The workshop was opened with a keynote from Mechthild Wörsdörfer, Director for Energy Policy at the European Commission’s Directorate-General for Energy. Dr Friedbert Pflüger opened the activity by welcoming all speakers and participants to the last workshop held by EUCERS together with KAS and ISD. Dr Pflüger started by noting that the subject is particularly timely following the Paris Agreement. The issue, as he explained, is that many see oil as something that will not be amongst us within a century. The question is whether this will happen. As he noted, only a few years ago we were talking about peak oil and today, however, some producers even fear that they might not be able to sell their oil thirty years from now. The issue is, thus, extremely relevant at this particular moment in time. Dr Pflüger then moved to introduce Mrs Mechthild Wörsdörfer and open the room for the discussion to start.

Mrs Wörsdörfer started by bringing attention to the fact that from the perspective of the EU, COP21 was considered a huge success, and that the EU has traditionally been able to keep its commitments with regard to climate change policies. She then offered examples of policies soon to be delivered such as the ‘2030’ framework and the Energy Union. Despite of all the effort being put into the issue, however, Mrs Wörsdörfer brought the attention back to the fact that it is a long-term transition. In her view, fossil fuels will continue to have an important role at least in the short and medium term, particularly due to the transport sector. Mrs Wörsdörfer then entered considerations about specific initiatives that can help to achieve climate goals (for example, the Emissions Trading System, low-emissions mobility strategy in the transport sector, regulations on CO2 emissions for cars and vans, initiatives to stimulate the use of advanced bio-fuels, technology progress in fields such as car batteries, the challenge of pursuing cost effective policies, the and the idea of phasing out fossil fuel subsidies). Regardless, Mrs Wörsdörfer considers that the need for fossil fuels will not disappear and the EU will remain dependent on them. As this entails imports, Mrs Wörsdörfer following statements referred to the fact that security of supply continues to be an important goal. This is, as noted by Mrs Wörsdörfer, particularly important when we consider EU’s gas dependencies. In this aspect, Mrs Wörsdörfer considers that the globalization of gas markets, driven by expansion of LNG, is key to Europe’s energy security. At a global level, Mrs Wörsdörfer also mentioned that the future of fossil fuels will be affected by the ambition of the implementation of the Paris Agreement, which has been ratified by many countries, including US and China, and will likely be ratified by some EU member states in the hopes of seeing it enter into force prior to Marrakech.

The first panel “The Future of Oil after the Paris Climate Conference” was chaired by Dr Friedbert Pflüger, EUCERS Director; with a keynote by Dr Christoph Frei, Secretary General and CEO at the World Energy Council, and comments by Olaf Martins, Global Engagement Manager at the International Association of Oil & Gas Producers (IOGP); John V Mitchell, Associate Fellow in Energy, Environment and Resources at Chatham House; and Jose A Bolanos, KAS Fellow at EUCERS.

Dr Christoph Frei expressed his desire to offer a ‘sneak preview’ of what will be said at the World Energy Congress in early October. His intervention was structured in three main points: change in global context, transition within sector, and collaboration between countries. With regard to change in global context, Dr Frei noted that over past 45 years we have seen a doubling of population, quadrupling of global GDP, and an increase in energy demand by a factor of 2.6. However, the next 45 years will see smaller increases in population, which implies a loss of momentum. With regard to the transition in the sector Dr Frei observes three main drivers: decarbonisation, business model, and resilience. To achieve global warming goals it has to accelerate from a 1% decarbonisation per year to 6%, which is hard considering that proven reserves are larger than the carbon budget. Dr Frei also mentioned that it is yet uncertain whether technologies such as CCS will be able to offset the remaining emissions. Dr Frei also described many different trends, as for example that the reduction of entry costs into energy markets, are changing business models. Furthermore, Dr Frei highlighted the pressure that the need for resilience is having on infrastructure. In his view, the need to think how to build and react to weather events affects possibility. Finally, the issue of collaboration was described by Dr Frei as contextual change driven by a tension between coordinated action upon directives (a “symphony logic”) and more spontaneous market trends (a “jazz logic”). The result is a trend that is neither of these logics but a combination of both – although Dr Frei invited the audience to seek out for further details in the forthcoming congress.

Olaf Martins begun by introducing the IOGP whilst also noting that they see a very significant role for oil in the forthcoming future. He then posed the question of why oil is so successful, which he believes comes down to oil’s enormous energy density. Moreover, as also argued by Mr Martins, oil is still the number one source of energy in most countries in the world (40 of 72 countries evaluated). This was put into perspective by Mr Martins when he highlighted that it takes time to transition. Mr Martins illustrated this through a graph from BP that shows that it took oil several decades to pass the 20% market threshold. In such manner, whilst Mr Martins considers that change will happen, he was also emphatic when mentioning that it will take time. Mr Martin’s main concern in this regard was investment. As he mentioned, oil plays a big role today and will play a significant role in the future. He illustrated this with the example of train tanks. As per his calculations, each day the world needs a train of 2400 km to satisfy demand. Whilst some scenarios believe that the ‘length of the train’ will be shorter in the future, even the most optimistic scenarios would require a lot of oil. Without investment, he notes, it would be impossible to achieve the necessary production, which calls for concern.

John V Mitchell began by highlighting that the effect of Paris can only be properly understood after considering what was already going on in oil before the Paris. The first trend he considers noteworthy is fracking, which has reversed the balance of energy resources in the US and the possibility that fracking may come back big if prices rise again. The second trend brought to consideration by Mr Mitchell is the switch to the East, where demand in developing countries has been seen to grow rapidly, which has a profound effect on the structure of energy markets. The third trend noted by Mr Mitchell is the rise and collapse of prices in the recent past, which has left companies in very complex circumstances due to the additional debt acquired by the industry in the past decade. Mr Mitchell noted that it has become clear that the situation cannot continue and that equilibrium will need to happen. To this, Mr Mitchell considers that the Paris Agreement adds two main influences. The first is that, because all countries are subscribing to it, there is an inevitable trend to policy change. Mr Mitchel highlighted the fact that it is unknown if it will be enough but he considers that there is no excuse to say that change cannot happen. The second influence noted by Mr Mitchell is the reshuffling of markets that will result from the fact that, as evidenced by the INDCs, there are differentiated strategies in developed and developing countries. Mr. Mitchell considers that this will reinforce pre-existing shifts in energy markets. Mr Mitchell closed by illustrating how many of these changes could happen and the impact that they could have.

The second panel on “Climate Policy Implications for the Fossil Fuel Industry“ was opened by Mr Blomeier, who welcomed the panellists. He started by mentioning the relations between KAS, EUCERS and ISD, which has led to very successful cooperation. He mentioned that one of the facts that calls his attention the most is that we are not only talking about demand and supply per se but about extremely relevant and complicated geopolitical and geo-economic factors. Mr Blomeier considers that it highlights the way in which the map of the world is shifting significantly and the need to have a long term view into the future. Without further ado, Mr Blomeier opened the floor to the second panel’s first speaker.

Christof Rühl started by advancing that his intervention would lead to the conclusion that, short of very rapid unpredictable technological changes, the 2 degree goal will not be achieved. He then began by addressing the contrast between energy and carbon intensity changes. Energy intensity improvements have been and will continue to be a global trend because energy is expensive and thus energy saving technologies spread around the world. However, there is less meaningful exchange of technologies around the world with regard to carbon intensity. Mr Rühl then addressed considerations about the way in which the fuel mix has changed historically by showing how the world economy shifted unto oil, and how recent changes have added more diversity to the fuel mix. However, as highlighted by Mr Rühl, despite of this diversity, coal needs to be regarded as the leading fuel in the power generation sector. Although some diversification has happened, this was initially at the expense of oil’s power generation share. And yet, as Mr Rühl added, even by continuing with the impressive growth rates they currently have, renewables (wind, solar, and biomass incl. biofuels) would add up to only about 10-12% of the global mix by 2035. As highlighted by Mr Rühl, this could change the energy mix to the point that gas could replace coal and oil could be displaced as the leading fuel in the world. However, this also means that there would still be a growth in emissions and the offsets from increasing renewables and improving efficiencies are not sufficient to meet climate goals. As such, Mr Rühl closed with three statements. Firstly, that if the current share of renewables is any guide, targets will be missed. Secondly, the fact that current efforts are not enough does not automatically mean that the task is impossible, only that it requires of ‘something else’. Thirdly, that technological changes are necessary.

The first comment in the second panel was done by Dr Frank Umbach, who started by acknowledging that the Paris Summit, particularly when compared to Copenhagen, should be considered as success. Nonetheless, he added, the net outcome is likely to be upwards of the 2 degree goal due to the fact that efforts are insufficient, inadequate and ineffective. Dr Umbach then offered a number of examples to support this view such as, for instance, the tension there is between the issue of decreasing national emissions and enhancing global climate protection. In his view, whilst these two goals are often conflated, sometimes reducing national emissions leads to higher net emissions at a global scale (for example, due to transporting the fuel). Dr Umbach closed by offering examples and scenarios to illustrate the point, ultimately calling for integrated strategies to avoid this problem.

Dr Mark Howard started that he has been convinced about the threat of climate change for long. He believes that it is important to remember that science about climate change provides a range of outcomes so views about climate change will naturally change in one way or another. Dr Howard’s second point referred to the speed of change, as he noted that energy markets can change significantly in relatively short spans of time, as it happened with US shale. Dr Howard then noted that there are technologies that are close to making a difference to oil demand. For example, he noted that the market share of electric vehicles, whilst still about 1% of world markets, are growing quickly and some expect true cost within the following decade. As such, for Dr Howard, the question is at what point does electric transport start impacting demand for oil? After mentioning that he thinks 25% market penetration could tip the scales, Dr Howard addressed the relation between this and policy suggestions such as IEA’s 450 scenario. Dr Howard closed his participation by noting that, regardless, liquid fuels will continue to be required and thus, noted concern about the need for strategies in this regard.
Dustin Benton’s comment focused on three key points. The first was the role of the state in fossil fuel industry. Mr Benton noted that only 5% of power sector investment happens in conditions of free markets, as the rest is either controlled or influenced by the state, and that National Oil Companies now account for 44% of upstream investment. He considers that this brings about a positive and a negative consequence: the fact that there is a lot of inertia and thus change could be slow, the fact that policies are likely to have traction which could speed up the transition. The second point referred to the power sector, where he acknowledges that decarbonisation has been unsatisfactory thus far despite of knowing that it can be done. Mr Benton thinks that nowadays, however, some technologies such as solar seem to offer more hope due to the fact that they are easier to deploy – which could lead to a faster transition. The final point made by Mr Benton dealt with the issue of the policy strategies that should be implemented. In his view, it is better to focus on ‘making good things’ cheaper rather than on trying to ‘make bad things more expensive’. In his view, the latter, whilst tempting, does not work because of politics. Instead, it is possible to lower costs of good technologies. Having said that, he also noted that carbon pricing could help preventing a re-carbonisation. Mr Benton closed with a final comment about Carbon Capture and Storage (CCS). For Mr Benton, CSS for coal needs to be reconsidered because renewables are becoming cheaper so it makes more sense to have an affordable non-emitting solution rather than an expensive offset driven one. As such, Mr Benton considers that coal and CCS only make sense when it comes to backup generation.

Questions & Answers (Q&A)
Each of the panels closed in a lively Q&A session. As per the standard EUCERS/KAS/ISD Energy Talks format, the content of Q&A’s is left out of the summary to encourage frank and honest discussion in future activities.

Dr Samuel Greene, Director of the King’s Russia Institute, gave an introduction thanking everyone for coming and inviting them to read the report which was now online.  He praised the relevance of the report in the fast changing circumstances of today’s politics.  Chris Mottershead, Vice Principal (Research and Innovation) of King’s College London commented on the clear analysis the report communicated, it was ‘clear, concise, balanced [and] a pleasure to read’.  Professor Dr Friedbert Pflüger, Director of EUCERS who chaired the panel, thanked everyone for their support in the cooperation between the two centres at King’s and congratulated Dr Andreas Goldthau, author of the study, on writing a balanced report on a very controversial and polarized issue in today’s energy politics.

Dr Goldthau thanked his team and EUCERS before introducing his report.  In his report Dr Goladthau has come to the conclusion that Nord Stream 2 could in fact bring benefits to many countries that oppose it.  It is suggested that the pipeline is so contested that discussion today only revolves around geopolitics.  Most people are shooting criticism at the project before it has even started, he believes when one steps back, these criticisms have less basis.

The politico-economic consequences of the denial of transit fees to Ukraine, a vital source of revenue, are a regular point of criticism.  However, Dr Goldthau has noted that the effects of Nord Stream 2 would not be as negative as is often perceived.  Ukraine would benefit from the strengthening prices and solidifying of demand caused by Nord Stream 2.  Free market forces would naturally balance out the situation.  Gas coming from the West is increasingly putting pressure on Eastern prices; Czech gas price equalization was given as an example.  Interconnectors and infrastructure are increasingly causing convergence between gas prices from Russia, Norway, Netherlands and LNG prices.  It is even noted that Russian LTC gas is competing with Russian hub priced gas.  Thus, Ukraine could benefit from a net economic gain from lower gas prices.  The ability to source from the West would also give it more independence.

Dr Goldthau noted certain pre-conditions needed to be met to encourage these advantages of Nord Stream 2.  A strong watchdog, in the formof EU Competition Authorities and infrastructure integration where seen as vital. The political challenge Nord Stream 2 present to the EU was also pointed out.  If the project is too controversial from a political perspective, those states and actors need to step in.  This is a litmus test for the EU Commission; will it define itself as a market watchdog or a political actor.  If it is a market watchdog it has to maintain neutrality and not apply legislation selectively or regulate markets, or will it act as a political entity and pursue the EU’s interests.

Professor Dr Plfluger then introduced Dr Katja Yafimava, Senior Research Fellow at the Oxford Institute for Energy Studies.  Dr Yafimava said she appreciated Dr Goldthau laying out a mosaic of views and thought his point about the role of the EU Commission, as a guardian of regulation or a political actor, was interesting.  She discussed the possible use of a ‘bureaucratic weapon’, whereby legislation is selectively developed and applied, and considered the possibility that Russian gas could be treated differently to other suppliers.

Dr Yafimava then noted that ASA, the independent regulatory body, has significant powers and stands above national interests.  She considered that it was a possibility that the EU could allow ASA stronger powers to regulate the gas market, but questioned if this would occur.  Again, it came down to the question of if Nord Stream 2 was a regulatory or political matter.  She advocated transparency would help all parties and questioned, if it is the case that this is a political matter, how much of a mandate did the EU have to act.

Professor Dr Pfluger then introduced John Roberts, Director of Strategy and Chief Analyst at Natural Gas Europe.  Mr Roberts agreed that any increase in Russian gas contributed to market flexibility and that more competition increased Energy Security.  However, he pointed out what he believed was a caveat in Dr Goldthau’s argument, that in order for this to take affect there needs to be sufficient interdependent infrastructure in the EU.  Currently, John believes, there is not sufficient infrastructure and most current developments are small scale.  He then queried if Nord Stream 2 only created a more open market in the North whilst limiting the market in the South East of Europe.  He also highlighted that it is crucial to understand Russia’s perspective of Nord Stream 2.  How does Russia view the gas it sells?  While he concluded Russia views it as both a commercial and geopolitical venture, what is important is to understand which one takes precedent.

The launch was followed by a Q&A. 

The full text of the study can be accessed here.

Mr Hans-Hartwig Blomeier. The workshop was opened by Mr Blomeier, who welcomed the audience. Mr Blomeier briefly mentioned that this event is part of a series of discussions about the topic of the future of oil. He noted how just a month ago we gathered to discuss the future of oil prices, and that we were in Edinburgh in January discussing the future of oil in the North Sea. Given that the conference included several speakers, Mr Blomeier wanted to be brief with his introduction. Thus, he thanked EUCERS and ISD for their on-going cooperation and then proceeded to give the room to the speakers.

Dr Friedbert Pflüger. In his introductory remarks Dr Pflüger begun by thanking the partners KAS and the ISD for the continuous cooperation. He then highlighted the importance of oil prices for war studies and international stability. Dr Pflüger also noted that it is important to bear in mind that whilst most producers have discussed diversification for several years, there has been little progress in this regard. Even the rich producing countries, such as Saudi Arabia, are finding it hard to meet their budgetary needs. Dr Pflüger also mentioned that another issue of concern is that OPEC represents the region with most reserves in the world, but not able to balance markets, as shown by the failure in Doha. Furthermore, he added that there are many open questions, such as the role of Iran in the future. To close his introduction, Dr Pflüger brought attention to the rapidly changing nature of markets, as only some years ago we were talking about the challenges of peak oil.

Geir Westgaard. Mr Westgaard’s participation begun by noting that the Gulf’s situation is so complex that it is impossible to summarise everything in a short talk. As such a focus on Saudi Arabia can help identifying the most significant trends. He begun by noting that the three main factors behind’s OPEC 2014 decision to not cut production, all of them directly related to Saudi Arabia. These were: the determination to recapture market share, a desire to challenge Iran’s comeback, a desire to push production to avoid being left with stranded assets. Mr Westgaard then continued the discussion by elaborating on this idea before he moved onto the policy measures that have been necessary to manage low oil prices, such as the use of foreign reserves, budget considerations, lending from international banks, and even the introduction of VAT. However, as noted by Mr Westgaard, it is clear that fiscal adjustments will not suffice, as there is a need for a deeper structural reform. Mr Westgaard then considered the likelihood that the Saudi Arabia’s ‘Vision 2030’ (also known as McKinsey Plan) succeeds at delivering said reform.

Julian Lee. Mr Lee started by noting that in his view the decision to not cut production in 2014 was a Saudi policy, rather than OPEC’s. Mr Lee agreed to what was noted by Mr Westgaard. He added that the experience of trying, and failing, to defend prices in the late 70s and 80s also cemented the determination to not try this time. Mr Lee’s intervention then moved into considering the results that the 2014 decision to not cut oil production has brought to Saudi Arabia, noting that the decision brought about both benefits and costs. Having done these considerations, there might be a problem at the heart of how we look at it, as we tend to get predictions about markets wrong. He noted, for example, the belief that prices could only go back up in times of high oil prices, and the idea that US shale would exit the market promptly due to low prices – which is yet to happen. Nowadays we believe that when prices come back up, new production will rapidly hit the market. However, Mr Lee’s final segment looked at different reasons why this may not be the case, including the not-easily-recoverable loss of human capital, the impact to credit worthiness of existing companies, and a problem of diminishing spare production capacity around the globe due to different geopolitical issues. Mr Lee closed his talk by noting that these, and other considerations done in the talk, are ideas for further thinking.

