WE CONSIDER TRANS-ASPIAN PIPELINE DESIGN AN IMPORTANT ISSUE - ANDRIS PIEBALGS

 

Caspian Energy (CE): What are the core aspects of building up the EU strategy on energy security? Is it planned to form a unified energy system of the EU? 

 

Andris Piebalgs, the EU Energy Commissioner: Ensuring a secure supply of energy to our citizens and industry is one of the pillars of the European Union's energy policy. On 10 January 2007, the Commission adopted the Communication "An Energy Policy for Europe" which proposes a number of initiatives to pursue our energy policy objectives.

The Energy Policy for Europe underlines that there is no single solution - instead, a variety of different initiatives should be pursued. They include increased energy efficiency, promotion of renewable energy sources, the diversification of energy supplies, routes and suppliers, proper functioning of the internal market and internal solidarity mechanisms to cope with possible supply disruptions. The importance of strengthening our energy dialogues with all our key energy suppliers and transit countries is also emphasized. To this end the European Union and its Member States must pursue the objective of strengthening our energy dialogues with a "common voice" forging effective partnership with our major energy suppliers.

 

CE: What policy will the EU follow in the Caspian region? What energy projects will be assigned high priority? What documents are due to be prepared after signing the MoU with Azerbaijan? What are main aspects of future cooperation with the Caspian states? Were these matters discussed during the meeting with President of Azerbaijan Ilham Aliyev in Davos (January 26)?

 

Andris Piebalgs: The potential of the Caspian region for EU energy security of supply is of paramount strategic importance. More intense dialogue and relations with Central Asian countries are identified as key priorities for EU External Energy policy in the Energy Package issued in January 2007. At the same time countries in the region are also interested in securing energy supplies in a stable market environment and attracting investments. 

At bilateral level, we have several instruments. The European Neighborhood Policy (ENP) takes fully into account the vital role that the EU's neighbors play in the EU's energy security either as supplier or transit countries. This has been fleshed out in the major energy cooperation sections of the ENP Action Plans. We also aim to deepen the Energy Community Treaty, gradually incorporating other neighboring countries. Political dialogue with Central Asian countries takes place within the Partnership and Co-operation Agreement structures. The appointment of an EU Special Representative for Central Asia in July 2005 has also provided the EU with important additional means of political dialogue.

The EU also aims to step up its bilateral energy dialogue. We recently signed a Memorandum of Understanding with Azerbaijan and with Kazakhstan. The EU and its partners are keen to move forward with implementation of the respective MOUs and we are actively engaged in discussions with both countries to this end.  

At regional level, we notably launched the so-called ‘Baku Initiative' with a Ministerial Conference in November 2004 between the EU and the Black Sea and Caspian Sea Littoral States and their neighbors. At the 2nd Ministerial in Astana on 29 November 2006, with the participation of Commissioner Piebalgs, the Presidency, Member States and the Governments of Armenia, Azerbaijan, Belarus, Georgia, Kazakhstan, Kyrgyzstan, Moldova, Tajikistan, Turkey, Ukraine, Uzbekistan, and the Russian Federation (as an observer), we had the opportunity to review the work carried out, and adopt a common strategic vision of our new energy cooperation in the form of an Energy Road Map. This Road Map should lead in the long-term to an EU-Black Sea-Caspian Sea common integrated energy market.  A follow-up meeting at technical level will take place this spring. A third Ministerial Conference will be held in 2008 to review the implementation of the Road Map.

In order to facilitate the transportation of Caspian energy resources to the European market, the Commission has provided political, technical, and financial support to new alternative export routes. Indeed, we support all projects enhancing diversification.

In this respect, the Nabucco pipeline will provide a new supply route for natural gas from the Caspian Regions to Central Europe via Turkey, Bulgaria, Romania and Austria. The Energy Package specifically proposes the appointment of a European Coordinator for this project. We also attach great priority to the development of a trans-Caspian pipeline which would be a cheap and quick gas transportation route to the EU.

