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European Commission

[Check Against Delivery]

José Manuel Durão Barroso

President of the European Commission

Speech by President Barroso at the Conference "Paving the way for a European Energy Security Strategy"

Energy Security Strategy Conference

Brussels, 21 May 2014

Dear Prime-Minister Tusk,

Dear Commissioner Oettinger,

Ladies and gentlemen,

I would like to thank and congratulate Commissioner Oettinger for this initiative, for the competence he has shown pushing this very important file inside the Commission. Commissioner Oettinger and his services are doing a great job under exceptionally challenging circumstances, and I want to acknowledge that.

Today's conference could not be more topical. With the events in Ukraine, Europe is facing a threat to its peace, stability and security the likes of which we have not seen since the fall of the Iron Curtain.

The 'Great Game' of geopolitics has made an unwelcome return and this is being particularly felt in the area of energy. Unfortunately the actions of some actors are based on a logic we cannot share. Because the European idea stems from a different perspective. For us the rule of law prevails over the rule of force. Sovereignty is shared and not limited. The logic of cooperation replaces the logic of confrontation.

And this leads - at least temporarily - to consequences we did not want, because Europe's world view sees countries as free to choose their own partnerships and to look for opportunities wherever they can be found, not as exclusively part of one sphere of influence or another, or bound to choose between one camp and the other.

But the current situation also asks some very real and very tough questions to the European Union. It is a test to our resolve, our determination and our unity. And all this comes together in the field of energy security. In fact the Ukraine crisis once again shows that for Europe energy independence is crucial. We have to explore all the possibilities which make this goal reachable. The situation also confirms that it is in our own interest to choose a path towards a low carbon, competitive and energy secure European Union. And, first of all, that it is vital for us that we stay together and united.

The European Commission has been calling and making proposals for such a stronger and more robust EU energy policy over these last years. There were many times in which we, in different Council formations and myself in the European Council, were pleading for a truly European energy policy. The reality is that because there were probably other priorities at the time, including by the way the very important financial crisis, minds were not sufficiently focussed on the urgency of a real energy policy for the EU. But because of these recent developments, I believe now minds are focussed and we could now make more progress than in the years before. This has been an objective, to increase our security of supply through our energy and also our climate policies. But now, because the situation has changes, I believe it is time to take it one step further.

This is vital for our prosperity, for our strength and our credibility. So we have to prove that European cooperation and integration is the right way – the only way indeed - to overcome such challenges. I am extremely pleased to discuss this with you, with my friend, Prime Minister of Poland Donald Tusk. I want to also to thank you, Prime Minister, for your strong commitment to this energy policy in the EU. In fact, we have launched this very inspiring idea of this energy community and I can testify that the Prime Minister and Poland have always been among our Member States one of those that have been doing more to achieve what I believe is critically important, that is to have a real Europeanization of energy policies – from the interconnectors and the infrastructures to the internal market and other instruments that we can develop. And I wish that many of your ideas that have been so important for the debate can now be discussed also among the members of the European Council, and as you know the European Commission is preparing and I will have the honour to present some ideas also in the European Council next month.

Ladies and gentlemen,

Europe's energy dependency is of course not new. But it did gain an added dimension in the light of recent events and in a context of growing energy demand worldwide, which is expected to increase by 27% by 2030.

The European Union currently imports 53% of the energy it consumes and is dependent on external suppliers for crude oil (almost 90%), natural gas (66%) and to a lesser extent also solid fuels (42%) as well as nuclear fuel (40%).

Some countries are particularly vulnerable, namely the less integrated and connected regions such as the Baltic and Eastern Europe. Six of our Member States depend on Russia as single supplier for their entire gas imports and three of them use natural gas for more than a quarter of their total energy needs. Nevertheless, this discussion is vital for the European Union as a whole and not just of the countries most concerned. Our external energy bill today represents more than 1 billion € per day and more than a fifth of total European imports. In fact, as you know, the EU today has a surplus in trade, not only in goods and in services, but since recently we have also a surplus in agriculture. The only important area where we don't have a surplus for obvious reasons, is of course raw materials and energy.

At the same time, dependency is a two-way street. It ties both suppliers and customers alike. Russia exports 80% of its oil and more than 70% of its gas to the EU - by far the most attractive market for Russia. Its revenues from this trade are key for the Russian budget. That is why we have stressed very firmly over the last months that energy must not be abused as a political weapon. Doing so would only backfire on those who try it.

