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Energy Security: Potential for EU-GCC Cooperation support their decision-making process towards the definition of energy policies and strategies. In particular, the results of the project will be useful to achieve the appropriate energy mix regarding energy security of supply and sustainability requirements; to improve the internal energy market regulatory framework; to develop stable relations with energy exporting countries and external partners; and to optimize the synergies between member states to improve security of supply. Energy Security – Potential for EU-GCC Cooperation The present book has been prepared as an adhoc background document for the “Conference on Energy Security – Potential for EU-GCC Cooperation” organized in cooperation with the Bahrain Center for Strategic, International and Energy Studies. It is a collection and summary of those SECURE project results which have a specific relevance for EU-GCC cooperation. The first paper contains the highlights of the energy scenarios developed in the context of the project. Work for this paper was conducted primarily by LEPII-CNRS. This paper describes the set of world energy scenarios that have been developed under the SECURE research project in order to study the “Climate Policy and Energy Security Nexus” in a European perspective. It is based on the statement that it is impossible to examine the energy security issue without developing a full set of consistent hypotheses on the intensity of emission reduction policies in the different world regions. This is understandable as these policies, if they are sufficiently ambitious to have an impact on GHG emissions and on the climate, will also have a noticeable impact on the international energy markets. The paper examines the impacts of three main scenarios –- Muddling Through (low intensity climate policies), Europe Alone, and Global Regime -– on the world and European energy systems. The study confirms that the world energy future will be fully different in the two extreme cases and that the Global Regime helps to alleviate both the climate problem and the long-term sustainability problem of hydrocarbon production. The Europe Alone case does not solve the latter problem, but it makes Europe less vulnerable to the risks associated with future energy shocks. The second and third papers, which are primarily the responsibility of GRCF, are devoted to the security of oil supplies – an item of intense common interest for EU-GCC cooperation. The second paper focuses in particular on threats to oil supply security. It follows an analytical approach, distinguishing different types of threats rather than bundling all together in an undifferentiated scare scenario. The primary distinction is between geopolitical and military threats: the former are linked to political developments and the adoption or reform of policies affecting oil production and exports (resource nationalism, political instability). The latter are linked to the use of military force or violence on the part of either state or non-state actors. A third section of the paper deals with potential threats to oil transportation on the high seas. The paper argues that there is no easy and immediate connection between resource nationalism and/or political instability, and global supply of oil and gas. This is not because political developments are irrelevant for influencing oil and gas supplies, but because this influence is highly variable and unpredictable. Political instability and resource nationalism are shown to have rarely been associated with acute supply crises or shortfalls. Their effect is rather gradual and normally compensated by action in other parts of the system. Concerning threats subsequent to the use of military force, the paper argues that oil and gas installations appear to be much more resilient to armed conflict than is normally acknowledged. Interstate wars are a low-probability event; they are generally confined to two main belligerents and contained. In contrast, civil wars or violent action on the part of non-state actors are phenomena whose frequency has not diminished at the global level. Cases in which violent action on the part of non-state actors has inflicted significant damage to existing installations include the “insurgency” phase
in Iraq and the activities of MEND in Nigeria. If oil installations are in remote or inhabited locations, the cost-benefit balance of attacking oil installations is not very attractive for the non-state actor. However, it is very obvious that a government’s inability to overcome or reabsorb violent opposition discourages international oil company investment even if the violence does not affect the vicinity of oil and gas installations. Concerning threats to oil shipping, the paper argues that maritime logistics are unlikely to generate major crises, but require constant attention. Patrolling and surveillance of maritime traffic is essential, as is investment to reduce pressure on key choke points, such as the Strait of Hormuz. Investment to reduce traffic in enclosed seas is highly advisable. The third paper deals with the functioning of global oil markets and its impact on energy security. It is argued that Energy security is primarily a function of investment. Investment in a market economy is a function of the expected revenue stream, which in turn is a function of prices. A wellfunctioning market is therefore a key component of security. In this approach, the main obstacle to oil and gas security of supply is the growing volatility of prices and their fundamental unpredictability. Security itself is also dependent on prices, because customers feel secure if they can buy all the energy they need at prices that they can afford. The paper offers a number of policy indications to contain volatility within limits that will not prevent the formation of a prevailing view of the likely evolution of prices in the medium and long term, which is the prerequisite for sufficient investment. The fourth paper (whose primary responsibility has been with Ramboll with support from OME and GRCF) deals with security of gas supplies. Until recently, the Gulf has not been a main source of gas imports into Europe, but this situation is changing fast. Because the main dimension of European insecurity with respect to gas imports is the excessive dependence on a small number of historical suppliers, the emergence of an important new potential source of supplies, such as the Gulf and in particular Qatar, represents a boost to European security in itself. Introduction In addition, exports from the Gulf are in the form of LNG, which adds considerable flexibility to the management of the European gas grid, which has been plagued by insufficient interconnections. As LNG cargoes are easily redirected in case of some disturbance, all that is necessary is to make provision for sufficient regasification capacity distributed along the coasts of the European Union to acquire the possibility of serving all vulnerable customers in the event of an emergency. The last paper, whose responsibility lies with the Fraunhofer Institute and the Vienna University of Technology (Energy Economics Group), is about the potential for renewable sources of energy. The paper is based on the European experience so far and details the potential for greater reliance on renewable sources but also the cost and problems connected with it. As the GCC countries have manifested rapidly growing interest for developing renewable energy sources, notably solar and wind, we believe that this is an area in which fruitful dialogue and cooperation is possible. The appendix contains a list of proposed policy measures that the SECURE project offers to European politicians and decision makers for consideration with the objective of enhancing European energy security. The issues of energy security and climate change are unfortunately frequently framed in an adversarial fashion – as if the objective is solely or primarily to reduce dependence on “their” oil. We believe that this approach is profoundly wrong. It is clear in our minds that the world will continue to need growing volumes of oil and gas for the foreseeable decades, in conjunction with the rapidly increasing demand in the major emerging countries. Greater reliance on coal is problematic because of the impact on global warming, and carbon capture and sequestration for coal fired power plants is not making the progress that had been hoped for. As the CEO of Saudi Aramco, Khalid Al-Faleh, has said: “We will have to meet the world’s increased energy needs, and must do so in the most responsible manner. So how do we best address the challenge of ready access to affordable energy?
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Energy Security: Potential for EU-G
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SESSION IV: LNG and Gas Supplies to
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had a drastically different vision
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now, China has preferred the LNG op
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considered an issue. Though the bor
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70bcm/yr by 2020. Even if only a fr
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that Russia and China have started
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(Parliament) which favors the use o
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of unconventional gas, has already
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Geopolitical Issues of Europe’s F
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• • • • • • • • •
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SESSION V: Renewable Sources in EU-
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• technologies, overall technical
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Figure 2: Overview of Opportunities
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onshore (378 TWh/yr), large-scale h
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world. Hence, renewable energy supp
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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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