s imports in 2010, according to EU data.

Ukrainian Crisis

EU leaders may discuss energy security in the context of the Ukrainian crisis over a dinner today and are scheduled to hold a first debate on the 2030 climate and energy framework for the bloc tomorrow. They also plan to urge member states to step up integration of electricity and gas markets in order to help reduce prices, which in some regions of Europe are double those in the U.S., where shale-gas production has brought the world’s biggest economy toward energy independence.

Europe’s oil and gas import bills rose to more than 400 billion euros ($551 million) in 2012, representing about 3.1 percent of the region’s gross domestic product, according to EU data. That compares to about 180 billion euros on average in 1990-2011.

In addition to greater diversification of energy sources, the leaders also want the commission to examine ways to boost Europe’s bargaining power vis-a-vis suppliers, according to the draft statement.

Poland, which relies on Russian gas monopoly OAO Gazprom for about two-thirds of its consumption, supports the planned EU call to increase the bloc’s bargaining power. Prime Minister Donald Tusk said he discussed various options for tightening cooperation among governments with German Chancellor Angela Merkel last week so that the EU can have stronger purchasing leverage.

Commission Plan

“I hope that we will be able to start this process today,” he told reporters in Brussels as the EU summit was getting underway. “The most important thing will be to oblige the European Commission to start preparations.”

The plan to be prepared by the commission should take into account that the EU needs to boost energy efficiency and continue to develop renewable and other indigenous energy sources, the draft summit conclusions say. That reflects calls by countries including the U.K and Poland, where shale-gas reserves promise to create new jobs and cut reliance on imported fuels.

The U.K. also wants EU leaders to ask the commission to present an in-depth study of Europe’s energy security and a 25- year plan to improve it, according to a government document for the summit.

Options for the bloc to diversify its energy sources include gas imports from the U.S. and development of the so- called southern corridor for gas from the Caspian region and Iraq, and increased cooperation with Norway and North Africa, said the U.K. It cited interruptions in the supply of Russian energy to the EU because of price disputes with Ukraine during the previous decade.

“Crises in Ukraine in 2006, 2009 and more recently have repeatedly illustrated the need to ensure Europe is not over- reliant on a limited number of sources of energy or vulnerable to external pressure,” according to the U.K.

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