Temporary disruptions of gas supplies in the winters of 2006 and 2009 already provided a wake-up call, underlining the need for a common European energy policy. Since then – and I remember well, because at that time I had to intervene very strongly, speaking not only with the leadership in Russia but also the leadership in Ukraine, and the European Commission has done everything it could to help the Member States most affected – since then, the Commission has done a lot to strengthen the EU's energy security in terms of gas supplies and to reduce the number of Member States exclusively dependent on one single supplier. Over the years, we have made significant progress towards completion of the internal energy market with increased interconnections. And in parallel, we have built up one of the best records worldwide in terms of energy intensity and a more balanced energy mix. So we have a lot to build on, and a lot of experience to learn from.

Yet despite all this the EU remains vulnerable. The tensions over Ukraine again drove home that message. For that reason, the European Council in March put a strong focus on security of supply and invited the Commission to study the EU's energy security in depth and develop a strategy for the reduction of our energy dependence by June. This is something our services are now working very hard on.

The strategy should build on a number of strengths and lessons learnt from current policies as well the effectiveness of the Union's response to previous energy supply crises.

All too often energy security issues are being addressed at national level without taking fully into account the interdependence between Member States and the added value of a more collective approach at regional and European levels, in particular for coordinating networks and opening up markets.

And energy security in the long term is also intrinsically linked to the EU becoming a competitive, low-carbon economy. Stronger energy security and the 2030 energy and climate framework go hand in hand. Energy security and decarbonization are actually two sides of the same coin.

Ladies and Gentlemen,

There are a number of key areas where action is needed in the short, medium and longer term:

Reducing energy demand is a fundamental precondition for limiting our energy dependence. It is also crucially important from a competitiveness perspective: as a price taker, the EU cannot rely on cheap energy, but can limit overall energy costs through by being more efficient. Meeting the existing 2020 energy efficiency target of 20% will result in 371 million tonnes of oil equivalent primary energy savings in 2020. So we need to speed up our efforts and focus on heating in building and industry, transport and equipment in particular so as to achieve our agreed target of 20%.

Next, increasing energy production in the European Union wherever possible. In the past two decades, our own production of energy has steadily declined. However, thanks to the 2020 targets, in 2012 energy from renewable sources contributed 14.1% of final energy consumption, and the European Union is on track to meet this common 20%-goal by 2020.

Member States have already planned to add an additional 29 million tonnes of oil equivalent of renewable heating between 2012 and 2020, corresponding to about 85% of the Russian natural gas imports used for heat production. Strengthening a market-based approach and improving coordination of national support schemes can provide further impetus to this very promising evolution.

Some Member States have also opted for nuclear energy to avoid excessive dependence from non-European suppliers. This remains an option that our Member states can explore according to their political and societal circumstances. Fully exploiting the potential of conventional hydrocarbons both in traditional production areas, like the North Sea, and in newly discovered areas, for instance in the Eastern Mediterranean, is also on the cards. And on top of that the possibility of unconventional resources, such as shale gas, is being considered by some Member States. The Commission has already provided a recommendation to ensure that risks that may arise from individual projects and cumulative developments are managed adequately in Member States that wish to explore or exploit such resources.

Diversifying external energy supplies is also vital. At EU level, external gas supplies are more diversified today than they were a decade ago, mainly due to new liquefied natural gas producers and to the rapid development of LNG regasification capacities in Europe. This is a development to build on, for instance through mechanisms that could increase the bargaining power of European buyers, as proposed by Poland precisely.

Building a resilient internal market remains work in progress. Following the 2009 gas crisis, we have taken action to strengthen gas interconnections and have successfully implemented "reverse flow" projects with financial support from the European Economic Plan Recovery. We need to step up such efforts, mainly through the Connecting Europe Facility, which Member States are now implementing. I expect governments to act swiftly in this critical field, for instance when it comes to permits. Because a functioning internal energy market, both for regulation and infrastructure, is the best cushion against external supply shocks. The Commission will continue to push for this, as the guardian of the Treaties.

Strengthening our emergency and solidarity mechanisms is another field for action. This includes minimum storage obligations, cooperation between Member States and crisis coordination mechanisms, which should be considered carefully. And, as highlighted in the G7 Ministerial Statement adopted earlier this month in Rome, emergency plans for the next winter should be developed at regional level.

And finally, developing our technological and industrial capabilities will be vital. From highly-efficient new coal plants and to the large scale deployment of CO2 capture and storage at coal-fired power stations, tomorrow's energy potential will depend on today's research. And, you know, we have also made a point of making this a clear priority in our next perspectives in terms of support for research, the Horizon 2020 European Union programme.

Ladies and gentlemen,

The June European Council will be crucial for our energy security strategy.

The Commission's to-do-list is clear:

A final decision on the new 2030 climate and energy policy framework - ensuring a cost-effective transition to a competitive low-carbon economy - should be taken as quickly as possible.

Also for reasons of certainty and not only for the climate discussions, this is important, because they are going to have a high level event in the margins of the general assembly in New York in September, called by Secretary General Ban Ki-moon, but also because the most important economic players in Europe and outside of Europe are asking us is what is our panorama, what is our horizon, what is the legal certainty we can have. So the sooner the Member States agree on the 2030 horizon the better.

