MEDREG, profile of the association of Mediterranean regulators for Electricity and Gas
ENAGAS, a major energy company joins oME
intErViEW WitH H.E. fouad douiri Moroccan Minister oF energy, Mines, Water and environMent
KEy MEssaGEs on tHE Main cHallEnGEs of tHE EnErGy sEctor Pierre gadonneix, chairMan Wec
BoostinG sustainaBlE EnErGy in tHE MEditErranEan PartnEr countriEs PhiliPPe de Fontaine vive, vice President eiB
contEnt
05 I a messaGe From the General dIreCtor Pedro moraleda
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06 I InterVIeW WIth h.e. FoUad doUIrI - moroccan minister for energy, mines, Water and environment
10 I BoostInG sUstaInaBle enerGy In the medIterranean Partner CoUntrIes - the eIB VIsIon
Philippe de Fontaine Vive - Vice President of the european Investment Bank
14 I Key messaGes on the maIn ChallenGes oF the enerGy seCtor, FoCUsInG on enerGy eFFICIenCy and sPeCIFICItIes oF the medIterranean reGIon Pierre Gadonneix - Chairman of the World energy Council, honorary Chairman of edF, Former Chairman and Ceo of GdF
and President of the harvard Business school Club of France
special features
Members’ corner
21 I eGas InternatIonal BId roUnd
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44 I medreG, the assoCIatIon oF medIterranean eleCtrICIty and Gas reGUlators tiziana tronci - Communication manager medreg secretariat
Profile 44
oME life 48
oME Members 59
22 I medIterranean oIl and Gas sUPPly-demand ProsPeCts sohbet Karbuz and Bruno Castellano - ome
28 I GrId ParIty oF solar PV In mena eleCtrIC marKets roberto Vigotti - ome
36 I CUrrent and FUtUre PersPeCtIVes oF solar thermal In the medIterranean reGIon: the role oF KnoWledGe manaGement and netWorKInG to aCCelerate marKet transFormatIon nicolas Cottret and emanuela menichetti - ome
analysis 22
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I am very pleased to introduce this ninth issue of Gem magazine and much honored with the contributions from distinguished guests: he Fouad douiri, moroccan minister for energy, mines, Water and environment, mr. Philippe de Fontaine-Vive, Vice-President of the european Investment Bank and mr. Pierre Gadonneix, Chairman of the World energy Council. I would also like to warmly welcome enaGas as new member company. We very much look for fruitful cooperation.
our association has been very active the first six months of this year as you could read in the section “ome life”. I am in particular satisfied with the success of our mediterranean energy Perspectives flagship publication issued late december 2011. this book is definitely a reference in all energy issues and perspectives in the mediterranean region and confirms the role of our association as the energy expert in the region. I take this opportunity to congratulate the ome team for their excellent work and express my gratitude to our members for their continuous support.
meP 2011 was welcomed by the euro-mediterranean community and ome has been invited to present its results in several high level regional events. numerous presentations also took place upon invitation of member companies and also of the european Commission and the Union for the mediterranean secretariat.
the recognition of the value of our association has also been translated in new projects signed with third parties, the publication for medener of a report on “energy efficiency in the south and eastern mediterranean Countries: overview of policies and good practices” with support of ademe and a cooperation agreement with Plan Bleu to jointly elaborate a “rupture scenario”.
editorial
last but not least, we are very happy about the cooperation with Union for the mediterranean secretariat and the signature of a memorandum of Understanding last may in marrakech in this regard.
at the time of printing this magazine, the world leaders are meeting in rio de Janeiro (Brazil) at the occasion of rio+20 to debate about the future of sustainable development of our planet. While there is complete uncertainty about the outcome of this event, there is no doubt that energy is essential for economic development and energy efficiency and renewable energy are key drivers of any sustainable energy future.
ome has always devoted high attention to both energy efficiency and renewable as our region is endowed with high potential for renewable energy and significant chances for improving efficiency. our meP clearly highlights the benefits of better exploiting these potentials both for economic and environmental purposes. But not only for these reasons, complementarities between the different countries in the euro-mediterranean area call for strengthened regional cooperation and ome will continue its effort to link its members around the sustainable energy future for our region.
enjoy reading our Gem!
Eng. Raafat El Beltagy
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the exchange of prime fuels has been for years a key driver for north-south cooperation, but new energy challenges bring further opportunities.
the number and type of initiatives blossoming to promote cooperation among mediterranean neighbors are a clear indication that opportunities exist and that different approaches are possible.
an immediate energy challenge for south and eastern mediterranean countries is to meet fast growing electricity demand. driven by increasing population, economic development and urbanization rates, demand for electricity is bound to multiply by three in less than 20 years.
many of these countries can much do to improve energy efficiency and most of them will need to use all available means to increase their electricity supply capacity. ome estimates that improving 20% electricity efficiency by 2030 in the south of the mediterranean is a feasible and necessary objective. Besides, around 160 GW of additional generation capacity will be required.
a longer lasting challenge shared by all mediterranean neighbors is the need to reduce fossil fuels dependency and develop more sustainable power generation technologies.
natural gas seems to be the option of choice for power generation today but should not be the main option for neither gas producing countries willing to meet their internal demand thereby forgoing export revenues, nor for importing countries willing to minimize the impact of increasing and volatile hydrocarbons price.
meeting steep rising electricity demand while deploying cleaner generation technologies in large scale are enough
daring challenges to convene all mediterranean neighbors; both challenges can also be the drivers to mobilize the resources that trigger economic development at a time when growth and employment are the top priority.
an appropriate step towards effective cooperation in the mediterranean should be to structure and coordinate the multiple initiatives pursuing similar objectives such as the Union for the mediterranean, dii, IPemed, medeleC, medener, medreG, medGrId, etc.
