EU Energy Policy on Natural gas

Jean-Arnold Vinois Head of Unit - Energy Policy, Security of Supply and Networks OLF Energy Dialogue, Brussels – 14 April 2010

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Outline of the presentation

1 The role of gas in the EU energy mix,

2 First and Second Strategic Energy Review,

3 Latest developments,

4 Future developments,

5 Conclusions

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1 Gas in the EU Energy mix

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1  EU Import dependency 2030 (%) (2007 and 2009 PRIMES baseline scenarios

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1 Origin of EU gas (role of Norway) EU-27 Natural gross inland gas consumption

( 532,16 bcm in 2007) Russia 23,3%

Norway 15,2%

Indigenous production 42,9%

Libya 1,9%

Nigeria 2,9% Trinidad and Tobago

0,5% Qatar 1,4%

Other Import Origin 1,1%

Egypt 1,1%

Algeria 9,7%

Russia Norway Algeria Nigeria Libya Qatar Egypt Trinidad and Tobago Other Import Origin Indigenous production

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1 Use of gas in the EU (2007)

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1 The features of natural gas

. Gas is relatively abundant, proven conventional gas reserves exceed 60 years, . EU gas reserves are limited but the EU is surrounded by vast gas resources (Norway, Russia, ME, Caspian …), . New role of unconventional gas « game changer », . Gas is the fossil fuel with the lowest CO2 emissions, bridge fuel or destination fuel, . Oil companies are becoming gas companies, . Good combination renewables-gas

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2 Three pillars of EU Energy Policy

Sustainable Development

Security of supply

Competitiveness

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2 First and Second Strategic Energy Reviews

First Strategic Energy Review (January 2007) focused on two pillars - competitiveness and sustainable development. It proposed the 20-20-20 objectives and the third internal market package now adopted.

Second Strategic Energy Review (November 2008) focused on the third pillar (security of supply). Proposed an EU energy security and solidarity action plan which identified five priorities:

2.1 Infrastructure needs, 2.2 Oil stocks and gas crisis mechanisms, 2.3 External energy relations, 2.4 Energy efficiency, 2.5 EU’s indigenous energy resources

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2.1 Infrastructure needs: Six projects

LNG

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2.2 Oil stocks and gas crisis mechanisms

New legislation on EU emergency oil stocks – published in September 2009

Communication on security of gas supply (November 2008) with a view to revising the Directive 2004/67/EC on Security of Gas Supply

A new Regulation on security of gas supply tabled by the Commission on 16 July 2009: . infrastructure standard (N-1, reverse flow), . predefined, transparent emergency plans of MSs, . regional cooperation, . coordination at EU level (Gas Coordination Group)

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2.2 Background of the new gas Regulation

. Lessons of the January 2009 gas crisis: »  A functioning internal market is crucial for security of supply

but issues of lack of infrastructures and cross-border bottlenecks need to be addressed,

»  Importance of reverse flows . N-1 rule – can be met through new infrastructures enhancing security of supply and diversification: »  interconnections, »  reverse flows, »  Underground gas storages and LNG, »  demand side measures . National Regulatory Authorities shall take into account the costs

for investment into security of gas supply

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. Risk assessment based on: »  Infrastructure standard N-1 »  Two supply standards for protected customers; . Transparent and common level of preparedness: »  Preventive Action Plans to address risks identified, »  Emergency Plans with 3 crisis levels; . Consultation between the Commission and

Competent Authorities for the set-up of the plans; . Plans to be published and notified to the Commission; . Involvement of all stakeholders; . Consultation with neighbours could lead to joint plans

2.2 Key features of the new Regulation

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3 The European Energy Programme for Recovery . A response to the economic crisis and to security of

energy supply concerns »  European Economic Recovery Plan proposed by the

Commission in November 2008; endorsed by European Council in December 2008

»  European Energy Programme for Recovery proposed by Commission in January 2009; adopted by EP and the Council on 13 July 2009; in force 1 August 2009 . EEPR Financial envelope of almost € 4 billion

»  € 2,365 million: gas & electricity infrastructure projects, »  € 565 million: offshore wind energy projects, »  € 1,050 million: CCS projects

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3 EEPR – gas and electricity projects

. 46 projects consisting of 87 actions:

»  19 gas projects 1,4 billion € »  14 reverse flow projects in 9 countries 80 million € »  13 electricity projects Almost 1 billion €

. Total EU contribution 2,3 billion €, leveraging 22 billion € of total investments through companies’ own resources, EIB, EBRD, other banks,…

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4 Future developments

. Implementation Report on the Trans-European Energy Network (TEN-E) instrument, April 2010; . Communication on energy infrastructure development for the 2020/2030 horizon; . Legislative proposal for a new EU Energy Security and Infrastructure Instrument by end 2010: » policy part - revision of TEN-E Guidelines, »  financial part - revision of energy part of TEN

Financial Regulation

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5 Conclusions . In 2009 the gas market saw some revolutionary events:

»  January 2009 gas supply crisis, »  reduced demand due to the financial crisis, »  more and more unconventional gas « game changer », »  more LNG making gas a more global commodity »  new indexation clauses in LT contract referring to spot market, . Gas will be increasingly important in our energy future: »  cleanest fossil fuel to achieve our climate change objectives, »  Relative abundant with new reserves (unconventional gas)

coming on stream . We need to: »  create an EU open competitive energy and gas market, the

best garantee for security of supply, »  stimulate the construction of the necessary infrastructures, »  adopt tools to ensure security of gas supply, »  foster our relations with our major energy suppliers,

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Thank you for your attention

http://ec.europa.eu/energy/