Central Europe Energy Partners has co-organised the conference titled “Energy Security in the Baltic Sea Region” on 28th of March 2011 at Gdańsk, Poland.posted: 2011-04-08 16:12:44
Energy Security in the Baltic Sea Region
The Conference of Central Europe Energy Partners
Gdańsk, 28 March 2011
Dozens or event hundreds of new reactors within the next twenty years – this was the scenario forecast by politicians, economists, and, in particular, power engineering experts. In the light of decreasing deposits of oil and gas and currently expensive renewable power engineering and coal industry contaminating the natural environment, it is the nuclear power engineering that was to guarantee satisfaction of the growing demands and, what is significant, moderate prices. The contemporary security measures are certain enough to prevent recurrence of the Chernobyl disaster – such assurances could be heard. Subsequent generations of reactors were to be even cheaper and available to even less well-off countries. Those in favour of erection of nuclear power plants considered the sale of their development, as the small number of opponents could not oppose to this demand.
This situation used to prevail several months ago and even several weeks ago. The tragic earthquake in Japan and no less tragic tsunami and destruction of reactors and warehouses of worn fuel rods in Fukushima undermined the earlier calculations. They triggered the revival of discussions about safety, profitability and future of the power engineering sector. The events, which could not be controlled by humans, forced almost the entire world to think about how to forecast the unforeseeable and secure against it. The Conference of Central Europe Energy Partners in Gdańsk focused upon posing of questions and trying to determine the shape of power engineering security in the future and, in particular, in our part of Europe. Over 100 million of people inhabit this part of the old continent– emphasized Olechnowicz, a president of Grupa Lotos and Chairman of the Board of Directors of the CEEP in his speech opening the conference – how can we ensure the level of security enabling us to function normally even in emergency situations?
The world is unforeseeable
Within a short period of time two significant elements of the power engineering security were undermined. Its started in Tunisia with Egypt, Yemen and Libya following. Now it is turn for Syria and this will not probably be the end. North African and Near East countries are affected by a sort of tsunami sweeping another dictators ruling with absolute power for dozens of years. Europe did not accept the regime, however, it got used to some predictability and stabilisation. Turning a blind eye to the regime, which was not democratic in the least, was purchased by supplies of the Libyan gas to Italy and France, safe transport of oil and gas via the Suez Channel and a relatively thin stream of emigrants. And what now? The world is changing – said Günther Verheugen, a former EU commissioner for Enlargement of the European Union and for Enterprise and Industry - we do not know, how the situation will develop in Japan, North Africa and in the Near East and the economic crisis has not yet ended. The unpredictability of the Arab countries and changes undergoing in those countries was also referred to by other guest invited to the conference. Ian Brzeziński, a son of Zbigniew Brzeziński, and American counsellor for international affairs and a member of the Atlantic Council, referred also to Russia as one of the lest stable countries. He also emphasized the growing, despite of the crisis, demand for oil and gas in China and India. The shift of the economic axis of the world in the direction of the southern and eastern Asia and improvement of the level of life in those countries will be maintain oil prices on the high level. It will also be used by Russia for exerting its pressure upon the European Union.
Economics or politics?
The use of economic tools in politics was not discovered in the 20th century and even in the 21st century. The countries located in the Baltic Sea Region have been strongly dependent on supplies from one source and, as Mikhail Krutikhin, a Russian journalist and founder of RUSENERGY emphasized, Moscow or, all the more, such companies as Gazprom are not willing to resign from its dominant position. Ian Brzeziński did not doubt either that power engineering would become a political tool in the future. In his opinion, Nord Stream is a perfect example of this approach. The interest of Russian oil concerns in purchase of stocks of Grupa Lotos is not accidental either. Mikhail Krutikhin explained that tax rules would change in Russia. As a result of the changes, processing of oil will be transferred to other countries. Therefore, such companies as Rosnieft or Łukoil want to purchase oil refineries in the EU countries with the focus upon those with stable position in the fuel market.
Are we a part of the European Union?
