Reports

Energy Security: A European Perspective

18 February 2005


The European Policy Centre and the Bertelsmann Foundation co-hosted Lord Browne of Madingley, Group Chief Executive of BP plc who addressed the issue “Energy Security: A European Perspective.” Annette Heuser, Director of the Bertelsmann Foundation, Brussels, introduced the speaker and Hans Martens, Chief Executive of the European Policy Centre chaired the question and answer session that followed Lord Browne’s presentation. This is not an official record of proceedings and specific remarks are not necessarily attributable.

Summary

Lord Browne of Madingley assured the audience that global energy resources were sufficient to meet the growing demand for energy worldwide. The European Union could – through its foreign and neighbourhood policies – play a key role in securing its energy imports for the future. He expressed his strong support for increased research and development in all energy related feels in Europe and globally but underlined particularly the need for greater scientific exploration of biomass renewable energies, generated from biological waste products. He also announced that BP was conducting research on how to build a platform for better EU-Russian collaboration and understanding, details of which would be made public in the near future.

Event Report

In her introduction, Annette Heuser, Director of the Bertelsmann Foundation, Brussels praised Lord Browne’s willingness to address often sensitive political issues such as climate change and emissions trading throughout his career at BP. Assuring energy security was a key challenge ahead, not least in light of the economic and political stability of energy supplying countries, many of which were direct neighbours of the European Union. European business representatives, policy-makers and researchers had to form broader alliances to tackle the key issues linked to the future security of energy.

Reflecting briefly on the history of the European Union, Lord Browne of Madingley said that the reconstruction and reorganisation of Europe over the past decades had been an internal process with key achievements including the establishment of the internal market, the euro and now the Constitutional Treaty. External relations had been relegated to Member States but events were now dictating that the Union take on an increasingly external profile. Providing the audience with background information on BP he underlined that it was the largest single corporate entity in Europe with 35 billion euros in capital, 43.000 employees and 400 000 barrels of oil produced annually. BP produces 5% of Europe’s total oil and gas production and while the North Sea was stronger than many thought, Europe’s indigenous energy supplies could not meet growing demand. Already, 50% of oil and gas needs were met by daily imports. By 2020 that figure will have risen to 60-70%, he said. Gas and oil would remain the largest sources of energy for the future and while nuclear energy would play an important additional role, public insecurities about its safety remained high. The percentage of renewable energies in this equation would remain “very, very small” – around 2% by 2020. Most of the technologies used in generating renewable energy were not yet stable and efficient enough for these to have a larger impact, though he hoped these would make a real contribution at some point in the future he recommended healthy realism in this regard.

A key challenge for Europe was that energy sources were limited to specific areas including West Africa, the Middle East and Russia. Europe thus needed large companies to assume the exponentially higher risks of operating in areas that were politically and economically less secure. Also, while commercial enterprise was a necessary component of securing Europe’s energy supply from these sources, government-to-government relations were equally important. The European Union had to be engaged in the energy equation promoting peace in the Middle East, good governance in Africa and the integration of Russia into the global economy. Europe had to speak and work as one, he said. He praised the further development of Europe’s security policies and Javier Solana’s role in mediating in Ukraine. The European Neighbourhood Policy was also an important step binding neighbouring states to Europe.

The importance of Russia

Among the oil producing areas, none was more important for Europe than Russia: 50% of all of the Union’s natural gas imports came from Russia and the country was Europe’s main trading partner. At the same time, oil and gas development was fundamental to the Russian economy and for this to continue the role of international investors had to be clear good governance guaranteed and a mutually advantageous relationship created between Russia and Europe. 16 billion euros of European funds were invested in Russia and BP’s own experience – through the merger of its Russian oil assets with TNK into TNK-BP, had been a positive one. TNK-BP was operating under international transparency standards and BP had 4 billion euros invested in it. Still, Russia was a “dark and hostile place” to many investors. The relationships between the European Union and Russia needed to be stabilised further and Russia had to become better integrated into the global economy. Its accession to the World Trade Organisation was part of that, but Europe needed to assist Russia in establishing universal rule of law, the best international standards and good governance. Cooperation in security was high on Russia’s agenda, particularly as it assumed the leadership of the G8 later this year. “Russia is part of Europe, part of its past through its cultural, economic and historic ties and it must be part of Europe’s future,” he said. Europeans had to act in that spirit. The challenge was to sustain progress in Russia – lest one forget that Perestroika and Glasnost were not phenomena of the distant past, but not even 20 years old. BP was currently working on developing the idea of a platform in Russia and Europe for serious debate to facilitate exchange and cooperation and to see Russia as a neighbour, friend and ally – not as an enemy. The company was planning to present its plans in the near future.

Europe’s competitiveness and its role in the world

Turning to the impact that Europe had had on the global scene, he highlighted the entry into force of the Kyoto Agreement on 16 February. However, Kyoto was only the beginning of a path toward meeting the challenges of the global war against climate change. Europe had demonstrated that taking precautionary action was both practical and effective. There was, however, no single magic solution to reducing emissions on a global scale – many different actions were needed. The emissions trading system laid the foundation for measuring progress and was a means to engage more people in the process of proving that it did not have an adverse effect on economic development. The trading system had to develop to encourage positive improvements. It could not remain the only mechanism in this fight; however, it had to be backed up by sustained R&D policies, including research into carbon sequestration, for example. Europe had to apply its skills to dealing with these problems. It was partly about politics, partly about company involvement but Europe had the skills and the capability to take science and test it globally.

Climate change was an element of energy security, which should not be forgotten. Long term energy security meant that long term measures for climate change had to be envisaged. A combination of policies was needed to enhance the relationship between politics and business, markets and the application of science. Europe faced many challenges including competitiveness on the global economy and this was rightly a priority of the EU Commission. Only those economies that could cope with the increasing complexities would be able to survive on the world market, he cautioned. “We have achieved so much over the past 50 years, including our security and prosperity and we should celebrate this achievement and share it with the world – for our benefit and for theirs.”

EPC Chief Executive, Hans Martens thanked the speaker for his optimistic views on Europe’s capability to regenerate itself and be competitive.