 

CE: Do you agree that the problem with the Caspian legal status is a major obstacle that blocks development of new energy projects? Is Europe interested to solve this long-lasting problem?

 

Andris Piebalgs: We encourage countries to address the issue of the Caspian legal status, although we do not consider this as an obstacle to the development of all new energy projects. 

 

CE: What political and practical assistance is the European Union ready to offer so as to support the Trans-Caspian Gas Pipeline Project as Iran and Russia stand against it?

 

Andris Piebalgs: The Commission has on several occasions expressed its support for a trans-Caspian pipeline. Developing a new energy corridor from the Caspian basin through the Black Sea region to the EU was discussed at the end of 2006 between the President of the Commission and the Presidents of Azerbaijan and Kazakhstan; the Energy Policy for Europe also underlined the importance of facilitating the transport of Caspian energy resources to the EU.

In term of practical assistance, a trans-Caspian gas corridor is currently being analyzed by the Commission under its external technical assistance program via two studies:  the first deals with the environmental impact of a Trans-Caspian pipeline; models for the financial engineering to finance such a pipeline and an assessment of the existing gas infrastructure in Kazakhstan in order to ensure an efficient connection with the new pipeline. This study has started and will be finalized by mid 2007.

The aim of the second study is to identify potential actions for further developing gas transit interconnections in Caspian Sea Basin and Caucasus regions (Turkmenistan, Azerbaijani, Armenian and Georgian) - it should be completed by the end of this year.

 

CE: How probable is the establishment of a ‘gas OPEC' (Iran, Russia, and Algeria)? What consequences will the EU envisage in case it is formed?

 

Andris Piebalgs: My personal view is that the European Union should seek to further develop its cooperation with major energy suppliers both of gas and oil, including OPEC, the Gulf Cooperation Council, countries of the Caspian Basin and central Asia etc.

However, our relations should be based on mutual trust and effective cooperation.

 

CE: What do you expect from the Germany's chairmanship in the EU?

 

Andris Piebalgs: We expect the German Presidency to reach agreement on an ambitious and realistic Energy policy for Europe at the European Council in March.

This package of measures that the Commission has put forth proposes to improve the functioning of the internal market for gas and electricity by strengthening the independence of the national regulators, promoting efficient unbundling and improving the co-operation between transmission system operators. A functioning internal market is a pre-condition to ensure security of supply and to implement measures to promote sustainability. The Commission's package also includes a new approach to energy policy, based on clear targets (on renewables, biofuels and reduction of green house emissions), and emphasis on energy efficiency. It highlights the important role of nuclear energy and proposes the establishment of an EU high level group of national regulators in order to further develop a common understanding and the adoption of European rules in the field of nuclear safety.

Regarding international relations, there is growing consensus on the value of speaking with one voice and recognition of the need to enhance co-ordination on energy matters. This is something we must build on with the support of the German Presidency. The Commission will pursue the energy dialogue with third countries, in particular, with Russia, the United States, OPEC as well as in the framework of the Energy Community Treaty, under the German Presidency. The Commission will also ensure the implementation of the recently signed Memorandum of Understanding on energy cooperation with Azerbaijan and Kazakhstan. A Memorandum of Understanding with Algeria could also be signed during the German Presidency.

We count on the German Presidency and on the commitment of all Member States in the definition and subsequent implementation of this new energy policy for Europe.

 

CE: Recently the President of Russia said that Russia stood for a multi-polar world to make each small country feel protected from the pressure of world powers. What influence will this political statement exert on the energy policy of Russia? May this statement of the Russian leader be regarded as a probable hint at Russia's refusal from the monopoly in the energy field?

 

Andris Piebalgs: We agree that global affairs should be regulated on the basis of international rules and using international institutions wherever appropriate, including for energy. The EU thus welcomed the Russian ratification of the Kyoto Protocol, we look forward to Russia's accession to the WTO and we would welcome its ratification of the Energy Charter Treaty. These last two agreements both offer rules for trade and investment in energy.  We also believe that competitive energy markets, including for production, lead to the most efficient development of resources, given a suitable regulatory framework, i.e. for environmental requirements. Monopolies tend to give rise to complacency and inefficiency. In our view, Russia would gain from a more competitive energy sector, with a regulatory framework to ensure respect of environmental and other standards while, of course, maintaining sovereignty over resource depletion and fiscal policy.