At the beginning the purposes was to create a system guaranteeing peace – Günther Verheugen reminded of the genesis of the today’s European Union – in the 21st century we need something more. We need solidarity between nations and countries. The European solidarity have has been put to the test in the last years. The economic crisis caused that several largest countries of the European Union seemed to forget about existence of the community and focused upon supporting of their own companies despite the EU restrictions. During the CEEP conference held in Gdańsk, the former commissioner did not hide his concerns, all the more, that the European solidarity is costly. What we observe is nationalisation and putting national interests in the first place. This approach makes it difficult to accomplish the previously adopted aims such as climatic aims. Despite disturbing information from Japan, the present crisis will not be possible to overcome without nuclear power engineering. The renewable power engineering will not satisfy the growing demand in the EU countries. There is not point in erecting large wind turbine farms, when there are not common transmission networks connecting all EU countries. The European Union is not a community of equal countries. The size, richness and dynamics of development cause that imposition of the same obligations connected with realisation of the climatic package is wrong, as weaker countries will not bear the load. The former commissioner for Enlargement emphasized that it takes time and economic strengthening of the countries, which accessed the community in the last years. The European Commission has to accept the fact that the climatic aims will not be accomplished by raising of the power engineering effectiveness.
It was only recently that in Brussels they understood that actions are necessary an not only declarations on integration of the member countries. Poland, Lithuania, Latvia and Estonia are still outside the common power engineering and gas networks. In this case, the border of the European Union is the River Odra. Our country has six gas connections with other countries and only one gas connection on the western border. Similarly to the three Baltic member states, Poland is dependent considerably on supplies from Russia. This dependency on one supplier could be much experienced during the Ukrainian and Russian disputes concerning gas. The European Commission drew conclusions from the conflicts recurring on our eastern border every winter and in the nearest years several investments will be realised in order to include the above-mentioned countries in the European network of gas transmission – Mr Maciej Kaliński, a director of the Department of Oil and Gas in the Ministry of Economy, explained. There are 3 investment projects included in Baltic Energy Market Interconnection, which have a significant meaning: LNG regional terminal, Poland – Lithuania intersystem connection and a similar investment project connecting Finland and Estonia. Additionally, the European Commission allocated funds for preliminary works on the designs of several other investment projects, including, but, not limited, to, the gas pipeline [Baltic Pipe] connecting Denmark and Poland. According to Mikołaj Budzanowski, an Undersecretary of State in the Ministry of Treasury, by 2015 Poland, Lithuania, Latvia and Estonia will be connected to the common gas network. This will be possible owing to erection of inter-containers on the southern and western border in order to facilitate transmission of gas from the Czech Republic and Germany to the Polish gas network. Following this, we may talk about the proceeding integration of the EU member countries.
Brussels also provides funds for other aims, as gas and oil also have to be stored in special warehouses. Ian Brzeziński postulated that we should follow the model of the USA and collect strategic reserves of power energy raw materials in order to secure against crises. Poland has to become adjusted to the EU requirements and extends its warehouse spaces considerably. In the opinion the American expert, the salt caverns found in the Pomeranian region are perfectly suitable for storage of gas and oil.
Brussels will provide additional funds for extension of the warehouse spaces and construction of LNG terminal in Świnoujście. As Mikołaj Budzanowski emphasized, connection of Poland to the western European gas network and construction of LNG terminal will constitute realisation of one of the aims adopted by the European Commission, i.e. free selection of sources of supplies with power energy raw materials. Such investments are necessary, as power energy safety is as important as military safety, Ian Brzeziński said.
Russia is the main supplier of oil and gas to Poland. Our eastern neighbour has vast resources of power energy raw materials. However, it does not have the infrastructure to process the resources and its extraction equipment are rather old. The main transport routes to Germany lead through Poland as well as Belarus and Ukraine. The local resources of gas and oil are too small, so the question concerning stable supplies and feeling of safety in the case, when key raw materials for the power energy sector are held in one country, is justified. Professor Friedbert Pflüger, a deputy of CDU in Bundestag, heard numerous Polish and other concerns about the intention of the supplier and noticed that even in the peak period of the cold war, the USSR fulfilled contractual conditions and supplied gas to Germany. However, Mikail Krutikhin, a Russian expert, did not share this optimistic view. Power energy raw materials constitute the largest export product for Russia and, therefore, Russia will strive in many ways to maintain the strong or even dominant position in the supplies. Gazprom and other Russian companies of the power energy sector make all efforts in order to maintain their position in particular markets. It was not accidental that the gas tycoon employed Gerhard Schröder, a former chancellor of Germany. The construction of the pipeline ate the bottom of the Baltic Sea was not caused by economic prerequisites either, but a willingness of direct contact with the largest customer – emphasized Krutikhin during the conference. Nord Stream will allow Gazprom to become independent of the situation in Ukraine or Poland. Russian companies try, at any cost, to conclude bilateral agreements, as such agreements make it easier for them to negotiate favourable prices and solutions with a weaker partner. Therefore, both companies and authorities of Moscow oppose to unification of the EU market. The list of efforts, which were to prevent adoption of the 3rd climatic package was long and this is not the end, Krutikhin added. Władimir Putin bluffs by threatening the EU member states with signing of a large gas contract with China. It has been six years now and nothing happened. Europe is integrating, takes care of diversification, which Russia as noticed and is even scared.
