HIGH TATRAS, Slovakia – The European Union is looking at the newly discovered reserves in the East Mediterranean as a way to boost energy security, sees a role for Ukraine as a transit country for Russian gas to Europe provided that Kiev implements the necessary reforms, wants to discuss issues concerning the Nord Stream-2 pipeline and lead the re-energized efforts to battle climate despite the decision of the US Administration to pull out of the Paris accord, European Commission Vice President for Energy Union Maroš Šefčovič told New Europe in an exclusive interview.
At the snow-covered High Tatra Mountains in Slovakia near Štrbské pleso with breathtaking views of the mountain range and lake, Šefčovič sat down with our newspaper on October 28 on the sidelines of the TATRA summit to discuss ways of increasing Europe’s energy security.
“The first thing to say is I think we really have to appreciate the huge potential of this East Med new gas field because what I hear from the region is that it could be a new Norway which could bring enormous benefits to the region, to the countries who actually live in a very difficult neighbourhood and could use the potential of this natural wealth for the stabilising of the situation of the coastal countries, of that region and find new ways how to use cooperation in the region which was so much marked by the tragedies of war. That would be excellent,” Šefčovič said.
“Second, I think very important to mention is we see that the gas explorations in the East Med region are developing and I think this first phase would be very important for how the scale of the project would be in the end development. Because at this stage I understand that still not all fields are properly prospected so it moves from one field to another around Cyprus they are prospecting one field one by one,” he added.
Šefčovič noted that the first stage of exporting gas from the East Mediterranean fields would probably be transported to the liquefied natural gas (LNG) terminals on the Egyptian coast and would be used in Egypt or it would be shipped as LNG to Europe.
“And then the next phase which is now very much studied based on the results of the feasibility study which was done which show that technically the EastMed pipeline between Cyprus and Crete is possible. Nevertheless, it would technically quite a challenge because you have very rough seabed and the depth is quite significant, Šefčovič said. “Then, of course, very much would depend on when and how readily available the gas from these new gas fields would be and where it would be more needed. Would it be in the region or would it be in Europe,” he said, adding that all this is being accessed and the EU has identified the connection between Cyprus and Greece as a Project of Common Interest (PCI).
“From this point of view, we see it as a very important diversification project that we will have, if I can say, a European-owed source in the East Med which would help us diversify the sources and a new route. At the same time, this project would be representing quite a big cost so we would need to look for strong interest and strong support from the business community because I don’t think it would be possible to finance it only from the Connecting Europe Facility or from the European Budget because the cost assessment was between 5 and 7 billion euro and it’s more or less the whole Connecting Europe Facility whole budget,” he said, smiling. “I mean, there would need to be very strong business case, different sources of financing and also a strong involvement of the business community so that would be see such an incremental gradual development.”
Asked what percentage of the total cost the Commission is prepared to grant to the EastMed gas pipeline project to make it commercially viable, Šefčovič said, “We’re not ready to tell the percentages at this stage. Because – that’s my personal observation – if I look at the process for Baltic Connector between Estonia and Finland that was a project that was much simpler, much smaller and also they had to really improve the submission a lot and show how much they were ready to participate and what would be the business part. So to say at this stage that we would go for this or that percentage would be too premature,” the European Commission Vice President said.
Ukraine gas transit
Turning to the gas conflict between Ukraine and Russia that has Russian gas supplies in the past, Šefčovič told New Europe that he does not expect another gas crisis.
“I’m much more at ease this year than last year because we’ve been really in a close touch with our Ukrainian partners on the gas storage filling so I think it was probably a month ago that I checked the latest figures of the latest gas storage level at 15 bcm, which is very good start of the season which is very good because they are more energy efficient, they consume less gas. Last year they managed even with a lower volume so if this would be the storage level with all that the reverse capabilities of three interconnectors Slovakia and Poland and Hungary, I think they should manage quite well,” Šefčovič said.
He said the European Commission expects Ukraine to complete several “crucial” steps domestically, especially the completion of the reforms in Ukraine and nomination and start of an independent regulator.
Šefčovič said another very important thing is to complete the unbundling process of National Joint Stock Company Naftogaz of Ukraine. “I had several discussions also with the prime minister (of Ukraine Volodymyr Groisman) and we agreed we need to have very clear roadmap how this could be done. I think the process is already overdue and the better, the more transparent way the unbundling would be done, the easier it would be to attract highly reputable companies into the consortium who would be ready to help with the management, which would be ready to guarantee the necessary investment for the renovation of the gas pipeline,” Šefčovič said.
“I spoke yesterday (October 27) with the representatives of the EIB (European Investment Bank), EBRD (European Bank for Reconstruction and Development). They are ready to step in once they would see there is a good law, there is proper unbundling done, you have reputable European companies. In that case they would have no problem to provide the financing for the necessary renovation,” the European Commission Vice President said.
Šefčovič also added that “a very important element there would be the Stockholm Arbitrage ruling should be done probably sometime between November and December, which I hope will bring the final clarification to this dispute which is already on the table for many, many years. I hope also that this would pave the way then for the restart of talks between Ukraine and Russia, between Ukraine and Russia and us on how to secure the gas transit in these conditions in the post 2019 period”.
