Page 5 - FSUOGM Week 44 2019

FSUOGM COMMENTARY FSUOGM
EU cuts number of priority oil and gas projects
The bloc is cutting funding towards oil and gas projects as it prepares to phase out fossil fuels over the coming decades
EUROPE
WHAT:
Only 32 gas investments have been included in the EU’s latest list of projects of common interest (PCIs), down from 53 two years ago.
WHY:
PCIs benefit from EU grants and fast-tracked planning and permitting.
WHAT NEXT:
Efforts to strengthen the bloc’s single gas market will inevitably suffer as a consequence.
THE European Commission (EC) has slashed the number of oil and gas projects eligible for EU funding support, as the bloc prepares to phase out the use of fossil fuels over the coming decades.
The EC published on October 31 its updated list of energy projects of common interest (PCIs) – infrastructure developments that can secure grants from the EU’s Connecting Europe Facility (CEF). The European Parliament and European Council now have two months to accept or reject the list of projects in full.
Electricity and smart-grid investments account for over 70% of the PCIs. But the list also includes 32 gas projects, namely pipelines and LNG terminals, aimed at helping the EU diversify supply and improve its energy security. But this is down from 53 the last time the list was updated two years ago.
Only one new gas investment was added to the list – the construction of a 4bn cubic metre per year second Polish LNG import terminal in Gdansk. Poland is seeking to cut down on pur- chases of Russian gas drastically after its long- term supply contract with Gazprom ends in 2022. The country currently covers the bulk of its annual gas demand of 15 bcm per year with Rus- sian supplies, securing the rest of it from its exist- ing 5 bcm per year LNG terminal in Swinoujscie, which is due for a 2.5 bcm per year expansion.
Many of the other gas projects selected are designed to strengthen the EU’s internal gas network, particularly in south-eastern Europe and the Baltic states, by building new pipeline connections and expanding gas storage. Sev- eral import developments were also included, namely the Southern Gas Corridor (SGC), which will deliver Azeri gas to Albania, Greece and Italy starting next year, and other LNG ter- minals in Greece and Ireland.
The list of oil-related PCIs was unchanged from a year ago, with the same six projects prioritised. These were the Adamowo-Brody pipeline, which would enable Ukraine to pump more imported oil to Poland, other connections linking Austria and Slovakia and Germany and the Czech Republic, the expansion of an oil ter- minal in Gdansk and a pipeline that handles its shipments, and an increase in the capacity of the Transalpine pipeline that allows Central Europe
to import crude via the Italian Adriatic port of Trieste.
The lack of new oil and gas additions comes as the EU faces mounting pressure from envi- ronmentalists to drop its support for fossil fuels. The European Investment Bank (EIB), which typically provides loans to PCIs in addition to the CEF grants, is due to decide this month on whether to end all funding for fossil fuel projects, with the EU’s other flagship lender the European Bank for Reconstruction and Development (EBRD) also considering the move. The bloc has also adopted ambitious new climate targets, including a 40% cut in greenhouse gas (GHG) emissions by 2030 from 1990 levels, and a quick expansion in the use of renewables.
Under its outgoing president, Jean-Claude Juncker, the EC has generally been supportive of natural gas projects in cases where they help bol- ster bloc energy security and help to phase out dirtier fuels such as coal. But whereas Juncker views gas as a transition fuel on the road towards the EU becoming fossil fuel-free by 2050, Pres- ident-elect Ursula von der Leyen is expected to take a much tougher stance on the energy source. She has also called for an even greater emissions reduction of 50% by the end of the next decade.
PCIs not only enjoy funding support but also a fast-tracked planning and permitting pro- cess. Whereas national governments can try to advance certain projects for short-term political reasons, the EC carefully selects PCIs based on their longer-term benefits, ensuring that these infrastructure investments secure funding and are completed on time. By scaling down support for gas, the EU will inevitably undermine its efforts to establish a single gas market.™
Week 44 06•November•2019 w w w . N E W S B A S E . c o m P5