EU, OPEC seek aggressive monitoring of oil markets

Doris Leblond
OGJ Correspondent

PARIS, June 22 -- Nonstop monitoring of oil market developments by both the European Union and the Organization of Petroleum Exporting Countries will be critical to avoid future supply interruptions, concluded EU-OPEC Energy Dialogue participants at the fourth joint gathering of EU and OPEC ministers June 21 in Vienna.

Insuring a stable, well-supplied oil market and addressing insufficient refining capacity were the central topics discussed at the meeting.

Answering EU concerns over possible upstream tightness over the next few months due to demand increases, OPEC members reiterated that there were "healthy commercial crude oil stocks and an increasing level of upstream spare capacity" to prevent short-term oil supply interruptions.

However downstream tightness has been a cause for concern since the second EU-OPEC meeting in December 2005 because lack of sufficient worldwide refining capacity continues to increase volatility and exert pressure on crude and product prices. Therefore, tightness in this sector of the industry could continue, speakers said.

In addition, current shortages in skilled labor, equipment, and services facing the oil industry could cause tight markets well into the future in both upstream and downstream, meeting participants said, emphasizing the continued necessary vigilance.

With the world energy system becoming increasingly global and interconnected, the two groups stressed the importance of partnerships and transparency in dealing with the world's energy needs "in a predictable, stable, and harmonious manner," with security of supply and of demand "being two faces of the same coin."

Energy diversity
While there was agreement that oil would remain the world's leading energy source for the foreseeable future and that there was enough conventional and unconventional resources to meet significant demand growth, both groups welcomed the growing diversity of the energy mix, including renewables. However there was some disagreement on the sustainability of biofuels.

It was agreed that a workshop on refining issues, including the implications of biofuels, will be held in Brussels in late 2007 or early 2008, and a roundtable on carbon capture and storage cooperation to reduce greenhouse-gas emissions will be held in first quarter 2008 to follow up on the subject begun in Riyadh in September 2006.

The participants also decided that a report on the development of an EU-OPEC Technology Centre, including the cooperative framework on energy education and training, would be presented at the Energy Dialogue's next meeting in June 2008 in Brussels.

Algerian gas to the EU
In the margins of the EU-OPEC ministerial meeting, European Energy Commissioner Andris Piebalgs discussed with Algeria's Energy and Mines Minister Chakib Khelil progress of a memorandum of understanding and the outlook for increased gas supplies from Algeria to the EU.

If the two gas pipelines currently under construction—Megas from Algeria to Almeria, on Spain's southeastern coast, and Galsi from Algeria to Cagliriari in Sardinia, Italy—are completed according to plan, Algeria could increase its exports by 23.5 billion cu m/year by 2010.

Currently the third largest gas supplier to the EU, Algeria in 2005 exported over 55 billion cu m of gas or 19.1% of the EU's overall gas imports. These amounts could move to78.5 billion cu m/year. Each gas line would have a capacity of 8 billion cu m/year.

A project to increase the capacity of an existing gas line linking Algeria and Italy through Tunisia could add an additional 7.5 billion cu m/year.

"Algeria has been a reliable supplier to the EU for more than 30 years and we are looking forward to deepening our bilateral energy cooperation," said Pielbags after the meeting.

The EU-OPEC Ministerial Dialogue was established in December 2004 to bolster understanding of each group's views on major issues involving energy demand and supply. The EU Commission says it has helped "strengthen key channels of communication across the two groups," and that its roundtables, workshops, and studies enable an in-depth look at topics of mutual interest.

The current president of the EU-OPEC dialogue, UAE Minister of Energy Mohamed Bin Dhaen Al Hamli, will turn the presidency over to Algeria later this year.