The European Commission will lead to a situation, in which all members states will have a similar opportunity of choice of supplies and gas terminals, common network and own resources will ensure power energy safety, Günther Verheugen emphasized. However, is it enough to take care of security of supplies and transmission and not worry about it? The last several weeks proved that it is difficult to foresee everything. On the one hand, Japan shows that a natural disaster on the unprecedented scale may occur at any time. On the other hand, the uprisings in North Africa and Near East threaten the current supplies and suppliers. Muammar Kaddafi was opposed as a dictator breaking human rights in Libya, however, he guarantee supplies of gas to southern countries of Europe. It was not only Silvio Berlusconi, who fraternized with the Libyan leader. Undermining of authority of the royal family in the Saudi Arabia will cause at least considerable increase of oil prices. And what, if similar events occur in Qatar, Kuwait or even Iran? Ian Walker from Windsor Energy Group reminded that 2/3 of the world consumption of oil originates from this region. The region also abounds in gas deposits and Europe is and will for a long time be the main customer. However, in the expert’s opinion, gas will not be cheaper, as others buy even more and more. Recently Japan concluded a large gas contract. Arab countries also have to use other sources of energy and, therefore, among others, they want to erect nuclear power plants. This way they do not intend to hide their preparations for production of atom bombs, but their own oil and gas resources are not sufficient to satisfy all demands for power energy. It will not be long when China and India will become leaders among the largest customers. The number of cars growing considerably in those countries may shift the main transport routes of tankers, Ian Walker added.
Participants of the CEEP Conference of Energy Security in the Baltic Sea Region agreed on one point, namely, that it is impossible to foresee the guarantee of undisturbed supplies in the future. This will not release the EU members states from their obligation to search for solutions. The EU’s own deposits of oil and gas do not satisfy the existing demands and will not suffice for long. Until recently there was a dominant conviction that the nuclear energy will be able to satisfy the growing demand for electrical energy and it may even extend its presence in automobile industry. The dramatic situation in Fukushima, a Japanese nuclear power plant, forces us to consider construction of new nuclear power plants – the words said by Friedbert Pflüger, a German politician of the ruling party sounded especially ominously for the power energy sector – it will be difficult to maintain public support for such investments. The storage of used fuel is still an additional and unsolved problem. The investments commended during the last years even add to the hazards. One may not forget about terrorism and unforeseeable natural disasters. In the opinion of Professor Pflüger, the future of power energy sector will depend on renewable energy sources, however, this road leads through the gas bridge and close cooperation.
Solidarity and partnership
We will not switch to power energy based on renewable sources at once, however, we may change proportions and, instead of construction of another nuclear power plants, Europe should focus on gas –Friedbert Pflüger explained. When we refer to large supplies of gas in Europe, we look in the direction of Russia and are at once scared by its interruption of the supplies and dependency on one supplier only. According to the German expert, the common foreign policy of the European Union will exclude unpredictable behaviour of Russia. The diversification of supplies, own resources, common network and, first of all, one European partner communicating with Gazprom – these are strong arguments. With such strong points, even Nord Stream will help in switching of the European power energy to gas. There are even more strong points, as, starting from the time, when the USA became independent owing to extraction of rock gas, the price of LNG dropped considerably in the world markets. Besides, exploration of shale gas in several European countries, including, in Poland, may be successful. Gas is an excellent raw material for today and tomorrow, Friedbert Pflüger persuaded. Gas power stations are easier to erect than coal power stations and, especially nuclear power plants. They may be erected quicker, which will be significant for realisation of the conditions of the climatic package.