Dr Carole Nakhle. Dr Nakhle begun by stating that there are two perspectives to the discussion, the short and the long term. Speaking of the short term, Dr Nakhle noted that OPEC’s, and in particular Saudi Arabia’s, strategy since 2014 has two main objectives: to stop US from gaining market share, which was achieved; and to stop own loss of market share, which has not been achieved. Dr Nakhle then noted that it is important to consider the question of what the Saudi government really believes about whether low oil prices are good for the economy given the extensive reform agenda that they have. After this, Dr Nakhle moved onto the topic of OPEC’s relevance. She noted, for example, that Doha is not necessarily a failure because OPEC’s history shows that sometimes there is no need for formal agreements for results to emerge. Continuing with her view of short and long-term perspectives Dr Nakhle then examined different challenges that are relevant for the future of oil in the region. She noted, for example, the short-term relation between oil companies and governments and oil prices, financing difficulties to be encountered in the near future, and the long-term challenge represented by climate change. Dr Nakhle’s intervention finished by noting that a concerning fact is that there is no comprehensive energy policy in the region, as there are many good intentions but a big challenge of implementation.

Frank Umbach. Looking at the bigger picture, Dr Umbach’s argument flowed alongside a number of key considerations. He reminded the audience that already at the outbreak of the last Gulf war in 2001, the US was already less dependent on oil supplies from the Gulf region compared with Europe and in particular East Asia.  Meanwhile the US oil imports from the Gulf have further declined (to less than 10%), whereas the import dependence of Europe (around 30%) and Asia (70%) have remained, which have increased US demands for larger burden-sharing (i.e. security commitments) by Europe and Asia. Looking ahead, example, Dr Umbach noted that the entire region is at a crossroads, derived not from any-one element alone but the combination of various trends – which creates a dynamic of its own and which appears to be underestimated in Europe and the U.S. Dr Umbach also brought up many conflicts faced by the region, such as the increasing geo-economic and geopolitical rivalry between Saudi Arabia and Iran (leading even to proxy wars in Yemen and Syria), as well as the fact that new generations are coming to power, which is accompanied by new personal ambitions. Dr Umbach considered that these are developments that we must anticipate. After this Dr Umbach turned to the difficulties of anticipating the future. He noted, for example, that Saudis miscalculated the resilience of US shale. That said, he also noted that technologies are impossible to bankrupt and as such even if the price war is placing some companies under pressure, the technology remains there and can rapidly increase the U.S. production when the oil cycle turns to more than US$50-60 per barrel. Dr Umbach then moved to the role that China might have to the future of oil. China’s oil demand and  storage capacity combined with the present economic transformation away from heavy industries may significantly reshape the global oil demand. Also on the topic of storage, he noted that the Gulf’s storage capacity could become a source of major changes as new leaders are less interested in favouring US and European interests with it. To end his intervention, Dr Umbach turned into considerations about Saudi Arabia’s spare production capacity, which has been already lower than the IEA has recommended for some years. Given its overall geopolitical importance, he noted that it has been referred to by US experts as the “nuclear weapon in the oil industry”. He noted that this factor might also bring about significant changes to the future supply and demand balance.

Stefan Haid. Mr Haid focused his presentation on Iraq. He started by remarking that the low oil price has definitely hit Iraq but that the ISIS insurgency has also been a major challenge. Coupled with a collapse in public services, public protests, deficits, the tumbling infrastructure, the investment required for the oil industry, the situation faced by the government is one of extreme pressure. In addition, he noted that the Kurdistan region is a further source of challenges for the government because, whilst there has been some cooperation to counter ISIS, many conflicts are still to be resolved. Despite of all this, Mr Haid noted that there are some sources of hope. In his view, Prime Minister Mr Al-Abadi has been able to keep the government together despite of the intense pressure. Similarly, he noted, the military has made a comeback after initially ceding ground to ISIS. Another point that needs consideration, noted by Mr Haid, is the stabilizing role that Iran has played. Finally,  Mr Haid stated that revenues are still coming despite of the low oil prices. To summarize; the big challenge is the question of ‘how to stabilize Iraq’. In Mr Haid’s regard, the challenge lies in successfully implementing reforms. For this purpose initiatives like the EU-Iraq energy centre can be vehicles to enhance cooperation with those in Iraq that are willing to implement reforms. An important aspect of this effort, noted Mr Haid, is to increase capacity development and further incentivise research. To close, Mr Haid made emphasis on the fact that if Iraq collapses the whole region will face an even bigger challenge.

Kalina Damianova. Ms Damianova focused on the role that Iran may play to the region and the future of oil globally. According to Ms Damianova, Iran’s nearly pre-sanction levels of increased oil production and export showed that Iran was following a long-term strategy, where the current low prices mattered little compared to the perspectives of its re-gained market share and re-established international position. Additionally, she suggested that extracting as much oil as possible from the ground could be a ”now or never” approach, as the uncertain future of the global oil markets significantly increased competition for market share regionally and globally. After this Ms Damianova suggested three short-term scenarios for Iran’s production increase: A low case that envisaged almost no change or little increase in oil production; a very optimistic scenario of 4 to 4.2 MMbbl/d according to the statements done by Iran’s officials, and a third scenario suggesting a production increase up to 3.7 MMbbl/d until the 1st quarter of 2017. Ms Damianova concluded that beyond 3.7 MMbbl/d Iran would need significant investments to continue increasing production.

Questions & Answers (Q&A)

A Q&A followed the keynotes. Following the format of previous EUCERS/KAS/ISD Energy Talks, Q&A’s will be left out of this summary with the objective of encouraging frank and honest debate in future activities.

[1] Due to the high number of speakers the insights are not comprehensive, focusing instead on generally reflecting the discussion.

Although inexpensive and supply is secure in the long-term (proven global coal reserves in 2013 were sufficient to meet 113 years of global production), coal is viewed controversially due to high CO2 emissions produced. However, due to rising global energy demand, coal is still an important player in today’s global energy mix. Technologies that allow for carbon capture and storage (CCS) and carbon capture use and storage (CCUS) are key for achieving climate goals while meeting energy demand. Globally, 22 large-scale CCS projects are currently in operation or being constructed – twice as many as a decade ago. What is the future of coal? Will new technologies such as CCS and CCUS make coal a clean energy source? These key issues were discussed during the workshop.

DAY I: Thursday, 5th May, 2016

In the afternoon of 5th of May 2016, the first welcome address was made by Dr Peter Hefele, Director of the regional project on energy security and climate change at Konrad Adenauer Stiftung (Hong Kong). After the introduction, Professor Dr Friedbert Pflüger, Director of EUCERS at King’s College London, chaired the meeting. Professor Pflüger mentioned the Paris climate agreement and its influence on coal. He concluded that coal is controversial but will continue to play a major part in the global energy mix. Instead of fighting against coal and trying to phase coal out, it is more important to develop clean coal technologies to make coal more sustainable.Afterwards, Professor Dr Gerhard Sabathil, Ambassador of the European Union to the Republic of Korea made his welcome address to participants. Following Professor Sabathil’s remarks, Dr Frank Umbach, Research Director at EUCERS, presented the EUCERS strategy paper on ‘the future of coal’. Dr Umbach gave an overview on present dilemmas of global energy and climate policies. On one hand, the use of coal for energy generation is subject to growing criticism in light of international climate protection efforts, particularly after the Paris climate summit. On the other, coal is inexpensive and available long-term.  He set forth his research objectives, including analyzing the strategic implications of different restrictions on export credit finance for coal power stations and clean coal technologies, and the overall question of whether coal has a future in the German and European energy mix in the medium-term. Then Dr Umbach concentrated on global dimensions and introduced the current energy situation worldwide, including the world’s energy reserves, increase of world primary energy demand, attributes of coal from many aspects and growth of new coal power capacity, laying a good basis for further discussion. He also mentioned CCS-projects worldwide and potential uses of captured CO2 as well as cost perspectives of CCS. Finally, Dr Umbach concluded that while promoting global climate and environment protection policies we need to be realistic and balance our analysis by taking into account energy security and economic issues. After intense discussion, Professor Pflüger made closing remarks and the seminar was followed by a dinner with participants.

DAY II: Friday, 6th of May, 2016

Session 1: Asia-Pacific’s Coal Power Industry- Opportunities and Challenges

Dr Peter Hefele chaired the first session of the day.  The first presentation was made by Dr Xunpeng Shi, Senior Fellow and Deputy Head of Energy Economics Division at the Energy Security Institute (ESI), National University Singapore (NUS).Dr Shi analyzed ASEAN’s future energy mix and the role of coal. He introduced the current energy paradox of ASEAN. On one hand ASEAN has aspirations to develop a sustainable growth agenda that promotes the use of clean energy and related technologies. On the other hand it is estimated that coal consumption keeps rising in the next three decades, due to its low cost and abundant reserves. Based on a SWOT analysis, Dr Shi listed opportunities and threats of strategies for a greener ASEAN energy mix. He also summarized the characteristics of coal in ASEAN, including 1) coal is cheap and affordable, 2) use of coal is expected to increase, 3) coal’s share in power generation will increase, 4) global restrictions make coal more cost competitive (in some developed countries such as the U.S., where domestic consumption of coal is limited by exporting it to other regions and therefore causing the increase of coal supply in other markets). Then Professor Younkyoo Kim, Director of the Center for Energy Governance & Security, Division of International Studies at Hanyang University, Seoul, South Korea gave the second presentation. He talked about why coal consumption is rising and what it means from a South Korean government’s perspective. Professor Kim pointed out that facing global energy challenges, we expected energy source like LNG and natural gas to play a much more important role in the short term. But what we have seen is that due to infrastructure problems and pricing mechanisms, natural gas cannot currently play a key role as a bridge fuel. South Korea has finalized its 2030 target of reducing greenhouse gas emissions by 37 percent. As a result, it is crucial for Korean government to improve its energy mix under climate change pressures. In 2014, the Korean government came out with the Second National Energy Plan to cut its future reliance on nuclear power to 29 percent of total power supply by 2035. Down from a planned 41 percent by 2030. Meanwhile, coal production is increasing. According to the IEA, 75% of the annual new generating capacity being added in Southeast Asia is expected to be coal-fired. Therefore, Professor Kim concluded that the only option we have, is to make coal cleaner by adopting technologies such as CCS. The third speech was given by Dr Frank Umbach, Research Director at EUCERS, King’s College London, who presented the recent EUCERS’ strategy paper on ‘China’s expanding overseas coal power industry’. Dr Umbach compared the world’s CO₂ emissions in 2005 with emissions in 2012 and pointed out that there is a significant increase of CO₂ emissions, a large part of which can be attributed to China. He suggested China’s percentage of coal consumption in its energy mix is going down, although the volumes of coal consumption may still increase and its peak consumption has not yet been achieved. However, in terms of China’s future energy policy, he believed that there is a structural change underway, which leads to a decrease of coal demand and as a result the current situation of over-supply may last longer. On the other hand, China’s increasing investments on coal mining and coal power projects in other countries is of great concern. Dr Umbach pointed out that the Chinese global coal expansion investments are taking place not just in Asia itself but also in Africa and even in Europe. If China’s domestic consumption of coal decreases on one hand, while the coal power industry expands by increasing its investments abroad on the other hand, it means for climate policies that it will decrease China’s domestic CO2 emissions but increase the emissions globally.

Session 2: The Future of Coal, CCS and Clean Coal Technologies after Paris

This section was introduced and chaired by Professor Dr Friedbert Pflüger. The first presentation was made by Miyeon Oh, Non-resident Senior Fellow of Atlantic Council Global Energy Center and Visiting Scholar at Johns Hopkins’ School of Advanced International Studies (SAIS). Ms Oh discussed the future of coal, CCS and clean coal technologies after Paris. She gave an overview on world energy consumption as well as the IEA projections on world energy consumption by fuel. She stated that coal would still play an important role in global energy mix in the future. Installed coal-fueled generation capacity keeps rising, especially in developing countries such as China and India. Ms Oh summarized that potential emission reductions can be realized through improving end-use energy efficiency, switching end-use fuel and promoting the use of renewables and nuclear. CCS is the only technology for climate mitigation and therefore is the key to increasing ambition for low-emissions pathway. Globally there are 22 large-scale CCS projects in operation or under construction. However, due to the currently low oil and gas prices, demand for electricity may decrease and therefore may slow down the CCS development process. She also emphasized that since 90 percent of growth in primary energy demand till 2035 will come from non-OECD countries (according to IEA projections), promoting CCS technology in those developing countries is of great importance. Dr Hwansoo Chong, Leader in the Policy Team at Korea CCS R&D Center (KCRC), gave the following presentation. Dr Chong’s presentation focused on Korea’s CCS core R&D programme. He showed the current energy status, indicating coal is the largest energy source in Korea. In addition, around 49 KRW/kWh is the average cost of electricity generated from the coal-fired power stations, showing coal is a cheap energy source. The safety issue related to nuclear energy and the high cost of renewable energy have to be made clear. As a result, CCS can act as a bridge technology for continually using coal-generated electricity to meet Korea’s energy demand while taking into account its 2030 target of reducing greenhouse gas emissions by 37 percent. Dr Chong introduced Korea’s CCS 2020 project in detail, including capture technology (31 projects), storage technology (7 projects), conversion technology (19 projects), and the building of infrastructure. He also introduced Korea’s CCS R&D Center at the end. Based on the above-mentioned points, Dr Pet Techarat made a comment and introduced the global status of CCS from a technological perspective.

Session 3: Global Trends in Energy and the Role of Coal in the World’s Energy Mix

This session was chaired by Dr Xunpeng Shi of ESI. The first presentation was made by Carlos Fernandez Alvarez, Senior Coal Analyst, International Energy Agency (IEA). Mr Alvarez mentioned the current debate on global climate change and also the fossil fuel divestment campaign. The campaign aims at the removal of investment assets from companies involved in extracting fossil fuels, in an attempt to reduce climate change by tackling its causes. He then explained the global trends of coal in detail. Today, 80 percent of coal consumption occurs in four regions: the European Union, the U.S., China and India: 1) In the European Union, coal consumption peaked in 1987, almost 30 years ago. As many countries in the EU have announced their energy plan of reducing the use of coal, there is a declining trend on future coal consumption.  2) In the U.S., where coal consumption peaked in 2006 or 2007, it is pretty clear that the country is phasing coal out. 3) In China, the peak of coal consumption will arrive in 2020 or as late as 2030. China is on its way of reducing coal consumption, but the total amount of coal consumption is still large. 4) In India, the peak of coal consumption is hard to predict as India needs coal to secure its electricity supply. The second presentation was given by Dr Joachim Lang, Head of Public Affair Office in Berlin, E.ON SE.Dr Lang summarized four major global trends in energy as follows: 1) Worldwide energy demands will continue to grow, as the world’s population and economy expands. But at the same time the growth of energy consumption is slowing down, which is caused by faster growths in energy efficiency. 2) The energy mix continues to shift worldwide: new energy supplies like renewables emerge, but fossil fuels remain the dominant source of energy powering the world economy until 2050. Among which, gas seems to become the fastest growing fossil fuel with its share in primary energy gradually increasing; while oil grows steadily and remains the most important fossil fuel for the next 20 years. 3) More investments and more innovation will drive change on energy markets. Due to global investments and falling costs, no fuel is projected to grow as fast as renewables. Innovation reduces the costs of low-carbon technologies and energy efficiency, but for oil & gas, the gains are offset by the move to more complex fields. 4) Future development of global energy systems depends on further policy action and regulation. The third speech was made by Dr D. Suba Chandran, Professor at International Strategic & Security Studies, National Institute of Advanced Studies (NIAS), Bangalore. Professor Chandran emphasized India’s coal conundrum. Coal is a relatively abundant and affordable fuel in India, however the quality is low and faces environmental constraints. Professor Chandran summarized India’s coal conundrum as: 1) High ash content of Indian coal is a major source of local air pollution. In addition, nearly 40 percent of identified coal resources are in heavily forested areas and in human settlements. 2) Increasing demand will have to be met largely through imports. However, India faces infrastructure difficulties in handling larger volumes of coal imports, as large parts of ports and railroads need to be upgraded. 3) Imported coal is likely to be more expensive and would raise power bills by over 25%. Based on the above points, he also presented some policy recommendations. These recommendations are 1) To address the political and strategic communities at the national level and help creating a national dialogue with the center, states, institutions and media. 2) To continue the existing approach in addressing the technical issues at the global level. 3) To create a ‘Asian Regional Dialogue’ sub-regional. The last speech was made by Zorigt Dashdorj, former Minister of Mineral Resources and Energy of Mongolia. He gave a Mongolian perspective on the future of clean coal and global energy security and climate change challenges. After a brief introduction on the importance of coal and current situation in Mongolia, Mr Dashdorj suggested that the CCS technologies have huge potential. However, for coal producers like Mongolia, it is ‘disconnected’ with the country’s reality for two reasons: 1) The Paris agreement does not provide clear incentive neither for the transfer of technology to developing countries like Mongolia nor does it encourage to continue the use of clean coal; 2) Coal is critical for developing countries, not only for energy supply but also for economic development and poverty reduction. As a result, developing countries need coal to be as cheap as possible to support their economic growth. Finally, he shared his political viewpoint on how to connect the CCS technologies with reality. We have to understand the issue from a perspective of political realism, renewable energy and clean coal solutions under climate change. The public also has to be persuaded that there is still possibility for coal to have a future, even though CCS technology is not mature. It is essential to promote global and regional technology transfer through commercial mechanism.

During the workshops some main conclusions were drawn, including – but not limited to – the following points:

1) Coal is (after oil) still the second most important energy resource in the world for energy consumption, which has longer availability than conventional gas and oil resources, is cost-competitive, widespread, and plentiful;

2) Coal remains a viable option to enable economic growth and meet growing demand for energy in the near future, as a result, instead of fighting against coal and trying to phase out coal immediately, it is more important to develop clean coal technologies and make coal more sustainable.

3) In developing countries, having access to cheap energy to support economic growth and secure energy supplies are regarded as top priorities, rather than reducing CO2 emissions;

4) In order to develop clean coal technologies like CCS, financing has to be available or otherwise poor technologies will be used in coal power plants;

5) Currently, there is no realistic alternative technology other than CCS/CCUS, which should be promoted as worldwide climate mitigation technology;

6) CCS projects have regularly been faced by public resistance, as some believe these technologies are means to extend the lifetime of coal power plants and blocking the development of renewable energy;

7) CCS/CCUS is considered as a key and cost-effective technology both for achieving larger emission reductions from fossil-fuel usage (not just coal, but also oil and gas) and enhancing energy efficiency.

Dr Friedbert Pflüger. Dr. Pflüger opened the discussion with a background conversation about the situation that the world and the oil industry are facing. He noted that there was a sense of confidence about the fact that despite its struggles, oil will remain vital for a substantial period of time. He then noted concern about a number of aspects that are influenced, in a way or another, by the prices of oil. Amongst them, the consequences of low oil prices for different type of actors, the geopolitical implications of low oil prices, and uncertainty surrounding the ability of some key global players to influence prices. Dr. Pflüger finalised by opening the table for all other speakers to provide their input.

