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Founded in 2001, The European Rim Policy and Investment Council (ERPIC) is a network of professionals, academics, former and acting diplomats, politicians and policymakers, business firms and non-governmental organizations.
ERPIC is committed to advancing mutual understanding between Europe, and its neighbours, by promoting closer economic, social and political interaction between the European Union, and its periphery.
ERPIC brings together members of business, investment, policy, media and academic communities to reflect on the problems and challenges facing the regions that border the European Union.
ERPIC analyses the implications of the policies of the EU, as well as those of individual EU and non-EU member states.
ERPIC acts as a resource centre for those with business and policy interests in the European Rim by providing information and risk assessment relevant to policy-makers, regional and global companies, and international investors.
The 2nd Lebanon International Oil and Gas Summit (LIOG) took place on fourth and fifth December 2013 at the Phoenicia Hotel in Beirut. The LIOG Summit was held under the patronage of the Ministry of Energy and Water (MEW), in collaboration with the Lebanon Petroleum Administration and was endorsed by the International Gas Union (IGU). H.E. Eng. Gebran Bassil, Minister of Energy & Water officially inaugurated the first day of the conference.
In his speech, Bassil talked about what he called the ‘golden era’ of natural gas that the world is entering today. He tackled the question of whether Lebanon will be able to enter the game in time or whether Lebanon will be a late comer that will eventually only benefit partially. Bassil answered by stressing that it is crucial for Lebanon not to enter the market too late, highlighting however that a precipitated entry would be equally detrimental.
Bassil added that despite the several delays in the bidding round, investors should not lose hope as Lebanon will certainly overcome all obstacles. Its need for stability and its determination to monetize its riches and achieve energy security will prevail and turn it into an energy producer. The ministry of energy and the petroleum administration are both working hard towards this goal, balancing speed and precision and putting transparency, professionalism and expertise at the core of their efforts, he added. Lebanon’s strategic geographic location and cultural diversity will allow it to be the ideal working partner of major international oil and gas companies. Lebanon offers a favorable economic environment for companies to operate freely taking advantage of the advantageous tax system, said Bassil.
Lebanon has achieved good progress in the recent years: to name just a few the petroleum law was issued in 2010 followed by several decrees, the petroleum administration was formed, a pre-qualification round was completed and received substantial interest from major international companies (at the end of which 46 companies were successful: 12 as operators and 36 as non operators) and the Lebanese waters were surveyed.
Despite the fact that two crucial decrees are still pending (one delimitating offshore blocks and their coordinates and the other approving the model exploration and production agreement), Bassil insisted that the first licensing round will be opened by 10 January 2014. Bassil added that it would be a great loss for Lebanon not to take advantage, and in a timely manner, of the natural wealth in its waters and on its shore. According to the most recent estimates, there is a 50% chance that 45% of Lebanon’s waters contain 96 Tcf of natural gas and its shore 850 million barrels of oil. The hydrocarbon wealth offshore and onshore Lebanon will allow the country to readjust its economy and achieve major projects that will benefit all Lebanese.
Bassil assured that the oil and gas deposits will be a source of stability and cooperation amongst the Lebanese and in the region rather than a new cause for discord. He added that there should be no room for doubt in the country’s capability to bring its national energy project to fruition and that disagreement should be leveraged to ensure that Lebanon benefits fully from its wealth and for the longest period of time possible. Bassil also mentioned the importance of creating jobs for the talented and skilled Lebanese workforce and ensuring that 80% of new jobs created are filled by Lebanese. He ended his speech with a message of hope saying that they will continue believing in what they do and doing what they believe in to achieve Lebanon’s national goal.
Karen Ayat is an analyst focused on energy geopolitics in the Eastern Mediterranean. Email Karen on email@example.com. Follow her on Twitter: @karenayat
Extending environmental regulations to all drilling—including exploratory wells—will cut the EU out of the global oil and gas boom.
