As
minister for energy and the environment, Yannis Maniatis helped shape Greece’s
energy policy, supported the European Union’s energy union and was instrumental
in initiating contacts with other eastern Mediterranean countries to promote
cooperation in the energy sector.
Now a
professor at Piraeus University, he talks to NGE about energy and
European politics.
Professor
Maniatis, let’s start with your views on the latest developments in Europe. As
an energy minister you grappled with these first-hand and I know you still have
strong views.
Global
developments in the energy, shipping industry and marine transportation, and
global market trends, are vital for Europe’s stability, energy security,
competitiveness and sustainability. This is not the time for business as usual.
We need to face realities, without illusions – no matter how hard the truth is.
But
Europe is currently facing broader challenges and I want to start with these
first.
The
European model seems to have lost its appeal. Europea la carteis
starting to take shape. The management of the refugee crisis is a complex
matter. None of us can say where this multi-level crisis will take us.
Europe is being destabilized politically, and the extremes are gaining the
upper hand.
There
are concrete issues that are shaking today’s Europe:
-
the
lack of leadership and vision
-
the
multiple and multifaceted crises that have broken out in Europe’s near
abroad
- the economic crisis
- the problems of
peripheral states
- low growth rates
- Europe’s ageing
population
-
London’s
recent bids for averting a Brexit
-
the
severing of very beneficial economic ties with Russia
-
the
stance of countries of the former Soviet bloc and unbridled anti-Russian
sentiment
-
and
the failure to exercise a unified foreign and defence policy that would
give the EU a decisive role in international developments.
At the
same time, despite the attempt at institutional deepening, centrifugal forces
are developing, and right now there does not appear to be an institution or
agency, that can impose discipline on the member states.
What we
see is a gradual return to nationalization of decisions. Thede
factooverriding of collective decisions creates a negative dynamic of
entrenchment.
With
European cohesion being tested in a state of affairs where member states are
attempting the ‘nationalization’ of many decisions, calling into question the
notion of communality, we must at all costs avoid a lapse into ‘less’ Europe.
One of the main challenges in this direction, in 2016, is a possible amendment/
suspension of the Schengen Treaty.
Today,
the differences among the EU member states over the refugee issue are large;
they appear to be unbridgeable.
It is
imperative that we find a functional compromise that doesn’t impact our
longstanding values and doesn’t involve shifting blame within the European
family. This is the only way for us to avoid fragmentation in 2016.
These
are issues and concerns that dominate European politics and Brussels today. But
what are your views regarding the energy sector within Europe? This is also
undergoing profound changes.
In the
energy sector, we do have the opportunity, and the choice, to make a
difference. Historically, we have seen that energy sources can be either a
source of conflict or a source of peace.
Therefore
now, it is more urgent than ever, that in responding to new developments, we
rise to the challenge and do everything possible to ensure three priorities:
-
That
energy sources, and the recent gas discoveries, function as a catalyst for
prosperity and stability in Europe’s wider neighborhood.
-
That
we complete the internal energy market and ensure that diversified gas,
traded openly with competitive and affordable prices, flows throughout the
EU.
-
That
natural gas supports the transition to a more sustainable and lower carbon
economy, by expanding the use of this lowest polluting hydrocarbon.
It is
Europe’s common interest to tackle energy security collectively, with a spirit
of solidarity
This
is what the energy union is attempting to achieve. What are your views on the
energy union?
Acting
together, the EU member states can strengthen their negotiating position with
partners abroad and achieve their mutual goals for energy security. In this
respect, I fully support the EU’s vision for an energy union.
The
vice-president for the energy union, Maros Sefcovic, in his recent speech on
the topic described the "5Ds model”.
- Decarbonisation of our
economies
-
Democratisation
into energy production and consumption
-
Digitisation
to optimise energy use and efficiency
- Diversification of our
energy supplies
-
Disruption
of traditional energy cycles.
Consumers
should benefit from new technologies and from more competition and be more
active in the market to get these benefits. An unacceptably high percentage
(10%) of European households cannot afford to pay their energy bills.
Citizens
are no longer passive consumers; they are becoming 'prosumers' – consumers who
can also produce energy and supply it into the energy grids. With smart grids
in place, a sunny day in Athens should lower energy prices in Lisbon; and a
windy day in the Aegean Islands should lower energy prices in Vilnius or even
in Kiev! In energy terms the energy union does not stop at the EU borders.
The
global oil & gas market is also going through difficult times and profound
changes especially in the way gas is traded. EU’s energy union and the more
recent energy security package are attempting to address the impact of these
developments on Europe. What are your views?
Global
gas developments are a challenge and have implications for Europe but they also
offer opportunities.
Before
the price of oil began falling in 2014, gas traded in hubs was significantly
more competitive than gas procured on the basis of oil-indexed contracts. This
created a division within the EU.
In
north-west Europe, where hub pricing was more developed, wholesale prices were
considerably lower – sometimes by 35% - than those in the less mature
markets of central and southeast Europe, which continued to rely on oil-indexed
contracts.
But today
we see that, due to the fall of oil, this gap has been closing, prices have
converged and natural gas prices have become historically low.
In
Greece TAP appears to be progressing and the southern gas corridor on the whole
is gaining momentum with full EU support. How is Greece benefiting from
increasing inter-connectivity?