An immediate and daring challenge for the South and East of the Mediterranean is to
meet fast growing electricity demand.
a Message FroM the general director
Pedro Moraleda let us work together for the Mediterranean region
A step towards effective cooperation in the Mediterranean should be to
structure and coordinate the multiple initiatives pursuing similar objectives.
this coordination could be best carried out by intergovernmental or multilateral entities, for instance the secretariat of the Union for the mediterranean. We have often called for a neutral entity, where all regional interests are represented and with strong political support to play this structuring role. Proper coordination is a prerequisite for avoiding confusion and overlapping, and to optimize the synergy among such diverse and qualified contributions.
dialogue and partnership are a part of ome’s nature and long history. We have cooperation agreements with some of the above mentioned entities and we have recently signed a memorandum of Understanding with the secretariat of the Union for the mediterranean. through these agreements ome is well positioned to contribute to the common challenges the mediterranean is facing by doing what we do best: analyzing mediterranean energy perspectives and setting the links with the industry, our dear and supporting associates.
let us, then, work for the future of the mediterranean region. the opportunities are as outstanding as the challenges and there is room and need for everybody willing to help but, to play as a team, let us start by appointing a coach and align the players.
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sPecial FeatUres
intervieW With h.e. FoUad doUiri Moroccan Minister oF energy, Mines, Water and environMent
GEM I Global energy for the mediterranean
What are the driving lines of the Moroccan energy policy under the new government?
our main energy issues remain the same: high dependency on imports (around 94%), heavy energy bill and volatility of international energy prices and their impacts on domestic market. thus, the main objectives of the moroccan energy policy are to provide sufficient and reliable energy to the economy and the population as well as to ensure environment preservation. this energy policy is set up on five strategic axes:
1) security of supply with diversification of fuel types and sources;
2) availability and generalization of energy access to all segments of society at affordable prices;
3) mobilization of domestic energy sources, mainly renewable energy and at the same time intensification of hydrocarbons’ exploration and oil shale valorisation;
4) promotion of energy efficiency and
5) regional energy integration among the african and the euro-mediterranean markets.
the challenge on the ground is to meet future energy demand through a balanced energy mix where clean fossil fuels will be combined with renewable energies, mainly wind and solar. the development of these resources along with energy efficiency are a national priority.
Do you envisage significant changes in the energy mix?
Globally, the new government has opted for pursuing the implementation of existing strategies and projects initiated by the previous Government; this is especially true for energy sector. however, the operational steps to achieve our objectives need to be improved or corrected: the continuity of strategy should take into consideration needed changes to ensure the success.
as a concrete example, in order to reduce coal and fuel oil shares in electricity generation, the government is aiming at developing natural gas use either by import through gas pipes and/or by importing lnG. studies undertaken have permitted the identification of the best site for lnG terminal. Currently, the different aspects related to this
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important project are under analysis. a natural gas law project is being prepared in order to regulate gas activities and give clear vision to investors and operators.
For renewable energy, morocco is developing its resources with the objective to increase their share in installed electricity capacity from 26% currently to 42% in 2020 (14% from solar, 14 % from wind and 14% from hydropower). We have the necessary assets to achieve this goal as our potential, mainly in wind and solar, are considerable. In fact, morocco is endowed with large wind and solar energy potentials.
according to the national strategy, two important programs have been launched and their realization is underway: solar program aiming at installing 2,000 mW and wind program: 2,000 mW to be realized by 2020 the horizon.
last but not least, a balanced long-term energy mix combining renewable and natural gas can allow us scaling up renewables use and their appropriate integration into grid by having natural gas as back up source.
How to cope with the coming electricity demand challenge, which is expected to multiply by 3 in less than 20 years?
In comparison with their current level, primary energy and electricity consumption will double from 2008 to 2020, whilst they will be respectively three times and four times higher in 2030. the challenge we are facing, is to meet this increasing demand.
so, in the medium term 2012-2020, the national Plan of power generation capacities based on performant and economic technologies (clean coal, natural gas and increase of renewable energy use) is under implementation.
this plan is, of course, in line with the national energy strategy that sets up at the top of its agenda the security of supply in the country’s electric power, renewable energy development and energy efficiency. It is planned to provide during this period an additional capacity of around 9,000 mW, of which 4,540 mW will come from renewable sources.
Any anticipated change in the regulatory framework?
since the announcement of the solar program in november 2009, appropriate legal, institutional and regulatory frameworks have been adopted to accompany the national strategy for developing electricity sector and renewables, such as the law creating a dedicated agency in charge of supervising the solar program, masen, or the law 13-09 related to renewable energies as well as the creation of Iresen (research Institute of solar energy and new energy Institute).
the ministry of energy, mines, Water and environment has also launched in 2011 a consultation for developing a national regulation scheme for the electricity sector.
the proposed regulation scheme is aiming at responding to the requirements of sector evolution and to the opening of the electricity market to high voltage consumers, in accordance with the law 13-09 for renewable energy. We need to implement the required regulation for a free market under build up by the exchange of electricity from renewable sources.
regarding the electricity grids, this expected scheme will allow the unbundling activities of the national office of electricity (one) through separate activities: generation / supply, transmission system / distribution.
the framework envisaged expects the creation of an independent authority of regulation. Indeed as you know, in an open market, it is necessary to have such authority to ensure the transparency, objectivity and non-discrimination actions including the mission to set the rules of market organization, conditions of access to electricity grid, the rules for access to the interconnections and to set the tariffs for the use of the electricity grid as well as the disputes resolution between the parties.
regarding the schedule of this process, the ministry of energy, mines, Water and environment intends to launch before the end of this year, a consultation in order to support the implementation of the national regulation scheme of electricity sector and the establishment of the authority of regulation by 2014.
on another hand, as I mentioned, a project law dedicated to natural gas activities has been prepared and we started already to discuss it with the main users and potential actors. our objective is to reinforce the use of gas within a national plan for developing this energy in industry as well as in the electricity sector. the legal framework is necessarily needed to give investors visibility in this field.