The resources of hard and brown coal in Europe make it the most certain and cheapest raw material for production of electrical energy. The problem involves the expensive and still undeveloped technologies of processing limiting emission of CO2 and undeveloped systems of capturing and storage of CO2. Günther Verheugen does not exclude coal. Poland, the Czech Republic or Germany have vast coal resources. The former commissioner thinks that basing of nearly entire power energy sector upon coal will make it difficult to switch to renewable energy sources in a short period of time. It is also difficult to resign from nuclear power energy, when we still fight effects of the economic crisis. However, other former commissioner of the European Commission does not have to be persuaded as to maintenance of the significant role of coal in electrical energy production. Pavel Telicka reminded of a recent tragedy in the Gulf of Mexico and emphasized that coal was an exceptionally safe source of energy. In the times of crisis we may not forget about competitiveness of energy generated from this fossil material.
Günther Verheugen, Friedbert Pflüger and Pavel Telicka differed in their evaluation of the future of the European power energy sector. However, they agreed that cooperation between countries, sectors and social organisations will be crucial for the power energy security. The common concerns for power energy security involves not only construction of a gas network, LNG terminals or common purchases in the future. Maciej Kaliski, a director of the Department of Oil and Gas in the Ministry of Economy mentioned benefits gained by Polish companies such as PGNiG or Grupa Lotos owing to opening of the Norwegian deposits of oil and gas to other countries. The Scandinavian country may not be a formal member of the European Union, but it understands the need of cooperation better than some long-standing members of the community. The established rules of granting of licenses for extractions will result in cooperation between various shareholders. Owing to this, the above-mentioned Polish companies will cooperate with the largest world concerns and learn about extraction technologies.
The economic crisis triggered responses, which do not have much to do with the European solidarity –Günther Verheugen noticed – the power energy security is so important for the entire Community that Brussels makes efforts in order to create common rules, networks and market. This is proved not only by additional funds for extension of connections between the members states, LNG terminals and warehouses designed for storage of reserves of oil and gas. We also strengthen the European security, said Marek Sokołowski, w Vice President of the Management Board of Grupa Lotos. Program 10+ makes it possible to use the supplied raw materials better. If necessary, it will also make it easier to process oil from other sources than those, which are presently used. The power energy security will increase the growing extraction, processing and make it possible to commence a power energy investment. When asked by reporters about assessment of Program 10+ and future of Grupa Lotos, Ian Brzeziński expressed his negative opinion on ideas to sell the company with such national significance to a concern from the country, in relation to which, one may not guarantee that it will not exert political influence. The sale of Grupa Lotos to Russian companies could affect future Polish and American undertaking relating, in particular, to the power energy sector –Brzeziński said – all the more that such modernisation would be possible owing to the American offset.
The economic crisis proved that national egoism appears in difficult situations ion some countries. The initiative of Central Europe Energy Partners is a response to the need of cooperation –Günther Verheugen, a former commissioner for Enlargement emphasized – in the European Commission they realise that this is not another lobbyist initiative, but an actual representation of the large market. We will only need to support politicians from that part of Europe and I believe that we will be able to find leaders willing to commit themselves to such partnership. CEEP has been conducting its activities for a year now. The organisation does not represent interests of individuals. We create a partnership, which will be heard in Brussels – Janusz Luks said – we have been to ten countries of the Central Europe and talked to companies and politicians. Their responses have been positive and we evoked the need of common thinking. The countries of our region differs from so-called old members states in their power energy balance, infrastructure and production. Therefore, we cannot impose the same obligations upon all countries, Günther Verheugen said. CEEP also makes up for the lost time in presentation of the condition of the power energy sector to the public opinion in the new EU members states. As early as in this year, it will publish two so-called White Books. One of them will include the opening balance, i.e. the condition of the power energy sector of the countries of the Central Europe. Janusz Luks also noticed that the year 2011 is exceptional. From January the EU has been presided by Hungary and in July Poland will take the rule. Additionally, Mr Jerzy Buzek is a President of the European Parliament and he perfectly understands the problems and challenges of power energy in our region. We have to make the most of this time.