Sticks or carrots?

Nov. 30, 2001
The European Union is the world's largest energy importer and the world's second largest energy consumer. It is importing more and more energy from beyond its borders.

The European Union is the world's largest energy importer and the world's second largest energy consumer. It is importing more and more energy from beyond its borders.

The figure today is around 50%, but it could rise to 70% in 20 years. European energy consumption is rising at a rate of around 2%/year.

This is the reason that the supply of oil and gas in Europe has moved to the forefront of political debate. The oil and gas industry is finding itself more accepted by politicians and increasingly its voice is being heard.

Loyola de Palacio, the European Commission vice-president for transport and energy, has emerged as one of the better-known faces in what has been a faceless organization.

She was recently in London to discuss European energy policy, and as the person who will essentially draft that policy, her comments are essential listening.

Secure supplies

De Palacio noted that protests against sharply raising fuel prices of last year suggest that citizens take energy for granted, or consider access to inexpensive energy to be their right.

She said, "But can we be sure that the energy they require is always there, at a reasonable price? This is why I believe that Europe needs to take a new look at its energy supply and its energy priorities."

A point she has raised that will interest the oil and gas community is the question of the holding of strategic stocks of oil to meet emergency situations.

The minister could soon bring forward plans to overhaul this system, regarded by many companies as a costly burden on their shoulders.

But will she ease that burden? It seems unlikely. And for the first time, she suggests that EC require member nations, or their suppliers, to hold strategic stocks of natural gas.

She said, "It is my view that the system is in need of review. And our growing gas dependence suggests that we may also need to consider extending the system to gas."

Stable markets

De Palacio said, "To some extent the structures to achieve stable international markets already exist, such as the producer-consumer dialogue with oil-producing countries. This must be strengthened.

"But new structures will be necessary. In the Caspian Sea region the dual challenges of extracting oil and gas and developing routes to bring it to the market is being addressed. It is attracting international investment for the modernization, rehabilitation, and extension of oil and gas networks. And it is also breaking down barriers, opening borders, and bringing prosperity and stability to regions which are desperately in need of it."

Is the threat that companies be required to hold natural gas stocks real, or a stick to beat into line those dragging their feet in infrastructure investment?

Equally, is the possibility of an overhaul of the strategic oil stock system a carrot being dangled to achieve the same end?