Hans-Hartwig Blomeier. In the second statement of the day Mr. Blomeier extended a very warm welcome to all the participants to the conference. He emphasised the importance of the collaboration between KAS, EUCERS and ISD, and welcomed the opportunity to have high level discussions about these complex topics. By noting that the future of markets is greatly “a matter of faith”, Mr. Blomeier brought to mind the key influence that some of those present would have on future events in the energy sector, speakers and participants alike.

Paul Appleby. Paul’s participation begun by bringing attention to the long-term structural aspects that define what the prices of oil are. He noted the difficulties involved in predicting oil prices, and the fact that oil prices will continue to surprise us. That said, he also noted that it is important to learn from the past, as BP did in their statistical outlook where they have a history of oil prices that goes back all the way to 1861. Paul’s talk also noted that the current oil price results not from one factor but from a convergence of events that took place prior to December 2014, including but not limited to OPEC’s decision not to cut supply in November 2014. Paul also addressed the question of whether production will go up immediately if prices recover, or whether a variety of disruptions such as geopolitical struggles will continue to appear as a norm. Paul closed by noting that the norm in the industry is to expect supply and demand to rebalance by the end of the year. At the same time, the industry also expects an extended period of relatively low prices due to the considerable amounts of oil that are currently stored across the world.

Marina Petroleka. Marina started by noting that although predicting oil prices is extremely difficult, the fundamental elements that define oil prices do signal the direction of travel. Marina’s participation then addressed the question of market rebalancing, which she noted could happen by the end of 2016. This date that is relatively sooner than previously expected due to the aggressive fall in prices early this year. Having said that, she also addressed the issue of re-emerging production if prices recover by noting that a potential game changing consideration is the flexibility of shale gas production. This, Marina noted, could put a roof on future price increases. After referring to different geopolitical factors such as unplanned supply disruptions and Doha’s influence on the markets, Marina closed by noting that overall, we can expect to see an increase in the correlation between geopolitical risks and oil prices.

Peter Parry. Peter began by noting that the impact low oil prices to consumers is actually positive, equating in the UK to 1.4% growth in GDP. He also noted that we need to be aware that there is no such thing as a single oil price as companies sell their oil at different prices, depending on the quality of their oil. Peter then mentioned that an important consideration is that market volatility is driven by very small changes. He considers this to be fundamental due to the fact that all oil companies are under severe pressure to improve and, at a time of low prices, small differentials matter. Peter then moved the discussion to account for some of the potential sources of future changes. For example, he addressed the question of stored oil, which he noted is the fastest available source of oil. A big question posed by Peter in this respect is China’s storage capacity, which is unknown. Peter also brought attention to the belief that future oil prices are “all about supply” rather than demand. He further explained that this did not intend to underplay the role that demand has for prices but rather to focus on the fact that demand is fairly predictable. Finally, Peter closed his participation by providing three different scenarios about the future of oil prices, which he discussed at length.

José Bolanos. Jose started by noting that it would be necessary to re-state everything said to have a complete picture of the future of oil prices. As such, rather than re-stating statistics he noted the importance of establishing the link in between all speakers. José posed that said link was the interest in the underlying structural factors that make prices happen, which presupposes a perspective on the past. José considered this to be particularly important because the current crisis is not the first time that the industry faces a glut, or the need to be profitable at low prices. He then linked this to an energy security paradox: affordability toward customers is enhanced with low prices so gluts typically strengthen oil’s position in society, but affordability of investment is diminished with low oil prices so companies find it hard to compete. José noted after this that whilst there are certainly many losers, there are also winners, which moves the discussion to a question of ‘how to be a winner’. José closed by noting that in this respect, the past shows that the winners tend to be those who dare to have a strategy for times of crisis rather than those who wait for the market to improve.

Questions &Answers (Q&A)
The conference finished with a comprehensive Q&A session in which many of the topics discussed were addressed and some others were brought up. This section touched on questions pertaining to the impact of the Paris Agreement, the ‘future policy’ question, the debate about the point at which ‘peak demand’ will happen, and other issues. As per our standard practice Q&A’s will be left out of this summary with the objective of encouraging frank and honest debate in future activities.

In his report, Bud Coote focuses on how US Exports of LNG will benefit European and global gas supply. Mr Coote’s presentation started with an overview on the development of LNG, the strong growth in the last decade and the future market potential. The first developments of LNG were caused by a shortage in US gas supply about ten years ago. Now the recent shale gas revolution has triggered a new wave of investment for LNG and former import terminals in the US had to be transferred into export terminals. Mr Coote explained that LNG, in contrast to natural gas that needs to be transported via pipelines, can be traded international. World production of LNG has grown to 333 bcm in 2014, which accounted for one-third of all traded gas.

Mr Coote than moved on to ask whether the increased US production of LNG find sufficient markets. Natural gas prices have reached record heights in the European and Asian markets in the last decade but oil and gas prices have dramatically declined since 2014 and the IEA has also predicted growth of demand to slow down. However, natural gas –the cleanest fossil fuel – is still in demand and LNG could assist in diversification efforts and improve competition, especially in Europe. For Europe, LNG could mean increased independence from one dominant supplier, Russia. Baltic countries used to pay 40-50% more for their gas than for example Germany. Since the opening of the first LNG terminal in Lithuania this has changed, without a shipment of LNG has even entered Lithuania. The pure possibility already changed the geopolitics of energy.

Another point Mr Coote made is the lack of competition in global LNG markets. Australia is the US’ biggest competitor. LNG from the Eastern Mediterranean and East Africa is potentially entering the world market, but in smaller quantities. Mr Coote also mentioned the potential of the Chinese market and how the uncertainty in China’s negotiations with Russia about natural gas supply could work in favour for US LNG exports.

Mr Coote’s presentation was followed by a comment by Ambassador Morningstar, who elaborated further on what LNG from the US could mean for Europe. More competition in the market and the entrance of new suppliers could give Europe more bargaining power in negotiating with existing suppliers, like Russia. And more suppliers of gas will also bring more price stability into the very volatile gas market. Mr Koranyi followed Ambassador Morningstar and commented on the EU energy security package, which was released the week before our discussion. Mr Koranyi focused on the provision on LNG, which recognizes the enormous potential of LNG for the European market. LNG would be an opportunity for the EU to complete internal energy market and for the US the European market has a high potential, with an annual natural gas demand of 200 bcm of all 28 member states.

The following discussion with the audience, students, academics, energy industry experts, media representatives and the general interested public, raised points on LNG in general but also the growth potential for other markets such as India, where coal dominates the energy mix. Which lead to the question on environmental costs of cheap energy and a discussion on the “real” costs of energy. Because natural gas is the cleanest fossil fuel, together with the potential of LNG to be sourced from multiple suppliers and therefore increase competition and energy security, LNG has the potential to contribute to the three goals of the EU’s energy policy: Secure, competitive and sustainable energy.

Opening Statement | Hans-Hartwig Blomeier.
Mr. Blomeier opened the activity by thanking the speakers and participants and noting that this activity is the first of the 4-year-long partnership taking place outside of London. Mr. Blomeier praised the very enjoyable and varied weather in Edinburgh whilst stressing the importance of coming as close as possible to the North Sea. Mr. Blomeier thanked the Heriot-Watt University team for their hospitality and also noted that it was a privilege to have this activity as part of KAS’s seminar for scholarship recipients. Finally, Mr. Blomeier introduced the speakers and opened the floor for the discussion.

Setting the Grounds | Dr Friedbert Pflüger
Welcoming the continued cooperation between KAS, EUCERS, and ISD Dr Pflüger started by praising the fact that the activity is taking place out of London. Dr Pflüger started his keynote by touching on a number of issues that affect oil across the globe. For example, he mentioned that prices have dropped dramatically, 75% since 2014. Because of its impact to businesses and employment Dr Pflüger considered the situation to be a catastrophe for oil producers whilst noting also that, for consumers, the drop in prices acts as stimulus. He then entered a discussion about the different roles that some players have been thought to have. For example, how in the beginning some people thought that the drop in prices may have been orchestrated to hurt Iran, or how others argued that this was clearly in the benefit of Saudi Arabia. However, he also noted that, in his view, it has become clear that Saudi Arabia cannot afford the situation any longer and that the situation now means “even more” instability in the Middle East. Dr Pflüger then spoke about the main reason for the drop in prices, namely the balance between oil supply and demand. He reminded how in 2015 we had an average of 2.5 million barrels a day of oversupply. Dr Pflüger considers this imbalance to result mostly from the increased availability of local oil in the United States, which translated in less purchases from world markets. He also notes that other areas such as Iraq, Northern Iraq, Kurdish region, Brazil, Nigeria, and Angola added to the glut, whilst growth in countries like China failed to meet expectations. At this point, Dr Pflüger noted that it is hard to know how much the oil price will continue to be low as there are many factors that play a role. For example, we are yet to find out the impact that Iran will have once it re-incorporates into the market. We know that Iran claims that it will add 500,000 barrels to the market just this year but Dr Pflüger added that Iran’s new contracts, to be presented in February in London, may significantly attract foreign companies and further the glut. Dr Pflüger also mentioned that investment of up to $1.8 trillion are currently in hold or completely cancelled which he believes will ultimately create a yearning for oil that will balance the situation, even if world growth slows down. As such, the main question, as seen by Dr Pflüger, is the question of ‘when’. In this sense Dr Pflüger identifies some trends that he considers as ‘good signs’ if seen from the perspective of oil producers. For example, low oil prices have led US consumers to buy big cars again. Chinese middle class, despite of the overall development of the Chinese economy, is buying cars as it did before. These events, Dr Pflüger noted, seem to indicate that whilst Paris had nice aims for decarbonisation there will be a continued demand for oil. As such, he considers that if the North Sea oil industry can survive the months or years of crisis, profit may be available on the medium term. In Dr Pflüger’s words, oil will be back “perhaps not at 100% but at 60%, 70%”. Dr Pflüger then continued to warmly welcome the following speaker, Dr Ian Duncan.

The local view | Dr Ian Duncan
Dr Duncan started by thanking the audience and noting that it is worth to consider that he is the only geologist in European Parliament. As such, he sits on the Energy Committee and the Environment Committee, as well as having been in Paris and Lima climate talks as one of the European delegates, and being the Parliament’s chief negotiator on the Emissions Trading Scheme (ETS). Dr Duncan then began his statement by giving a brief historical reminder of the importance of the North Sea. He noted that west of the place where the conference was taking place there are some very unusual orange-flat-topped mountains that are remnants of the oil shale industry of the 1860s, which marks the start of the global oil industry. Indeed, he noted, although the boom had to wait until the North Sea became accessible, Scotland was the heart of the early stages of the oil industry. Dr Duncan noted that this historical-geographical consideration is important because the North Sea is not a pleasant place to extract anything. As the need to be safe in such an environment is paramount the technologies that are now in use are at the cutting edge, which has led to a significant improvement in the safety record of the North Sea over the last few years.
After setting the scene Dr Duncan moved into the question of the future of oil. He began by reminding the audience of the proverb that reads “the stone age didn’t end because we ran out of stones”. He used this proverb to bring attention to the dilemma we face with regard to hydrocarbons, as the reality continues to be that the economy is dependent on carbon. Whilst there is an effort to decarbonize, most houses in Scotland use gas for heating and there are very few electric cars in the road. As such, he noted, change is not something likely to emerge soon. He also noted the need to be responsible with policy prescriptions toward the developing countries, as many may need carbon to develop. Ultimately, Dr Duncan reminds the audience that the problems of climate change were created by us – he even noted that Scottish people have the highest per capita carbon usage if seen historically. In this context, Dr Duncan noted that the North Sea will continue to be important as another undeniable fact is that there is oil in the North Sea, albeit difficult to extract and thereby expensive. As such, he considers, competition in the region will continue to get tougher as long as prices stay low.
Dr Duncan further noted that many factors are beyond control, as is for example Iran’s capacity to pump oil into the markets. He sees such type of factors as de-stimulating new extraction in the North Sea region. As such, Dr Duncan noted that although prices will bounce back, the question is the point at which it will become sensible to pursue further reserves in the North Sea. Dr Duncan further brought attention to the impact that this may have to employment, thus far having costed more than 60,000 jobs and estimated to go past the 100,000 mark. He further noted his concern at the fact that this is a loss to an economy that is greatly based in two things, oil and fish. Dr Duncan further noted that this is a particularly important consideration because fracking is currently banned in Scotland, which prevents expertise from the sea to be brought unto land. In such manner, as noted Dr Duncan, the challenge of what to do with the North Sea oil industry is a concerning one.
Dr Duncan closed his remarks by returning the conversation to the issue of climate change and Paris Agreement’s “well below 2°C” target and its ambition to actually keep global warming under 1.5°C. He noted that we cannot meet these goals as it is, particularly if prices keep going down and people continue to buy more oil. In such manner, Dr Duncan noted, the world needs to start thinking about mitigating measures. In this regard, Dr Duncan noted that Carbon Capture and Storage (CCS) may work. He noted with concern that very little money has been put into it albeit of a need of about £40 billion. Dr Duncan considers that a solid ETS may help in this regard by raising the cost of emitting. However, he also noted that the current price of €7 per ton is extremely low as CCS would require a price of about €80 per ton but, at the same time, he estimated that his current ETS effort will only take us to about €30 per ton. Consequently, Dr Duncan noted, a CCS effort will require of the willingness of emitters to embrace costly technologies. However, Dr Duncan closed by noting that the problem with this is that consumers always pay for costly technologies and as such we should prepare to live in a future in which energy will be more expensive.

The academic view | Dr Frank Umbach
Dr Umbach started his presentation by noting the influence that Saudi Arabia has had to the fall in oil prices. He noted how Saudi Arabia had traditionally acted as stabilizer for the markets to behave in ways that considers Western interests. This capacity is greatly due to the fact that no other country in the world has the spare capacity to exert such an influence. He furthered reminded how Saudi Arabia’s unwillingness to cut production precipitated the fall and noted how it is questionable whether Saudi Arabia will return to mind Western interests. This is not only because it has not done so yet but also in the light of factors such as Saudi Arabia’s internal politics and geopolitical considerations like its relation with Iran. Moreover, Dr Umbach also noted how discussions between the US, Europe and Asia about burden sharing have been stimulated by Saudi Arabia’s position. In a nutshell, whilst in 2001 22-24% of US’ oil came from the Middle East, nowadays only 10% does. As Europe and Asia are much more dependent on the Middle East than the US, many in the US question the $50 billion per year budgeted for ensuring oil stability in the region. Dr Umbach then moved deeper into to the issue of oil prices. He noted that the World Bank recently revised its oil price forecasts for 2016 down from $52 to $37 per barrel, which some analysts think is still too high. Dr Umbach noted how this is due to a combination of factors. For example, Dr Umbach considers that there will be no short-term double-digit Gross Domestic Product (GDP) growth in China, which will further decrease demand from Asia. He also noted Iran’s re-entry into the markets, as well as the 20% wordwide drop in investment last year and an expected 16% drop this year. Dr Umbach noted that this ‘War of Attrition’ may have profound effect across the globe. For example, he noted, it will most certainly lead to the suffering and perishing of many companies but at the same time, other players may find new opportunities in the market. In this regard, he mentioned the fact that fracking technologies have made leaps of progress with regard to efficiency, lowering costs in an unprecedented 35% to 40% in the last year. Dr Umbach noted that this technological factor changes the nature of the markets themselves. In such manner, whilst Saudi Arabia’s focus in defending its market share may have success against inefficient players, it is doubtful whether it will be able to offset technological progress. In fact, he noted, hedge funds and private equity funds have $60 billion ready to take over bankrupted oil assets. As such, Dr Umbach argued, there will be losers but ‘deep-pocket’ groups are in a position to capitalize from Saudi Arabia’s strategy. Dr Umbach also noted that a concerning problem associated with low oil prices is the loss of experts to other industries throughout the period of under investment. Dr Umbach noted that such a loss of human capital hinders the industry’s hopes for a rapid recovery if the present low oil price will not recover in the short-term future. Acknowledging the contribution from Dr Duncan with regard to the British North Sea, Dr Umbach moved unto a brief overview of the Norwegian North Sea. He noted how there are many similarities, such as the prioritizing of short-term earnings, up to 15 fields to be closed by 2020, a 16% fall in investment in 2015, and further cuts in investments announced recently despite of several licenses being awarded.
Dr Umbach then moved back to consider the general situation. This started with a comparison of the ‘cut-even’ price for different regions. In it, Dr. Umbach highlighted that only Saudi Arabia, Iran, Iraq and Kuwait are currently producing at a lower cost than the current oil prices. He noted how this necessarily means that all other producers will continue to have a serious gap in their finances insofar oil continues at current prices. In addition and with the notable exception of the United States, Dr Umbach highlighted how most countries are becoming even more dependent on external energy imports.
In the final segment of his presentation Dr Umbach summarized his views to the following statements. Firstly, there is a developing ‘oil mantra’ in which experts have moved from thinking that oil will continue ‘lower for longer’ to thinking that oil will be ‘a lot lower for a lot longer’. Secondly, it is difficult to imagine production cuts in the short term as Saudi interests are against high cost producers and Iran emerging as major oil producer and exporter. Thirdly, it is not realistic to expect a price recovery before 2017 and, even then, oil may only come back to $50/$60 per barrel rather than to $70/80 as assumed last year. Likewise, it would not be a surprise if oil prices do continue at record lows past 2017 8decreasing temporarily even to just US$20 per barrel). Fourthly, on the medium term perspective the worldwide transportation sector is the defining feature, particularly the issue of the battery prices and performance – which Dr Umbach noted being optimistic about in the mid-term future.

Questions &Answers (Q&A)
The activity continued with a lively Q&A session that accounted for about an additional hour of discussions. The questions and answers provided insight into a number of issues such as the general sense of the situation within Scotland, the issue of subsidies, nuclear possibilities, technology, technology bans, decommissioning, sustainability and many others.

Report by KAS fellow at EUCERS 2016 Jose Bolanos

Recently, the Asia-Pacific region has surpassed Europe to become the world’s largest gas importing region. As the fastest-growing natural gas market worldwide, the Asian gas market, with 790 billion cubic meters of natural gas demand[1], is estimated to become the world’s second-largest natural gas market by 2015. The demand is expected to surge ahead in the coming years, primarily driven by traditional importers in the region like China, India, Japan and South Korea. The center of gravity of the global natural gas market is shifting eastwards, in line with economic growth and increasing energy demand. As a result, energy geopolitics and energy security issues in the Asia-Pacific region is of greater concern.

