Events in Arab world confirm EU's efforts for greater diversification of energy deliveries

Azerbaijan, Baku, March 1 /Trend, E.Tariverdiyeva/
The present turbulence in North Africa is certainly a reminder to which extent political and socio-economic stability is a pre-condition for the EU's supply security, said Frank Umbach,
Senior Associate and Head of the Programme "International Energy Security" at the Centre for European Security Strategies (CESS, GmbH), (Munich-Berlin) and Associate Director at the European Centre for Energy and Resource Security (EUCERS) at the King's College (London).
"Of course, the countries of the southern rim of the EU - Italy, Spain, France - are in particular dependent on North Africa's stability. So the recent events will certainly strengthen the calls for a greater diversification of their and the EU's oil and gas supplies," Umbach believes.
Gas supplies to Europe from Libya through the Greenstream pipeline stopped because of riots in Libya. In view of the unstable political situation in Libya, oil and gas companies began to curtail their operations in the country and evacuate workers. This led to a jump in oil prices, which exceeded $110 per barrel. About 70 percent of Libya's all energy exports account for Italy, Germany, Spain and France.
The situation in Libya worsened after a coup in Egypt, when President Hosni Mubarak resigned. Riots began in Libya on Feb. 15 that covered major cities in the east such as Benghazi and Al-Bayda. Feb. 20 anti-government demonstrations reached Tripoli.
According to the expert, in many ways it confirms the EU's efforts for a greater diversification. The strategy to diversify oil and gas imports as much as possible has been confirmed and may even play a greater role in the future, Umbach believes.
"Thus the current events prove the need for the "second corridor" and the Nabucco pipeline that offers not just gas imports from Azerbaijan and hopefully Turkmenistan, but also from Iraq and in the future also Iran (having the second largest gas reserves in the world)," he said.
Nabucco gas pipeline project worth 7.9 billion euros will transport gas from the Caspian region and the Middle East to the EU. The maximum capacity of the pipeline with 3,300 km length is 31 billion cubic meters. The main suppliers of gas for the project are considered Azerbaijan, Iraq, Turkmenistan. Construction is scheduled for 2012 and first deliveries are expected in 2015.
According to the expert, the overall diversification strategy begins always with the entire energy mix (as broad as possible) and not just with the imports of oil and gas supplies. Furthermore, the best energy strategy remains the enhance energy efficiency and conservation, Umbach said.
"I don't think that the lesson is to move from one unstable or problematic oil and gas supplier to the next one, he said. Russia will of course always been the main energy partner of the EU. But we also need to care of not becoming too dependent - like in the gas sector, when Russia could supply more than 60% of our gas imports if the EU and its member states are not taking care of a greater diversification."
The unstable situation of the Arab world has rather confirmed the EU's energy security strategies, the expert said, but it will not lead - as Russia hopes - to even a greater dependence on Russia, though it appears more stable at present than North Africa.
According to Umbach, furthermore, giving the present de-linkage of the gas from the oil prices, the EU's efforts to decrease its overall gas consumption and imports (which will decrease in contrast to previous forecasts in 2004/5 - to which extent, however, is open for debate), the renaissance of nuclear power in Europe, the modernization of clean coal plants, the prospects for unconventional gas in Europe (even when only a fraction in Europe and other parts of the world is becoming available for the market) and the expansion of cheaper LNG and higher gas imports from Norway in the mid-term perspective have fundamentally changed the prospects of the European gas market.
"I can't see a European gas market for another 63 bcm pipeline in a shrinking European and a cheaper gas market which will cost three times of the Nabucco pipeline - at least not until 2020," he said.
South Stream project is regarded as a new gas supply route from Russia to Europe. It is implemented by Italy's ENI and Russian Gazprom, which signed an agreement to build an offshore gas pipeline on June 23, 2007.
It is planned that the offshore section of South Stream will run under the Black Sea from the Russian (Beregovaya compressor station) to the Bulgarian coast. The capacity of the pipeline should reach 63 billion cubic meters of gas per year. Total investments in the project are estimated at 25 billion euros.
According to the expert, Russia doesn't have the gas resources available for South Stream (with the exception of using gas from the existing gas pipelines through Ukraine).
Feeding South Stream with gas from Yamal or other extremely expensive new gas fields is too expensive for the time being (at least until 2020) when much cheaper alternative gas sources are available, the expert believes.

"But the unstable situation reminds us at a real crucial vulnerability of Europe and the entire world: the remaining oil resources may last just for another 40 years. The era of cheap oil is already over at a time when the entire worldwide transport sector is still dependent on just one energy source: oil," Umbach believes.

Thus, according to the expert, it needs to redouble global R&D efforts for alternative energy-driven cars and to make the motors much more efficient and energy conserving.

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