Wednesday, April 23, 2014

Drew EGC Report

Diversified Routes & Sources Lead to “Golden Age”

The Minister in charge of energy matters in Austria, Reinhold Mitterlehner, Federal Minister for Economy, Family and Youth for the Austrian government, gave the keynote ministerial address at the European Gas Conference in Vienna, Austria. His topic was the European gas market in 2012.

He said the fact that the conference was once again being held in Vienna underlined the importance of the Austria in the natural gas sector. The Minister added that the Austrian capital hosted the “Vienna Energy Club,” which brought together eight international energy organizations that shared their views on the future.

 

“Who will supply Europe with natural gas?” he asked, answering that the numerous masterminds in the conference might generate proposals for answers on what the future could be.

 

“The question implies that Europe will have to be supplied with gas,” Mitterlehner stated.

 

Natural gas, he said, was the answer in the wake of Fukushima: “This catastrophe caused a turnaround in energy policies, especially in European countries, led by Germany, which decided to opt out of nuclear energy by 2022. The ambitious goal of the German government announced last year is to get most of the electricity supply from wind and from solar energy.” 

 

Switzerland and Belgium, he noted, also decided to change their nuclear policies.

 

“In German speaking countries the amount of public discussion over this was enormous,” he noted.

 

Austria, he said, was encouraged to continue its non-nuclear path and pursue its Austrian energy strategy consisting of three pillars: to foster renewable sources, to guarantee a stable supply, and to increase energy efficiency.

 

“To realize the goals of the first and second pillar, the importance of gas has become more evident than ever, as a bridge fuel which substitutes nuclear production and backs up renewable electricity generated by wind power and photovoltaics. Gas power plants can step in when green electricity runs low and effectively guarantee a stable supply of energy.”

 

According to the IEA, he said, the EU’s natural gas demand by 2030-35 could rise by approximately 25%, while domestic production was expected to decline significantly, by 47%.

 

“With a share of about 25%, gas is an important component of the EU’s energy mix,” Mitterlehner said. “In Austria, it makes up about one-fifth of the energy mix.”

 

As the EU could only cover one-third of its natural gas consumption, Mitterlehner contended that it was susceptible to uncertainties of various kinds.

 

“Just think of the vulnerabilities in the relations between traditional supply and transit partners, i.e. the ongoing discussions on gas prices and infrastructure questions between Russia and Ukraine,” he pointed out. “Russia is the EU’s major gas supplier at 41%, followed by Norway at 27% and Algeria at 17%.”

 

He recalled the turmoil caused by the Arab spring which led to the disruption of Libyan gas supplies, not to mention the emergence of problems with Iran.

 

“Problems can arise at any time,” he added. “All of these incidents have an impact on gas supply, demand and pricing beyond their geographical regions. So far gas supplies to Europe have not been heavily disturbed so far, but we have to make an effort to avoid this scenario by securing the diversification of gas supply routes and also sources.”

 

He made mention of shale gas, which he said was even being talked about in Austria, offering that it could be an interesting option for the EU and its natural gas supplies. “Within the EU, Poland seems to be lavishly endowed with shale gas resources,” he explained. “According to estimates, possible reserves in Austria’s could cover the country’s gas demands for 30 years. 

 

“The Austrian approach to this matter is a very pragmatic one,” he continued. “On the one hand, we don’t categorically say no; on the other hand, drilling and material processing are subject to very strict procedures in the Austrian Mining Law.”

 

Minister Mitterlehner mentioned that the inauguration of the first string of the Nord Stream natural gas pipeline was an important first step for transport routes in Europe. He noted that most of the conference delegates were from countries that would be part of the European Southern Gas Corridor.

 

“The timing of the conference could not be better as 2012 will be a decisive year for the gas supply of Europe,” he said, mentioning numerous pending natural gas pipeline projects that could be started this year, like Nabucco, Interconnector Turkey-Greece-Italy, or the Trans Adriatic Pipeline, not to mention the South East European Pipeline project, which, he said, had enriched the debate. (Read about how TAP has just been chosen over ITGI, here.)

 

“Recently, the European Commission has reiterated its strong support for the swift opening of the Southern Gas Corridor. Commissioner Oettinger said that in connection with the Shah Deniz two-tender process, it will welcome the decision of the Shah Deniz Consortium for the selection of the pipeline.”

 

According to him, Austria agreed that a scalable solution was needed, that a small start could increase in capacity at a later stage. “Transport capacities will be ready when the Shah Deniz Consortium will start to supply,” he added, noting that it was scheduled to come to a decision in the first months of 2012. 

 

He continued, “Austria has an undeniable preference which could strengthen its role as an energy hub in Europe. The Central European gas hub located in Baumgarten is one of the most important trading points in Europe, receiving gas outside the Union and for transporting it further on to the EU. With Nabucco in operation, Baumgarten’s status will become even more important.”

 

The gas storage at Baumgarten, he said, was relevant to Austria and its neighbors, bearing capacities for reverse gas flows that allowed for the physical flow of gas in both directions.

 

One existing problem, Mitterlehner pointed out, was that gas markets had tightened in Europe with about twice the price of natural gas in the US. “An optimized legal framework for a functioning market and for sufficient infrastructure is need to make the EU attractive for existing and new suppliers,” he explained, offering examples of improvements like entry-exit tariffs and more rights for consumers.

 

“Gas will also help us in another area,” he stated, “avoidance of the worst effects of climate change by cutting down emissions, and boosting energy efficiency. Natural gas facilitates a rapid reduction of CO2 emissions if other fossil fuels like coal are replaced.” 

 

Gas-fired electricity plants, he noted, had 50-70% lower emissions than coal-fired ones, along with being more efficient. 

 

Mitterlehner commented, “The mission is to have half the emissions and double the energy. That’s the reason it is an important element of our Austrian energy strategy.”

 

“Due to the multifunctional character of this fuel,” he concluded, “we can truly speak of a ‘golden age of gas’ ahead of us.”

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