In October the European Parliament narrowly voted to extend the EU's Environmental Impact Assessment (EIA) directive to the drilling of a single shale-gas well. National ministers are due to vote on the move in the EU Council this month. If they uphold the measure, all shale exploration underway in Europe—from the Bowland Basin in Lancashire, England, to Lublin Province in Poland—will face significant new delays.
The larger danger for Europe is that energy investors may take such a decision as a signal to give up on the EU as a place to develop shale oil and gas. There are now so many more opportunities world-wide for shale-gas development that the industry may conclude its best strategy in Europe is to stay out of it.
The EIA directive has been in force since 1985 as a key plank of EU environmental regulation. It mandates the standards and procedures for environmental assessments and provides a list of projects that must be subject to them. The list, known as "Annex 1," has so far been limited to major energy and infrastructure development, chemical and steel installations, and work with a well-established risk of hazard—asbestos extraction and processing, radioactive waste disposal and so forth.
Currently the rules only require an EIA for gas drilling if the commercial extraction exceeds 500,000 cubic meters per day. That excludes the overwhelming majority of commercial shale wells that Europe might see in the future, and certainly the test wells it will take to get there. Most operating shale wells in the U.S. and China produce less than 100,000 cubic meters apiece per day.
The EIA rule-change would require that all "exploration and exploitation of non-conventional hydrocarbons"—i.e., every hydraulically fractured shale well—be subject to a complex and costly assessment, regardless of how much gas the well produces. The assessment would add approximately a year-long delay to development, and would be mandatory even for test wells that might never turn a profit. That would include, for instance, the exploratory well in Poland that's been producing about 8,000 cubic meters of gas per day since the summer.
It's not as if the industry isn't already facing national and local regulation. There is not yet a single shale-gas well anywhere in Europe producing commercial flows. Cuadrilla Resources started looking into British shale in 2008 and is still waiting on the permits and approvals to commercialize the gas.
So why are EU regulators in such a rush? Surely it would be wiser to wait for Poland, the U.K. and others to proceed with exploration and commercial development. Then, after more national regulatory experimentation, EU institutions would be better able to work out where European regulation could add real value.
Then again, from an environmental perspective it may be that EU-wide regulation is of little value at all, given the nature of environmental impact. The EU's 28 nations cover 4.4 million square kilometers and come with vastly different geologies and natural resources, not to mention different property rights and legal systems. What's good for the Baltic Basin might not work at all for the Fylde Coast.
The controversy also raises a major constitutional question: Under the EU principle of subsidiarity, how could European officials even propose a rule that would regulate down to the level of a single test well? Article 194 of the Treaty on the Functioning of the EU states that European environmental policy "shall not affect a Member State's right to determine the conditions for exploiting its energy resources." That appears to be exactly what Brussels is trying to do.
Before the shale revolution, capital chased fossil-fuel resources. That meant that governments had considerable leverage to decide how to regulate development; capital holders had little say in the matter if they wanted to develop.
Now, however, with the immense shale-gas resources available around the globe, the situation has reversed: Resources are chasing capital. Governments or organizations like the EU that seek to impose burdensome, unjustified or premature regulatory structures, will find the capital quickly heading elsewhere. Oil and gas will still be plentifully produced, just not in Europe, which will be relegated to importer status.
This Op-Ed by Alan Riley was first published in The Wall Street Journal Europe. Mr. Riley is a professor of law at City Law School in London.
At the beginning of this week, Chevron began works on the leased perimeter in Silistea, Pungesti, part of Vaslui County. Exploration works will ascertain the plot’s shale gas potential.
According to Razvan Mitroi, spokesman for Chevron Romania: “the company restarted works in Silistea… equipment has arrived that will make the platform on which the first shale gas exploration bore will be located.”
The start of the works were not without barriers. Equipment reached the site with the help of police as locals attempted to prevent equipment from passing through. Around 30 people staying in tents from the Silistea-Pungesti camp claimed that police used force on Monday morning. Two protesters were taken by ambulance to the County Hospital in Vaslui City.