I wish
to stress the importance of TAP, which will transport initially 10 but later up
to 20bn m³/yr from the Caspian – Azerbaijan, through Turkey and Greece to
Italy.
Apart
from access to more diversified supplies, we expect that this will also bring
about a greater influence of hub pricing for gas in Greece.
Through
the connection of TAP with the Greek-Bulgarian Interconnector IGB – these
benefits will potentially be felt in parts of southeast Europe which today
don’t have access to Europe’s major grids or any European hub. To this end, the
so called ‘vertical corridor’, which has as first part IGB, constitutes a new
promising pipeline for southeastern Europe.
In
Europe the new energy security package places major emphasis on LNG and gas
storage. How do you think this will benefit Europe and Greece?
Lower
oil prices have of course also affected international LNG prices. Both spot LNG
prices, as well as LNG procured on oil-indexed contracts, decreased in 2014 and
2015.
Because
Europe could not compete with the higher Asian prices, it has not even
exploited its existing LNG capacity, utilizing only 22% of its 200 bcm
capacity. Under these circumstances, it is not very surprising to read that
today, Europe accounts for a poor 13% of the global LNG market; and that only
13% of its imports are covered by LNG.
There
are many challenges ahead. I consider that the EU needs to promote, as a
priority, an efficient use of already existing LNG terminals by developing
further internal connections with reverse flow, which will allow gas to flow
where it is needed.
However
we are also pleased that the European Commission’s new list of projects of
common interest (PCI) promotes LNG terminals in Croatia and Greece. The
floating LNG terminal, which is being planned in northern Greece, will provide
important added value and greatly facilitate the access of central and
southeast Europe to diversified LNG.
What
about the eastern Mediterranean’s gas potential? How can this benefit Europe?
These
exciting new developments which are increasing Europe’s prospects for further
diversified sources and routes.
In
addition to the discoveries of the Tamar, the Leviathan and the Aphrodite gas
fields, in offshore Israel and Cyprus, we have Zohr, the super-giant field in
Egypt which, is estimated to have 30 trillion ft³.
There
are various options for transporting this gas to Europe’s markets. Marine
compressed natural gas constitutes one solution for Cyprus. The markets of central
and southeast Europe are within the commercially viable range of CNG ships.
I would
also like to refer in brief to the eastern Mediterranean pipeline. The Greek
company DEPA began exploring the possibility of this pipeline back in 2011. The
project is designed to carry at least 8bn m³ of Israeli and Cypriot gas to
Europe’s markets. Its off-shore routing starts from the Levantine gas fields
towards Cyprus – and from there onwards to Crete and mainland Greece. In Greece
it would link-up with the IGI-Poseidon, enabling the gas to reach Italy.
Studies have already shown us that this project is technically feasible and may
be bankable.
How
can Greece benefit from all these developments in Europe and around it in
southeast Europe and the eastern Mediterranean?
Let me
stress that Greece’s developments in hydrocarbons, are increasing the potential
of the eastern Mediterranean. For, I can confidently say, that Greece’s
prospects are serious, and based on solid parameters.
Greece
is an emerging hub. You may ask how is this going to happen? For two main reasons:
-
Infrastructure
policy:EU is supporting as priorities, the development of 12 major
projects of common interest in Greece, of which nine are in the gas
sector.
-
Shipping:Greece
has the biggest tanker fleet in the world…. the world’s largest floating
oil and gas pipeline.
You
mentioned the shipping sector. This is where Greece excels. How is this faring
in the current environment?
The
shipping sector is definitely one of the sectors which have experienced
substantial changes within the record low oil price environment that we
currently live in since last year.
The
steep collapse of the oil prices overall and particularly the big discount of
prompt vs. long-term delivery prices – the so called "price contango”
phenomenon in market terms – incentivized big players like China to increase
their imports in order to allow for stock building of its strategic petroleum
reserves.
The
second major impact was also a positive one for global demand for seaborne
transportation of oil. Refineries across all continents – even including
European refineries, whose competitiveness has always been deficient vs. the
rest of the world – achieved record high utilization rates in 2015.
A
combination of facts drove profit margins – the so called "refinery margins” –
at unusually high levels, allowing for heavy asset utilization.
The
third main change due to cheap oil has affected – again positively – all
sectors of marine transportation; this is the steep decline of bunker prices.
Marine fuel cost is strongly correlated to global crude oil prices and hence
this has also been following the downward trend of oil across the globe.
Bunkers represent one of the biggest cost elements for a ship and hence this
development has provided support to freight rates both for tankers but also for
dry bulk vessels.
However,
we are all aware, that this has not been enough to drag dry bulk carriers out
of the "red zone” and hence help them to return to
profitability.
A final word?
In a
nutshell, I believe that it is up to the governments in the region to realize
the high stakes that there are here.
All
these elements can ensure and insure a new prosperous and sustainable European
energy future with more gas, more flexible gas-fired power generation units,
hence more flexibility and hence more renewables, hence less pollution and a
cleaner environment.
Let us
then all together open up the window for fresh European air to blow into our
neighborhood. Let us also open the door for a bright, new, sustainable energy
future in Europe.
Thank
you very much, Professor Maniatis.
http://www.naturalgaseurope.
com/european-energy-at-a-
critical-point-28753