European Regional Energy Strategy

Country Overview: Germany Typical European energy layout:  34% oil, 23% natural gas, 26% coal  11% nuclear; 7% renewable energy Changes by 2030:  Increase of renewable energy  Decrease of nuclear energy and oil,  But, increase of natural gas 80% of natural gas from Russia without changes Diversification - LNG, Caspian Sea, Iran, North Africa

Country Overview: France Main source of energy: nuclear  121 Mtoe out of 137 Mtoe primary production is nuclear  50.5% independence rate  5.1 Mtoe export of electricity  LNG hub Changes by 2030:  Renewable sources, gas and nuclear expected to grow  Oil remains steady CO 2 and energy intensity objectives won‘t be met Oil exposure will remain high

Country Overview: Italy Current Energy Mix:  Coal 9%; petroleum 44%; gas 37%; renewables 7% + 3% nuclear (from France) 2030 BAU:  CO 2 +38% (1990) - TPES +25%: coal +28%; gas +40%; renewables +70%; Nuclear +? Objectives(?): Security, Sustainability, Affordability

Country Overview: UK Energy profile:  Ninth largest global consumer of energy (2008: 165M barrels of oil equivalent) Shifts in fuel consumption/production:  Once an energy exporter, recently became net importer of petroleum (2005), gas (2004) and coal (2001)  Highly dependent on Norwegian petroleum (70+% of UK imports)  Gas and renewables replacing coal

Country Overview: Norway Western Europe’s Producer Country  Energy Profile  Self-sufficient to 2030  Consumes oil (44%) and electricity (42.3%)  OIL Reserves – 6.7bn barrel / 2.47bpd produced, net exporter  GAS Reserves – 81.7 tcf3 / 3.5tn cf3 produced for export  ELECTRICITY – 50% European reservoir capacity / production = consumption  Economic Impact  NORWAY – 25% GDP / 52% exports / 31% gov’t. revenue / 30,000 workers  STATOIL – NOC, public in 2001, 62.5% state owned  EU – Oil to U.K., NLD, FR, GER, BEL / Gas to GER, U.K., FR, BEL, NLD  Energy Vulnerability / Security  PRODUCTION – Oil peaked in 2001 / Gas peaked in 2006…2010…2013  Will Norway run out of oil/gas before it can re-invent its economy?

Country Overview: Norway Creating wealth for future generations  The Petroleum Fund  Estimated value of $400bn  Could reach $1trn and provide a 15yr safety net  Drill, drill, drill…

Regional Comparison Commonalities Same prospective 2030 trends for renewable energy and natural gas European directives regulatory constraints : CO 2, market deregulation High geopolitical importance of Russia in the gas and oil supply market EU integration of markets and policies in medium- to long-term Differences Nuclear power National resources Domestic opinion towards nuclear Government incentives through investment/tax (renewable vs nuclear)

Summary of country strategies Germany  Technology change from oil to hydrogen  Diversification of natural gas supply plus increase of efficiency & renewables  Markets and Institutions scenario: EU-Russia, EU-Caspian Sea, EU-Africa France – Short term: internal markets deregulation – Domestic public opinion: tax debates, nuclear – Diplomacy: Central Asia, Caucasia, Turkey, North Africa – EU integration of energy market and policy Italy  Short term: Energy Efficiency  Long term: Nuclear; Renewables, Gas (from North Africa, Russia, Caspian Region and LNG from Middle East)  EU integration of energy market and policy

Summary of country strategies United Kingdom  Short-term: Implement CHP to increase energy efficiency and capture waste  Long-term: Expand nuclear energy program and increase use of renewables to decrease dependency on foreign suppliers  Overall: Increase cooperation with EU for EU-wide strategy Norway  Expand resource base  Exploration and technology on the NCS  International expansion  Emphasize natural gas  Develop off-shore wind / become an electricity exporter  Leverage LNG success in Barents Sea  Grow wealth in petroleum fund - slow production  Environmental sustainability – wind / CCS / smart grid

Impact of standalone strategies? Europe is a special case  European Union was founded to centralize the national steel and coal strategies of its member states  Lisbon Treaty will further current integration  Net consumers versus net producers Most strategies are complimentary  All diversifying sources and moving away from fossil fuels to more sustainable, cleaner forms of energy  However, different national-level incentive structures and views on nuclear energy

What EU action means Until now the only common energy policy was on Climate Change Eastern European Member States still in a “cold war” mode in their behavior toward Russia With the Lisbon Treaty: Solidarity among EU Member States (short-term) Common Energy Market Common Foreign Policy (and Energy Policy) Buyer market power (?)

Critical geopolitical implications Regional balance of power  Norway’s political stature increases in the region Delivers more gas/oil from CNS (Barents Sea) and feeds European electricity grid Brings international resources to EU and U.S. Balances U.S. / EU vs. Russian interests in the development of arctic region fields As a fringe producer, Norway is not immune to OPEC or “energy weapon” politics  EU’s relationship with Russia By 2030 Russia will provide about 50% of the EU's gas imports Current focus on bilateral agreements with Russia versus common front – impact of Lisbon Treaty? Renewables offer freedom from dependency on Russia or other foreign powers Future of the EU  Could EU expansion be driven by energy needs? E.g. Turkey, which is poised as an energy conduit to Europe  New EU neighbors are increasingly energy producers  EU comfort level with growth of nuclear power varies by country

Regional Takeaways EU cooperation is critical and the Lisbon Treaty should facilitate compromise and collaboration  Common EU-strategy rather than individual country approach towards Russia, Caspian Sea region, Iran  Common energy market in the EU  Potential common strategy for technology change to hydrogen? As net consumers, reducing EU dependence on foreign energy is critical – renewables are part of the solution Norway: “No” to EU, but integrated into EU/world markets