Oil & Gas für Jedermann 11-12 Oktober 2007 Salzburg The EU energy policy: implications for the oil sector Cristobal Burgos-Alonso Energy Adviser, DG TREN, European Commission Directorate General for Energy and Transport 1
Overview of the Presentation o The objectives of the Energy Policy for Europe and action plan taking an integrate view of energy policy and climate change o Facts on the energy and oil market at the EU and world level o Commission policy initiatives related to the oil sector Directorate General for Energy and Transport 2
Energy Package: Integrating energy & environment Energy Policy for Europe (Strategic Energy Review) Limiting Global Climate Change to 2 C STRATEGIC OBJECTIVE A unilateral EU independent commitment of at least 20% GHG emission reduction by 2020, compared to 1990 levels Directorate General for Energy and Transport 3
THE THREE CHALLENGES Sustainable Development KYOTO Renewable energy Energy efficiency Nuclear Research and innovation Emission trading Competitiveness LISBON FULLY BALANCED INTEGRATED AND MUTUALLY REINFORCED Internal Market Interconnections (Trans-European networks) European electricity and gas network Research and innovation Clean coal Carbon sequestration Alternative fuels Energy efficiency Nuclear Security of supply MOSCOW International Dialogue European stock management (oil/gas) Refining capacity and energy storage Diversification Directorate General for Energy and Transport 4 4
How much Oil Needs the World? World Primary Energy Demand 18 000 Other renewables 16 000 14 000 12 000 Nuclear Biomass Gas 10 000 Mtoe 8 000 Coal 6 000 4 000 2 000 Oil 0 1970 1980 1990 2000 2010 2020 2030 Source:IEA Directorate General for Energy and Transport 5
What does this Mean for Europe? EU-27 Total Primary Energy Supply (2004) Source:DG TREN, Eurostat Directorate General for Energy and Transport 6
EU-27 Energy consumption by fuel and carbon and energy intensity (Primes 2007) Graph 1: EU-27: Energy consumption by fuel and carbon and energy intensity mtoe 2000 1800 Carbon and Energy intensity 1990=100 100 renewables 1600 1400 1200 80 60 nuclear natural gas 1000 oil 800 600 40 solids 400 200 0 1990 2000 2010 2020 2030 20 0 carbon intensity energy intensity Directorate General for Energy and Transport 7
How much Energy we Need from the Outside? EU-27 Development of Import Dependence up to 2030 (Baseline Scenario) Source:European Commission DG TREN, PRIMES Directorate General for Energy and Transport 8
Oil Export Flows through Major Strategic Maritime Channels Source: IEA World Energy Outlook 2005 Directorate General for Energy and Transport 9
Directorate General for Energy and Transport 10
World Primary Oil Demand by Region 120 100 80 mb/d 60 40 20 0 2004 2010 2020 2030 OECD Transition economies Developing countries OECD/IEA Directorate General for Energy and Transport 11
Share of transport in global oil demand and share of oil in transport energy demand 100 90 80 70 per cent 60 50 40 30 20 10 0 1971 1980 1990 2002 2010 2020 2030 Share of transport in global oil demand Share of oil in global transport demand OECD/IEA Directorate General for Energy and Transport 12
SUSTAINABLE DEVELOPMENT TRENDS IN CO2 EMISSIONS up to 2030 Mt CO2 relative to 1990 (Baseline) 600 500 400 300 200 100 0-100 -200 2000/1990 2010/1990 2020/1990 2030/1990 transport industry electricity/steam other total CO2 Directorate General for Energy and Transport 13
Alternatives policies EU CO2 emmissions under different scenarios 1990=100 Directorate General for Energy and Transport 14
EU-27: Total consumption of oil and gas: Baseline and Scenarios: (Mtoe) 800 700 600 500 400 300 200 oil: baseline oil: high RES and efficiency oil: soaring oil and gas prices gas: baseline gas: high RES and efficiency gas: soaring oil and gas prices 1990 2000 2010 2020 2030 Directorate General for Energy and Transport 15
EU-27: Net oil imports: Baseline and Scenarios: 1990 =100 135 130 125 baseline 120 115 high RES and efficiency 110 105 100 soaring oil and gas prices 95 1990 2000 2010 2020 2030 Directorate General for Energy and Transport 16
Refining issues Net European Trade flows (Million tons) Directorate General for Energy and Transport 17
Refining issues: Implications for Downstream input flexibility Heavier, more sour crude Non-conventional feedstocks / CTL, GTL, etc. output flexibility => address current dependency on: US gasoline market External middle-distillates suppliers Directorate General for Energy and Transport 18
Oil transport issues Oil imports to Europe are transported largely (90%) by tanker. Land-based pipelines are important in oil imports from Russia, now the main source for Europe. However, current developments, notably in relation to the Druzhba pipeline, suggest that Russia may use maritime transport, notably through the Baltic and Black Seas, to an increasing degree in the future. Directorate General for Energy and Transport 19
Pipeline transport The relative price of shipping versus pipeline transportation of oil and gas could be influenced by the application of carbon emissions pricing. Shipping is a major and growing source of CO2 emissions in the EU Whatever action to reduce the emissions from the sector is finally decided, it will presumably translate into higher costs. The impact of higher costs on maritime v. pipeline transport of energy remains to be seen. Directorate General for Energy and Transport 20
Maritime transport Maritime transport of energy through European waters, destined for other markets, notably North America, is also likely to grow dramatically, reflecting global oil and gas market developments. The growing regional mismatch worldwide between demand and production will result in a major expansion of international trade in oil and gas over the next decades. Interregional trade in oil is expected to increase by two-thirds by 2030 Directorate General for Energy and Transport 21
EU policy initiatives: an integrated approach Fuel use efficiency Fuel diversification for transport Diversification of import sources and routes Simplification of compulsory stocks legislation Market transparency and information Energy dialogues with producers and consumers countries Research and development Maritime issues TEN-E ETS:Refinery emissions caps Directorate General for Energy and Transport 22