DAY I: Wednesday, 28th October, 2015

In the afternoon of 28th of October 2015, the first welcome address was made by Dr Peter Hefele, Director of the regional project on energy security and climate change at Konrad Adenauer Stiftung (Hong Kong). Then Professor Siaw Kiang Chou, Executive Director of the Energy Studies Institute (ESI) at National University of Singapore made his welcome address to all the participants. After the introduction, the meeting was chaired by Professor Dr Friedbert Pflüger, Director of EUCERS at King’s College London, together with Ms Annie Medaglia, Deputy Director of Global Energy Center at Atlantic Council of the U.S. The first keynote speech was given by Mr Michael Feist, CEO of Stadtwerke Hannover (municipal utility company in Hanover, Germany) and Executive Vice-President of the German Association of Energy and Water Industries. Mr Feist reviewed the carbon emission reduction targets in European region and revealed the huge potential of carbon emissions reduction by substituting coal with gas. Other renewables such as wind energy or solar energy can also contribute to the carbon emission reduction. However, they all have their own issues. For example, in some locations from January to March, the insufficient sunlight and wind would probably make renewables difficult to meet the energy needs. As a result, it is important to ensure gas supply. When addressing gas supply security, Mr Feist also introduced the political impact, gas pricing mechanism, and rising LNG imports in EU. Following the keynote speech was given by Mr Jean Abiteboul, Senior Vice President of Cheniere Marketing Ltd., U.S. He gave an overview on global gas markets, as well as corresponding forecasts on gas markets in different regions in 2020 and 2025. Mr Abiteboul anticipated that the United States is likely to become one of the lowest cost LNG providers in the future, with a projected LNG capacity of 94 mtpa in 2025 (Australia: 81 mtpa, Qatar: 68 mtpa). In the meantime, Asia will become the main market for LNG growth, with an estimated LNG demand of 314 mtpa in 2025 (in comparison Europe: 89 mtpa, Americas: 19 mtpa). Finally, Mr Abiteboul summarized the benefits of importing LNG from the U.S. to Asia as diversifying the latter’s sources of supply and its gas price mechanisms, getting access to cheap and abundant sources of energy and mitigating the uncertainty on demand and lack of storage. After the presentations, many questions were raised. Professor Dr Friedbert Pflüger put forward the thought that whether we have been just too optimistic about the gas market in Asia. Since the Asian economy is slowing down, gas prices in Asia are much higher than in Europe; and also nuclear power is back on the energy development plans for many countries in Asia. After intense discussion closing remarks were made by Ms Medaglia and the seminar was followed by a dinner with participants.

DAY II: Thursday, 29th of October, 2015

Part I Geopolitical and Geo-Economic Impacts on the Asia-Pacific Region and Europe and its Contribution to Sustainable Energy Systems

At the beginning of this part, Professor Dr Friedbert Pflüger first made an introductory statement on how to secure our energy supply. Key pillars that can contribute to energy security were identified: supply diversification; energy independence; energy interdependence; and free market competition.

Session 1: Natural Gas – The Bigger Geopolitical Picture

This session was chaired by Professor Pflüger and the first presentation was made by Professor Jonathan Stern, Chairman of the Natural Gas Research Programme at Oxford Institute for Energy Studies.Professor Stern analyzed the emerging gas superpowers and global power shifts. Based on introduction of current gas superpowers of Russia and Qatar, as well as emerging gas superpowers of Australia and the U.S., Professor Stern concluded that the gas world is moving away from pipeline gas to LNG. And for these gas superpowers, the export volumes do not make themselves ‘winners’ if their projects are not profitable. In terms of geographical reach and profitability of existing projects, Russia and Qatar are clear winners; while in terms of new projects, only Qatar is a clear winner due to the low costs of existing projects and careful approach in expanding its scale of export. Then Mr Sanjay Jobanputra, Vice President and head of Business Development Asia, Statoil gave the second presentation. He talked about commercial thinking and geopolitical risk in the global gas industry. Mr Jobanputra first pointed out that long-term forecasts are uncertain. Though some known uncertainties can be handled by constructing scenarios, there are still a large number of other known unknowns such as consumer behavior, climate change impact that cannot be measured accurately, not to mention those unknown unknowns. Still, Asian markets were predicted to drive global LNG demand growth in the future. Pacific Basin LNG demand was expected to rise from 200 mtpa in 2015 to 300 mtpa by 2025, while South East Asian LNG demand was estimated to increase from 10 mtpa in 2015 to more than 45 mtpa by 2025. Demand would be driven by traditional buyers such as China, Japan and India, as well as emerging buyers in South East Asia. The third speech was made by Dr Tatiana Mitrova, Head of the Oil and Gas Department at the Energy Research Institute of the Russian Academy of Sciences (ERI-RAS). Dr Mitrova laid emphasis on the changing global energy flows and the corresponding geopolitical implications for the Asia-Pacific region and Europe. Based on the presentations valuable comments were made by Professor Keun Wook Paik, Senior Fellow at the Oxford Institute for Energy Studies, and Mr Sergey Tulinov, economic affairs officer of United Nations Economics and Social Commission for Asia and the Pacific (UNESCAP).

Session 2: Looking into the Geo-Economics of Gas

This section was chaired by Ms Annie Medaglia. The first presentation was made by Mr Laszlo Varro, Head of Gas, Coal, and Electricity Markets Group at the International Energy Agency (IEA). Mr Varro discussed the role of gas in a carbon constrained energy system. He stated that cheap coal exported by the US is now replacing gas in Europe. Even Germany is building new coal plants to replace its nuclear power. Based on the current situation, Mr Varro led us to a discussion whether we actually need gas as a bridge fuel, or if solar energy and batteries make gas capacity redundant. The following presentation was made by Dr Chunping Xie, KAS fellow at the European Centre for Energy & Resource Security, King’s College London. Dr Xie first gave an overview of current gas markets in East Asia, followed by a brief introduction on current pricing mechanisms in different gas markets. Further estimations were made on gas consumption based on a heterogeneous panel co-integration model. Estimations were also made on gas production based on a logistic curve model. In addition, according to the construction of gas pipeline, as well as the long-term contracts at present and in the future, natural gas imports were also estimated. The final presentation in the session was given by Dr Xunpeng Shi, Senior Fellow at ESI, National University of Singapore, who mainly discussed gas hub initiatives in East Asia. An overview on East Asia’s gas market was given, suggesting that Japan, South Korea and China together took up 61% of the world’s total LNG imports in 2013, and this number is estimated to be 43% by 2035. However, the proportion of total LNG imports in the Asia-Pacific region will still remain as high as 70% in 2035. Comparisons were made on the world’s gas pricing mechanism and emphasis laid on the current situation of Asia premium. Based on the above-mentioned points, Dr Shi concluded the possibilities and benefits of developing gas hubs in East Asia.

Session 3: Climate Change and the Future Role of Natural Gas

This session was chaired by Professor Hongyuan Yu, Director for Public Policy at the Shanghai Institute of International Study. The first presentation was made by Dr Frank Umbach, Research Director at EUCERS, King’s College London. Dr Umbach talked about the role of natural gas in the future energy mix of Europe and the Asia-Pacific region. He analyzed drivers and determining factors for global, European and Asian gas demand by 2040. Forecasts on global gas demand and gas production were also introduced, as well as the projected gas import dependency and LNG import. Conclusions were drawn that the world’s gas demand increases are dependent on Asia’s demand; however, Asia’s gas demand growth might be revised downwards due to the slowdown of economic growth etc. In addition, the switch from coal to gas will take place in the U.S. and in Europe, but not in Asia. Instead, coal will be the fastest growing energy resource in Asia, and may become the most important one around 2030 or 2040. If coal will be replaced by gas in Asia in the future is still of great uncertainty; and at the moment not really realistic based on the current situation. The next presentation was given by Professor Quentin Grafton from the Australian National University and former Executive Director of the Australian Bureau of Energy Economics. Professor Grafton presented an analysis of risks, returns and regulation of unconventional gas. Risks included hydraulic fracturing, methane emissions, other risks of seismic events, gas blow-outs, air pollution and non-water well pad issues were also emphasized. When talking about returns, following aspects of annual value-added GDP, employment, annual incremental government revenues in the U.S. unconventional oil & gas industry were taken into account. Regulations in the unconventional gas industry were also discussed.

DAY III: Friday, 30th of October, 2015

Part II Gas/LNG trading hubs and hub pricing in East Asia

After introductory statements by Professor Siaw Kiang Chou, Dr Yongping Zhai, Technical Advisor of the Energy Sector Group at Asian Development Bank (ADB), made a keynote speech on ‘Natural gas in Asia’s energy mix: a development financier’s perspective’. General information about ADB was firstly introduced. Numbers suggested that ADB’s clean energy investments are growing rapidly in recent years, most of which are spent on renewable energy projects (59%). ADB’s energy policy objectives suggest that natural gas is an important part of the energy mix to improve energy security and to reduce emissions of greenhouse gases etc. A comprehensive ADB study on developing a competitive LNG market in Asia was also introduced, which was mainly about assessing the requirements of fostering a competitive LNG market and examining how an Asian gas trade hub can be created to benefit Asia as a whole.

Session 1: Introduction to Gas Hubs and Hub Pricing in East Asia

This section was chaired by Professor Keun Wook Paik, Senior Fellow at Oxford Institute for Energy Studies. The first presentation was made by Ms Yuanyuan Chen, economist at Shanghai Petroleum and Gas Exchange. With a topic of ‘China’s initiatives in building gas hubs’, Ms Chen first introduced the construction of gas pipelines and LNG terminals, and also its market reform in progress, including market liberalization on E&P of shale gas, gas import, interprovincial town gas companies, and price deregulation from governmental guidance to market-based mechanism. In addition, a particular introduction was made to Shanghai Petroleum and Gas Exchange (SHPGX), covering its shareholder structure, value chain and its efforts on the Chinese gas price index. With pipeline natural gas, liquefied natural gas and LNG receiving capacities as its three products, the SHPGX started its trial operation from July 2015. Professor Tetsuo Morikawa, Senior Researcher at the Institute of Energy Economics (IEEJ) in Japan gave the second presentation. Professor Morikawa first described the concept of a LNG hub, which is to form an international LNG price instead of domestic wholesale pipeline gas prices (in comparison to the case of the U.S. or European hub like Henry Hub or NBP). A domestic approach to develop Asian benchmark price was described in detail, including gas market liberalization, domestic wholesale price (hub) development, divergence of wholesale and import prices, and also de-oil-indexation of import prices. An international approach was also introduced, covering relaxation of destination clause, spot market development, divergence of oil-indexation and spot prices as well as spot price development. In addition, electricity and gas market liberalization in Japan as well as LNG trading hub initiatives in Japan were also presented. The third presentation was made by Mr Dave Carlson, Senior Business Development Director of the Singapore Exchange (SGX). In his speech, Mr Dave Carlson focused on Singapore’s initiatives in building a gas-trading hub. Due to the lack of indigenous gas (compared to the Middle East or North America) and the non-liberalized gas market (compared to Europe or North America), wholesale gas prices in Asia are high compared to the rest of the World. And Singaporean gas prices are amongst the highest in the world, only below those countries who fully reliant on LNG. In addition, the LNG market is becoming shorter termed and the spot market share is growing. As a result, the market needs a trusted spot benchmark. Physical LNG participants, together with EMC/SGX of Singapore, are trying to create such a benchmark for Asia. In addition, the Singaporean LNG Index Group of SLInG was also introduced, which is a spot index based on a weekly industry poll for major traders’ assessment of a fair mid-price for a Singaporean FOB LNG cargo. Based on their presentations, comments were made by Mr Paramate Hoisungwan, Senior Analyst and Upstream & Gas Team Leader of ASEAN Council on Petroleum (ASCOPE) and Mr Michael T. Jones, Senior Analyst of Northeast Asia Gas & Power, Wood Mackenzie.

Session 2: Moderated Discussion

This session was a roundtable discussion, chaired by Dr Xunpeng Shi. Leading panelists discussed stakeholders’ views on the East Asian gas hub initiatives.

Session 3: Lessons learned from European experience

Dr Frank Umbach chaired the session and the first presentation was made by Mr Henning Gloystein, Energy Editor Asia at Thomson Reuters. Mr Gloystein discussed the successes and failures of European energy market liberalization. He pointed out that the UK natural gas market (NBP), Dutch natural gas market (TTF), German and Nordic power markets (e.g. EEX and NordPool) have worked well in European energy markets; while French power & gas markets (and southern European markets), German natgas markets, and Carbon markets have not done so well. At last, learning points for Asian natgas and LNG were concluded as: 1) excess supplies need to become liquid; 2) non state-controlled buyers of several sizes are required; 3) should benefit from a large customer base and diverse suppliers; 4) regulator should be trusted and neutral. The second presentation was made by Mr. Andre Lambine, Senior Advisor of Gas at Platts, on ‘critical success factors of European gas hubs’.Key success factors were concluded as: 1) Transparency. Hub price quotations and indices have been publicly available since the hubs commenced trading; 2) Deregulation. There must be demand to trade; 3) Interconnectivity. Trading between geographical areas must be facilitated; 4) Standardization. Makes it possible to compare prices; 5) Balancing of the Market/Clearing House. That can reduce counterparty risk; 6) Financial trading which will boost liquidity. The third presentation was made by Dr Xunpeng Shi, on ‘Europe’s transition from oil indexation to hub pricing: An Asian perspective’. Dr Shi argued that, oil indexation is no longer justifiable due to many reasons such as oil not being an alternative to gas (coal emerges as an alternative now) and also the low correlation with the U.S. market. Transition from oil-indexed to gas-on-gas (GoG) competitive pricing is underway in Europe as its gas hub development is a dynamic process, which is still in progress. In East Asia, some countries would like to see gas hub trading take off in the near future, too. Lessons from the European experience are valuable for reflecting on successes and failures of gas hub emergence and an East Asian perspective can be derived from European experience and adjusted to a new context. Based on their discussions, comments were made by Juan Roberto Lozano Maya, Researcher at Asia Pacific Energy Research Centre (APERC).

Session 4: Lessons learned from other commodity markets

This section was chaired by Professor Quentin Grafton. The first presentation was made by Mr Hari Malamakkavu Padinjare Var, Research Associate at ESI, National University of Singapore. His speech was mainly about transition to market based price in crude oil markets and lessons learned for hub pricing in natural gas markets. Both evolution of crude oil pricing and traded natural gas pricing were introduced. Key factors in development of oil benchmark pricing were analyzed and hub market development framework was built for natural gas. The second presentation was made by Ms Jacqueline TAO, Analyst, ESI, National University of Singapore. Detailed introduction was given to the coal pricing mechanisms. Lessons for market based pricing of natural gas markets were concluded as: 1) Large volumes of trade, though critical, does not guarantee the evolution of a geographical trading hub; 2) Relevance and reliability must be present, in addition to price discovery; 3) Governance plays an important role. The third presentation was made by Dr Xunpeng Shi, who focused on Dojima rice exchange.An overview was given on the Dojima rice exchange, as well as its history and challenges. Implications were summed up for gas market development on following aspects: spot market, futures market, government and policy development. Based on their presentations, comments were made by Dr Yanfei Li, energy economist at Economic Research Institute for ASEAN and East Asia (ERIA).

[1] Data Source: IEA (International Energy Agency), Developing a Natural Gas Trading Hub in Asia, https://www.iea.org/media/freepublications/AsianGasHub_WEB.pdf

Professor Dr Friedbert Pflüger, Director of EUCERS and chair of the discussion, opened the debate highlighting the relevance of Brazil as an emerging energy actor due to its successful management of renewables and, to some extent, non-renewables, as well as having a cleaner energy mix than many countries, stating that it is an important regional actor both at the energy and at the geopolitical level. He thanked ISD and KAS London for their help with this workshop as well as with the previous discussions that covered Iran and Kazakhstan and wished a fruitful discussion on the South American country.

Brazil currently has 13.2 billion barrels of proved oil reserves according to the EIA, as well as 13.7 Tcf of natural gas. Crude oil production is 2.7 million barrels per day and natural gas production is 911 Bcf. The country’s energy mix is very dependent on renewables and hydropower alone accounts for over 70% of the electricity generation (EIA, 2014). A larger hydrocarbon production is expected to arise from the offshore pre-salt layer in the upcoming years and greener projects such as solar and wind power generation have been gaining momentum in the country, although there is still a long way to go.

Mr Hans-Hartwig Blomeier, Director of the Konrad Adenauer Foundation (KAS) in London, stressed the importance of the EUCERS/KAS partnership and of the EUCERS/ISD/KAS Energy Talks series. On Brazil, Mr Blomeier highlighted the relevance of renewables in such a large country and also mentioned the environmental concerns of large harvests for fuel rather than food production. In addition, Mr Blomeier commented on the role Brazil plays regionally both at the energy and at the political level and the need to understand its modus operandi.

Mr Túlio de Andrade, Head of the Energy, Environment and Climate Change Section of the Embassy of Brazil in London, presented an outlook on Brazil’s energy mix, which has a 42% renewable composition, and focused on the country’s clean energy move, which has been a reality for many decades in the country. Renewables are responsible for 75% of Brazil’s electricity generation and the government, according to the diplomat, has promoted projects for wind and solar power. This makes the transition to a low-carbon economy not so much applicable to Brazil since the country already has a strong foot on non-polluting resources.

Dr. Alexandre Strapasson, Honorary Research Associate at Imperial College London, presented the country’s scenario of biofuels, of which Brazil is the world’s second largest producer, with a special emphasis on land use coupled with food demand. The professor stated that the higher the demand for animal products such as meat, the less land will be available for biofuel production such as ethanol, which, in Brazil, is usually derived from sugar cane. Dr Strapasson believes Brazil could be more aggressive when it comes to biofuel production. According to  him, unlike what is commonly assumed, the use of land for biofuel production such as ethanol does not result in larger deforestation and environmentally there is an overall gain as less pollution is generated when biofuels are used by the transport sector.

Dr Frank Umbach, Research Director at EUCERS, stressed Brazil’s geographical characteristics, as well as its vast resources and energy consumption/production (world’s 8th and 10th largest respectively). Particularly concerning its hydrocarbon production, Dr Umbach shed light on Brazil’s major challenges for the future development of the pre-salt layer, which, notwithstanding its massive reserves at 28-35 billion barrels according to Petrobras (POLITO, 2014), present challenges that are both technological and economic. In addition to this, the price of the oil barrel, at US$50 as of mid-July 2015, has made the development of such fields a less attractive activity, which could hinder Brazil’s promise of self-reliance in the hydrocarbon sector in the near future.

Mr Thomas Fröhlich, specialist on Brazil’s ethanol diplomacy, has presented the situation of ethanol production in Brazil as linked to the country’s energy diplomacy, which was strengthened during the administration of Luiz Inácio Lula da Silva (2003-2010). Internationally, Brazil has taken up to the “commoditization” of ethanol by trying to create an international market for the product by widening both the producer and the consumer base, hence becoming a major international player in this respect. The researcher has also commented on the prospects for the ethanol market in Brazil and worldwide, which can benefit greatly from recent technological advances in agriculture leading to its development elsewhere. One particular problem of ethanol’s advance in the world market are the commodity prices, which are often difficult to predict. However, matters of sustainability and trade barriers are often political and can be more easily overcome when compared to the offer-demand dynamics of global fuels.