Credit: Ministery of Energy, Mines, Water and Environement.
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GEM I Global energy for the mediterranean
What is your approach to energy subsidies?
energy pricing policy is an important issue for morocco as a net importer of energy: we face directly the impacts and fluctuations of the international energy market prices. some petroleum products are subsidized: butane, diesel oil, fuel oil and premium gasoline. With the rising trends of crude prices, the compensation fund has serious difficulties to meet its role: the expected global gap by the end of this year was estimated at 30 billion dirhams unless domestic prices are increased.
the Government has decided last week to raise the prices of premium gasoline, diesel and fuel oil in order to partially absorb a part of the gap and in parallel, the Government is finalizing the Compensation fund reforms. these reforms are aiming mainly at setting up a better targeted subsidies to citizens with limited income and to gradually move towards real energy prices sending the right signals to consumers for a more rational use of energy.
What role you see for private investors, foreign initiatives and/or independent power producers (IPP) especially in solar and wind Moroccan programs?
We firmly believe that private sector plays an important role in developing energy sector in morocco and that morocco has a successful history of Independent Power producers (IPPs) since 1994. I think also that we have succeded in building a tight public/private partnership in the field of producing energy.
of course, the IPP success is based on ensuring needed and adapted legal context: the attractiveness of such projects to investors depends on the institutional scheme adopted, importance of scale and potential profitability. the past experience within this regard has led the way to all the new projects such as solar or wind programs.
For example, the realization of the wind program will involve a Public/Private partnership and will be based on the IPP’s model with criteria of selection that takes into consideration the imperatives of proposed industrial integration as well as profitability.
Morocco has organized the 5th edition of MENAREC (Middle East and North Africa Renewable Energy Conference) on 15-16 of May, what were the main outcomes?
the main topics of menareC 5 were the prospects and challenges for a sustainable socio-economic development in the mena region through renewable energy. this Conference highlighted the strong growth in energy demand in mena countries due to demographic and economic growth, and the urgent need to ensure a
transition towards a more sustainable global energy system as well towards more secure energy markets.
the conference highlighted the issue of climate change that the mena region is facing together with increasing desertification and degradation of biodiversity. this situation presents a threat to the economies and the ecosystems of the region.
through this conference we wanted to propose a work framework that allows going beyond discussions and ensuring precise actions.
a joint committee has been set up for this purpose.
one of the priority issues we agreed to focus on was the creation of a structured industrial approach in the mena region to renewable energy and energy efficiency. an industrial approach that also provides new employment opportunities while benefiting from synergies and scaling effects.
What are the chances for reinforcing cooperation with neighboring countries?
Integration in euro-mediterranean and african space is a major component of the national energy strategy, as the strategic geographical position of the Kingdom sets it to become an important energy platform and a central actor in the increasing electricity exchanges between the countries around the mediterranean sea. thanks to the interconnections developed with spain and algeria, morocco constitutes an essential gateway in the future “mediterranean electric loop.”
In this perspective, our country has adhered to the mediterranean solar Plan, the deserteC Industrial Initiative and medGrid project, whose goal is to favour synergy in the development of wind and solar energy in the euro-mediterranean area.
the advanced status with the european Union enables morocco to be integrated more rapidly in the european energy market. For this purpose, we are harmonizing the reforms of our energy market to fit the european practice in this domain. In this field, we have initiated negociations to find the suitable modalities to apply the article 9 of the european directive that will enable us to export surplus green electricity to europe.
at the same time, morocco, algeria and tunisia are working towards the objective of integrating their electricity markets into the european one. the implementation of such integration needs the reinforcement of the interconnections to allow the exchange of important volume of energy and the harmonization of laws and energy regulations with european ones.
Progress has been made through the reinforcement (400 kV) of the existing interconnection between morocco
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and algeria. morocco has an ambitious program to reinforce its local grid in 400 kV which is a pre-requisite for an efficient euro-maghreb market of electricity. this program will allow reinforcing the security of electricity supply, improving the volume of exchange between the north and the south of mediterranean sea and will give morocco the opportunity to play an important role as a transit country.
What is your opinion about an eventual Mediterranean Energy Community?
mediterranean countries have in common several challenges to face in the fields of energy and environmental sustainability.
reliable access to affordable supplies is a prerequisite for development and the mediterranean region is considered as a “hot spot” for climate change. there are no boundaries when it comes to sustainability and vulnerability.
It is obvious that energy is at the heart of the mediterranean cooperation, and the shared objective of our countries is to grant security of energy supply in the long term; a security of supply that takes into consideration the eventual depletion of fossil reserves and the effects of climate change on this region.
the core for this cooperation is renewable energy based electricity generation and large scale development of energy efficiency.
these objectives could be better achieved by working together for our common goal with the multilateral initiatives such as the mediterranean solar Plan (msP), dii, medGrId, etc.
as a matter of fact, we can meet the challenge by assuming our interdependency and working out stronger links and interconnections.
so yes we can, we can have a mediterranean energy Community.
A last word?
I was very much pleased at the occasion of the menareC Conference to meet and to learn more about ome, a pioneering energy association that is playing an important role in promoting co-operation between all energy actors of the mediterranean region.
For the “future” mediterranean energy Community, ome will certainly be needed.
Credit: Ministery of Energy, Mines, Water and Environement.
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sPecial FeatUres
sustainable energy is the only viable solution to overcome the triple challenge of increase in energy demand, of environmental stress and of high unemployment in the southern and eastern mediterranean.
