Baltic Rim Economies - Baltic Port List

Expert article 864 Baltic Rim Economies, 21.12.2011 Quarterly Review 5�2011
The Baltic Sea and the Arctic will increase their importance in the energy
security for the European Union
By Jorma Korhonen
Energy issues continue to dominate world headlines. The oil
market, the future of nuclear power, the rapidly changing gas
market, major increase in renewable energy production and
environmental concerns are shaping energy and climate
policies. In the Baltic Sea Region, at issue are how best to
maintain and develop reliable as well as economically and
environmentally sustainable energy systems.
With the Nord Stream gas pipeline, about one third (55
billion m3) of gas imports to EU come through the Baltic Sea.
The fast growing oil deliveries through Russian ports is
estimated to increase Russian oil transport through the Baltic
Sea to approximately 230 million tons by 2015. That
corresponds to almost half of current Russian oil production.
As maritime transport and petroleum shipping in particular,
continue their dramatic increase in the Baltic Sea, we must
confront the ensuing huge environmental risks.
Russia is the EU’s most important energy supplier, and
companies in the EU are Russia’s key foreign investors, the
Finnish company Fortum being a major example. Some have
expressed concern regarding how energy security might be
affected by dependence on energy from Russia. Russia’s
share is 36% of the EU’s gas imports, as well as 31% of oil
imports and 30% of coal imports. According to the latest World
Energy Outlook by the International Energy Agency, the EU
accounted for 61% of Russia’s fossil fuel exports in 2010.
However, the IEA predicts that in a longer term an increasing
share of Russian energy exports go eastward to Asia.
Instead of dependence, we should recognize our mutually
beneficial interdependence, which will grow as the EU’s own
oil and gas production diminishes. The EU and Russia are
closely interconnected through a dense energy network,
notably concerning oil and gas. Although both sides will
continue their diversification policy, this requires close
cooperation on existing and new infrastructure. This should be
done through a strong legal framework for cross-border
investments in joint projects. The EU and Russia need to
agree on a legally binding framework for energy trade and
investments. The WTO membership of Russia is welcome
news for over-all economic relations with the country.
Substantial energy-related provisions to be negotiated under a
new basic agreement between the EU and Russia would give
further predictability in the energy sector.
As anti-nuclear concern spreads in Euroope after the
Fukushima disaster, the gradual shutdown of all nuclear power
plants in Germany will have important effects on Europe’s
climate change ambitions as well as on the supply and price of
energy. This being said, the countries around the Baltic Sea
have ambitious plans to increase nuclear energy capacity.
Russia is building four reactors in the Leningrad region and
planning two reactors for Kaliningrad. Finland should have one
new reactor ready in 2013/2014 and two others by around
2020. Sweden has made a decision in principle to grant
permission to replace their 10 reactors with new, and probably
higher capacity reactors. Lithuania is planning to replace the
recently closed Ignalina NPP with a new one to be built in
Visaginas. Poland has plans for at least two NPP’s.
Shale gas is a game-changer in the United States, and
may well prove to be the same in regions of north-west
Europe. Recent explorations of shale gas in Poland could
result in production by 2014, with estimated reserves lasting
Poland for 300 years. Poland, now a gas importer, would
become a gas exporter. With increased exports of liquefied
natural gas (LNG), the world is no longer dominated by
pipeline gas only.
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Recent oil and gas explorations in the Arctic, especially in
Norway, are very promising. The agreement of the delimitation
of the Barents Sea between Norway and Russia opens a vast
territory for further exploration. In addition, the known large
reserves in north-west Russia will increase the importance of
north-west Europe in the energy supply for the EU. Some
Arctic oil and gas resources might eventually be exported
through the Baltic Sea. According to the IEA report, Russia will
push gas output in the Barents Sea and Yamal Peninsula, at
least in the longer term, to help to compensate for expected
declines elsewhere in Western Siberia. Oil resources in the
same areas also look very promising.
The EU regional initiative Baltic Energy Market
Interconnection Plan (BEMIP) has already produced concrete
plans and projects to connect the electricity networks of the
three Baltic States to neighbouring EU countries. These
interconnections have been partially financed through the
European Energy Programmed for Recovery and new
financing methods are under active consideration. BEMIP is
also considering the merits of a joint LNG gas terminal in one
of the Baltic countries, as well as plans for the new NPP in
Visaginas in Lithuania, possibly as a joint project of the
Estonia, Latvia, Lithuania and Poland.
The establishment of these interconnections will
consolidate the infrastructure for the internal energy market of
the European Union in the Baltic Sea region. This is an
important step for further development of EU’s external energy
relations, enhancing the ability of the EU to “speak with one
voice” with external energy partners.
The EU and its member states have ambitious plans to
increase renewable energy. This means increased domestic
energy production, be it hydro, wind, wood, biogas or other
biofuels. Here as well, north-western Europe is well placed due
to its natural resources.
The production, transport and use of energy in north-west
Europe will increase considerably. In view of the EU’s growing
need for energy coupled with the decrease of indigenous
energy production elsewhere in the EU, the importance of
energy issues in the Baltic Sea Region are assured to remain
in tomorrow’s headlines.
Jorma Korhonen
Director-General
Department of External
Economic Relations
Ministry for Foreign Affairs
Finland
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