Mr Daniel Rossetto, director at Climate Mundial Ltd., discussed Brazil’s possibilities for solar power generation, which, although attractive, has been promoted by the government to quite a limited extent. According to Mr Rossetto, when it comes to renewables, Brazil has a good record of hydropower and, more recently, wind power, but not so much of solar power in spite of its potential of 6 kWh/m2 in some states in the Northeast. Currently, solar power makes up less than 1% of the country’s electricity mix and the cost-effectiveness of wind over solar power in the past decade has made the latter more competitive in Brazil.

Dr Flávio Lira, 2014/2015 KAS fellow at EUCERS, highlighted Brazil’s rationale for energy production at the strategic level. The country has historically insisted on different forms of energy production as a way of decreasing foreign dependence and making use of its natural resources in a competitive manner. At the same time, Brazil does not have the mission of championing cleaner energy production. This has rather happened due to the natural availability of strong river streams, wind and sunlight, as well as the centuries-long culture of sugar cane plantation, which could also serve ethanol production. Brazil’s current challenges of hydrocarbon production – low oil prices and difficulties of investment in the pre-salt layer – is an example that the country is currently operating in two energy fronts: the more traditional renewable base (hydropower and ethanol) and a newer hydrocarbon focus (particularly pre-salt) seeking ultimate independence in this area, notwithstanding the current shortcomings of its E&P sector.

The roundtable discussion was followed by a Q&A involving academics, government personnel and business people. The video coverage of our event can be found on our YouTube Channel.

Overall, participants agreed that Brazil plays an important role in energy regionally and that the volume of its production is relevant when it comes to hydropower and, more recently, the oil and gas sector. As an apparent rising power, Brazil seeks to secure its energy supply in a time of rising domestic demand. Notwithstanding its rising production of oil and gas at the upstream level, the country’s downstream capabilities are still not ready to deal with the heavy crudes that make up most of Brazilian production. The pace of (re-) investment stemming from upstream gains to the downstream sector in the country, as well as the fair and realistic use of the the local contents rule for further E&P development, might shield the country from higher energy turmoil that might threaten its oil and gas industrial base. Renewables shall remain a relevant part of the country’s energy mix even though hydrocarbon production has recently been on the rise. From an EU perspective, an energetically stable Brazil is important both at a geopolitical level (by helping bring stability to Latin America, a historically relevant partner of European countries) and when it comes to supply and demand, particularly concerning hydrocarbons. If Brazil is able to solidify its E&P operations in the near future, its historical trade links with the EU will be a significant starting point for a stronger import/export chain between Western countries and Brazil. This might result in increasing purchases of European refined products by Brazil and of both crude and refined Brazilian products by the EU. Joint research and operational projects between Brasilia and Brussels involving energy diversification and energy security are likely to create a healthy interdependence that benefits both sides, which demand energy at an increasing level and constantly seek reliable partners for affordable and safe meeting of their demands.

By Flávio Lira, KAS fellow at EUCERS

References:

EIA [US Energy Information Agency)

Analysis: 

Brazil. 2014. Available at 
https://www.eia.gov/international/analysis/country/BRA. Retrieved on 25 July 2014.

POLITO, Rodrigo. Valor Econômico. Empresas: Energia. Pré-sal tem potencial de reservas de 28 a 35 milhões de barris. 25 July 2014. Available at 
https://valor.globo.com/empresas/noticia/2014/07/25/pre-sal-tem-potencial-de-reservas-de-28-a-35-bilhoes-de-barris.ghtml. Retrieved on 27 July 2015.

Although the temptation of an estimated one trillion cubic metres is already bringing companies from the three countries closer together, the political sensitivities that have kept them apart in recent years are real and complicate matters.
Recognising the opportunities but also the challenges at stake, EUCERS together with the Atlantic Council stepped in, offering a much-needed neutral setting for discussion, organising a one-day workshop in Istanbul on 19 November.

The event also enlisted the support of the Sabanci University’s Istanbul International Centre for Energy and Climate which offered the university’s Minerva Han venue in the Galata district of Istanbul.

The workshop brought together members of the academia, representatives of relevant energy businesses as well as officials from the countries involved.

The seminar kicked off with the welcome address of John Lymann, director at the Atlantic Council’s energy and environment programme, Professor Friedbert Pflueger, EUCERS director and Professor Nihat Berker, the president of the Sabanci University who introduced the topic of the conference – Natural Gas in the Eastern Mediterranean, Opportunities and Challenges – to a 100-strong audience.

The first panel started off with a discussion about the political and geographical realities of the region as well as a review of the natural gas projects that are being developed.

Gal Reiter from Modiin Energy, a publicly-traded company engaged in oil and gas exploration in Israel talked about the recent natural discoveries in Israel as well as dilemmas facing her country in selling the volumes currently set aside for export. Israel which boasts some of the most important natural gas reserves in the region is currently assessing the export options which could include either building a liquefaction terminal or the construction of a pipeline to Turkey.

Reiter offered a comprehensive presentation of the blocks under development and their estimated reserves. These are Yam Tethys, Tamar, Dalit, Leviathan, Dolphin, Tanin, Shimshon, Karish.

She pointed out that while Israel expects to export some 40 percent of its estimated 900bcm gas reserves, the country is also looking to increase the share of natural gas within its overall generation mix to some 47 percent by 2015, while reducing that of coal from 39 percent in 2003 to 19 percent also in 2015.

The following speaker, George Shammas, chairman of the Cyprus Energy Regulatory Authority (CERA) also outlined the opportunities and challenges currently facing his country. He noted that the recent important gas discoveries in the Eastern Mediterranean and the proposed development of an LNG terminal in Cyprus may transform the country into a regional hub as well as an energy and political bridge between Europe and the Middle East. Such a vision would not only align with the EU’s policy on energy infrastructure, but also offer a much-needed ground for stability in that region, he said.

Other members of the first panel touched on Turkey’s role in creating an energy hub that would act as a nexus of volumes imported into Turkey or transited to Europe via Turkey from a variety of regions including the Caspian, the Middle East and the Levant.

Hasan Selim Ozertem, head of the centre for Energy Security Studies at the International Strategic Research Organisation (USAK) and Professor Huseyin Bagci, department chair of International Relations at the Middle East Technical University highlighted Turkey’s ambitions to create an energy hub that would also exert   geopolitical influence in the region.

In contrast, Professor Ahmet Evin, an energy expert at the Sabanci University remained sceptical about the ability of any regional country to establish such a hub.

The intervention of Professor Pflueger however reminded both speakers and members of the audience that the shale gas revolution that started in the US may prompt Washington to reduce its influence in the Middle East and the Levant, giving greater leeway to countries in this neighbourhood to guide the foreign policy of the region. He also concluded the first panel on an optimistic note, pointing out that energy can be not only a source of conflict, but also a source of reconciliation and long-standing disputes between Turkey, Israel and Cyprus could be smoothed out by the promise of greater cooperation in the natural gas sector.

The second panel was made up of business representatives who have an interest in the regional gas market. Speakers included Matthias Keuchel, general manager of Turkey’s Enerjisa, Bekir Sami Acar, managing director of EWE Turkey, Nusret Comert, vice chairman of Turkey’s oil and gas association Petform, Kanat Emiroglu, chairman of the board of Turkey’s Global Enerji and Simone Bertolo, head of LNG business development at Italy’s Enel.

Panellists analysed the demand for natural gas in Turkey and southeast Europe which expect to be at the receiving end of volumes from the Caspian, northern Iraq and the Levant within the next five years.

Finally, the third panel focused on the contribution of eastern Mediterranean gas to the Southern Corridor – a project that has the support of the European Union and seeks to help member states to wean themselves off their dependence on Russian gas.

Dr Frank Umbach, associate director of EUCERS spoke about the emerging competition between Russian and non-Russian gas projects in Turkey and southeast Europe, particularly at a time when Russia is involved in building its much-touted South Stream gas pipeline that would serve the southeastern European gas markets.

Androulla Kaminara, special advisor at the European Commission and currently an academic visitor at St Antony’s College Oxford, analysed the development of the European gas market from the perspective of four key factors – the impact of the recent financial crisis, the effect of the Fukushima nuclear disaster, the rising demand for gas in non-OECD countries and the effect of the shale gas revolution on the European market.

Janusz Luks, CEO of Central Europe Energy Partners (CEEP) and Dr Efgan Niftyiev of the Caspian Strategy Institute in Turkey – two organisations that also supported the workshop – spoke about the pricing of natural gas in Europe and the effect of additional volumes on both demand and prices in the medium term.

The event was concluded by remarks from Yvonne Ruf from Roland Berger Strategy Consultants followed by a Q&A session.

EUCERS would like to thank the co-organizers: Atlantic Council U.S. and IICEC at Sabanci University for their support and the Sabanci University for providing the venue. EUCERS would also like to thank Enel S.p.A. for hosting the business lunch on the day and its partners CEEP, the Caspian Strategy Institute in Turkey, Petform and Roland Berger Strategy Consultants.

Professor Dr Friedbert Pflüger, Director of EUCERS and chair of the discussion, opened the debate, emphasising on the enormous energy wealth of Iran, making it a remarkably interesting topic to begin the 2015 EUCERS/ISD/KAS Energy Talks on ”Re-Emerging Energy Superpowers”, which also envisage discussions on Kazakhstan, Iraq, Brazil and others. In relation to the event on Iraq, Professor Pflüger mentioned EUCERS cooperation with the Iraq-EU Energy Centre. He also announced a new EUCERS’ project on Kazakhstan and the EU, conducted jointly with the Nazarbayev University and supported by the KAS.

Due to various internal and international factors, the world’s 4th largest crude oil and 2nd largest natural gas reserves holder and geo-strategically located Iran, has failed to successfully exercise its energy potential domestically and internationally. However, in case of lifting of the international sanctions imposed on Iran due to its not transparent nuclear programme, the eventually re-integrated Iran into the energy markets, if not in the short, but in the longer term will have crucial economic and geostrategic implications for Europe and internationally.

In this regard, Professor Pflüger expressed positive hopes that the Iranian President Hassan Rouhani’s government was orientated towards reaching a final nuclear deal. The EUCERS’ Director concluded with posing to the panel the key pending questions regarding Iran: What is expected from the International Nuclear Negotiations? and What will the implications of a re-integrated Iran in the global energy markets be for Europe and internationally?

Mr Alistair Burt MP and former Parliamentary Under Secretary of State at the Foreign and Commonwealth Office (FCO) responsible for FCO policy on the Middle East began his statement by acknowledging that after suffering many cataclysms in their long history, the UK-Iran relations were now in tasting phase and had to undergo a gradual healing process. Later in the discussion, he reiterated that the UK was looking forward to having positive outcome of the nuclear talks and seeing a re-emerged Iran, playing a key role for the stability in the Middle East.

In this regard, Mr Burt addressed the issue concerning Iran’s identity, questioning whether Iran would emerge as a power taking part in a structured world of rights and responsibilities or it would remain a regime exercising its influence being a counterpole to that structure. According to Mr Burt the greater identity question is a debatable issue within Iran, determinative for the outcome of the nuclear talks, the realisation of Iran’s energy potential and the improvement of its overall economy. Given Iran’s controversial position in the Middle East, its future role in the region was another matter Mr Burt questioned. Being aware of the complexity of the leadership in Iran, also in many ways highly democratic, because many people were taking part in the internal debates, he reiterated that important was Iran’s final decision on how it would use its influence in the region and internationally. Finally, Mr Burt outlined another debatable issue concerning what other powers, such as the US or Saudi Arabia were expecting from a re-emerged Iran and what impact it would have on some of the regional balances, leaving the questions open to interpretation.

Professor Jonathan Stern, Chairman and Senior Research Fellow at the Natural Gas Programme, Oxford Institute for Energy Studies, took the case of the Iranian gas exports, basing his arguments on Ms Elham Hassanzadeh’s book Iran’s Natural Gas Industry in the Post-Revolutionary Period Optimism, Scepticism, and Potential. Although there has been a massive increase in Iran’s gas production, the even faster rise of its domestic demand and the effect that the subsidies have on lowering the gas prices make Iran unable to export any significant amount of gas at least until 2030. Additionally, as pointed out in Ms Hassanzadeh’s book, the domestic elites had strong economic grounds to oppose gas exports, since the natural gas usage for reinjection into oil fields and for the petrochemical development produced the biggest economic return from gas to the state. According to Professor Stern even if the sanctions are lifted, the domestic issues resolved and significant foreign investments made, it will still take 20 years for Iran to emerge as a major gas exporter. Within 10 to 15 years Iran most probably will export modest amounts of natural gas to its neighbourhood, with Iraq and Pakistan being the most realistic destinations. Although Professor Stern remains sceptical about the gas exports, he envisages the Iranian oil exports to have a greater impact to the energy markets, since the lifting of the sanctions will have an immediate effect on Iran’s oil sector.

Dr Frank Umbach, Research Director, EUCERS, King’s College London, voiced similar to Professor Stern concerns about Iran’s gas exports, highlighting that due to domestic gas shortage Iran might not even be able to fulfil its plans to export to Iraq and Oman, particularly during the winter times. Additionally, he stressed that if there were lifting of the sanctions, it would be a gradual process, which would not have immediate effect on the gas exports. However, even in case of fast sanctions alleviation, he envisaged that with the remaining domestic challenges it would take approximately 5 years to have larger Iranian gas exports. Regarding the pro and against gas exports debate within Iran, Dr Umbach stressed that although in Iran there were some interested parties, the exports should not be overestimated at least on the short to midterm. Comparing the internal discussion to the one taking place in the US, he explained that in Iran it encompasses different school of thoughts and added that the complexity of the matter was not entirely transparent to the public.

In terms of oil, Dr Umbach was not very optimistic either, arguing that in the worldwide oil competition the energy efficiency, absent in Iran, was becoming an increasingly important factor. Furthermore, he suggested that the oil prices decline would negatively affect Iran’s oil sector, as the Iranian oil exports had already decreased.

Mr David Jalilvand, a PhD candidate at the Berlin Centre for Caspian Region Studies, researching energy and political economy of Iran, confirmed the previous speakers’ statements that Iran benefits of domestic gas allocation. However, he added that exporting gas might have strategic advantage for Iran, as it created stronger relations with its customers, making gas exports a more attractive idea to the foreign policy makers in Iran. He further mentioned that the Iranian energy industry would also benefit from the higher and stable income from the foreign consumers, contrasting to the lower and delayed payments of the domestic ones.

Concerning the oil prices drop, he suggested that since the share of oil and gas revenues in the Iranian budget was about 30% and it would be decreased to about 20% in the next budget starting from March the 21st, the difficulties stemming from the prices are considerable but should not be overestimated at the same time. Moreover, he hinted that the new budget would be based on an oil price of $72 and some non-tax paying semi-governmental companies would now have to pay their share of taxes. To the comment made by Mr Duero on the importance of the increasing Iran’s exports of natural gas in the form of electricity, Mr Jalilvand added that Iran had also increased its petrochemical exports, thus improving the balance of its non-oil trade. Mr Jalilvand agreed with the panel that in the upcoming years no major volumes of export were expected, except small ones to Iraq and perhaps Oman and Pakistan.

Ms Kalina K. Damianova, KAS Fellow at EUCERS, conducting a study on Iran as a re-emerging energy superpower, added that the degree of competitiveness of the expected new Iranian oil contracts also gained key significance. Given Iran’s historically inherited reluctance to grant foreign companies access to its energy sector, the extent to which the new legal terms will be satisfactory to the international private sector is determinative for the attraction of the international oil companies in the crucially needing modernisation Iranian energy sector, whose improvement is a key step to any future exports.

As other challenges remained on the domestic level, Ms Damianova added that the sable and transparent implementation of the expected legal reform would actually mark the substantial improvement of the business environment. She hinted that the possible deepening of the EU-Iran energy relations, might also suggest political and security implications for Europe. Since Iran has been recently discussed as an ascending power, Ms Damianova stressed that power should also entail responsibility and concluded questioning how this responsibility would effectively contribute to the stability and security.

Due to technical and political obstacles, reaching and developing Iran’s full energy and export potential might take decades. However, with regard to the encouraging signs of potential reconciliation between Iran and the international community, the 2015 EUCERS/ISD/KAS workshop on Iran discussed the obstacles facing the current situation and the opportunities that might arise in the future, in order to help predicting the geostrategic impacts for Europe.

The roundtable discussion was followed by Q&A, initiating a vivid debate between the panel and the participants counting to more than 60 people – representatives of the government, the private sector and the academia. The full video coverage from the event can be found on our YouTube Channel. The provided reception afterwards, allowed the debate to continue over some wine and aperitifs.

The event was dedicatedly organised by the EUCERS’s team, with the leading role of Carola Gegenbauer, Operations Coordinator.

By Kalina K. Damianova, KAS fellow 2015/16 at EUCERS

In his welcome address, Prof Dr Friedbert Pflüger, director of EUCERS, described the topic of Chinese economic growth and the consequent growth in energy demand as one of hope and fear. The trend entailed both chances and challenges for businesses and increasingly so when considering that the IEA expects 80% of global energy demand growth by 2030 to come from developing Asia alone. Further stressing the magnitude of this outlook, Hans Hartwig Blomeier, director of the KAS Office in the UK, also reiterated the geopolitical and –strategic dimensions of these developments, going beyond mere technicalities. As such, the workshop represented an important final piece of this year’s Energy Talk Series that had already covered global energy developments in the Mediterranean, the U.S., Kurdistan and Iran.

As the first speaker of the panel, Tim Yeo MP, Chairman of the Energy and Climate Change Committee of the UK Parliament, outlined five important drivers of contemporary Chinese energy policy. Firstly, Chinese energy demand is slowing down, although still high by Western standards. Secondly, Chinese policy makers are increasingly concerned with climate change as a threat to water security and the economy, represented in the 13th Five Year Plan and the initiation of an Emissions Trading System.  This was also related with, thirdly, rising air pollution levels and a growing and vocal middle class. Fourthly, energy and carbon intensity remains high in China, yet growing at a decreasing pace. Finally, from a security perspective, China is eager to cut energy imports and utilise own indigenous resources. This has also shown that despite its political system, public opinion is not neglected, with renewables the main beneficiary. There remain, however, high inefficiencies of the economy due to a lack of a competitive market and high corruption levels. Regarding the Chinese coal demand, Mr Yeo raised several influential factors that would lead to its decline in relative terms. Gas demand is growing, however faster than its production, resulting in increasing import levels via LNG. He also referred to the recent pipeline deal with Russia. At the same time, Chinese investments in renewable energies is increasing with benefits for the global renewables market as prices of solar are decreasing. A similar effect for wind power could be next. Considering the Chinese issue of air pollution levels, Mr Yeo forecasted China to be at the centre of the automobile industry’s shift towards electrical cars. Overall, Mr Yeo therefore considered coal demand in decline and saw great potential in China becoming a leader in climate change action.  He stressed that the key for success was adaptability, a point also important for Europe, which he encouraged to make use of all its indigenous energy resource potentials.

