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Black Sea Energy and Economic Forum 2009
Speaker: Fabrizio Barbaso, Deputy Director General, DG TREN, European Commission
October 1, 2009
The critical role of the Black Sea Region in strengthening EU Energy Security (Prepared Remarks)
Introduction
It is a pleasure to be back in Romania and I am honoured to be with you today.
Allow me to express my gratitude to the Government of Romania and to the Atlantic Council for organising this very timely conference. As we witnessed in this morning’s sessions, there is considerable interest in the Black Sea region and this comes as no surprise. The Black Sea Region plays a critical role in strengthening EU energy security and today I would like to share with you some thoughts on (1) why the Black Sea region is critical to EU energy security and (2) what concrete steps are being taken to address energy security in the region to the benefit of the EU, its neighbours and partners.
I. Why is the Black Sea region important for EU Energy Security?
First, it is important to underline that energy security has been a core policy area since the EU’s birth. In his 1953 Nobel Lecture, George Marshall called on nations to learn from past events and find ways to avoid war and maintain peace. In Europe at this time, following the Schuman declaration of 1950 and learning from the lessons of the Second World War, plans were already taking off for a new kind of peaceful cooperation in Europe. This was the start of the European Coal and Steel Community, the forerunner of today’s European Union (EU).
In those days, coal meant energy. Coal was the primary fuel of the EU economy, fuelling homes, businesses, factories and transport. Millions of jobs depended on its extraction, processing and transportation, not to mention its consumption. For Europe, the link between security and energy had been clearly established.
The same question faces the world today: Is energy security a factor for peace, or does it aggravate conflict? In some parts of the world, access to energy is clearly an issue which exacerbates disputes. In some cases it may be a direct cause. For today’s EU, as in the 1950’s, energy security is, and must remain, a motor for peace.
The EU is the world’s second largest energy consumer and largest energy importer. 54% of all energy used in the EU is imported, 60% for gas and 84% for oil. Demand for imports is rising. In recent years, world energy demand outside Europe has risen faster than ever before. One of the EU’s greatest challenges is to ensure that growing energy dependence does not become a risk to wider economic or international security.
There is much talk about the EU’s dependence on energy imports. But, in fact, all of us, consuming, producing and transiting countries alike, are becoming more and more dependent on each other: security of supply is important for us, but other countries seek security of demand. This is the age of energy inter-dependence.
To tackle these risks, the EU’s response is clear. Our own energy security depends on building up cooperation, dialogue and negotiation with all stakeholders, based on mutual respect and trust. Within the EU, 27 Member States and almost 500 million citizens have come together into a single internal energy market, based on commonly agreed goals, political objectives and legislation. Closely related to this, is our approach to climate change, which we see as the other significant international threat to security. Finding solutions to climate change will also help improve security of energy supply.
An historical milestone was reached as of 1 January 2007 when the EU’s shores reached the Black Sea. As a result, the prosperity, stability, and security of our neighbours in the Black Sea region became an immediate concern to the EU.
Moreover, as pointed out in the Commission’s Communication on Black Sea Synergy (April 2007), the Black Sea region is a production and transmission area of strategic importance for EU energy supply security. It offers significant potential for energy supply diversification and it is an important component of the EU’s external energy strategy.
There are for example several technical options for additional gas exports from the Caspian area through the Black Sea region to the EU.
Also, additional quantities of crude oil will likely be imported into the EU through existing or new pipelines and/or via ship tankers. The congested Turkish straights will not be able to transit additional oil production, therefore new infrastructure will need to be considered, particularly as increased Caspian oil production is expected in the years to come (notably from Kashagan oil field – Kazakhstan).
This situation raises concerns both in terms of security of supply, but also with regards to the environmental threat of possible tanker accidents in our seas.
Against this background, allow me to outline some of the concrete steps we are taking to address energy security in the Black Sea region.
II. What EU actions are being taken to address energy security in the Black Sea region?
Internal EU Energy Legislation
A fully functioning, true, internal EU energy market is key to fostering more secure and sustainable energy for Europe. Our so-called third package of internal energy legislation will make it easier for us to avoid energy crises and deal with disruptions more effectively. It will help create the necessary economic signals to trigger investment by separating the interests of producers from the interests of network operators and it will increase transparency and access to market-related information: demand, network capacity and supply.
The gas crisis in January 2009 between Ukraine and Russia was a painful reminder of the strategic importance of energy security to Europe. The crisis forced European citizens to suffer from the winter cold, and negatively impacted on our industrial output. This came as a real shock for many Europeans. The 27 EU Heads of State meeting in the European Council in March 2009 underscored the urgency of clear guarantees from suppliers and transit countries that suppliers will not be interrupted. They also vigorously stressed once more the importance of diversifying sources, fuels and routes of energy supply.
In fact, this crisis confirmed beyond any doubt the merits of the Commission’s Second Strategic Energy Review adopted at the end of 2008. It specifically focused on energy security and proposed a five point Energy Security and Solidarity Action Plan. It calls for an improved crisis and prevention response mechanism, a new impetus on energy efficiency, a better use of EU indigenous resources, as well as a greater focus on energy in the EU’s external relations.
