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Andris Piebalgs

Energy Commissioner

EU – Algeria Energy Challenges

Speech at the 5th International Conference on Investment Opportunities in Algeria’s Energy sector
Oran (Algeria), 26 November 2006

Dear Minister Dr. Khelil,

Ladies and gentlemen,

I am honoured to be invited to take part in this 5th International Conference on Investment Opportunities in Algeria's Energy Sector, hosted by the Ministry of Energy and Mines and to have an opportunity to address this prestigious audience.

Algeria has already been exporting gas and oil to the EU over` the past decades and is one of the biggest EU energy suppliers.

I am very grateful for the invitation to this conference because these are busy times for the European Union in terms of energy.

Therefore let me introduce you briefly to what are our plans in terms of energy policy.

The EU will have 27 member states from 1st January 2007 and its population will reach 480 million citizens.

Adequate energy supplies at affordable prices remain the priority. We are now shaping a new, European policy following the mandate given us by our Heads of States and Governments. My services are working on a large package of concrete measures that will be presented in January next year.

I believe that the starting point in our reflection on the future of the European energy policy reflects the challenges we are all facing in the increasingly global energy sector:

  • First of them are inevitable consequences of climate change. The recent report by Sir Nicholas Stern estimated its costs to up to 20% of global output. This will have major negative impacts on our economies if we don't decide to act now.

EU has started its action by creating emissions trading scheme. But this is only beginning. Strong global response is needed.

  • Second challenge, are the growing energy prices which influence European competitiveness.
  • Thirdly, security of supply is a challenge for us. At the beginning of this year we had a wake up call in this respect.

The IEA has recently summed up the options we have in facing these challenges: providing unstable, polluting and expensive energy or making sure energy supplies stay clean, clever and competitive.

Facing these challenges, the EU adopted a three-prone approach to help us ensure security of energy supply, environmental sustainability and competitiveness of our economies for the benefit of our citizens.

One of the important responses the EU provides is strengthening of our internal market.

Internal energy market represents the corner stone of our energy approach. It's been for years now, that we have been active in this area and I believe that we have achieved some successes in this respect:

  • prices for electricity have remained constant or declined in real terms, despite much greater regulatory demands in the environmental area, growing electricity consumption and high oil prices;
  • and the EU gas market is progressively becoming more competitive with a lot of new investments coming on stream.

However, we are still facing some challenges, in particular in terms of market structure, solidarity instruments among our member states and ensuring sufficient interconnection capacity. Therefore we will propose set of new measures that will facilitate competition in the sector in order to attract additional investment.

Another component of our energy policy addresses energy efficiency (where EU plans to save 20% of our energy consumption by 2020) and development of low carbon and in particular renewable energy sources.

But most importantly our long term goal is to reduce the amount of carbon in our energy mix. We want to use oil more efficiently and promote use of gas as the cleanest fossil fuel.

For this, we continue to develop a coherent external energy policy for the EU to ensure that the EU is speaking with one voice. We have already been active in this area over the past, but there is now a growing realisation that a more coherent and EU-wide approach is necessary.

Moreover, there is also an agreement that our external energy efforts should be aiming not only at ensuring energy security but also at promoting sustainable energy development and addressing development issues such as access to energy services.

These priorities have also been highlighted on the occasion of the External Energy Policy Conference held in Brussels on 20-21st November with the participation of a wide range of our external partners.

Ladies and Gentlemen,

Algeria has been a reliable energy provider for the EU. But we need to do more to continue this privileged partnership. We need to work at a regional level – in the electricity sector.

Hydrocarbons represent most of Algeria’s export revenues and Europe remains its main export market. This means we are interdependent on each other in terms of security of energy supply and security of energy demand.

In the close future, this relationship will be further enhanced with several export infrastructure projects coming on stream. These projects will require that important investments take place – both by Algerian and European companies.

To facilitate this, we need to provide stable and predictable legal and regulatory frameworks on both sides. This can be done through close cooperation between European Commission and Algerian authorities.

Therefore, we have agreed to develop a strategic partnership between EU and Algeria in the energy sector that could serve as a good basis for enhancement of our energy cooperation.

I believe that the EU-Algeria strategic energy partnership should have a threefold focus: (1) the convergence of the Algerian and EU energy policy through convergence of our regulatory frameworks; (2) the development of energy infrastructures of common interest and (3) technology cooperation and exchange of expertise.

I note with satisfaction that several projects involving EU-Algerian partnerships are already well-planned and advanced. However I believe that we could still facilitate this process and support the projects of mutual interest such as: Medgaz gas pipeline, Galsi gas pipeline and the Trans-Saharan Natural Gas Pipeline.

Moreover, the development potential in oil sector is also very significant. I welcome Algeria's plans for the expansion of the Arzew port area.

As you certainly know, nearly 90% of Algeria's crude oil exports come to Western Europe. I see major opportunities for further EU-Algeria cooperation and additional foreign investment in enhanced oil recovery in many oil fields. There is also a large potential for enhanced activity in view of using the associated gas.

Also, I would like to mention Algeria's rapid growing electricity demand, which will require significant additional capacity in coming years. I see here important possibilities for further cooperation, and would welcome Algeria's plans on undersea power connections to Europe (Italy and Spain) likely to run in conjunction with natural gas pipelines.

Finally, I am glad to note that Algeria hopes to increase the share of renewable energy, and take this opportunity to reiterate the Commission's support to enhanced EU-Algeria technology cooperation in this area, as well as in the energy efficiency field.

Ladies and Gentlemen,

There is a great potential for development of energy relations between the EU as the world largest integrated energy market, and Algeria as one of the world’s largest energy producers.

There is a need for investments in this country over the next years for improving hydrocarbons production and export capacities and upgrading energy transport infrastructure. There are also huge prospects for investing in renewable energy sources and for improving energy efficiency in production and use.

We should seize together these opportunities that lie ahead of us and promote well functioning markets based on open, transparent, non discriminatory and stable legal conditions to make it easier for energy investment to take place and foster trade.

The issues chosen for this conference are therefore highly topical and I am convinced that you will all have a mutually rewarding and useful exchange of views.

Thank you for your attention.

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