EU policy iniciatives Fuel efficiency Objective: improve energy efficiency by 20% in 2020. All sectors to contribute Improvement of vehicle efficiency and freight infrastructure Fuels Directive revision: reducing by 1% p.a. the life-cycle emissions of liquid fuels for road transport Driver behaviour Directorate General for Energy and Transport 23
EU policy iniciatives Fuel Diversification Binding overall 20% RES target by 2020 and a 10% minimum binding target for biofuels. Member States are in the process of setting national targets and action plans on Biofuels The Commission will propose a revision of the Biofuels Directive before the end of this year Directorate General for Energy and Transport 24
World biofuel demand (Millions tons) Directorate General for Energy and Transport 25
EU policy iniciatives Diversification of import routes and sources Directorate General for Energy and Transport 26
EU Policy Iniciatives To review the Emergency Stocks system Higher Risks to Energy Security o o o o Global demand from outside the OECD is growing strongly, making import dependency in EU and OECD countries more risky High geopolitical risks and low spare capacity Middle East supplies expected to rise with higher vulnerability of chokepoints and pipelines Increasing dependency on oil in the transportation sector is difficult to reduce Directorate General for Energy and Transport 27
EU policy iniciatives Energy dialogues and international iniciatives Producer/Consumer dialogue: In a context of tight markets and increasing resource nationalism constructive dialogue is important EU-OPEC EU-Russia EU-Norway EU-GCC IEF Consumer/Consumer dialogue Climate change and energy security are global problems US India China Others: MED, Baku iniciative, ENP countries International iniciatives: G8, CCS, Hydrogen, Gas flaring, etc Directorate General for Energy and Transport 28
Research and development CCS Carbon Capture and Storage (CCS) technology is still emerging, a lot of work is still necessary to demonstrate its safety, public acceptability and economic feasibility. An enabling regulatory framework for CCS is being developed. CCS may well be an essential element in allowing continued power generation in Europe from fossil fuels in a climate-compatible way during the next decades of transition to a sustainable energy future. Research, development and demonstration of CCS technologies is being supported through the 7th Framework Programme. If CCS does come into widespread use, the location of future coal- and gas-fired power plants (or other fossil fuel conversion processes, eg refineries) may be concentrated in coastal areas adjacent to suitable geological storage sites under seabed. Directorate General for Energy and Transport 29
Research and development E/P innovation Production will involve the complex technologies and methods necessary for the exploitation of reservoirs in decline. Research on new extraction technologies including CO2 injections into producing oil and gas fields to enhance recovery rates should help. Improved technologies to find and produce oil and gas as efficiently as possible, with a minimum of discharges and emissions, are crucial. As exploration and production move into deeper waters, technological innovations will be needed Directorate General for Energy and Transport 30
EU policy iniciatives Research and Sustainable Fossil Fuels STRATEGIC PLAN by end 2007 Promotion of technologies to support EU Energy policy and the low-carbon energy economy Sustainable fossil fuels: : to make plants CCS ready by 2020, Second generation biofuels, hydrogen fuel cells Energy efficient transports Improvement of the legal framework (CCS in ETS) and public acceptance Directorate General for Energy and Transport 31
EU policy iniciatives: Energy and the Sea The maritime areas around Europe are useful for energy production (offshore oil and gas); for carbon free energy generation (offshore renewables); for promoting diversification of transport routes and methods through maritime transport; for contributing through present and future submarine pipeline networks to building up the interconnections needed for the energy internal market; and for the use of the seabed for future carbon sequestration and capture. An integrated and long term maritime policy will contribute decisively to a stable regime on the uses of Europe's oceans and seas. It will therefore allow for the full exploitation of the energy potential which lies on the vast maritime areas of the EU Member States, for the benefit of energy sustainability and for its security of supply. Directorate General for Energy and Transport 32
EU policy initiative: TEN-E revision Safety and environmental risks will inevitably rise as oil and LNG tanker traffic grows and energy infrastructures are built and operated. This underlines the importance of a strong legislative framework for safety and environmental risks related to tanker traffic and effective implementation of that framework. CCS technology will required CO2 transport and storage facilities These issues could be addressed in guidelines for a dedicated Trans-European Network for hydrocarbons, covering all infrastructure elements Directorate General for Energy and Transport 33
EU policy iniciatives Better monitoring and understanding the Market Demand/Supply => Price Discovery Mid-stream & bottlenecks Policy implementation: regulatory feedback Policy formulation: impact assessment EMOS and Observatory Directorate General for Energy and Transport 34
Conclusions Energy is essential for Europe to function, especially when the challenges of climate change, increasing import dependence and higher energy prices are faced by all EU members. Moreover the interdependence of EU Member States in energy, as in many other areas, is increasing. Europe needs to act together, to deliver sustainable, secure and competitive energy. With the implementation of the right policies and technological changes the oil sector will play an important role in achieving this goal. But the Agenda is not an easy one Directorate General for Energy and Transport 35