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Energy Security: Potential for EU-GCC Cooperation the Red Sea and the Black Sea also are potentially highly problematic, but the “political equilibrium” between oil and environmental interests in those areas is very much more in favor of oil interests and action to limit tankers’ freedom of navigation accordingly less likely. tanker traffic in the Mediterranean A study of maritime traffic flows in the Mediterranean Sea was recently concluded by Lloyd’s Marine Intelligence Unit on behalf of REMPEC in the context of the SAFEMED project sponsored by the European Commission. 13 The study asserts that the most significant change in overall traffic patterns in the Mediterranean in the coming years will be the development of export routes for crude oil from the Caspian region, which is currently shipped predominantly via Black Sea ports through the Bosphorus. North European demand for energy is likely to see an increase in LNG transits via the Mediterranean from gas fields in the Arabian Gulf and the Far East. If planned LNG terminal developments actually take place, the density of LNG tanker deployment around the Italian coastline will increase significantly. Of the three main source regions discussed subsequently by the Euromed energy ministerial conferences (Athens 2003 and Rome 2003) to develop pipeline infrastructure so as to reduce maritime transport of hydrocarbons, the prospect for pipelines from North Africa or the Middle East appear remote, because there is no experience of major sub-sea oil transport pipelines (while these are well proven for gas), and overland pipelines would greatly increase the distance to be covered. However, in the case of crude oil from Russia and the Caspian across the Balkans, the logic is much more stringent. Nevertheless, as noted in the discussion of Turkish Straits’ bypasses, little progress towards implementation of any of these pipelines has taken place so far. Conclusion: Scenarios of Supply Interruption and Potential Remedies The general conclusion that can be drawn from this discussion is that there is no scenario of 2 interruption of maritime oil and gas transportation which may cause a severe physical shortage of oil, in general and specifically for Europe. Even the most problematic of cases – the attempted closure of the Strait of Hormuz – could not have the catastrophic consequences sometimes discussed: a good part of Gulf production could be evacuated from ports outside of Hormuz, and the strait is unlikely to be totally closed. Whatever disturbance to passage would not last more than two-three months. The shortage of crude oil created by such circumstances could be dealt with through draw-down of strategic stocks held by governments under the IEA program. It was also found that, in almost all cases, existing potential tensions could be easily allayed if responsible governments took the necessary steps to create alternatives, notably pipeline bypasses, or to curb illegal activities. It was argued that the main reason preventing the required investment in transportation alternatives is the lack of a well-functioning market mechanism for burden sharing. Although excessive reliance on congested straits may cause losses to individual shippers because of increased waiting time, increased insurance rates or piracy acts, this does not translate in the willingness to participate in investment which should be carried out by third parties. In most cases, the temptation of free riding prevails, and no one underwrites the required investment. Where passage must be paid for, the resulting income stream supports investment to increase capacity and accommodate growing demand. Supply interruptions consequent to closure of major sea lanes may be addressed by the European Union directly and indirectly. Directly, the EU can more forcefully pursue projects aiming at reducing vulnerabilities, such as excessive passage of tankers through the Turkish Straits. Eventually, “congestion charges” may need to be imposed, not differently from what is done in the case of private cars in central London and several other major cities. Freedom of navigation and the right to free passage cannot be sacrosanct principles to be applied in all circumstances, even where resources are objectively scarce. Indirectly, the EU could have agreements with
partner countries aiming at facilitating investment in infrastructure that may reduce vulnerabilities and the danger of accidents and engage in promotion endnotes 1. 2. 3. 4. 5. 6. 7. 8. 9. Threats to Oil Supply Security of international compacts to enforce ever more stringent standards for oil, products and chemical tankers. International Energy Agency, “IEA Response System for Oil Supply Emergencies,” December 2008, 11. Financial Times, April 2008. “Network Oil Infrastructures - An Assessment of the Existing and Planned Oil Infrastructures within and towards the EU,” Commission Staff Working Document accompanying the Green Paper “Towards a Secure, Sustainable and Competitive European Energy,” COM(2008) 737. Caitlin Talmadge, “Closing Time: Assessing the Iranian Threat to the Strait of Hormuz,” International Security 33, no. 1 (Summer 2008): 82–117. Talmadge, ibid. US Congress, Joint Economic Committee, “The Strait of Hormuz and the Threat of an Oil Shock”, July 2007 available at http://www.house.gov/jec/studies/2007/Straight%20of%20Hormuz%20Study.pdf The pipeline has been operating at much less than its rated maximum capacity because most customers of Saudi Aramco prefer to lift from Ras Tanura in the Gulf rather than from Yanbu. Nevertheless, a study conducted for the Baker Institute of Public Policy (Ewell, Brito and Noer An Alternative Pipeline Strategy in the Persian Gulf, http://www.rice.edu/energy/publications/docs/TrendsinMiddleEast_ AlternativePipelineStrategy.pdf) concluded that “the throughput of the existing pipeline system can be significantly increased with the use of drag reduction technology. As many as 11 MBD could be moved through the combined Petroline-IPSA system for an investment of $600 million. Alternately, a noticeable increase in Petroline throughput can be obtained for as little as $100 million. All options require an additional annual cost of roughly $50 million to hold DRA (drag reduction agent) inventory, or additional investment to build DRA production capacity in Saudi Arabia. The additional cost of moving oil during a crisis by this route is less than $1 per barrel. This is clearly economically feasible in the event of a SoH (Strait of Hormuz) closure; the price of oil will rise more than $1 per barrel in this case, covering the additional costs. It is just as clearly not economically viable as a routine peacetime alternative: Yanbu exports are already economically unattractive (compared to Ras Tanura) for most Saudi customers, and adding DRAs would increase costs of oil at Yanbu even further.” This discussion is based on Sam Bateman, Joshua Ho and Mathew Mathai, “Shipping Patterns in the Malacca and Singapore Straits: An Assessment of the Risks to Different Types of Vessel,” Contemporary Southeast Asia 29, No. 2 (2007):309–32. Sam Bateman, Catherine Zara Raymond, Joshua Ho, Safety and Security in the Malacca and Singapore Straits — An Agenda for Action, Singapore: Institute of Defence and Strategic Studies, 2006. 10. http://www.icc-ccs.org/index.php?option=com_content&view=article&id=30&Itemid=12 11. The map is accessible at http://www.icc-ccs.org/index.php?option=com_fabrik&view=visualization&co ntroller=visualization.googlemap&Itemid=219 12. http://www.itopf.com/ 13. “Study of Maritime Traffic Flows in the Mediterranean Sea” Regional Marine Pollution Emergency Response Centre for the Mediterranean Sea (REMPEC), July 2008.
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Page 3: Contents Introduction 5 I. The Euro
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Page 77 and 78: now, China has preferred the LNG op
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Page 87 and 88: of unconventional gas, has already
Page 89 and 90: Geopolitical Issues of Europe’s F
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Page 93 and 94: SESSION V: Renewable Sources in EU-
Page 95 and 96: • technologies, overall technical
Page 97 and 98: Figure 2: Overview of Opportunities
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case. Figure 8 shows the developmen
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Overview of RES Characteristics and
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keep the RES surcharges for the ene
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in the electricity sector, particul
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References • • • • • •
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Energy Security: Potential for EU-G
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