EU makes concrete energy cooperation progress as Iran oil import sanctions come into force

Πηγή: DiploNews
By Shawnna Robert
July 6 2012

In the joint conclusion of the ninth Ministerial-level meeting of the energy dialogue between the European Union (EU) and the Organization of the Petroleum Exporting Countries (OPEC), the participants recognized the challenging economic developments and their implications for the global energy sector. Oil price volatilityreinforces the need for market monitoring and closer consumer-producer cooperation through energy dialogues.

The EU outlined a need to move towards a broader energy base by 2050. The EU cited tensions in global sovereign-debt markets and high oil prices as contributing to a loss of confidence towards the end of 2011 and the EU's subsequent output contraction. OPEC showed that oil demand in the world is set to grow, with much of the new demand coming from developing countries. It views policies aimed at alternative fuels, efficiency, and higher taxes as a significant demand risk. OPEC is investing in accordance with perceived demand for its crude.

Both parties agree that EU-OPEC dialogue has enabled them to remain focused on fostering market stability through constructive exchanges. Advances have been made in assessing the drivers behind oil, gas, and fuel market developments. There have been more frequent contacts between both groups. They agreed on the importance of sharing information and data covering all time frames. They also agreed to organize an international round table on offshore safety in November, a study assessing potential human resource demand bottlenecks early next year, and to continue a study on the impact of energy efficiency on energy demand. The 10th ministerial meeting will be held in Vienna, Austria in 2013.

EU Energy Commissioner Günther Oettinger welcomed this week the agreement to implement the Trans-Anatolia Gas Pipeline (TANAP), bringing Europe closer to sourcing gas directly from Azerbaijan and other countries in the Caspian region. The aim is to implement the pipeline no later than 2018. The gas will travel from the Eastern Turkish border to the Western Turkish border. Pipelines will link to the soon to be expanded Southern Caucasus pipeline starting in Azerbaijan through Georgia to a variety of proposed pipelines in Europe. The Shah Deniz Gas field is the largest natural gas field in Azerbaijan with an anticipated production of 16 bcm/year. The new pipeline connections will contribute to supply security for the EU and Turkey.

Nabucco West, the South East Europe Pipeline (SEEP) and the Trans-Adriatic Pipeline (TAP) were all in competition to deliver gas to Europe from the Turkish border. The Nabucco West pipeline was pre-selected by Azerbaijan this week as the preferred partner for the distribution of gas to Central Europe, bringing oil from the Turkish border to Vienna, Austria. The European Union took the lead in developing the Southern Gas Corridor and developed the concepts that have led to this decision. A decision by Azerbaijani authorities on the final route is planned for June 2013.

While Europe has been looking to expand energy cooperation with its international partners, the renewed sanctions on Iranian oil came into force. The EU is traditionally a major importer of Iranian oil, accounting for 23% of Iran's oil exports. These are the toughest ever EU sanctions, which are targeted at intensifying pressure in the Iranian Government over its perceived lack of transparency in its nuclear program. The sanctions include a ban on Iranian oil, financial services related to Iranian oil sales, and the purchase and transport of Iranian oil. The aggregate impact of the reduction of Iranian oil sales world wide due toincreased sanctions globally amounts to almost $32 billion in lost revenues every year. China, India, Japan, South Korea, South Africa, Turkey, Taiwan, Sri Lanka, Singapore and Malaysia have already reduced Iranian oil imports significantly.