EU energy chief warms to offshore oil and shale gas

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Europe is at a competitive disadvantage because of a reluctance to take risks on offshore oil drilling and tar sands, and a failure to fully explore its shale gas options, EU Energy Commissioner Günther Oettinger says.

Speaking at an energy conference in Brussels on 17 July, Oettinger expanded on his recent call for Europe to add a fourth target - a 20% industrial contribution to GDP - to the EU’s three 2020 climate-related goals.

Asked by EurActiv how the industrial target could be met, Oettinger replied that the EU faced “three disadvantages” in competing with the United States: a greater dependence on imports of oil and gas, and correspondingly higher energy prices.

“In the US there’s a process to re-industrialise the country first by oil. Whoever rules in Washington, one gallon can’t be more than $4,” he said.

Washington also offers lower initial taxation.

“They accept some risks with offshore drilling for ‘own sources’ in the Gulf of Mexico and they accept [tar] sand oils and others,” the commissioner said. By contrast, “we import oil and have high taxation.”

The result is that Europe’s transport and industrial sectors are disadvantaged, Oettinger said.

Gerben-Jan Gerbrandy, the Liberal vice chair of the European Parliament’s environment committee, described Oettinger’s words as “a very interesting quote from an energy commissioner who also has long-term targets for renewables”.

The EU is pledged to increase the share of renewable sources such as wind and solar in national energy mixes to 20% by 2020, as well as cutting CO2 emissions by 20% on 1990 levels, and making voluntary energy savings of the same amount.

But Europe’s industrial associations and the EU’s energy directorate are increasingly restive about the costs of climate action in a recession.  

Offshore oil drilling

Brussels legislation to classify oil from tar sands as highly polluting is currently on hold. In October 2011, Oettinger’s energy directorate in the EU published a limited proposal to improve safety in offshore oil and gas drilling.

MEPs are currently fighting to get this strengthened by including considerations such as:

  • Delicate ecosystems and adverse weather conditions in the Arctic;
  • Extending the ‘polluter pays’ principle to include financial guarantees from operators covering all liabilities, in the event of accidents;
  • Expanding EU oversight of the regulation’s implementation through a reinforced mandate for the European Maritime Safety Organisation (EMSO).

“I think that the Gulf of Mexico oil disaster has shown that we are taking too many risks at the moment,” Gerbrandy told EurActiv. “It’s a very worrying development when Shell oil company is now planning to start drilling in the Arctic’s extremely vulnerable ecosystem.”

On 15 July, one of Shell’s Arctic ships – the Noble Discoverer – slipped its moorings in windy conditions and drifted to within 91 metres of the Alaskan shore, sparking environmental protests in Britain.

“We should be spending our money on further development of renewable energy instead of looking for the last drops of oil in the world in the most extreme places,” Gerbrandy said.

Shale gas

Shale gas is also a divisive issue in Europe, with states such as Poland and the United Kingdom incorporating it into their energy strategies, while Bulgaria and France have banned the process of hydraulic fracturing, or fracking, over fears of earthquakes, freshwater contamination and other hazards.

Earlier this year, an EU report on unconventional gas in Europe found no need for further environmental legislation on shale.

But concerns about the warming impact of methane emissions from shale led the International Energy Agency’s chief economist Fatih Birol to tell EurActiv in May that it was “not the optimum path.”

For his part, Gerbrandy said: “I have the feeling that there are still too many uncertainties about the environmental cost to put our money on shale gas.”

But Oettinger argues that since the US used shale to reduce its dependence on cheap imports from Qatar and Nigeria, North Americans now pay roughly 30% of the European gas price.  

“We are not really active in looking at which risks and options we would have with shale gas,” he added.

Reindustrialisation

Underwriting Oettinger’s analysis is a concern that industry’s contribution to European GDP fell from 22% in 2000 to 18% in 2010. “We need more industrial production,” he said.

Because power prices in northern Italy were twice as expensive as in the US, the commissioner proposed “a clear energy price strategy to avoid an ongoing process of deindustrialising Europe”.

This was welcomed by the EU’s energy intensive sector, which has lobbied heavily for more support.

“We cannot deny that the cost of energy is too high in Europe and the tendency is to see it increasing,” David Valenti, a spokesman for the European steel association, Eurofer, told EurActiv.

“We also have to pay for renewables, and the carbon price that energy producers are passing on in their power prices,” he added. “These are all things that put us at a disadvantage.”

Timeline: 
  • Summer 2012: Brussels expected to bring forward proposals on backloading allowances to support the carbon price.
  • Late 2012/Early 2013: EU Fuel Quality Directive expected to be decided.
  • Late 2012: European offshore drilling legislation expected to be passed.
  • 2013: EU may decide to legislate on shale gas.
  • 2020: Deadline for EU states to increase the share of renewables in national energy mixes to 20%, cut CO2 emissions by 20% on 1990 levels, and voluntarily, increase energy savings by 20% on 2005 levels.
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