Asked about the Commission’s involvement in plans to construct the Nord Stream-2 gas pipeline from Russia to Germany, Šefčovič said, “Of course, we are involved because, as you know, we presented that request to the Council to get this mandate for the negotiations and we did it, I would say, at expressly stated preference of many of the Member States. What would be the best way how to resolve this issue because we had many outstanding, conflicting situations, if it comes to the legal framework, if it comes to the compatibility of this project with the Energy Union goals and also in the area what we can do together for the aim, which was unanimously supported by the EU Member States, that is the continuation of the Ukrainian gas transit,” he said.
“Unfortunately it’s still in the Council. I know that the Estonian Presidency is doing its outmost. We have different positions of the legal services on especially the direct applicability of the Third Energy Package for the offshore pipeline and that is one of the reasons why we want to present this amendment to the gas directive and to make clear there should be no, I would say, ambiguity or questions marks over the application of the Energy Union, of energy law on the offshore pipelines. We hope that it would help the Council to accelerate the work on the mandate so we can really proceed with the negotiations,” Šefčovič said.
Asked whether the EU Third Energy Package applies or not, the Commission Vice President said, “The legal services they have their reserves on this. At the same, as you know, legal services issue advisory opinion and I know there is at least almost half of the Member States who is ready to issue the mandate to us. And I really believe that if you have the issue like in this case that you have two colliding legal regimes that you have the risk of the legal work that we’re talking about such a strategic project like the pipeline which became politically extremely controversial the best thing we can do is to discuss among us Europeans our priorities and then to negotiate it with the third party, in this case in Russia with very clear priority in mind that is, of course, the EU law and the Ukraine and the energy security which we should keep all in mind”.
Asked if the European Commission would push Russia to keep Ukraine as transit country for gas supplies to Europe, Šefčovič said, “I think that we need to negotiate that. First, I’m absolutely sure that if Naftogaz is properly unbundled, if it is managed with a reputable European consortium, if the investment from the international financial institutions is made to renovate this pipeline, I think there is not only political but very strong commercial case to use the system which is in place and which was working for decades and was working very well. So we want to make it, of course, commercially very, very interesting but also we’re stating this as a political priority that for us to have three transit routes to Europe is much better than to have just one, and especially if it’s done in a way that puts the Ukraine and Central Europe in a very difficult situation”.
Regarding the second branch of the Turkish Stream gas pipeline that Russian gas monopoly Gazprom wants to expand to Europe through Greece and Italy, Šefčovič said that during his presentation to the Southern European ministers “I told them than in 2030 we would need more or less the same volume of gas as we do today – maybe a little bit more, maybe a little bit less. It would be around 400 million cubic metres and, at the same time, I teased them a little bit because I put on one page all the projects which are being considered, all different pipelines, all different LNG terminals, all different projects, and in the end it resulted in the capacity of 900 bcm so more that double of what we would need in 2030”.
Šefčovič urged the ministers “to be a little more strategic, what we need to support, what we don’t need to support, where to invest the money because from this it’s clear that at least half of the assets that are being proposed right now could end up being stranded and the investment in these assets would not bring back the revenue or simply would be lost”.
The European Commission Vice President called for “a very strategic and rational approach”, focusing on the projects that help Europe to diversify its energy sources, guarantee energy security and which are “good, safe investment from the prospective 30-40 years down the road”.
Trump & EU climate goals
Finally asked about the fight against climate change and the decision of US President Donald Trump to withdraw from the Paris Climate Agreement, Šefčovič said, “I think actually that the decision of President Trump had, I would say, very mobilising effect on climate community all over the world and I would say especially in the United States. I could tell you that I was approached by many cities, many mayors with whom we are working under this Global Covenant of Mayors from the United States. I had several meetings with (California Governor) Jerry Brown, (former New York Mayor) Michael Bloomberg. I had several meetings with I would say the international-known American companies and all of them wanted to make sure that despite the decision of the federal government they want to do more and to show that Americans care about climate change, if not on the level of Federal government, on the level of many states, most of the cities and many businesses”.
Šefčovič said Trump’s decision “also had an energising effect on Europe because the world in this respect very clearly came to us and clearly told us how they expect the European leadership in this respect to be demonstrated not only by our deeds that it would be the first major economy which would transform all these commitments into the legal, binding legislation and I’m sure all of it would be approved next year and, at the same time, we took over such important frameworks of cooperation like Mission Innovation, like Clean Energy Ministerial where we took over the Steering Committee and after the Chinese presidency now the next year will be European Presidency to organise summit in Øresund, Denmark and Finland will do and after that Canada is good to go. So now we work in this trio in very strong manner and I think that paradoxically it had a very energising effect on this climate community”.
The European Commission, Denmark, Finland, Norway, and Sweden will jointly host the ninth Clean Energy Ministerial (CEM9) in 2018. Canada will host the tenth Clean Energy Ministerial (CEM10) in 2019.