Indeed, the energy and climate change challenges are among the greatest tests which europe’s mediterranean partner countries1 have to face. their long term economic performance is dependent on reliable, sustainable and affordable energy supply, including mitigating and adapting to climate change impacts.
Meeting increasing energy needs is a priority for the EIB
the energy sector of the mediterranean partners have been characterised by rapidly growing demand on fossil fuels, subsidised energy tariffs, and inefficient energy use. renewable energy accounts for a very small share of the total energy demand, despite the large renewable potential of the region, in particular for solar and wind. the development of the sector is challenging in most of the countries, as it needs to both meet growing demand, reducing environmental impacts by improving energy efficiency and developing the renewable potential. this will imply mobilising the substantial financing needed in a context of limited access to capital, due to political risks considerations and the impacts of economic crisis. all these challenges must be addressed and require strong action. eIB has a substantial role to play in this context.
GEM I Global energy for the mediterranean
Financing needs for sustainable energy in the southern & eastern mediterranean region are very significant in the medium and long-terms. despite a recent slowdown in energy demand growth, earlier trend is expected to resume in the coming years, driven by economic development and the needs of a fast growing population.
In the short-term, existing and already advanced energy generation projects can provide enough capacity to meet expected demand in the short-to-medium term. In the longer term, however, new capacity will be required. renewable energy should cover a significant part of the additional demand needs, if the energy sector in these countries is gradually moving into a more environmentally sustainable path. Indeed, investments for energy networks and their upgrades will be needed, both to ensure the quality of supply and in the medium long term to support the sources as renewables become a significant part of the mix.
The energy sector represents 56% of EIB commitments in the region
With lending amounting to almost eUr 5.9 billion since the creation of the FemIP (Facilité euro-méditerranéenne d’Investissement et de Partenariat) in 2002, the energy sector has been one of the largest beneficiaries of eIB loans in the region. at present, it absorbs about 56% of eIB commitments in the region and stands out as one of the top priority sectors for eIB action in the field of infrastructure.
Boosting sUstainaBle energy in the Mediterranean Partner coUntries - the eiB vision PhiliPPe de Fontaine vive, vice President oF the eUroPean investMent Bank
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eIB can provide financing for projects using a variety of instruments ranging from senior loans to equity. In addition the eIB has also developed other means of financing, such as equity and carbon funds, to further support renewable energy and energy-efficiency projects. It also works upstream with project promoters, providing technical assistance to develop projects.
eIB financing for mediterranean partner countries has contributed to major investments in power generation, electricity transmission, as well as in the distribution, exports and transmission of natural gas. the electricity generation projects have included wind, solar and hydro projects, along with high-efficiency natural gas power plants. In addition, the eIB has supported the expansion and a better integration of the energy networks with the eU networks (for example via its financing of electricity interconnections and gas networks).
among the many projects approved in 2011, attention should be drawn to the ouarzazate solar plant, the first large-scale plant of this kind in north africa, which FemIP—as the lead lender for european financing—will fund to the tune of eUr 300 million. this large-scale project has unique production potential (500 mW at the site ultimately), which is expected to help reduce annual carbon dioxide emissions by 240,000 tonnes. the work is scheduled to actually begin in 2012. other key renewable energy projects under preparation in the region are being currently appraised, such as wind farm projects in egypt, Jordan, morocco, and a solar thermal project in Israel. Furthermore the eIB is financing a study on possible means to diversify the supply of natural gas in morocco.
renewable energy projects still account for a limited part of eIB energy financing. In the future this part should increase, as the objectives of the mediterranean solar Plan are gradually realised.
Cornerstone for the next decade: the Mediterranean Solar Plan
the mediterranean solar Plan (msP) is one of the priority projects of the Union for the mediterranean (Ufm) and aims to promote the implementation of sustainable energy solutions concerning renewable energy (re) and energy efficiency (ee). Its objective is to develop an additional re capacity in the region of 20 GW by 2020 along with the
eIB sIGned eUr 5.8 BIllIon oF loans For enerGy ProJeCts In medIterranean Partner CoUntrIes oVer 2002-2011
Regasificacion & liquefact.
20.9%
Refineries 5.9%
Ten years of EIB financing for energy in the region
activities undertaken by eIB in the mediterranean in the field of energy are wide-ranging and far- reaching. Following the record year of 2010 (where eUr 1.8 billion of eIB loans were signed for energy projects), and despite the political unrest following the arab spring, 2011 saw the approval of eUr 600 million of eIB financing for 4 energy projects in the region.
In the past ten years, eIB financing for mediterranean partner countries has contributed to major investments in power generation, electricity transmission, as well as in the distribution, exports and transmission of natural gas. In the past three years, financing was mainly provided for electricity networks and gas-fired power stations in egypt and tunisia. more such projects are currently under eIB appraisal in Jordan, tunisia, and morocco as well as a major natural gas transportation and treatment project in tunisia.
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necessary electricity transmission capacity, including international interconnections. We strongly support the implementation of the msP master Plan led by the Ufm secretariat, and actively participates in the working group on the msP financial implementation and on regulation to support re development.
despite mediterranean partner countries’ awareness on the region’s huge potential for re and ee, and some encouraging steps towards their deployment under the msP, the overall contribution of re and ee to meeting a growing energy demand has remained limited. there is a real need to accelerate the development of re and ee projects in the region to fulfil national re and ee targets and to achieve the regional msP objectives.
EIB accelerates the MSP with a new Project Preparation Initiative
achieving the msP objectives requires identifying and supporting pilot projects able to serve as significant test cases and policy drivers for the large scale development of renewable energy and energy efficiency.