On October 3rd, Chevron obtained the building permit necessary to build in Vaslui County, which would be Romania’s first shale gas exploration bore. Around 500 people protested on October 16th in the area. Tom Holst, Chevron’s country manager for Romania announced that shale gas exploration in Pungesti will be suspended until the safety of the company’s employees, builders and of the community is ensured and until people understand that Chevron’s methods are of top-quality.
Despite the opposition of the locals and police intervention, the first exploration bore should be operational in January 2014. According to Chevron's Externaml Communications Advisor Cam Van Ast, “Chevron can confirm that it has resumed operations activities in Silistea, Pungesti commune, Vaslui County. Chevron will undertake only exploration activities with conventional technologies in block EV-2, under our existing permits and approvals, which we obtained at the start of October 2013.”
He stated further “Our priority is to conduct these activities in a safe and environmentally responsible manner consistent with the permits under which we operate. Chevron is committed to building constructive and positive relationships with the communities where we operate and we will continue our dialogue with the public, local communities and authorities on our projects.”
The situation in Pungesti remains serious with police still present. George Epurescu, a representative from Romania without Them, one of the strongest environmental protection organizations involved in organizing the resistance against Chevron said that police intervention is an abuse made by the state:
“The intervention in Pungesti took place as a result of a direct order that Ponta received from Washington, as a result of the visit from a month and a half ago. The will of the community has no value, although the government brags about the decentralization law… this proves through unconstitutional laws, they are trying to eliminate all the power of the civil society or of the citizen to defend themselves against the state. The creation of an isolated area and the seizing of the activists in the Resistance Camp represent a cynical game, an attempt to humiliate the population, but the environmental activists will still oppose and will still organize the opposition against shale gas exploitation.”
The United Kingdom unveiled its measure to encourage investment in the shale industry, reducing the tax payable on a proportion of profits from 62% to 30%.
“A new tax allowance to encourage investment in shale gas that halves tax rates on early profits,” Chancellor George Osborne said in the Autumn Statement.
The measure was already discussed earlier this year, in order to foster shale gas exploration and production. The Government sees economic benefits beyond oil and gas sectors.
“The country that was the first to extract oil and gas from deep under the sea should not turn its back on new sources of energy like shale gas because it’s all too difficult,” stated Osborne.
Southern France needs a central intervention as prices in the region rose to a record over a dearth of liquefied natural gas (LNG) deliveries, regulator Commission de Regulation de l’Energie (CRE) wrote in a statement.
‘The gas market in southern France is facing major tension at the start of winter,’ CRE wrote on the note released on Thursday, explaining that France needs LNG imports as soon as possible.
Last month, France announced its plans to grant special treatment to energy-intensive factories located in the South, in an attempt to offset higher gas prices that local users pay compared to industries in the north.
Prices in the south have been higher than in the north due to diversion of imports from Europe to Asia and to “structurally” tighter supply. Cold weather and low stocks at the southern French hub of Marseille added further pressure.
Poland may need to wait for four years to know if the exploitation of shale gas is profitable, said the new Environment minister on Friday.
Maciej Grabowski, who formally replaced Marcin Korolec at the helm of the Environment Ministry, is considered the right man to lead Poland toward shale gas production.
"We know that shale gas is there, but we do not know at the moment whether its exploitation is profitable. There are not enough wells, there has to be at least five times more," said on Polish radio.
Last week, Grabowski said that a draft law on shale gas would be ready by the end of the year, “ to reduce the potential risk for investors.”
Afterwards, investors will be enabled to speed up the exploration process.
“If we get this number of wells in four years then we would be able to estimate whether we can achieve a production on an industrial scale," Environment Minister added.
Norway’s Government upheld the decision to reduce tariffs in the gas transportation system Gassled, maintaining the measure introduced by the previous government that will impact gas transported after 1 October 2016.