In this context, allow me to highlight in particular the Commission’s adoption over this summer of a proposed new Regulation to improve the security of gas supplies in the framework of the internal gas market. It calls for Member States to be fully prepared in case of supply disruption, through clear and effective preventive and emergency plans involving all stakeholders and incorporating fully the EU dimension of any significant disruption. Regional cooperation and solidarity are at the heart of our proposal. The Plans will be based on appropriate risk assessments. I fully expect that this Regulation will be given high priority by the Council and the European Parliament in the months to come in order to ensure that the EU is better prepared to prevent another gas crisis.
Energy Infrastructure and the Southern Corridor
Of course, promoting infrastructure is essential to the EU’s energy needs. Indeed, the EU Energy Security and Solidarity Action Plan considers that a number of infrastructure developments should be considered as energy security priorities, amongst which is the development of a southern gas corridor to bring energy resources from the Caspian, through the Middle East and Turkey, via the Black Sea region to the EU. Several projects make up the southern corridor, including Nabucco, the Interconnector between Turkey, Greece and Italy (ITGI) and White Stream. The priority of the southern corridor has also been recognised by the European Economic Recovery Plan, under which 4 billion Euros have been reserved for energy projects.
The success of the EU’s approach has recently been demonstrated by the conclusion of an intergovernmental agreement between Turkey, Bulgaria, Romania, Hungary and Austria to facilitate the building of the Nabucco pipeline. We were delighted to have witnessed this historic event just two months following the Southern Corridor Summit in Prague. It is the first concrete project in the EU’s vision of a new Southern energy corridor and other projects in the Southern Corridor may benefit from this vision and from the recent agreement.
Moreover, all countries involved in the Southern Corridor, whether producer, transit country or consumer, will benefit from greater diversification and security in their energy markets and economies.
For the countries of the Caspian Basin and Central Asia, as well as those of Mashreq and Middle East, the realization of this corridor would enable secure and long term access to one of the world’s largest, most integrated and financially attractive energy markets.
For the countries of the southern Caucasus and the Black Sea region, the realization of this corridor would offer them the possibility of additional energy supplies to new markets as well as a long term source of gas transmission revenue.
And for the EU, the Southern Corridor offers geographically new sources of energy and the potential to enhance commercial and economic relations with the countries of the Black Sea and Caspian regions, as well as Central Asia.
The Commission will continue to strongly support the development of the southern corridor. To this end, we are actively developing a mechanism to provide producers in the Caspian region a secure and stable environment for export of energy sources to the EU. As foreseen in the Second Strategic Energy Review, the feasibility of a mechanism for the purchase of Caspian gas ("Caspian Development Corporation") is being explored in collaboration with the European Investment bank, the European Bank for Reconstruction and Development, and the World Bank.
Enhanced EU energy Co-operation with the countries in the Black Sea Basin
We also benefit from a variety of existing and new instruments to enhance energy relations with Black Sea countries at the regional and bilateral level.
Black Sea countries such as Ukraine and Georgia are prime beneficiaries of the Eastern Partnership, as are the Caspian neighbours: Azerbaijan and Armenia. This will seek to accelerate political association and economic co-operation between the EU and partner countries. It also establishes an energy security platform which among other things, will focus on energy support and security mechanisms.
The Energy Community is a valuable tool which foresees the implementation of the contracting Parties of most of the EU legislation in the energy field. This helps to create a stable regulatory and market framework and provides a strategic legal framework for our energy supply lines.
Black Sea countries play a key role. Turkey and Ukraine are currently observers and if negotiations are successful will become full members. Georgia was accepted as an observer to the Energy Community in December 2007. Where appropriate, we will also consider the extension of the Energy Community to other countries.
Several Black Sea region countries also participate in the regional energy dialogue established under the Commission’s "Baku Initiative". This brings together the EU and 12 partner countries in the Black and Caspian Sea region with a view to facilitate the transp01iation of energy resources to the EU and supp01i the creation of regional energy markets, as well as to enhance co-operation in the area of energy efficiency and renewables.
I should note that helping Black Sea countries to develop a clearer focus on these areas has an important overall benefit, not just in terms of releasing energy resources, but also as regards our climate change objectives.
EU-US Energy Co-operationLet me now say a few words about European Union cooperation with the United States on energy. Cooperation is good, is coherent, and is on-going. It has been, however, at times ad-hoc as the formal structures we have in place can be sometimes slow to react to rapidly changing circumstances.
We have decided to address this problem and we are, at this moment, working with our US friends on the creation of an EU-US Energy Council which will be the focal point for all our energy contacts. The Council will operate at the highest level.
It is our hope that the creation of the Council will be announced by the leaders during the EU-US summit to be held in Washington in November.
III. Conclusion
Ladies and Gentlemen, the EU is advancing with an ambitious energy agenda. Beyond any doubt, the Black Sea region plays a critical role in its success.
However, it is equally clear that energy security cannot be assured by national actions alone. Neither could the EU, despite its size and advance stage of energy integration, assure energy security by itself.
But the EU has shown that energy collaboration, dialogue and understanding, are a means to bring greater energy security not only to our own citizens, but to the wider world. As President Barroso declared at the signing of the Nabucco Agreement: Gas Pipes may be made of steel, but Nabucco can cement links between our people.
We have a mutual interest in ensuring a stable and predictable framework for the flow of energy, including through the modernisation of existing and the establishment of new energy infrastructures.
We will continue our work towards increased energy security and diversification. This should in turn bring wider political and economic benefits in terms of stability and progress to the Black Sea region as a whole.
Thank you for your kind attention.