In close partnership with the european financiers and using european Commission neighbourhood Investment Facility funds, the eIB has launched the msP Project Preparation Initiative (msP-PPI) that is expected to accelerate the implementation of up to 20 renewable energy and energy efficiency projects in the mena region.
the msP-PPI provides grants for technical assistance so as to unlock the msP projects. In doing so it supports the preparation of investment projects in the following areas:
• renewable energy: Proven re technologies, including wind, solar (PV and CsP), sustainable biomass, small hydro;
• energy efficiency and energy savings projects in all sectors (e.g. industry, housing, transport) including combined heat & power;
• Projects connecting re projects to the national grid.
the initiative also represents a cooperation platform for promoting best practices for energy efficiency and renewables projects. Finally, all projects that would receive grants from the msP-PPI will be eligible to receive.
thinking about the future, today: eIB wind farm project in tangiers, morocco.
eIB green energy investments provide much-needed sustainable jobs in the mediterranean.
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energy projects
Cooperation amongst financiers, the european Commission, the Ufm and the beneficiary countries is key to attain the msP objectives. such collaborating efforts are embodied in KfW, aFd and the eIB’s jointly pledge to provide up to 5bn eUr financing for msP projects.
the eIB notably participated in the launch of the Inframed Fund, the first financing facility of the Ufm, and the largest fund dedicated to investment in infrastructure in the southern and eastern mediterranean region. Furthermore a dedicated eUr 5 million msP project preparation initiative (msP-PPI) was recently launched, financed by the eC’s neighbourhood Investment Facility, and managed by eIB with other interested european Financing Institutions.
eIB is also trying to develop ee projects in the mediterranean partner countries. a study has just been launched to assess dedicated technical assistance needs in the region. the study includes the provision of technical assistance for the preparation of pilot energy efficiency
projects in different cities of the region together with the european Commission, and in support of the Covenant of mayors initiative of the eU Commission.
Time for action
the energy system of the southern & eastern mediterranean region should enter in a phase of rapid transition towards a more sustainable energy system with far-reaching implications for the next decades. the time for action is now.
eIB’s strategy is to support this transition, and to further assist mediterranean partner countries to develop new projects and initiatives in the area of renewable energy, energy efficiency, as well as energy networks in support of both a better integration with the eU energy markets and the integration of re sources.
1 the mediterranean partner countries are: algeria, egypt, Gaza/West Bank, Israel, Jordan, lebanon, morocco, syria (currently suspended), tunisia, and libya in the near future.
meeting increasing energy needs is a priority for the eIB in the mediterranean.
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sPecial FeatUres
key Messages on the Main challenges oF the energy sector, FocUsing on energy eFFiciency and sPeciFicities oF the Mediterranean region Pierre gadonneix, chairMan oF the World energy coUncil, honorary chairMan oF edF, ForMer chairMan and ceo oF gdF and President oF the harvard BUsiness school clUB oF France1
GEM I Global energy for the mediterranean
Secure energy supply to fuel economic growth and human development
Growth in energy demand slowed in 2009 due to the economic crisis, but shot up by 5% in 2010. According to the IEA, with a GDP multiplied by 4 by 2050, energy demand will be multiplied by 1.5 and electricity demand by 2, even with huge demand- side management efforts.
demand is increasing for all energy sources, notably those used to generate electricity.
• oil demand will continue to rise until the air transport and automobile industries have found an alternative to oil. even with the barrel reaching more than 110$ last march, oil demand growth was steady in 2011 and will continue to grow. this means we have no other option but optimize the existing conventional and unconventional oil reserves and develop alternative fuels through a determined r&d policy.
• Coal is likely to continue to be widely used across the globe: in the Usa, China and India for example, where coal respectively accounts for 50%, 70% and 80% of the electricity mix.
• Gas is an increasingly important energy source, notably with the development of unconventional resources. In the Us, which will soon be able to export gas, gas prices are disconnected from oil prices, and will supposedly remain so for at least another five to ten years. Gas is
even though long-term challenges are the same for every country and the final goal has to be common, there are as many different paths to sustainability as there are countries boasting specific geographies, histories, cultures, resources, technologies etc. We at WeC, with more than 93 countries on board, know that. But we all concur to reaching to global energy sustainability and finding global solutions to: security of energy supply to drive growth, and acceptance of energy as regards environment protection and energy poverty.
I will first present the great challenges of security of energy supply with a special focus on energy efficiency, then the challenge of energy acceptability regarding both the climate and social equity, before I end up with presenting the set of solutions that are urgent, crucial... but reachable.
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also becoming very competitive, at about $3-5/mbtu in the Us, which is almost three times cheaper than in europe ($11/mbtu) and Japan ($14/mbtu), and also because it is less emitting than coal. Will a “golden age of gas” take place?
even with an abundant resource, energy security can still be an issue when resources are located far from consumption sites. For example, in 02/2012, gas supply became problematic in most of europe with a very cold winter that put great pressure on gas shipments from russia to southern europe and the border of the mediterranean, in a global context of a geopolitical unrest in libya and Iran. new infrastructures, like south stream, for example have been made to relieve the pressure and this is good news. Unless great developments continue to be made in gas infrastructures, pipelines or lnG terminals all over the world, gas development can be hindered.
moreover, burning gas emits. If by 2050, Co2 is valued at about 50/tonne, gas will be less competitive, all the more as carbon capture and storage (CCs) is nowhere near maturity.
lastly, as the recent accident on the elgin-Franklin pumping platform in the north sea reminded us, the exploitation of unconventional gas will have to cope with more stringent regulations as regards environment protection that could affect its competitiveness.
• the world will also rely on nuclear power. WeC recently published a report on the future of nuclear industry one year after Fukushima showing that 50 countries are operating, building, or considering nuclear generation. half of them are “newcomers”. more than 60 nuclear power plants are now under construction and 90% of those are in only 4 countries: China, India, russia, Korea... Undoubtedly nuclear power will continue, although a handful of countries have decided to abandon nuclear power, provided that nuclear safety and transparency and public acceptance are continuously being reinforced.