“Sound resource management means that the profit from oil and gas resources must be extracted on the fields, not in the infrastructure. Tariffs in the infrastructure are reduced when the predicted return has been achieved. This predictability for investors is important for the authorities,” Tord Lien, Minister of Petroleum and Energy, said in a note released on Friday.
Norway announced tariff cuts to make additional finds profitable and to boost exploration and recovery rates. Lower tariffs would then encourage energy firms to explore for more gas in the Arctic Barents Sea, where only a few discoveries have been made thus far.
At the same time, companies have spent $5.1 billion in recent years to acquire stakes in Norwegian pipelines and investors claim that the decision to cut tariffs is illegal. Njord Gas Infrastructure, Solveig Gas and Silex Gas announced in July that they intend to proceed with legal actions against Norway to claim compensation for losses due to the cuts in gas transportation tariffs.
“Lower tariffs will promote exploration, development and production of oil and gas, strengthen the competitiveness of Norwegian gas and provide for sound transportation solutions,” explained Lien.
Top energy bosses have joined forces with senior government ministers in arguing the case for Gazprom's South Stream gas pipeline, stressing its value and potential economic benefit for Europe.
Critics say the pipeline will tighten Russia's grip on the European energy market while the European Union says that it currently fails to comply with EU energy and environmental laws.
But a high-level conference in Brussels on 4 December was told the project will play a "vital role" in meeting Europe’s additional demand for natural gas.
The event was attended by policymakers, experts and representatives of the government in Serbia where work began on 24 November on the Serbian leg of the pipeline.
The main route for Russian gas to Europe runs through Ukraine but this has been dogged by political and pricing disputes that have affected supplies and raised concerns over Europe's energy security.
South Stream, the event was told, is designed to provide an alternative to the troublesome Ukraine route with the first gas expected to be pumped through the pipeline in 2015-2016.
The planned pipeline will transport some 63 billion cubic metres of gas per year through the Black Sea, Bulgaria, Serbia, Hungary and Slovenia into Italy.
The 2,380-km pipeline, funded by Gazprom as well as Italy's Eni, France's EDF and Germany's BASF was first suggested in 2007 and is expected to cost €17 billion.
Construction of the Bulgarian stretch also began last month and the project gives Russia a clear run into the lucrative energy markets of Europe.
The event heard that by 2030 Europe’s natural gas needs are anticipated to grow by 25%, of which 80% will be imported. Faced with the prospects of diminishing domestic production and uncertainty about regulatory and environmental aspects of commercial unconventional development, Europe requires security of supply.
Russia is the EU’s largest trade partner for energy goods and current projections indicate that the annual supply of Russian gas to Europe will increase from 312 billion cubic metres to 537 billion cubic metres over the next 15 years.
After successfully completing the Nord Stream pipeline which opened in 2011, pumping Russian gas under the Baltic Sea direct to Germany, Gazprom is now focused on the south and east of the continent.
The project involves seven European countries across the Black Sea through Turkish territorial waters and is one of the most ambitious infrastructure projects undertaken, with huge engineering and environmental implications.
The Brussels debate was organised by Natural Gas Europe, an independent media organisation, as part of its 'Gas Dialogues', a series of conferences which began in Sofia in June examining the social, environmental and economic impacts of the project.
The aim is to promote increased dialogue around South Stream and highlight the current state of planning and development.
The debate in the European Parliament brings the series of conferences to a close and keynote speakers included Gazprom representatives and energy experts.
The two-hour debate, "South Stream: The Evolution of a Pipeline" discussed the importance of the pipeline in economic stimulation, security of supply, diversification of energy sources and its role in the development of a strong partnership between the energy enterprises of Europe.
A senior representative from the European Commission said that while the EU welcomes what he called "this interesting" project, he said it also has concerns about it meeting EU energy and environmental laws.
Klaus-Dieter Borchardt, director of the commission's internal energy market, said, "For fear of pouring cold water on this I have to say that before it can operate on EU territory it must comply with EU energy law. This applies to everyone, not just Gazprom and Russia and I hope that with sufficient goodwill on both sides we can find a good result."