 

CE: How would you evaluate the level of liberalization of the European market? Is liberalization feasible in case with gas?

 

Andris Piebalgs: Liberalization of the gas market is too slow but I am sure that we will achieve it. On the 10th of January, the Commission has published two important reports that analyze the level of liberalization of the gas and electricity market. These were the report on the prospects for the internal gas and electricity market that provides a general analysis of the problems that hinder the process of market liberalization. The final results of the energy sector inquiry, which focuses on the competition in the electricity and gas market, have also been published. Both documents concluded that there is still progress to be made in both markets. I therefore believe that strong measures are needed to enhance the process of liberalization, so that Europe can enjoy efficient and competitive energy. As the reports show, the progress in gas is even slower than the progress in electricity. More liquid wholesale markets have developed in electricity than in gas. This is due to the history of both sectors, and contrary to what one might expect at first glance, the sector that is originally the most internationally oriented, turns out to be the least capable of creating an integrated EU market. An important reason for this is the tradition of long-term commitments that the gas industry has with its upstream partners. These are currently a fundamental aspect of the gas supply to Europe, but as our reports have shown, they can easily be abused by the owners of the contracts to block access to markets. Adequate implementation of Third Party Access to infrastructure is a key aspect of liberalization, and vertically integrated companies can efficiently block it to prevent market integration. Market liberalization in gas has to start by ensuring access to the networks, so that gas companies can compete in obtaining customers. Efficient supply of customers is the basis of market liberalization, and access to markets is the key factor here. Once access to markets is established, I believe a momentum will be created that will further enhance liberalization. Access to markets will create market liquidity, which in turn will create faith in the market for price formation. Liberalization itself will therefore change the fundamentals of the gas business that are now seen by many as its main inhibitors.

 

CE: What is the reason for slow implementation of the Nabucco and Turkey-Greece-Italy projects? How is the construction of the fourth corridor of the EU proceeding? What countries will supply gas to the EU through this pipeline?

 

Andris Piebalgs: At the present time no significant delays have been reported to the Commission for the implementation of these pipelines of the 4th corridor. The in operation dates are end of 2010/2011 for TGI (this year for the Turkey-Greece section), and the same date for NABUCCO. So, it is premature for the time being to speak about slow implementation of these pipelines.

The study phase of the TGI offshore section (called Poseidon) is finished, the authorization phase is ongoing, and construction should start in 2008. The Nabucco is at the end of its study phase, its authorization phase will start this year, and the construction works should begin by the end of 2008.

While this is primarily a question for the consortium behind the Nabucco project, supplies of natural gas into this pipeline could come from a variety of sources in and around the Caspian basin (Azerbaijan, Kazakhstan, Turkmenistan and Iran if political conditions permit,  as well as potentially other Middle Eastern sources).

 

CE: Following the recommendations of the EU Green Paper, by 2020 the share of alternative sources in energy supply will grow to 50%. What practical steps will be taken in this direction?

 

Andris Piebalgs: The Communication "An Energy Policy for Europe" adopted on 10 January proposes initiatives to bring the share of renewable energy sources at 20% of our energy mix by 2020. Part of this will come from biofuels, and the Commission has proposed a further target of a minimum of 10% of our transport fuel consumption from biofuels. The bulk of it will come from growth in renewable sources of electricity and heating, according to Member State preferences. If the policy principles are endorsed by the European Council in March, the Commission will then prepare legislation that will incorporate them into the different national legislations. It will also deal with market access, standardization and certification issues, training, and the removal of unnecessary administrative and legal barriers. The Renewables Roadmap also lists the other activities planned including a review of support systems, work with public procurement, incorporating renewable energy policy into external policy and continuing to work with research and demonstration programs to foster innovation in this sector and achieve our long term goals.

 

Thank you for the interview