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GLOBAL & REGIONAL KEY ENERGY ISSUES:HOW TO FACE THEM. - Slav Slavov - WEC Regional Coordinator for Europe & Central Asia. Current Process Status: Driving Forces. Goals, targets &commitments as defined by: - Agenda 21;and PFIA21 - UN CSD, 9 th session, April 2001

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GLOBAL & REGIONALKEY ENERGY ISSUES:HOW TO FACE THEM

- Slav Slavov -

WEC Regional Coordinatorfor Europe & Central Asia


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Current Process Status: Driving Forces

  • Goals, targets &commitments as defined by:

    - Agenda 21;and PFIA21

    - UN CSD, 9th session, April 2001

    - Johannesburg Plan of Implementation (JPOI)

    - UNCSD-14 (April 2006): SG report on progress

    - Participation: Governments, industry, NGOs


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ENERGY: GLOBAL ISSUES

  • Access to energy for poverty alleviation

  • Integrating of energy for SD into national policies

  • Support efforts to improve functioning of markets

  • Encourage PPP, to give impetus to energy for SD goals

  • Strengthen the role of major groups in policy making

  • Promote increased R & D in varies technologies


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SUSTAINABILITY: THE REGIONAL DIMENSION

  • Regions face different priority challenges:

    For example:

    - Access to energy for poverty alleviation (poor countries)

    - Reducing CO2 emissions (developed countries only)

    - Internalisation of external costs (western Europe)

    - Technology transfer (developing countries)

  • Conclusion: (1) Developed countries-environment & security ;(2) developing countries- economy & social

    development.


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Key Energy Issues

  • Enhance security of supplies and reduce further dependency on oil;

  • Pursue market reforms in energy sector while secure reliability of electricity markets;

  • Enhance energy efficiency in both, supply and demand sides, with particular emphasis on C/E Europe.


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Key Energy Issues

  • Preserve environment & climate by:

    - promoting inter alea Kyoto mechanisms;

    - promoting market for renewables;

    - enhancing R & D on nuclear,oil

    substitution & CO2 sequestration;

    - harmonization of energy tax systems;


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WEC AND SUSTAINABLITY

  • WEC contribution to this global process:

    -World Energy Assessment Study;

    -WEC Global & Regional Studies and Scenarios;

    -WEC 19th Congress, Sydney, September 2004:

    Delivering sustainability: Challenges & Opportunity

    for the Energy Industry


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19th World Energy Congress, Sydney 2004

Main conclusion:

Delivering sustainability to energysector should be a priorityobjective. It is achievable but..... challenges are many; and they must be tackled now and urgently if sustainabilityis to be achieved in this century.


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SECURITY OF ENERGY SUPPLIES

  • WEC`position on security - AAA

  • WEC`Recommendation: Keep all the options open

    as

    diversity is the backbone of a robust, less vulnerable energy system, even if the optimum mix would vary according to the local conditions.


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SELECTED KEY ISSUES

  • Security of supplies in liberalised markets;Europe`s vulnerability;

  • Energy Intensity and Energy Efficiency.


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What future evolution?


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THE TWO POSSIBLE ENERGY WORLDS

  • Definition of a “CONCAVE” energy trajectory: All published scenarios, e.g. WEC-IIASA, shape an accelerating energy demand over time in which “Acceptability” is the binding constraint

  • Definition of a “CONVEX” energy trajectory: Still unexplored domain of decelerating energy evolution in which “Availability”, “Accessibility” and “Acceptability” are all binding constraints


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SECURITY OF SUPPLIES (1)- the risks-

  • Energy fundamentals revert back to 1970s/1980s crises:

    - volatility of oil prices;

    - continuous growing import dependency;

    - growing reliance on one supplier-Middle East;

  • But under different conditions:

    - today oil is used in transport sector only;

    - oil share in Europe`s energy market is less than 10%;

    - price increases dictated by the market imbalance;


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SECURITY OF SUPPLIES (2)- the risks-

  • Investment risks & uncertainties persist, as:

    - full implications of market liberalization unclear;

    - impact of market opening on contracts (take or pay ?);

    - longer supply routes and fear of terrorism;

    and recent doubts:

    - oil reached the peak, no spare capacity;

    - oil & gas might face geological constraints ???

    - price escalation of hydrocarbons;


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WHAT PROSPECTS FOR OIL

  • Peak of the non-Middle-East production reached;

  • Maturity of OPEC Middle –East seems also reached.


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NON-ME OIL AND TECHNOLOGY


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FUTURE OIL BALANCE?


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OIL DEPENDENCY ON MIDLE EAST

  • 2/3 European oil imports from ME in 2025-2030;

  • at average, the OPEC- ME fields are 50 years old;

  • they might produce for many years, but:

    like Marathonians (unlike sprinters)

  • Recent studies (Matt Simmons) show Saudi Arabia

    could already be mature (confirmation of Hubert curve); and ambiguity about Kuwait reserves;

  • Current role of OPEC

    -

    - today oil is used in transport sector only;

    - oil share in Europe`s energy market is less than 10%;

    - price increases dictated by the market imbalance;


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THE 1973 SHOCK…

A growing gap that OPEC could not fill


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WHAT PROSPECTS FOR NATURAL GAS

  • Production peak reached in OECD regions;

  • Production rise elsewhere with the LNG boom;

  • Higher price would limit consumption:tendency to use it in residential & commercial markets only.