Professor Dr Keun-Wook Paik, associate fellow of the Energy, Environment and Resources department at Chatham House and senior research fellow at the Oxford Institute for Energy Studies, continued the discussion by coming back to several already raised points. He pointed out that the LNG hub at Singapore would not reach anticipated levels due to lower Chinese LNG demand. This stands in relation to Chinese gas projects in Thailand, imports from Turkmenistan as well as the mentioned Sino-Russian pipeline deal. The shift from coal to gas in China was therefore primarily a matter of prices rather than climate change ambitions. Professor Paik stressed that observed gas prices of $18 per Million btu in Japan would not be acceptable in China, where natural gas, although having seen massive expansion over the past two decades, still only accounted for 5% of the energy mix. Nonetheless, the Asian gas market was bound to see growing geopolitical and economic competition as increased gas from Australia and new gas from the U.S., Canada and Eastern Africa enter the market. The Sino-Russian gas deal, according to Professor Paik, was in part a consequence of the Ukrainian crisis which pressured Russia to look for new export markets. China, in this respect, has been the great winner, as he assumed that it was primarily Russian concessions that enabled the deal following years of intense negotiations.

Finally, Dr Frank Umbach, Research Director at EUCERS, also picked up on already mentioned points of the discussion by stressing that from his point of view climate change was not considered a main issue for China, despite the fact that without China, no successful actions tackling global emissions could be taken. China remains the largest CO2 emitter and has recently even surpassed the EU’s in per capita emission. In this respect, he stressed that this trend is likely to continue as China will be fuelled by coal for years to come. Current plans to reduce coal’s share in the energy mix from 70% to 50% by 2030 were firstly highly optimistic, and secondly, would still mean two times today’s consumption levels. Hence, Dr Umbach reiterated the importance of clean coal technologies. Referring also to the Sino-Russian gas deal, he added that another important factor is the steadily declining demand for natural gas in Europe that could be observed in all recent IEA World Energy Outlooks. Although the gas price agreed in the deal with Russia had not been published, analysts expect prices to be below those of the European market, while building costs of the “biggest deal ever”, according to Dr Umbach, have not been included yet. This would beg the question whether the Russians are truly willing to subsidise the Chinese consumer. However, Dr Umbach pointed out that China had the greater leverage in this respect, aiming at a high degree of diversification from various pipelines and through spot priced LNG. From a geopolitical perspective on China’s energy hunger, maritime chokepoints and conflict with Japan and Vietnam in the South and East China Sea continue to be important issues. Also Chinese relations with Iran and its involvement in African energy projects had to be taken into consideration. The latter have been directly undermining Western policies. To stress the point of the interdependence of issues, Dr Umbach finally also raised the matter of Chinese investments in European critical infrastructures, such as the electricity grid and telecommunications, and the consequent vulnerability of Europe to cyber-attacks.

Following the panel discussion, as always, attendees had the chance to comment, ask questions and debate the matters at hand further. Going back to the earlier breakfast buffet also provided ample opportunity to network. Overall, the workshop once again proved to be very insightful, raising many points and perspectives and giving everyone present an in-depth overview of the connected issues. It was therefore a befitting closing of the 2014 Energy Talks Series on the important topic of shifting global energy flows, as well as an excellent preparation for next year’s Series on (re)emerging energy super powers.

By Jan-Justus Andreas, KAS Fellow 2013-14

Commencing the discussion, Professor Dr Friedbert Pflüger, Director of EUCERS, reiterated the contemporary developments on the global energy market and tectonic shifts stemming from them. Flaring as much natural gas as Azerbaijan produces, Iran as the most powerful hydrocarbon nation in the world could become a central part of these shifts. Much will depend on the outcome of the current negotiations on Iran’s nuclear program and the lifting of the economic sanctions. According to Professor Pflüger, since the re-integration of Iranians vast energy reserves into the market would be favourable to all sides, the current opportunity should be taken seriously and Iran given a chance to prove itself as a reliable and trustworthy partner. Dr August Hanning, former President of the German Intelligence Service (BND) and representative of the Institute for Strategic Dialogue, voiced similar hopes for a positive outcome of the current negotiations. In his experience, however, one could never know with Iran, which had to clarify its position regarding its nuclear program. Iran could, nonetheless, become a stabilising force in the reshuffling of the balance of power in the Middle East.

Slightly counterbalancing the positive and hopeful standpoints taken by Professor Pflüger and Dr Hanning, Jonathan Paris, Senior Advisor to the Chertoff Group, regarded the glass rather half-empty than half-full. He suggested a more cautious approach regarding the actual willingness of Iran to give up its nuclear weapons program and pointed out the severe concessions needed to be taken by the Iranian government. Taking into account the recent ISIS operations in Iraq, Mr Paris voiced concerns over the consequent increased importance of conservative security for the countries in the region, which extended especially to Israel. Looking at the Israeli response to the death of one teenager in the past days, Mr Paris pointed out that in case of a threat to its entire population there was no country more willing to defend its people with all means necessary. According to Mr Paris, these developments – both the situation in Iraq and the nuclear negotiations with Iran – hence require a proactive leadership role to be taken by the US government, exerting the fear for US action. The Obama administration, however, had proven otherwise.

Taking the case of a re-integration of Iran, Elham Hassanzadeh, Research Fellow at the Oxford Institute for Energy Studies, pointed out that regarding European Energy Security no direct gas trade with Iran could be expected before 2020/2025. Natural gas entering the European market via Turkey could take place earlier though, utilising the TANAP pipeline. LNG exports, primarily targeted for the Asian markets, could only be expected beyond 2030, due to the lack of infrastructure (including no existing terminals) and investments. According to Ms Hassanzadeh, critical for the actual size of exports will be the evolution of domestic demand which skyrocketed over the past years, reaching 150 bcm and rendering Iran the 3rd largest consumer of natural gas. Ali Ghezelbash, founding board member of the European Iran Research Group, confirmed Ms Hassanzadeh’s points and added that in the short-term major investments needed for efficiency improvements in the industry and infrastructural upgrades are highly unlikely to take place. Mahdi Kazemzadeh, Managing Director at Afraz Advisors Ltd., voiced hopes for the return of Iran to become a significant player, hinting at the fact that the country already owned a reasonable energy infrastructure which only required upgrades. Closing these gaps had to be considered an easier task than, i.e. building new infrastructure up from the ground.

Chris Cook, Senior Research Fellow at UCL Institute for Security & Resilience Studies, proposed a new approach forward for Iran domestically by following what he called the least-common-fuel-cost principle after the Danish example. Denmark, following 1973 had decided that for a given output of electricity heat and power they would minimise the carbon fuel input. The result has been a doubling of the country’s GDP over the past 40 years, a levelling consumption of energy and a significant decrease in carbon fuel demand. With one litre of gasoline requiring three litres of crude oil and one MMbtu of heat or cooling equalling ten MMBtu from the source in Iran, efficiency according to Cook could and should be a first crucial step for the country. This becomes all the more apparent in global comparison where Iran’s energy efficiency of gas generation stands at 13%, compared to 60% in Denmark, and about 35% in the UK.

Dimitry Zhdannikov, EMEA Energy editor at Reuters News, hinted at the increased diversification of the European gas market in the future. Referring to shale gas from the U.S. as well as the potential of the Eastern Mediterranean and East African fields, according to Mr Zhdannikove, Iranian gas was not necessarily needed and entailed a political risk that required a cost-benefit analysis. The picture looked, however, slightly different for global oil markets which suffered from severe disruptions. Considering the recent developments in the Middle East and Saudi Arabia’s potential inability to cover another major supply outage, Mr Zhdannikov expected the market to remain extremely tight for the next years. With regard to Iran’s role in this respect, he agreed to previous statements of uncertainties about the country’s energy infrastructure and concluded by stating that an oil output of above 3.5 MMb/d in the near future had to be considered highly unlikely. Dr Frank Umbach, Research Director at EUCERS and the final speaker of the panel, also took a more global approach by putting the potential need for Iranian oil in perspective with current developments. In that respect Dr Umbach stressed that there were far less shale oil reserves in the US than shale gas, which had fundamentally supported stable oil prices in the past. This however meant it was crucial to provide timely investments to ensure supply in five to ten years, as also repeatedly urged for by IEA chief economist Fatih Birol. From his own experiences when he visited Iran in 2008, Dr Umbach depicted the huge ambitions present in the oil and gas industries, going as far as to propose to transport Turkmen gas via pipelines through Iran to the European market. He then questioned whether Iran would still have such expansive interests.

Following the discussion of the qualitatively and quantitatively impressive panel, the open debate with the event’s participants proved fruitful for both sides . A subsequent reception provided ample opportunity for everyone to debate further and connect, while enjoying similarly ample amounts of food and wine.

By KAS Fellow at EUCERS, Jan-Justus Andreas

The panel discussion commenced under the moderation of Professor Dr Friedbert Pflüger, director of EUCERS, who in his opening remarks stressed that diversification of energy supplies was as crucial for Europe’s energy security as it was for the work of EUCERS. He pointed out that regarding the shale revolution in the U.S., EUCERS already published its very first strategy paper on this topic and its potential implications for Europe in as early as 2011. Professor Pflüger also outlined the internal debates that are taking place in the U.S. with respect to the prospective LNG trade vis-à-vis domestic energy independence. Following Professor Pflüger’s opening remarks, Sasha Havlicek, CEO of the Institute for Strategic Dialogue, gave some incitements for the subsequent discussion by inter alia hinting at the fact that following the recent developments in Ukraine, even the UK’s conservative party was bigging up Europe, which always indicated that something was afoot. She also questioned whether a similar shale revolution could take place in Europe, despite the very mixed public and governmental responses so far.

As the first speaker of the panel, Eric Mamer, Deputy Head of Cabinet in the DG Energy of the European Commission, stressed that while only a few months ago prices had been the primary focus for the European gas market, since Ukraine, this had shifted towards the actual security of supply. Regarding LNG from the U.S., Mamer also agreed with a statement made by Professor Pflüger earlier that even if LNG would reach the European instead of the Asian market – with its higher prices – this would only constitute a long-term option. He, however, also generally questioned whether an increased dependence on the U.S. was the solution to Europe’s problem; “when there already is a U.S. military presence in Europe, does one need a U.S. energy presence?” Mamer instead focused on the need to progressively change the balance of energy, in which for the Commission efficiency remained key. With regard to the Ukrainian crisis, Mamer underlined the importance to maintain open channels towards the East in order to prevent a further escalation of the situation. Generally, he said that the Commission continued to hold on to their 2030 perspective and the overall target to lessen Europe’s energy dependence and reduce the degree of imported energy.

Dr Petra Dolata, Research Director of EUCERS, moved the focus point of the discussion beyond just the U.S., by looking at Canada’s role as well, whose Foreign Minister only a few weeks back announced he would be able to supply Europe with natural gas, especially the Baltic States. Dr Dolata stressed that this was in fact a perfect example of the complexity that followed when markets and politics intersect. Canada has a vocal Ukrainian community and, at the same time, a far more open energy market than i.e. the U.S., which continued to have several political hurdles for energy security reasons. Furthermore, Canada’s dependence on U.S. demand might become an issue in the future considering U.S. production growth through the shale revolution. However, Dr Dolata also pointed out that Canada currently had not a single functioning export terminal and at the same time also required an expanded infrastructure to transport gas to the seven planned terminals – of which only one was situated on its eastern coast. Dr Dolata continued that climate change was further pushing demand for natural gas. In fact the demand side should be a greater focus for policies in response to the recent crisis, since these responses normally had the larger long-term effect compared to short-term actionism targeted at the supply side. Finally, Dr Dolata also outlined several decisive variables such as Australia’s LNG ambitions and Chinese own shale gas developments with their respective implications for Asian market prices, which in the end might turn out favourable for the European market considering LNG imports from the U.S..

Henning Gloystein, Senior Correspondent and Head of European Power, Gas & Coal at Reuters News, added further insight regarding market developments through his assessment of current price levels. Showing the spot price evolution for the UK and considering the complete costs and hence price for LNG trade, according to Mr Gloystein, profits would continue to be higher for gas companies to sell their goods on the Asian and South American markets. This would most likely also be the case in the near future since Europe was in a situation of backwardation, meaning natural gas would continue to become cheaper on the continent. Nonetheless, by mentioning several new potential market players, such as Mozambique, Tanzania as well as Australia’s expansion plans, Mr Gloystein depicted an outlook for Europe in which North-American LNG might not play a big role, however generally, diversified natural gas might still be feasible due to a growing global LNG market in general. To the delight of Dr Dolata, Mr Gloystein also pointed out that one should watch Canada.
Finally, Dr Frank Umbach, Associate Director of EUCERS, stressed that there was no silver bullet solution that would improve Europe’s energy security but rather a multitude of approaches were needed. He also returned to the crisis in Ukraine and its energy implications by considering that compared to the last Russian-Ukrainian crisis in 2009, when little alternative sources of supply had been available, today the situation was totally different considering new pipeline options (i.e. Southern Corridor and regional gas interconnectors between EU-member states) and evolving exporters. At the same time, another change was taking place regarding Europe’s natural gas demand, which was currently stagnating. Dr Umbach referred to the latest energy outlook by the IEA who expects this trend may even continue through to the year 2035. Furthermore, since many Gazprom contracts were to expire within the next two to three years, according to Dr Umbach, the basic need as well as an opportunity for change was currently developing. Moving to the actual shale developments in the US, Dr Umbach voiced scepticism regarding the pace and likelihood of further LNG approvals in the short-term perspective, especially considering the second instance of approval, the Federal Energy Regulatory Commission. He, however also stressed that if the government wanted to supply Europe with LNG it could overcome the profit differentials through tax incentives and other measures. Hence, U.S. LNG to Europe should not be precluded solely on economic grounds. Furthermore, Europe’s own shale gas resources should be taken into account, especially considering their positive economic and geopolitical potential as well as lower greenhouse gas emissions in comparison with long-distance Russian gas pipeline imports. Dr Umbach continued to outline Ukrainian efforts for energy source diversification both regarding gas and oil projects in the Black Sea, which under the current circumstances and their proximity to Crimea are unlikely to continue, but also regarding shale gas developments in its eastern parts where again these are unlikely to continue for the time being. However, Ukraine’s shale gas projects in its western region could probably experience a boost in the near future. Finally, Dr Umbach moved to the implications a European energy source diversification might entail for Russia. He primarily stressed the South Stream project, which he called the “most expensive import option” since it also requires Russia to connect its own infrastructure with the Southern Corridor, at an overall cost of $21 billion. These costs were likely to be covered in the gas contracts of the future, and hence needed to be included in the calculation. In light of recent developments, and the general cost factors, Dr Umbach therefore questioned the justification of the project in addition to the unsolved questions of compliance with the common EU laws (Third Energy Package; Third –Party access etc.). Finally, considering that South Stream had always been a geopolitical project in order to circumvent Ukraine, if the Commission was to support South Stream, Ukraine would lose valuable transit fees and more importantly its leverage towards Russia considering its importance for the European market. Consequently, “Europe would sell the rope to Russia, on which they will hang Ukraine” as it would allow Russia to increase its pressure on Ukraine contrary to the EU’s promise to strengthen its energy cooperation with Ukraine and to reduce its gas dependence on Russia. Dr Umbach hence urged that this geopolitical component needed to be integrated into the current debates on the future of the European energy market and Ukraine. 

Following the panel discussion, Jan-Justus Andreas, KAS-Research Fellow at EUCERS, and Dr Maximilian Kuhn gave additional comments to the discussion. Mr Andreas generally agreed with the statements considering the Asian and European price differentials’ impact potentially resulting in little LNG from the U.S. to reach the European market, and added in this respect the continuously increasing domestic demand for natural gas in the U.S.. He pointed out that this demand increase could coincide with a potentially stagnating or even decreasing production output by the time large scale LNG was to enter the global market. Consequently, current price levels of natural gas could most likely not be maintained, and with increasing domestic prices, the price for LNG would rise as well. Adding also a strategic perspective, Mr Andreas hinted at the fact that Japan had experienced the highest spot prices in its history early this year (above $20/ Million btu) and was largely dependent on fossil fuel exports transiting through the Malacca Straits and the East China Sea which in case of an escalation of i.e. the Islands dispute with China could threaten Japan’s energy security. Consequently, also Japan was looking to the U.S. for a more diversified energy supply for its market.

Dr Maximilian Kuhn, having the last words of the panel discussion, summed up certain consequences from the debate, by also extending the focal point beyond natural gas to other liquid fuels. Dr Kuhn stressed both the importance of infrastructure and in this respect the issues regarding European refineries’ specialisation on the Russian Naphtha, as well as the low gas price levels in Europe that actually cause much of the LNG reaching the European market to be resold to i.e. Asia. Furthermore, Dr Kuhn also hinted to the fact that energy relations with Russia were more than 50 years old and could not be replaced overnight, yet the increase in interconnectors in the European gas grid since the last crisis in 2009 could potentially enable reverse-flow towards Ukraine. However, in order to expand export, current market restrictions needed to be overcome from a political point of view. Finally, Dr Kuhn concluded that at least since the crisis was taking place now instead of autumn or winter, Europe had not only full gas storages but also some time to deal with this delicate situation.
Following the general debate, a Q&A session gave the audience the possibility to further discuss the variety of mentioned issues and aspects regarding shale gas, the Ukrainian crisis and European energy security. As always, the session itself was followed by a reception enabling further networking among the participants and speakers while enjoying both food and wine. The entire workshop was videotaped and will be available on EUCERS’ YouTube channel in due time.

The discussion was aimed to shed some light onto the myths, realities, and potentials that revolve around the Arctic, especially in light of the developments of the past decades regarding the retracting ice due to climate change and the resulting accessibility of the region. With even the mainstream media catching up to the idea of possible future conflict over the resources that are said to be found below the ice – including gas and oil – the portrayal of the region as existing outside a legal framework has led to a larger public debate.

As the first speaker of the evening, Alan Kessel, Deputy High Commissioner of Canada to the United Kingdom, commenced by clarifying that the Arctic in fact was nowhere near a legal vacuum, and should not be confused with Antarctica, which since it was an uninhabited landmass required a unique international legal framework. The Arctic on the other hand, was firstly inhabited, and secondly, organised through the United Nations Law of the Sea Convention (UNCLOS) and any disputes among the five Arctic coastal states (United States, Russia, Canada, Norway and Denmark) were being settled within the existing international legal framework. This had also been reiterated in the 2008 Ilulissat Declaration, which bound the Arctic states to orderly settle disputes regarding overlapping claims.

Paul Stansfield, Arctic and Antarctic Desk Officer at the UK’s Foreign & Commonwealth Office, stressed that the Arctic Council, which consist of the above mentioned five Arctic states, Sweden, Iceland, and Finland, as well as the permanent members of the indigenous peoples of the region, has shown to cooperate and find agreement in dealing with most arising aspects in the Arctic.