• In addition to conventional energy resources, and hydropower, which still harbors significant potential especially in africa, south america and asia, “new renewable energies” will have to develop quickly to meet the energy supply challenge. europe, the Us, China have developed wind power on a large scale, cumulating 238 GW of installed capacity worldwide, among which 97 GW in europe and 29 GW in Germany alone. PV has also bloomed very recently, reaching 67 GW worldwide, of which 25 GW in Germany alone and approx. 4 GW in the Usa and the same portion in China, and with 27 GW of new capacities installed worldwide in the year 2011. these energies are bound to develop more globally and account for an increasingly large share of the world total mix, provided that they are exploited in countries that have good potentials, that their cost go down, and that intermittency and storage issues are resolved.
Energy efficiency will be a priority. According to COP 17 it can reap almost 40% of the expected CO2
emissions mitigation by 2050, provided that the best technologies are selected and supported by most efficient regulations to keep cost in check.
energy efficiency is a key mechanism to achieve progress towards a lower carbon economy. It can also contribute to social equity by reducing energy cost and increasing energy availability, which is a growing concern in countries that see energy poors increasing in numbers with the economic crisis.
Promoting energy efficiency is widely viewed as being the largest, cheapest, and fastest option for tackling key energy problems, and many solutions are available already. some even say that “the cheapest kWh is the one we do not consume”. It’s partly true, but also partly wrong: indeed great challenges remain, as our WeC energy efficiency report stated in 2010 and our WeC report on energy and climate policies 2011 underscored. to name a few:
• energy efficiency can be expensive (when it comes to completely retrofit fleets of buildings) and entails transaction costs that are hard to measure and reduce (for example when energy efficiency measure implies lifestyles changes).
• attracting financing for energy-efficiency initiatives and encouraging consumers (residential and industrial) and energy suppliers to adopt existing solutions is also one of the biggest challenges facing energy policymakers— especially when the payback periods are long or when the advantage is perceived by someone else than the payer (this is the case in a rented house for example).
• … all the more as evaluation of the effectiveness of expenditure on energy efficiency is difficult and rebound effects are important. a recent study by the european Union highlighted that as much as 30% of the gains from energy efficiency are lost because the savings are put back into energy-consuming activities.
as a consequence, taking energy efficiency as an example, I cannot stress more the need for policymakers to consider consumer (and corporate) behavior as much as technologies.
The implication of these huge demands in energy sources and energy efficiency is a thirst in investments.
Indeed, existing generation and transmission infrastructure are not sufficient. massive investments are required in all energies and networks, amounting to 1.4% of global GdP a year through 2030, at a time of “peak money”... Investments must be made now, in order to have infrastructure in place ten years from now—and in the right places… two thirds will be made outside oeCd countries, which also implies a certain amount of technology transfers through international trade
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frameworks, so that developing countries directly put in place the cleanest and most energy efficient technologies. most of the infrastructure that will have to be in place in 2030 does not exist today. If we do not act now, energy security is at threat.
Acceptance of the energy system, which embraces economic cost, climate and environmental protection and the struggle against energy poverty, will be the other big challenge for the sector
The acceptability of cost
all these investments and efforts will only be made if they are compatible with the current economic context and are affordable to all countries. that is the reason why each country must assess the cost of energies in its specific context and keep in check the cost of its developments. this is all the more true as we are now facing great uncertainties regarding the price of energies, for both energy importers and exporters. If the price of the oil barrel is to surpass 150$ on the long run as Iea predicts, will the importers be able to afford the cost? and will the exporters be able to secure their revenues? this is a very sensitive question for the mediterranean region.
The protection of our climate, environment and of our safety
Public acceptance of technology is now also driven by each technology’s capability to contribute to curb climate change. all international experts agree that we must do all we can to keep global warming at below 2°C by 2050. specialists say it is almost too late, and that we may already be on a trajectory of more than 6°C. In 2010 despite the crisis, Co2 emissions rebounded at a record level of +5.3%, i.e: 30 Gt and energy intensity/GdP went up +o.4% (vs a long term trend of -1%/year). and preserving the environment means more than protecting the climate. In everyone’s mind—and this was reinforced by the events of 2011—it also requires an essential improvement in the safety of all energies and technologies. nuclear is obviously on the front line after Fukushima, gas as well after elgin-Franklin but all technologies are in fact targeted.
The struggle against energy poverty
again, acceptance of energy goes far beyond environment protection. the global population is expected to grow from 7 billion today to 9 billion by 2050, with most of this growth occurring in developing countries, where the tragedy of fuel energy poverty is the most tangible. In 2011, close to 2 billion people still live without access to modern energy. these people are exposed on a daily basis to toxic emissions from fires they light, live in darkness and insecurity, and do not have access to neither medical care nor education. more globally, energy must develop hand in hand with human development. as the same 1 billion
people on earth suffer from energy scarcity and water stress, energy development must go hand in hand with water development.
Need for a new governance at both national and international levels
At national level, we need smart energy regulatory framework and public policies, adapted to each country’s specificities in terms of natural resources, geographies, history and culture, skills, etc.
theses smart regulatory frameworks should all, in the present context of economic crisis, keep costs under control, and hence strictly promoting the most competitive technologies. Indeed, we have in the world a wide range of generation technologies, but degrees of maturity and competitiveness vary:
• on the one hand, some technologies are economically mature and ready to be used today (average costs of between €60 and €100/mWh, for instance onshore wind, hydropower, supercritical coal, nuclear, combined- cycle gas turbines, and even solar technologies in some very sunny regions of the world like California for example etc.). these should be prioritized, deployed and promoted through a range of tools: taxes, feed in tariffs, regulations etc. I insist these mature technologies should be prioritized when it comes to deployment, because we must overall avoid “stop and go” policies that are very damaging to energy industries, as the recent european “stop and go” policies on solar PV reminded us. yet, some technologies, though still not mature, economically or socially, need to be further developed. their costs are two to ten times too high to be competitive. examples include solar photovoltaic in some regions of europe which (contrary to California), costs about €250/mWh; offshore wind, which costs €170/mWh; storage, smart grids, CCs, gas-coal to liquids, and second-generation biofuels. all of these will require r&d as well as demonstration, and/or bidding processes to bring prices down and resolve technical issues like for some new renewable: intermittency and storage.