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OECD HAS PEAKED


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NORTH AMERICANGAS PRODUCTION…


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RUSSIAN GAS

RUSSIAN GAS


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Siberia


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DEPENDENCY ON RUSSIAN OIL & GAS

  • Europe depends 40% of Russia on gas and 25% on oil;

  • Russian reserves move far way from Europe and close to the Asian markets;

  • Asian markets are more attractive than Europeans;

  • Gazprom seek partners and distribution markets;

  • Russia may continue to be a reliable supplier.

    -

    - today oil is used in transport sector only;

    - oil share in Europe`s energy market is less than 10%;

    - price increases dictated by the market imbalance;


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WHAT PROSPECTS FOR COAL

  • Increased use of coal for CTL and power generation;

  • Risk of limited use in power generation exist if:

    - energy efficiency in combustion stay low;

    - CO2 sequestration technology stay late, behind 2020.

    Coal reserves are abundant!


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2005 IEA VIEW OF WORLD CTL & GTL

kb/d


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WHAT PROSPECTS FOR NUCLEAR

U N C L E A R ?

but

getting more place in the Energy Agenda


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Reforms in elmarket should`n conflict with security

Adequacy and Reliability are the backbone of a modern

power system;

  • Costumers and economy need 100 percent reliability;

  • Disruptions caused by ``brownouts`` and `` blackouts``

    imply substantive costs to economy and households;

  • A clear ``trade off`` between operators and regulators;

  • Sharing responsibility for securing supplies in a liberalised market.


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SECURITY OF SUPPLIES - Conclusions on Fuel Imports -

  • Scarcity of resources create supply imbalance and call for large price increases.

  • The current and future oil price volatility will affect GDP severely, future economic recessions might be worst than previous.

  • Oil price volatility lead to price increases in other fuels, but mostly of gas, making it less competitive.

  • Current policy and market tools do not support investments neither in upstream nor in energy infrastructure.

  • Europe becomes more dependent on imports and vulnerable in infrastructure;

  • Energy crisis lower GDP growth and energy intensity.


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World Energy Intensity


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SECURITY OF SUPPLIES - Conclusions on Fuel Competition-

  • Oil price increases affects differently other sources:

  • fossil fuels

    might reduce gas market share; boost coal use and non

    traditional (synthetic liquids, coal gasification);

    - speed up R &D on hydrogen and CO2 sequestration;

  • nuclear:

    re-consideration of policies; speed up R &D on technology & waste storage;increase the market share;

  • RES: Increasing the share to the possible extend;

  • efficiency: Ease investments for further improvements

  • Investment risks & uncertainties:

    - increasing the share of production outside Europe;

    - impact of market opening ( take or pay ?);

  • Longer supply routes and fear of terrorism;

  • Full implications of market liberalization unclear;

    and recent doubts:

  • Oil might face geological constraints ???

  • But under different conditions:

    - oil share in energy (Europe) is less than 10%;

    - price increases dictated by the market de-balance;

    - oil production reached the pick, no spare capacity;


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SECURITY OF SUPPLIY- Conclusions on internal market-

  • LIBER shifted responsibility to market, but barriers still exist to become fully competitive;

  • LIBER confirmed a higher level of energy service, and management, perhaps lower costs (?) but not lower prices. Some disadvantages:

  • The market remain national;

  • The role of stakeholders not well defined;

  • Uncertainty about security of supply (disruption);

  • Reserve capacities declined, in generation and interconnections, investments are rather cyclical.

    therefore

  • Markets require new policy instruments (cost-effective) to manage risks and cover costs of disruption;

  • In electricity, reliability contracts and capacity markets prove to be most effective, for ensuring adequacy and reliability of market operation;


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What is needed to enhance security of oil & gas supplies

  • re-defining policies, in view of recent circumstances;

  • assess & increase if needed, by regulations the emergency stocks, in particular that of natural gas;

  • encourage diversification of supplies & accelerate development of strategic projects (Nabuko?);

  • ensure conditions & support partnerships with upstream supply companies (Gazprom?);

  • encourage a regular dialogue (on policy & company level) with suppliers and neighbouring ``energy corridors``countries.


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What is needed to enhance security in electricity market

  • First, more transparency and harmonization is needed;

  • Markets require some new policy instruments (cost-effective) to manage risks and cover costs of disruption;

    (Re-consideration of the Directive ?)

  • The market should be more encouraged to invest in security: reliability contracts and reserve capacitycould be effective market instruments, for ensuring adequacy and reliability of market operation;


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What is needed to reduce EURO-dependency on import

  • Main directions formulated in the ECnew Green Paper;

    among which:

  • policy of fuels substitution; increase the share of RES

    by policy and market tools (Renewable Energy Road Map);

  • enhance EE in energy supply & demand, in particular in the new members (with 20%by2020).

  • launch a public debate on nuclear;

  • Finance R & D in CO2 sequestration & nuclear.

  • re-considering each energy mix and min. quota for


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SECURITY OF SUPPLIY- WEC-Europe contribution-

  • WEC is carrying out two regional studies, namely:

    1.Vulnerability of Europe to Energy Crises; and

    2.Future of Nuclear power in Europe.

  • WEC & EC cooperate on this issue:annual seminars.

  • Joint EC-WEC Seminar on Security of Supplies

    (Brussels, Friday 30 June 2006)

    under the chairmanship

    of

    EC Commissioner: Mr. Andris Piebalgs;

    and

    WEC-Vice Chair Europe: Mr. Pierre Gadonneix


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Global Energy Information Service


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