Dr Petra Dolata, Research Director at EUCERS and Lecturer at King’s College London, remarked in this respect that just because the media had now come to grips with the “existence” of the Arctic and its associated countries, resources, and (potential) disputes, these aspects are not new and have been discussed and resolved for decades. Mr Stansfield also pointed to the fact that since there was no legal vacuum and the existing regional and international frameworks promoted cooperation among the various actors, there was neither an apparent threat of conflict, nor a race or scramble for resources to be seen. This was readily agreed on also by the other members of the panel, and Dr Dolata also depicted that most energy resources were in fact found within the 200-mile Exclusive Economic Zones of the coastal states.

Paul Stansfield, who outlined the UK Arctic policy published in October 2013, continued by pointing out that the role of the UK in the Arctic was merely to support the Arctic Council’s tasks and promote sustainable and responsible actions in the region regarding commerce, science, energy resources, the environment, tourism, and the safety of the indigenous people. Furthermore, it had to be recognised that the Arctic was no homogenous region in the sense of inter alia geographical and climate differences between the “European”-Arctic and the “North-American” one. Dr Petra Dolata added that also the indigenous people of the Arctic were internally divided in their interests and opinions, i.e. regarding resource explorations.

By taking the more academic approach, Dr Petra Dolata, looked at the recent events from a political scientist’s perspective and remarked that there had been a politicisation of the topic for example through a Russian flag planted on the North Pole in 2007, as well as the Canadian response to the incident declaring Arctic sovereignty a national interest. While these acts, as stressed by Mr Kessel, had no legal foundation, Dr Dolata pointed to the implications these actions have had for the perception of the Arctic as a potential theatre of conflict. She referred especially to the European perception of the dispute, which had been rather shaped by surprise about the strong and decisive rhetoric by the Canadian government. This did not fit into the European image of Canada as a mediative, peace-loving nation. She continued by outlining further dividing lines in the Arctic, such as coastal states vs. maritime powers, Arctic powers vs. Arctic states, and NATO vs. non-NATO Arctic states. Paul Stansfield later noted however that since NATO was internally divided regarding its interest in the Arctic, while there has been debate, no action had been taken from their side so far. Finally, Dr Dolata also questioned whether it was the right approach to continue to have states as the centre of international agreements and made the point that in the 2008 Ilulissat Decision the indigenous parties were not included in the discussion. The cooperation between states and indigenous people had earlier been considered exemplary by Mr Kessel, since in the Arctic Council states and indigenous parties had to agree unanimously.

Overall, the event must be considered a great success, since it was able to clarify common issues and misperceptions with regard to the Arctic, its legal framework, and the risks of conflict, and thereby could defuse the fear of a war in the North for the time being.

In their welcome address, both Professor Dr Friedbert Pflueger, director of EUCERS, and Hans-Hartwig Blomeier, director of the London Office of the KAS, referred to the relevance of the upcoming series of events. The complexity and scope of contemporary developments in the energy sphere can be depicted already by the variety of topics to be discussed in 2014, considering their nature as well as their geographical location. Following the workshop on Turkey and Mediterranean Gas – for which EUCERS in cooperation with the Atlantic Council of the US (ACUS) plans to organise another conference in September this year in Jerusalem, Israel – the series will be discussing matters regarding the Shale Revolution in the US, Kurdish Oil in Northern Iraq, the implications of Iranian re-integration into the global energy market, and finally China’s growing energy “hunger”.

This session on Turkey’s role as a growing energy hub with a particular focus on Eastern Mediterranean Gas was hallmarked by the general agreement that Eastern Mediterranean Gas was not a game changer based on its economics, and in situ reserves, yet bears the potential to be one with regard to its geopolitical implications. Nonetheless, the first speaker of the panel, HE Daniel Shek, Former Israeli Ambassador to France and ISD Engaging Turkey Task Force Member, also pointed out the many political barriers that needed to be overcome to achieve such a new political environment of the region, referring to the Cyprus issue, as well as Syria and Lebanon, and Turkish-Israeli relations. Iulian Chifu, Advisor for Strategic Affairs and International Security to the President of Romania, added the Turkey-Greece case to the list of ambiguous relationships, which however had seemingly improved over the past years.

Mehmet Öğütçü, Founding Chairman and CEO of Global Resource Cooperation, who considered Eastern Mediterranean gas in the global context, urged for realistic estimations regarding the magnitude of the resources in the Eastern Mediterranean, but also stressed that it is not a below the ground issue but in fact the above the ground factors which will be determining the future of Eastern Mediterranean Gas. He continued to advise caution regarding the Cyprus question, which might experience a push, yet realism should prevail over unrealistic dreams. Referring to the perception of energy cooperation being a driver for reconciliation as a “peace pipeline”, Aura Sabadus, Journalist and Research Associate at EUCERS, pointed out that for example the experience in the case of the Baku-Tiflis-Ceyhan-Pipeline has shown that peace pipelines may not be as peaceful as they sound. She pointed in this respect to the unhappiness of Turkey about the transit fees they collect from the transit of oil. If it was however solely about political gains, the Arab-Gas-Pipeline would have an even greater effect on overcoming current issues in the Middle East, and could include flow-back possibilities for Israel and a pipeline to transport Israeli gas through Jordan to Lebanon, and Syria into Turkey, en route collecting Cypriot and Syrian gas as well.

In addition to the considerations on the opportunities that Eastern Mediterranean gas bears geopolitically for the region, the members of the panel also discussed the energy landscapes of the respective players as well as the associated economics and required infrastructural upgrades. Mehmet Öğütçü pointed in this respect to the growing energy demand in Turkey, which he considered its “soft belly”, and which is the second most important export destination of Russian gas after the EU. Androulla Kaminara, Special Advisor to the European Commission and a current Academic Visitor at St. Antony’s College at Oxford University added that in combination with the recent agreement for two nuclear power plants to be run by Gazprom, Turkey stands in danger of allowing Russia great monopolistic powers over its energy sector for the next fifteen years to come. While the EU was increasingly attempting to distance itself from Russian energy sources, it seemed Turkey was moving ever closer towards them. Furthermore, Turkey will need extensive upgrades of its energy infrastructure requiring $6-8 billion in order to allow it to become the energy hub it aspires to be. Continuing with the Israeli energy landscape, Dr Amit Mor, CEO of Eco Energy Ltd., made clear what extensive implications the exploration of natural gas has already had for Israel. He outlined that the share of natural gas in Israel’s power generation was expected to amount for 70% within the next five years from virutally 0% just ten years ago. Furthermore, Israel was also planning to shift its vehicle fleet both towards natural gas and its derivatives, such as methanol, as well as electricity over the next years.

Moving towards the export possibilities and challenges, also with respect to the abovementioned difficult relationships among neighbouring countries in the region, Dr Amit Mor showed the various options with respect to their economic and political viability. He stressed the high security risks that impede the building of LNG terminals in Israel, and instead outlined the possibility to use two already existing LNG facilities in Egypt, of which one is currently idle and the other running at 30% of available capacity. However, also with Egypt there are political risks, which would support the options of for example floating LNG facilities, an LNG facility in Cyprus combining Israeli as well as Cypriot gas, or a pipeline to Turkey. In his overall assessment of the possibilities, Dr Mor concluded that in the case of Eastern Mediterranean gas, it is most likely that geopolitics will actually be more decisive than economics.

In contrast, both Iulian Chifu and Gulmira Rzayeva, Senior Research Fellow for energy related issues at the Center for Strategic Studies under the President of the Republic of Azerbaijan, concluded that the national interests of Turkey firstly regarding its own market and potential supply gaps that could arise as early as 2016, as well as its ambition to become an energy hub, will have the ability to overcome the political stand-offs – especially between Turkey and Israel, and Turkey and the Republic of Cyprus – in favour of the economic gains. This perspective was also supported by Anthony Livanios, CEO of Energy Stream CMG, who stressed that in order for Turkey to become a reliable energy transit country, and possibly even an energy hub in the future, it would have to prove exactly this reliability through its relationships with its neighbours. Hence, he considered that cooperation in the Eastern Mediterranean, while economically and in energy reserves terms a minor player, was of great interest for Turkey in order to consolidate its position within the greater picture, regarding Caspian, Iraqi and Iranian gas, as well as its relationship to the EU. 

With respect to the economic viability, Gulmira Rzayeva further noted that the most viable solution would be a pipeline linking Israel and the South Western part of Turkey, where already existing infrastructures of the Botas Petroleum Pipeline Corporation could handle about 2-3bcm without great additional investments needed. Overall, the greater viability of a pipeline instead of LNG terminals was rooted in both the security risks, as well as the capital cost factors and market prices. A pipeline from Cyprus to Turkey would only require about $2-3 billion, compared to $4-6 for LNG. John Roberts, Energy Security Specialist, also remarked that a pipeline would not necessarily mean that there could be no additional LNG terminals. Similarly, Aura Sabadus outlined that combining Israeli and Cypriot gas at an LNG hub in Vasilikos (Cyprus) could in the long-term ramp up exports of over 50bcm of gas. According to her, this option was bearing even greater potential since security issues with regard to LNG facilities in Israel and Egypt are similarly present with respect to floating LNG facilities that are the size of several aircraft-carriers, and hence would constitute easy targets. The special advantage of LNG lies also with the potential to sell gas to Asia. However, generally, both Cypriot as well as Israeli gas could very likely enter first and foremost the growing Turkish market, which is currently at similar price levels as the average European ones, according to Gulmira Rzayeva.

An issue for the economics of such export plans lies however also with the growing competition, which of course has positive impacts on overall European energy security with respect to diversification, which continues to be key policy for Europe, according to Androulla Kaminara. Nonetheless, due to the growing demand levels in Turkey, already Mehmet Öğütçü had hinted at the increasing Turkish interest in the gas fields of Northern Iraq and from Iran. John Roberts added several other newly evolving competitors to the picture, and reiterated the possibilities of the to-be reintegrated Iranian supplies, which could enter the market as early as 2015. Furthermore, the evolving East African players according to Roberts will most likely prevent Israel from exporting its gas to Asian-Pacific consumers. All these factors together put pressure on the commerciality of the Eastern Mediterranean. However, despite growing competition in some areas, there are also question marks regarding the reliability of existing players. Mr Roberts mentioned the rapidly declining Algerian gas exports in this respect, and further pointed to the difficult partnership between Europe and a Russian state that was increasingly regressing to a zero-sum attitude in international relations. The potential fallout to Turkey of this relationship will depend on the EU’s response to the current crisis but might very well include a tougher approach on onshore pipelines with reference to the South Stream project, which is subject to European Commission assessment and approval. This point had already been raised earlier by Iulian Chifu, who feared a denial of access for the Black Sea Corridor. For Roberts, however, the biggest issue is the failure to understand that “cheap gas” does simply not exist for any low prices for natural gas come at a political cost as well, which could be observed in the contemporary case of Ukraine.

Overall, Aura Sabadus stressed that Turkey must be considered the only viable potential challenger as an energy hub to Russia’s contemporary power over European gas. However to explore its potential, Turkey requires a strong liberalisation of its markets and for the EU to finally open the energy chapter with Turkey. Generally, it would be in everyone’s interest to diversify, particularly since Russian gas is not just any gas but attached to a multitude of strings. As HE Daniel Shek had noted in his initial remarks, for the near future, economic interests may not be able to resolve political conflicts but could and should act as a catalyst to at least overlook them.

Following the extremely insightful discussion among the nine panel participants, Professor Pflueger took the floor stressing that all these bright options of diversification and future competition for the European gas market remain unfortunately unavailable for the near and long term future, while Europe’s dependence on Russia continues to be a reality of today. This needed to be acknowledged by European states when flexing muscles in light of the current Crimean Crisis as the reality in fact would leave little leeway for Europe to actually do so. Considering the case of Eastern Mediterranean Gas, however, Professor Pflueger reiterated the extraordinary long-term political potential of energy cooperation between Israel and Turkey and remarked that Turkey has the ability to become a great player as an energy hub if it manages to not get entangled in traditional regional conflicts.

The general discussion was as always followed by a Q&A session that gave the audience the possibility to further debate the complex issues at hand, as well as a follow-up reception to provide networking opportunities, and a forum for further discussion. Overall, the event had been a great success with a large audience and an almost equally extensive panel providing a comprehensive and instructive debate, whetting the appetite for this year’s series and the upcoming workshops.

By KAS Fellow at EUCERS, Jan-Justus Andreas

Dr Tamim commenced by outlining the history of democracy in Iraq, dating back to 1921, and stressed that after the previous elections in 2005 and 2010, the upcoming ones will for the first time take place without international security forces present. He continued by outlining further differences in the upcoming election compared to the former ones, such as the new party system, which will allow smaller parties to gain seats in the Iraqi parliament and has caused several larger parties to split. He projected that the Prime Minister’s party will again be strongest party in Iraq, however only receiving about 75 of the 165 needed seats to form a government. Through Dr Tamim’s projections of the division of seats for 2014, he made visible the political difficulties arising from the diverse cultural and religious foundations of Iraq. He deduced that while after the last elections it took nine months to form a government, in 2014 this will most likely be exceeded decisively.

The minister then moved on to outline the international influences on the Iraqi election. According to him, Iran will have the greatest effect by directly influencing the Shia population of Iraq, whereas the US’ influence will have decreased in comparison. Turkey, as well as Saudi Arabia, will be impacting future Iraqi politics by potentially forcing a name for the future Prime Minister.

Finally, coming to the topic of oil, the Dr Tamim recounted the various oil fields in Iraq and their sizes. By stressing the fact that Iraqi oil will last for 250 years, compared to 110 years in Kuwait and only 88 years in Saudi Arabia, he made clear how big a role Iraqi oil will play in the future. In addition, the minister also outlined the prospect of future recovery of gas. Hence, based on the economic impact, domestically as well as internationally, oil will lie at the heart of the election debates. Dr Tamim continued that this would also affect the situation in the North of Iraq, where the autonomous Kurdish region has claimed ownership over their resources, sparking an argument with Baghdad. The minister concluded his speech by stating that oil will move the wheels of government and whoever will be able to get the oil flowing will become next Prime Minister.

In addition to the talk given by Dr Tamim, Shwan Zulal, Research Associate of EUCERS, commented on the situation of the Kurdish region in Northern Iraq, outlining also the commercial divide; while Exxon Mobile has moved North in 2012, British Petroleum has remained in the South, maintaining close ties with Baghdad. He argued that the central government has limited options to counter the claim by the Kurds, since Baghdad’s threat of cutting their budget would most likely lead to secession. Consequently, the future Prime Minister will have the challenge of re-establishing constructive ties with Iraqi Kurdistan and diplomatically overcome the grey-zones of the constitution.

Overall, the talk was extremely successful by giving an informative projection of the upcoming elections, and particularly by outlining the influences of the international community as well as natural resources. The Q&A session that followed depicted the variety of interests and the potential for conflict, and concluded an insightful afternoon.

The Energy Forum was generally divided into three panels, the first consisting of the ambassadors of Greece, Austria, and the Secretary to the Ambassador of Azerbaijan, as well as the Head of the European Commission Representation in the UK. The second panel discussed the topic of how Europe can achieve diverse, secure and sustainable energy supply, while the third dealt with the opportunities for Europe through the Southern Gas Corridor and natural gas in the Eastern Mediterranean.

At the heart of the forum lay the keynote speech by the Rt Hon Michael Fallon MP, Minister of State for Business and Energy.

Regarding the challenges that Europe is currently facing with respect to its energy security, the minister stressed that one must consider the facilitation of affordable energy prices, the increase in economic growth and competitiveness, as well as the creation of a sustainable, low-carbon energy system not as mere aspirations, but as imperatives. In order to achieve an energy secure future, Europe would have to utilise all available energy technologies from unconventional resources, Carbon Capture and Storage, nuclear power, to renewables, as well as improve energy efficiency. All this was to be combined with the benefits of a common European energy market and a transformed EU emission trading system, so the Minister. Since the future would remain unpredictable, the Rt Hon Michael Fallon concluded with the need for ambitious objectives while remaining flexible in the ways to meet them.

During the first panel, His Excellency Konstantinos Bikas, the ambassador of Greece to the UK, commenced the day by outlining the potential impacts of a common European energy market for the Greek economy, and also highlighted the direct and indirect effects of the Trans-Adriatic Pipeline (TAP) on the Greek job market. Following the ambassador, Jacqueline Minor, Head of the European Commission Representation in the UK, continued the discussion by reminding the audience that production and diversification of energy sources were only one aspect of energy security, with the other one being consumption, in which the transport sector was posing the greatest challenge. His Excellency Emil Brix, the ambassador of Austria to the UK, concluded the first panel by outlining two important aspects hindering effective energy security for Europe: Firstly, the incoherence of energy politics among the 28 member states, which had led to an inconsistency of European energy markets, thereby hampering comprehensive investments. And secondly, the ambassador exclaimed that true energy security could only be achieved through renewable energies, for which subsidies for fossil fuels and nuclear power were the greatest hindrance.

Following the keynote speech, the speakers of the second panel, dealing with Europe’s energy security, outlined both opportunities and challenges from newly discovered energy sources, as well as infrastructural matters within the EU. Mehmet Sepil, president of Genel Energy commenced the round by outlining his company’s experience in Northern Iraq. Together with the explorations taking place at the coasts of Israel, Lebanon, and Cyprus, Sepil pointed out the potential political as well as economic implications for Europe and the region regarding energy security and overall stability.

With respect to the internal energy security matters of the EU, Livio Bettoschi, CEO of BIP UK and New Markets, outlined the challenges caused by the European energy transition, especially regarding infrastructural matters, such as the shift from a few large scale power plants towards a multitude of low scale renewable farms. James Pay, Partner at Clifford Chance, continued to talk about different energy sources for Europe and focused on gas, renewables, and nuclear power in particular. For the former, he hinted at the unforeseeable effects of the shale revolution across the Atlantic, yet also pointed out the great potential of LNG trade, as well as the need for Europe to find an own approach in the exploration of unconventional resources that would not be too restrictive, nor too inflexible. For the renewable sector, Pay saw the greatest issue in the meeting of the capital investment costs, which he considered also an issue for the nuclear power sector since the Fukushima disaster had made investors uneasy in this regard.

Graham Meeks, Director of Policy at Green Investment Bank followed this line of thought regarding the need for large amounts of investments. Looking from a security of supply perspective, and by comparing the UK with Germany, Meeks displayed the similar yet differently caused challenges for the two countries. The UK on the one side had to deal with an ageing energy infrastructure as well as the shutting down of a multitude of coal power plants crucially decreasing energy reserves. Germany on the other side had to deal with the absence of its nuclear power generation due to the moratorium following the Fukushima disaster, as well as the shutting down of 28 GW worth of power plants by 2017 and hence would probably be experiencing similar energy bottlenecks, with both countries requiring further investments for future security. Meeks estimated the total necessary investments for the EU to be around 1.1€ trillion.

