Thomas Lamnidis - Petroleumclub.ro

Thomas Lamnidis - Petroleumclub.ro

Thomas Lamnidis - Petroleumclub.ro

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How can the EU secure itsown Energy Supplyin an uncertainenvironment?rong>Thomasrong> rong>Lamnidisrong>Vice President, KLC Law Firm

Energy StrategyOne of the major political issues of the EUReasons:• high oil prices• problems connected with gas supplies(gas price connected with oil price)• low level of success on reduction ofCO2 emissions(lower than expectations/targets)

InfluenceThe above reasons-factorsinfluence the Energy Strategies of:EUandNeighbouring countries(Black Sea, Caucasus,South East Europe)

EU Level• The creation of an internal energymarket faces problems of aregulated-under under liberalization market• Additional resistance of “EU Energydeep State” (overregulation and/orhidden obstacles)

Where do problems exist?• These barriers do not exist only in nationalinternal markets• Also present in the interstate trade of energythusBarriers to real competitionare often hidden in the details ofmarket designs as well

“Supporter” of Energy Liberalization• EU Court of Justicein Case C-17/03 C“Vereniging voor Energie”Provides:1. authentic interpretation on EU Directivesconcerning energy liberalizationand interstate trade;2. interrelation between EU energy Directives withEuropean Community Treaties

Market & EU Authoritiessupport internal energy market• BP Director on EU Government Affairs:“Europe needs a stronger and more coordinatedpolicy framework to address growing concernsabout security of supply and climate change”• EU Commissioner for External Relations:“It It is in all our interest to maximize coordination inthe external area and speak with one voice…………inorder to get the best deal for all Europe”

EU Strategy for Security of Energy Supply• Directly connected with uncertain factors:• use of nuclear energy for electricity generation;• use of new technologies (CCS);• use and development of renewables;• midterm use of lignite, carbon and gasfor electricity generation;• development of a Eurasian Energy Market under acommon regulatory frameworkthus creating the“Energy Holly Alliance”

Regional Level• Despite uncertainty, assumption and risk,at Regional LevelCooperation and coherent strategies existexamples:• Energy Community Treaty• Energy Charter Treaty• INOGATE Umbrella Agreement

Regional Level CooperationBasis for:CommonEurasian Energy Market

Concept of Eurasian Energy Market• Energy Commissioner Mr. Andris Piebalgs:“The European Union and itsneighbours need to work togetherfor the extension of our energymarket beyond the EU”.

European Energy RegulatorObserving:1. Application of the EU Directivesconcerning liberalization;2. Interstate trade and transportation ofenergythus:Bringing the energy sector institutionally at thelevel of European tax payers expectations

Common Regulatory Framework• Basis for attraction and facilitation ofinvestments in the energy sector, by providing:1. Stability in the business environment;2. Clarity of rules and procedures;3. Conformity across EU member States;4. Basis for a commonly regulatedEurasian Energy Market

Basic Principles1. Energy is a global phenomenon;2. EU countries should appreciate their position inthe global energy market and act accordingly;3. Security demands a safeguard;4. Market intervention and over-regulation regulation hinderthe system;5. Parties in energy supply chain should invest inenergy efficiency & renewables;6. Invest in research, development andinnovation regarding energy supplies

EU Energy Regulator• Was foreseen in EU Green Paper onEnergy of March 2006Critics argue:1. Would introduce more regulation!2. Why do we need another regulator?3. Isn’t t that the definition of over-regulation?regulation?4. Are we not trying to avoid that?

Concept of Regulation• Regulation is all about controlling asituation or a market;• If Regulation should exist, then:“whattype of regulation”not “howmuch regulation”Matter of “quality”,, not “quantity”

EU Energy Regulator1. Guarantor of a common Europeanregulatory framework2. Offering equal opportunities to acommon EU liberalized and regulatedenergy marketThis could be extended to EUneighbouring countries(producing or transit countries)

EU Energy Regulator• Could play an important role during the processfor the choice of appropriate route/s to transportof energy to Europe• Impartial broker between contradictingeconomic interests of companies within EUand• Institutional negotiator at interstate level withtransit & producing countries of theneighbourhood EU area

Multiples Routes for Energy-Romania•Costanta– Omisalij OilPipeline;•Nabucco Gas Pipeline;•Underwater electricity highvoltage interconnection,Romania-Turkey

Schematic Presentation of an Interstate Energy Transportation SystemInstitutional Framework(Energy Charter Treaty / INOGATE Umbrella Agreement / Energy Community Treaty)State A(Weak credit)Intergovernmental AgreementState B(Weak credit)Settlement ofDisputes AnnexState C(Adequate credit)Production/Supply SharingAgreementSupply(market)GuaranteeA.B stateenterpriseIndemnityGuaranteeA, BHost Government AgreementTransit AgreementsJoint VentureCommon Project Manager &Common OperatorLoanProject LendersGuarantee Production / Supply sharing A &Transit Agreement A, B, COfftakers(market)Offtakers(weak stateenterprises)IndemnityGuaranteeCIFI’s (e.g. World Bank, EBRD, etc), Guarantors (e.g. Sace, Hermes,Exim Banks, AIG, etc.) and / or Guarantee Trust FundInternational borderInternational border

Schematic Presentation of the Nabucco Gas PipelineInstitutional FrameworkEnergy Charter Treaty / Energy Community Treaty / INOGATE Umbrella AgreementIntergovernmental AgreementSettlement ofDisputes AnnexTURKEYBULGARIAROMANIAHUNGARYAUSTRIAProduction/Supply SharingAgreementSupply(market)Host Government AgreementTransit AgreementsDevelopment Company(Common Project Manager &Common Operator)Key OfftakerGuaranteestateenterpriseIndemnityGuaranteeLoanProject LendersGuarantee Production / Supply sharing &Transit AgreementsRegionalOfftakersIndemnityGuaranteeIFI’s (e.g. World Bank, EBRD, etc), Guarantors (e.g. Sace, Hermes,Exim Banks, AIG, etc.) and / or Guarantee Trust FundInternational borderInternational border

Schematic Presentation of Romania-Turkey Electricity InterconnectionInstitutional FrameworkEnergy Community TreatyIntergovernmental AgreementSettlement ofDisputes AnnexROMANIATURKEYGenerationCapacitiesHost Government Agreement-HGADSOTurkeyTSORomaniaDevelopment Company(Common Project Manager &Common Operator)TSOTurkeyGenerationCapacitiesLoanEligibleCustomersSupplyCompaniesIndemnityGuaranteeProject LendersIndemnityGuaranteeIFI’s (e.g. World Bank, EBRD, etc), Guarantors (e.g. Sace, Hermes,Exim Banks, AIG, etc.) and / or Guarantee Trust FundInternational Waters

Time to reconsider EU Energy Regulator?• Mr. Xavier Solana:“the internal (within EU) energycompetition could decrease the EUability to promote effectively theobjectives of its external policy....”

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