• this is also true for energy efficiency where some technologies are competitive (renovation of attics for example) while some others are still too expensive or not accepted and some tools are very efficient (labels) while others are not, burdened by rebound effects.
Here, I would like to focus on the Mediterranean region, because it really synthesizes the key challenges and questions of the energy future:
mediterranean countries see their population grow rapidly and urbanization sprawl, putting some pressure on the energy demand and energy infrastructures but also offering opportunities for energy efficiency (making efficient buildings from scratch and putting in place the cleanest technologies).
GEM I Global energy for the mediterranean
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nevertheless, some countries are luckily gifted with conventional sources of oil and gas and are also now searching for unconventional oil and gas. these are undisputable assets but these countries will have to cope with their technological and environmental risks and opportunities while at the same time paving the way to cleaner technologies and to development paths that no longer rely on their capacity to export fossil fuels.
mediterranean countries have great opportunities in renewables as the region is endowed with sun, deserted spaces and some windy areas. Countries should work on renewable projects but only on those with very competitive costs and with limited risks as regards the environmental impact. I am thinking of the technologies that will not put a stress on local water resources for example, in areas already suffering from water scarcity.
I was in oran, algeria last november and I was impressed by the vision of the energy policy makers, whose programme deploys only competitive technologies by incentivising investments on the long run; while at the same time boosts r&d and on the field demonstrations of various future solar technologies (PV with different cells, concentration...), so that the winner technology proves itself out to be the most competitive, the least damaging for the environment, and the best accepted etc.
as a conclusion, the mediterranean region’s essence in the future can be a laboratory for the world where solutions have to be developed on all key aspects of the global energy development: on the technological side (with great potentials in efficiency, renewables and unconventional), on the environmental and social side (with great population growth, over-exposure to the effects of climate change, potentials to better manage the water resource).
At international level, common rules are necessary
there is a real need for more integration, cooperation between countries at an international level. the aim is tree-fold:
• mitigate costs of energy transition to low carbon future, otherwise new industries will not develop and one part of the world population, who could not afford expensive technologies, would be left aside of development.
• While at the same time, ensure the three key energy issues are preserved: security of supply, struggle against climate change and energy poverty.
• and moreover, promote an efficient international governance on:
- energy safety, for all sources of energy and especially nuclear, since risks are global. In the world after Fukushima, I think this goal is achievable with reasonable efforts, building on existing institutions.
- energy trade, in order to promote ways for developing countries to directly access low carbon technologies.
Conclusion
now what can you do, for your region and for the global energy sector?
We all know solutions and technologies that can help us meet these challenges but we all know that there is not one silver bullet for everyone: taking stock on our respective experience and expertises, knowledge and visions, we shall try to capture possible paths to energy sustainable.
energy requires technical solutions, raw materials and, mostly important, human and social innovation. this is why, in the energy sector, dialogue, meetings and experience-sharing are essential. this is what WeC is created for and I hope to see you again soon.
I wish you very profitable days at enermed.
1 this paper is based on the introduction speech of mr. Gadonneix to the third enermed session and during which he was invited to share with participants his vision of the major energy challenges on the long term, focusing especially on two areas that have fuelled this enermed session: energy efficiency and the specific challenges of the mediterranean region. For more information on enermed, cf. ome life section and www.ome.org
From left to right: L. Guarrera (OME), P. Moraleda (OME), P. Gadonneix (WEC) and H. Ben Jannet Allal (OME).
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GEM I Global energy for the mediterraneanGEM I Global energy for the mediterranean
MeMBers’ corner
enagas a MaJor Mediterranean energy coMPany
Antonio Llardén, Chairman & CEO of ENAGAS.
enaGas is a basic gas infrastructure operator, leading european lnG import facilities, the spanish Gas transmission operator (tso) and, by law, the technical overall operator of the spanish gas system.
enaGas assets in spain include around 10,000 km of high pressure pipelines, three underground gas storages (serrablo, Gaviota and yela), three lnG regasification terminals (Barcelona, Cartagena and huelva), a 40% shareholding in the Bilbao lnG receiving terminal, is developing a terminal in musel (Gijon) and in the projects of two other lnG receiving terminals in the Canary Islands. enaGas has recently reached an agreement to take a 40% share of Quintero lnG terminal in Chile.
Over 40 years of experience in the gas industry
enaGas has played a key role in the introduction of natural gas into the spanish energy market by setting up an extensive transport infrastructure that contributed to make of the spanish gas system one of the most reliable and best prepared to diversify sources and means of supply.
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International connections with France, Portugal and the Maghreb
Main Control Centre from which the Spanish Gas System is coordinated
Compressor stations and regulation and/or metering stations throughout the country
Carrying natural gas to the furthest corner...