As the last speaker of the second panel, Dr Petra Dolata, Lecturer at King’s College London and Research Director of EUCERS looked at the current developments from an academic perspective stressing the fact that Europe was not the centre of International Relations anymore and that the 21st century was marked by complex power dynamics and shifts. She stressed that energy security remained a contested concept meaning different things to different actors, depending on their perception of energy as a mere commodity or as a strategic good.

The third and last panel dealt with the opportunities for Europe of the Southern Gas Corridor and natural gas in the Eastern Mediterranean. Dorian Ducka, Deputy Minister from the Ministry of Energy and Industry of Albania outlined the benefits for his country through the TAP project, which would not only integrate Albania into the European gas network but make the country a South Eastern energy hub. Group Political Adviser of BP, John Baldwin, continued along these positive sentiments by outlining the difficult yet successful process of negotiations and presented the most recent results of the final investment decision agreement, entailing the unlocking of several important aspects for the future potential of the pipeline. He stressed the importance of the economic viability of the project combined with the political acceptability, however also conceded that compromise would be inevitable.

Dr Frank Umbach, Associate Director of EUCERS continued the list of speakers by representing amore critical stance regarding the Southern Gas Corridor, pointing to the fact that 80% of the gas would enter the Italian instead of the Balkan market, which however was in greater need for diversified gas sources. He then moved on to stress the uncertainty of gas demand in Europe, referring to the most recent IEA World Energy Outlook forecasting a stagnating demand for the continent. In context of his analysis of Russia’s competing South Stream project towards TAP, Dr. Umbach has questioned the economic rational of the South Steam project. Its costs alone of building of new gas infrastructure to circumvent Ukraine and to connect the South Stream pipeline with Russia’s own Southern Gas Connectors on Russia’s own territory have officially been doubled to more than US$22 billion last December and which are not included in any official costs analyses. In response to this critical viewpoint, Brendan Devlin, Advisor at the DG Energy at the European Commission, stressed the fact that the Southern Corridor was first and foremost a connector to supplying countries rather than an inter-European pipeline. While the Balkan might not be the primary customer of the gas, this was due to its proportionately low need in gas, and the real problem would lie with the politics of Gazprom regarding its client companies in the region. He further claimed the success of the project, being an example of international diplomacy balancing the interests of industries and countries. Also Michael Hoffmann, External Affairs Director of TAP, went back to the point of gas distribution within Europe and pointed particularly to the extension opportunities of TAP, referring to the availability of gas delivery contracts with Bulgaria and Romania, as well as the possibility to pump gas further north towards Germany, Belgium and the UK through the EU’s reverse flow system. This would imply a far larger possible end market.

Looking more broadly at European energy demand, Dr Ibrahim Palaz, Senior Fellow at the Caspian Strategy Institute, considered the Southern Corridor as only one way of diversification of Europe’s security of supply. He stated that the EU’s dependence on foreign energy sources, currently standing at 64%, was bound to increase to about 80% by 2030, of which gas was to make up 30%. Considering Europe’s dependence on primarily Russian gas, Palaz considered diversification through further routes key, pointing at the possibility of an increased LNG capacity. Finally, Androulla Kaminara, Academic Visitor at St Antony’s College at the University of Oxford, added another potential candidate for the EU’s diversification in energy sources, namely the Eastern Mediterranean, where the estimated amount of reserves would be able to supply 20% of Europe’s gas demand. While this could become a game changer for Europe in itself, another one could be a Turkish-Iraqi Agreement for the gas and oil reserves in Kurdistan, from which the EU could benefit immensely.

Overall, the Energy Forum had been a great success, giving all participants plenty of opportunity to network and exchange ideas while listening to insightful and engaging debates. The Q&A sessions following each panel gave further breadth to the discussions and left the audience with an idea of the challenges and prospects for future European energy security.

Three keynotes followed a welcome by Professor Dr Nicole Conrad, President, EACS Switzerland, ZHAW School of Management and Law and Professor Dr Friedbert Pflüger, Director EUCERS, King’s College London.

Stefan Chun, CEO of Cube Engineering in Germany guided us through steps in developing wind farm projects, while highlighting potential conflict areas in the planning and implementation process.

Dr Inka Hanefeld, Partner at Hanefeld Law Office in Hamburg, Germany focused on the view of the arbitrator in arbitration proceedings and other alternative conflicts solutions for wind farm projects. She talked us through conflict management systems and how to recognize conflict potential in wind farm projects at an early stage, by calling in an expert to consult from the start.

After a short coffee break, the workshop continued with a keynote speech by Jörg Kuhbier, former Senator and Partner of Counsel at BBH. Mr Kuhbier presented on mediation and moderation in planning and implementation of wind farm projects. He also gave an overview of current wind farm projects throughout Germany and perspectives in the context of the German “Energiewende”. Mr Kuhbier illustrated different types of conflicts arising in wind farm projects and possible solutions through alternative settlement procedures by using six case studies.

A discussion followed the keynotes. The broad consent was that arising conflict situations in wind farm project planning are best prevented by including a mediator from the beginning, who consults in the planning and implementation of projects as well as holds regularly discussions with stakeholders to resolve conflicts early and effectively. The Energy and Arbitration Center Switzerland (EACS) could take the role as such a mediator, as it is pooling competences and knowledge in technology, industry and law.

The event included keynote speeches by Jennifer Giroux of the Center for Security Studies (CSS) at the ETH Zurich, Dr Alexander Fekete, Professor of Risk and Crisis Management at the Cologne University of Applied Sciences, and Dr Frank Umbach, Associate Director of EUCERS.

Professor Dr Friedbert Pflüger, Director of EUCERS, chaired the session and recapitulated the current series of Energy Talks. He stressed the importance to discuss the topic of attacks on energy infrastructure by referring back to the events earlier this year in Algeria, as well as the on-going problems in Nigeria regarding oil theft, and the Gulf of Aden regarding piracy. Hans-Hartwig Blomeier, Director of the KAS London office welcomed speakers and participants.

Jennifer Giroux presented the Energy Infrastructure Attack Database that had been developed at CSS, which does not only include terrorism as a cause for an attack, but also piracy and insurgencies. By displaying the acquired data, she made evident how attacks on energy infrastructures have increased over the past 30 years, with repetitive peaks, constituting an average of 300-400 attacks a year. Ms Giroux stressed the importance that most of these attacks take place in clusters, implying certain regions with multiple attacks on similar targets. She presented the main geographical hot spots to be Iraq, Nigeria, Afghanistan, Pakistan, India, Columbia, Egypt, Syria, and Yemen. While cyber-attacks are of distinct interest for the center, the difficulty of identification and attribution hinders an effective inclusion of this data. Finally, Jenifer Giroux displayed the center’s approach to utilise the contagion framework to explain the various factors leading to respective attacks, based on information on the agents, hosts, and environmental factors.

Professor Dr Alexander Fekete opened his presentation by questioning whether a high risk automatically implies a high probability. He then argued that by connecting an increased security to high risk targets, probability is decreased. He underpinned this theory through data on pipeline failures in the EU from 1971 to 2006, in which attacks and crime constituted only about 3%. By referring, however, to the 2006 Switch-Off that caused a black-out over half of Western Europe, Professor Fekete displayed the severe potential consequences of a well-targeted attack on the grid, making clear that the potential implications are as important as the degree of threat. The next question, therefore, was whether Europe is prepared to degrade gracefully, implying that not all parts of the system would shut down in the event of an attack. Based on a theoretical economic assessment in Germany, such preparation was considered to be present following a high degree of diversity and redundancy in energy supply. However, in practice not immediately considered potential targets of attacks on energy infrastructure, such as bridges, can have a severe impact on the security of supply. This is due to the fact that below most bridges run several energy distributors, such as gas, electricity, water etc. Finally, Professor Fekete pointed out the various interests and philosophies in crisis and risk management by various involved state agencies, which continue to hinder an effective assessment, preparation and mitigation of an attack.

Dr Frank Umbach concluded the presentations by explaining the challenges of energy security following the lines of diversification implying greater interconnectedness, and the security implications this interconnectedness has for physical as well as cyber-attacks. He argued that the increase in connectors following the 2009 Gas blockade by Russia while having improved European energy security has opened new vulnerabilities with an increased cascading effect danger. Furthermore, cyber-attacks add the electricity grid to other high risk energy infrastructures, such as oil and gas. This is of particular importance for critical infrastructure, as in hospitals, and renewables. Dr Umbach further elaborated how the new dangers of the cyber world threaten developed states, as both power plants and critical infrastructure share two common features, which are their dependence on electricity, and the connection to the internet. This becomes all the more alarming since there is no experience in dealing with such new threats, and businesses, who have become victims of cyber-attacks or blackmailing have had a distinct interest in not publicising information in this regard. With respect to preparedness, Dr Umbach stress how the false feeling of security has enabled the attack on the Algerian power plant earlier in 2013, and pointed out the lack of awareness and acknowledgment by company leaders of security threats, which are not considered a business priority. Moreover, smaller companies will not be able to provide the funds for adequate security provisions, which decreases their presence in unstable regions with potentially severe repercussions regarding needed investments in new energy infrastructures for the future. Finally, Dr Umbach concluded that there is the need for a change in security culture in companies, reaching all the way up to the CEOs, with a distinct focus on mitigation and recovery, not just prevention and preparedness.

Following the presentations, a lively discussion between the participants and speakers developed with critical views expressed about the points made. One question for example focused on the difficulty that short-term stakeholder commitments entail with regard to a change in a company’s security culture. Professor Pflüger drew the attention again to the increase in physical events, focusing on the developments in Nigeria, where oil theft becomes an increasing problem. A new emphasis was laid on the root causes for violence, which can only be targeted by companies and states together within the respective communities, as well as on the danger of attacks on Nuclear power plants. The panel gave founded arguments to all posed questions, and pointed out with regard to the last one that nuclear power plants are among the most secure energy infrastructures, and a far greater risk and probability lies in an attack on LNG terminals in harbour cities, which could have a destructive effect similar to a tactical nuclear bomb.

A brief reception followed the event, allowing participants to exchanges views in a more informal setting.

The event included keynote speeches by Dr Anita Orban, Hungary’s ambassador-at-large for energy security, Thomas Dimitroff, Partner at the Infrastructure Development Partnership, and Tora Leifland Holmström, government affairs advisor for the Trans Adriatic Pipeline (TAP).

Professor Dr Friedbert Pflüger, Director of EUCERS, chaired the session and noted the political importance placed on energy infrastructure within the European Union. Furthermore, he gave an example of one aspect of what an integrated system might look like with reference to the interconnector pipeline, providing bi-directional transport capabilities.

Dr Anita Orban focused on the energy concerns of Central European states, noting that the issue had taken on renewed importance after the 2006 energy crisis resulting from the Russia-Ukraine gas dispute. This political importance is given further significance, she noted, given that the EU Presidency is revolving back to Central European powers. Dr Orban also acknowledged that the shale gas revolution is also having an indirect effect on Central European energy policy with Poland – which has Europe’s largest reserves – now trying to harness the potential of its shale deposits. Finally, Dr Orban noted that Central European countries have three primary energy goals. The first is to achieve energy security. The second is to speed up energy market integration. The third is to secure stable and competitively priced energy.

Thomas Dimitroff opened his presentation by urging attendees to consider the question of integrated infrastructures from the perspective of producer/exporter countries. To highlight the priorities from this perspective, Dimitroff spoke about the ongoing tender between Nabucco and TAP to transport natural gas from Azerbaijan’s Shah Deniz field. Moreover, he spoke of the challenges in building integrated transport delivery systems, which can cause problems further down the supply chain.

Tora Leifland Holmström concluded the presentations by explaining the Trans Adriatic Pipeline and its role in the southern gas corridor. She explained some of the factors consortiums like Shah Deniz look for when awarding contracts, including: commerciality, project deliverability, financial deliverability, engineering design, alignment and transparency, operability, scalability, and public policy considerations. Holmström also outlined some of TAP’s key features, which will include an ability to supply 10-20 billion cubic metres of gas per year. It is also anticipated that TAP will have 80 percent physical reverse flow capacity along with connectors linking it directly to TANAP.

Following the presentations, a lively discussion ensured between participants and speakers. A representative of the Albanian government, for example, spoke of the importance of major infrastructure projects to Central European countries, describing Albania’s first cross-border pipeline as the most important infrastructure in Europe for years. Yet, another participant also pointed out that these decisions could sometimes create tensions between surrounding states because each is vying to become a regional energy hub. Dr Frank Umbach also intervened to point out how the ascendency of interconnectors helped changed markets that were previously nationally fragmented.

A brief reception followed the event, allowing participants to exchanges views in a more informal setting.

Presentations were made by Jörg Asma, partner with KPMG in the department of IT Advisory with responsibility for information protection business resilience in Germany and the EMA. He was joined by Dr Sarah Mander from the Tyndall Centre at Manchester University, and she focuses heavily on climate change mitigation and social responses to energy crises.

The session was chaired by Professor Dr Friedbert Pflüger, Director of EUCERS. He noted the numerous challenges concerning energy infrastructure, not least its aging and insufficient nature. Furthermore Pflüger highlighted the additional strains posed by new energy sources such as wind and solar which create instability in energy grids, and the ever increasing threat of cyber attacks.

Jörg Asma opened the meeting by focusing on the threat from cyber attacks. He pointed out that there are two very different types of cyber attacker. The first are criminals who often seek financial gain from their activity. The second, however, are an altogether (but increasing) community of activist-hackers (‘hacktivists’) who have no typically have no monetary interest in launching an attack. Instead, they are motivated by ethical or moral interests and this community no represents the greatest threat in the hacking space. Asma also pointed out the difficulty of detecting hacking operations which can usually operate for 4-6 weeks before any detection has occurred. To highlight this, Asma offered a case study where KPMG was asked by a client to detect the vulnerability of its software controlling wind farms. He noted the relative lack of sophistication of the security software protecting that infrastructure, and explained how it was hacked. Furthermore, he explained how employees are becoming increasingly susceptible to malicious code emails through their use of social media such as Facebook and LinkedIn, which can reveal their interests.

Dr Sarah Mander spoke of the need to mitigate threats by moving to a decarbonised electricity grid by 2030, and reducing carbon emissions by 80% by 2050. She also noted how electricity networks need to do more in order to adapt to the current pressures being applied to them. This includes boosting operational resilience by updating aging cables and overhead lines. Moreover, Dr Mander pointed to extreme events such as weather disruption which can also cause disruption to electricity supply. She noted that it is not just electricity providers who need to explore ways of developing infrastructure resilience to such events, but that better public awareness is also needed to help educated the public to cope with these events when they occur. In essence, she noted a five-point plan for building resilience around the ideas of: resistance, reliability, redundancy, response, and recovery.

A vibrant discussion followed with participants questioning the speakers and debating the issues. Participants spoke about the increasing public disdain for above-the-ground electrical cables and the pressure to have more of them underground. This also led to a discussion of planning regulations regarding the building of new pylons. Dr Frank Umbach also spoke about cyber attacks noting that cyber crime can cost $40 billion annually, and that such attacks are increasing by 30% per annum. He noted that, in this context, the advent of smart home technologies would create new vulnerabilities and costs. This was an aspect, Dr Umbach argued, that manufacturers are overlooking. In 2009, for example, it was noted that both Russia and China attacked the U.S. electricity grid with viruses. Overall, the U.S. reports that attacks on its critical infrastructure increased by 52% from 2011 to 2012. Germany also faced similar attacks.

A brief reception followed the event, allowing participants to continue their exchanges in a more informal setting.

Professor Dr Klaus Thoma opened the meeting by highlighting the particular challenges for building resilient infrastructures such as increased urbanisation and the threat from terrorism. He also noted the difference of working across different infrastructures where change and innovation operates on very different timescales. For example, ICT and automobile innovation tends to occur almost yearly while the sewage infrastructure or urban structure changes over centuries. Creating intra-structure resilience can therefore be extremely difficult to achieve. To illustrate this, he highlighted the Desertec Foundation’s proposed plans to implement a clean power programme. With a large part of it based in North Africa, the problems of political instability and terrorism are dramatically captured. Furthermore, the issue of technological innovation is also relevant here relating to solar power, photovoltaics, and high voltage direct current transmission.

Dr Yolanda Garcia-Mezquita contrasted the theoretical and engineering based approach of Prof Dr Thoma by highlighting practical measures being taken by the European Commission to address some of these challenges. She noted how the Commission is trying to find new ways to incentivise drivers for investment so the private sector can be encouraged to address some of these problems. This has been done, to an extent, she noted with integrating and interconnecting markets across Europe. Indeed, she pointed out that the Commission does not just want to empower private companies – but also individual consumers through initiatives like smart meters. Yet, Dr Garcia-Mezquita also explained how European interdependency can also present problems such as during the Russian-Ukranian gas dispute in 2009 which had ramifications across the continent as a whole.

A discussion followed with participants questioning the speakers and debating the issues they had raised. Participants spoke particularly robustly on topics relating to whether the market can really accommodate future energy needs. Many argued that the ratio of return on investment to risk and time made it unattractive for potential investors. There was a broad consensus that this problem would be insurmountable without government intervention to guarantee minimum unit prices and protections. Indeed, many felt this related not just to infrastructure but also to the development of new technologies. To complement purely pecuniary measures, it was also suggested that legislation could play a role, although, again, it was felt this would only work if supported by financial assurances from government.

Professor Dr Nicole Conrad, Director of the EACS, welcomed participants and introduced the in September 2012 established centre at the ZHAW. The EACS is the first and only one of its kind. It is the newest addition to the dispute resolution services offered in Zurich. The EACS concentrates on alternative dispute resolution, namely arbitration and mediation, in the field of energy and resources disputes. The primary aim is to provide disputing parties with an alternative dispute resolution “one-stop shop”.

The EACS offers administrated arbitral proceedings. The EACS also offers seminars and conferences and publishes various publications on international commercial arbitration. The major aim of the EACS is the promotion of national and international arbitration in the field of energy law.

A welcome by Professor Dr Friedbert Pflüger, Director EUCERS, followed. He stated EUCERS academic interest in the research field of EACS and stressed the importance of mediators in energy conflicts. Pflüger then referred to a few examples of energy projects and highlighted potential conflict stages. He concluded that the EACS based in Switzerland, with its history of neutrality, can make a difference in the energy mediation landscape.

Three keynote speeches were held over the afternoon. Dr Jürgen Klowait, Head of Law, E.ON Kernkraft GmbH(nuclear energy) presented on “Dispute-Wise-Management” and explained round table mediation and conflict management in the German industry as well as highlighted strengths and weaknesses of different forms of conflict management.

Afterwards Christian Held, Partner at Becker Büttner Held law firm, held his keynote on “Energy-Law Mandate, Dispute Prevention and Settlement of Disputes”. Held talked participants through dispute cases in detail and described the everyday work of lawyers specialised on dispute management in the energy field.

In the third keynote, Professor Dr Franz Baumgartner of the School of Engineering, ZHAW presented “New Challenges in a Changing Landscape of the Energy Industry” with a special focus on the role of renewables.

The afternoon was concluded with a discussion and a reception hosted by the EACS.