He asked,"Is this possible? I do not know yet but we in the EU want to work constructively with Russia to see how we can diversify our energy supplies. This will require mutual trust and understanding and I remain optimistic."
In reply, Alexander Syromyatin, deputy head of Gazprom's project management department, said he believes the project will help safeguard EU energy supplies in the future, help reduce greenhouse gas emissions from the use of fossil fuels like oil and "connect producers and consumers."
He said, "South Stream's contribution into providing Europe with energy security is very significant. It allows us to create alternative and secure natural gas supply routes to our consumers."
He added, "This will also have a positive impact on economic conditions in Europe and help member states emerge from the crisis."
In response to a question from the packed audience, Syromyatin also said he believes it remains feasible that gas supplies will start on schedule by the end of 2015, adding, "This should be sufficient time for the politicians to sort out their differences."
His comments were endorsed by Anatoly Yanovsky, Russia's deputy energy minister, who cautioned that construction of the pipeline would continue irrespective of questions over its compliance with EU energy law.
He said, "The EU is a key trading partner for Russia and 20 per cent of our oil exports go to Europe. But the two sides have been moving in different directions when it comes to energy policy and the only way we can resolve this is through common efforts.
"I would just say that if all laws have to comply with an individual country or bloc, there can be no room for international rules."
Moderating, Bulgarian MEP Slavcho Binev said, "The major objective of the project is meeting Europe’s additional demand for natural gas, which is the most environmentally-friendly and secure fossil fuel."
Binev, deputy leader of the Europe of Freedom and Democracy group, added, "Natural gas will long remain a reliable foundation for Europe's energy sector and diversification of routes and implementation of joint projects to construct new offshore gas pipeline systems are vital."
Further contribution came from Viki Cooke, director of 'World Thinks", who presented the results of an online survey of 2,500 people and experts in the five transit countries (Hungary, Bulgaria, Italy, Slovenia and Serbia) impacted by the project.
She said these show that the overwhelming majority of those surveyed are in favour, with the number of supporters of South Stream outnumbering opponents by 12 to one and 59 per cent of the public backing the project.
She said, "There is clearly strong support for this and also for natural gas. People see it as preferable to coal, oil and nuclear. The majority think that the advantages, such as the economic gains in transit countries, outweigh the disadvantages."
The survey also showed, though, that trust in Gazprom and the Russian government remains an issue for the public.
Alan Riley, of the City Law School in London, pointed out that the EU now imports as much gas from Norway as it does from Russia and also castigated "crazy" European policies which focused on the production, rather than consumption, of CO2.
The 450-km Serbian leg of the pipeline is worth almost €2 billion and at least 2,000 jobs. Serbia consumes about 2.5 billion cubic metres of gas, mostly imported from Russia through Hungary. The Western Balkan nations as a whole consume about 6 bcm per year, a figure expected to rise in coming years.
Zorana Mihajlovic, Serbia´s minister of energy, development and environmental protection, told conference, "South Stream is of great economic and geo-strategic importance for Serbia.
We expect to benefit a lot from gas transit tax that could potentially bring in €100m annually."
"The project demonstrates that Serbia still has an important role to play today as a key bridge between Europe and Russia."
She said it was up to Russia and the EU to resolve regulatory issues, adding, “Whatever is decided, it will be respected by us.”
The minister also highlighted the economic benefits, saying that work on the Serbian leg of the pipeline could create up to 100,000 jobs.
Natural gas, she said, had an important role to play in the energy mix both of Serbia but the EU too, adding that at a time of austerity in Europe, the economic investment required to develop South Stream offers "significant benefits" to a part of the continent that seeks economic stimulus.
The conference heard that fellow ex-Yugoslav republic Macedonia, on Serbia's southern border, is also interested in South Stream gas and there is the possibility of supplies to Kosovo too.
by Martin Banks
Oktavia Dangel ODangel@bell-pottinger.com
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