For the next winter, we will ensure coordination with Member States and all key players for increasing storage, developing reverse flows, the LNG potential, as well as security of supply plans at regional and EU levels.

The European Union must reduce its external dependency on particular suppliers and fuels by diversifying its energy sources, suppliers and routes, notably through the Southern Gas Corridor - which the Commission, and I have to say myself personally, has pushed tirelessly over the last years - and a new gas hub in Southern Europe. Our Transatlantic Trade and Investment Partnership should also have an energy chapter where we further advance the goal of a transatlantic gas market.

Energy security in the European Union cannot be separated from the energy security of its neighbours and partners within the Energy Community, notably Ukraine. That is why the Commission brokered the recent agreement on reverse flows between the Slovak Republic and Ukraine. Once again, thanks to Günther Oettinger. And this is why the Commission is leading on behalf of the 28 the trilateral discussions with Russia and Ukraine to guarantee the security of transit and supply of gas to Ukraine and to the European Union. I am glad that Member States agreed to entrust the European Commission with the responsibility to conduct these delicate talks.

And, as you know, just yesterday, on behalf of all the Member States of the European Union, I answered to President Putin clarifying what is our position on such an important and urgent matter. And just to tell you that I just came from a meeting – that's why we came a bit later and couldn't listen to the whole speech of Commission Oettinger – with the Georgian government. I received the Prime Minister of the Georgian government, and in fact they are now planning to join the European energy charter. So it shows how much it is important to have this space of energy as a way of having security and certainty and not an area of conflict.

Measures are also needed to integrate the internal energy market further, especially for the most dependent Member States. We need more integration, not more obstacles.

Energy security should be mainstreamed for the implementation of the European financial instruments up to 2020, in particular the European Regional Development Fund, the Connecting Europe Facility. As you know, this is an innovation. It was the European Commission that for the first time proposed this instrument, the Connecting Europe Facility, not only for transport but for energy, and also symbolically for digital - symbolically because Member States could not agree more than 1 billion euros. But for energy we have some funds there, so we should also use the Connecting Europe Facility, the Horizon 2020 that I already mentioned – and there the Member States agreed to increase the volumes of funding for research – and the European Neighbourhood Policy Instrument.

So we have different budgetary windows in the European Union to support, even if some resources have, of course, to come either from the national governments or from private companies. If we have a real functioning internal market I'm sure that more investment will come from our private partners. And we have of course not to forget that the European energy security should also be a stronger policy objective for the European Investment Bank interventions both in the EU and outside the EU. And we are in good contact and cooperation with the European Investment Bank on this specific issue.

More coordination of national energy policies is necessary to respond credibly to the challenge of energy security. Consultations on envisaged intergovernmental agreements with third countries having a possible impact on security of supplies are a must, and the Commission should be informed and involved at an early stage.

If we agree on these priorities and maintain the momentum that resulted from the Ukrainian wake-up call, Europe will come out of this crisis stronger, more united and more secure than we were before. In fact Energy, besides the geopolitical aspects, can be/must be a very important driver for European integration. After all, we should not forget that the European integration process started functioning precisely around coal and steel. So it is a very powerful driver for European integration, provided also there is political will of all our capitals. This is the condition sine qua non, the political will to do it. If the political will is there I have no doubts that we can achieve impressive results, not from today to tomorrow, because some of these decisions take a while to implement, but in a relatively short time. Our common project is not completed yet and energy cooperation is certainly one of the areas where we have more to gain in working together and more to lose if we act separately.

And indeed if you look at the last years, that has been constantly and consistently presented as one of areas where more Europe was needed. Not more Europe in the sense of more centralisation, but the Europeanisation of the policies. That's what the European Commission, namely through the support to the deepening of the internal market, has been leading for some time.

I can assure you that the Commission will make very clear proposals in this sense to the June European Council. The work is going very well within our services, namely with the leadership of Günther Oettinger, but also with all the other colleagues that have to with this. I'm personally following them at work closely. So I'm happy that the Commission will be ready to present a very good package and then it will of course be up to our governments to take the next steps. I am confident they will make the necessary steps forward, speaking with one voice. Because today there is more than ever an awareness of the political and economic importance of this policy.

And to our international partners we say: the EU remains the world's largest energy market. It remains a transparent, reliable and responsible partner. Therefore, we have a shared interest in preserving transparency, reliability and responsibility for the sake of our energy cooperation, but also for the sake of a predictable and rules based world.

What is at stake indeed when we speak about energy, even if we don't want to see it as a political weapon, is much more than energy. It's about the kind of world we want to live in.

I thank you very much for your attention.

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