10,000 km of high pressure gas pipelines
3 regasification plants:
Total emission capacity:
GEM I Global energy for the mediterranean
anticipating an impressive growth in energy demand, the spanish energy authorities opted to give an important role to natural gas in the energy mix and called enaGas to develop the necessary gas infrastructure.
according to this plan, enaGas built the first lnG receiving terminal in spain, and the first one in Continental europe, in Barcelona. this lnG plant, which was commissioned in 1969 with a storage capacity of 40,000 m3, has now 8 tanks with a total storage capacity of 840,000 m3 and a maximum send out capacity of 1,950,000 m3 (n/h).
the role that such a secure, clean and competitive source of energy as natural gas plays now in the spanish energy mix proves that the decision was correct. the network of lnG terminals currently in operation has certainly contributed to the security and diversification of energy supply in spain. as a matter of fact, the spanish gas supply system is one of the most diversified in the world; in 2011 spanish lnG terminals received cargos from 12 different source countries, major mediterranean countries among them (algeria, egypt, libya).
this large and diversified receiving capacity in the Iberian Peninsula could be an excellent alternative to ensuring gas supply to europe when the Iberian-French Corridor is fully developed, more specifically when its eastern axis is built.
French and spanish tsos have been working for years in developing the necessary infrastructures and there are currently two interconnections in operation between spain and France: larrau and Biriatou. enaGas is fully committed to this project which is essential for the internal european gas market and very helpful to further
link south mediterranean gas producers with north mediterranean gas markets.
after more than 40 years building and operating gas infrastructures enaGas has developed a unique expertise in gas transport, lnG regasification, underground storage and technical operation of gas systems.
enaGas expertise in engineering and construction makes of this company a strategic partner in the international context for projects related to regasification, transport and underground storage.
Committed to sustainability
sustainability is among enaGas’ mission and values. the company has formulated a sustainable energy model focussed on innovation and improved performance in all areas, and has formally announced a Corporate responsibility Policy that includes the commitments with stakeholders and sets a benchmark in this field. last year enaGas was classified as world’s number one in the Utilities sector of the dow Jones sustainability Index.
Committed to the Mediterranean
enaGas welcomes the opportunity of joining ome as it is completely aligned with ome objectives of promoting cooperation in the mediterranean region. enaGas is convinced that the collaboration among all energy companies operating in the region will permit to make of energy a driver for enhanced integration.
With this objective in mind, enaGas is willing to offer its experience and knowledge to ome.
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ARAB REPUBLIC OF EGYPT Ministry of Petroleum and Mineral Resources
Egyptian Natural Gas Holding Company “EGAS”
Interested companies can review and/or purchase the available data of the bid round blocks starting on Monday June 4th, 2012 according to the procedures and determined prices from EGAS premises addressed:
85 EL Nasr Road, 1st district, Nasr City, Cairo, Egypt, 11371 Data summary, coordinates, procedures, Terms & Conditions and the Model Agreement can be obtained
through EGAS website: www.egas.com.eg Offers sould be delivered to EGAS premises, 7th floor on Wednwsday Nov. 14th, 2012 before 12:00 o’clock noon
Cairo local time
The Egyptian Natural Gas Holding Company “EGAS” Invites oil & gas exploration & production companies for 2012 international bid round to explore / exploit for Gas and Crude Oil in Egypt
Under the production sharing agreement (PSA) The 2012 bid round includes (15) exploration blocks in the Mediterranean Sea & Nile Delta Sedimentary basin of Egypt
Further information or clarifications through: Vice Chairman for Agreements & Exploration
Telephone: +202 24055830 / 31 Fax : 202 24055832 e-mail : bidround@egas.com.eg
Announcement for 2012 INTERNATIONAL BID ROUND
We have opened a new section in our Gem magazine dedicated to presentations, views or information that our members wish to share with other regional partners.
In addition to the presentation of enaGas, new member of our association, we are glad to show here the International Bid round 2012 just launched by eGas, one of our egyptian partners and current Chairman of ome.
this Bid round may represent a quantum leap in egypt’s exploration policy responding to the needs of encouraging production of hydrocarbons, which the internal market so eagerly needs, and to be competitive in the current international context.
When presenting the Bid round, eng. mostafa el Bahr, Vice Chairman for agreements and exploration of eGas, highlighted that it is the first time that egypt is offering blocks along its eastern maritime border.
he also clearly addressed pricing issues, the creation of a cost recovery pool in case costs are higher than expected in deepwater and the abandonment clause, presented by first time in this Bid round .
egypt wants to remain a major player in the gas market and this Bid round aims to be a competitive offer to investors.
egas international Bid roUnd
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introdUction this article is a condensed and updated summary of the oil and gas chapter in the ome’s flagship publication “mediterranean energy Perspective 2011” released in november 2011. the following sections give an overview of the developments in oil and gas reserves and resources, exploration activity, unconventional resources, and oil and gas supply-demand evolution in the past and next two decades with a focus on the south mediterranean. Pressing challenges and opportunities in the region is presented in the final section.
reserves and resoUrces the mediterranean region contains an estimated 68 billion barrels (Gb) of proven oil reserves representing 4.6% of global proven oil reserves. alone, libya accounts for 69% of the proven oil reserves in the region. With regards to natural gas, proven reserves are estimated at 8.9 trillion cubic metres (tcm), representing 4.7% of the world’s total. half of these gas reserves are in algeria and a quarter are in egypt.
Sohbet Karbuz and Bruno Castellano - OME
Mediterranean oil and gas sUPPly-deMand ProsPects
many of the countries in the mediterranean region have been well explored for hydrocarbons; however, those in the south are relatively under—explored or unexplored. In addition, some mature fields could see their recoverable reserves increase with the use of enhanced recovery techniques. so, there could be further increases in mediterranean hydrocarbon reserves in the future.
the size of future oil discoveries in algeria is likely to be small and deeper formations are more likely to contain natural gas rather than oil. While libya has the largest proven oil reserves in the mediterranean region, some observers think that the reserves may be higher based on potential in both onshore and offshore sedimentary basins. In egypt, a number of frontier areas are gaining interest for their hydrocarbon resource potential: the sinai Peninsula, Upper egypt and the red sea. International attention has recently turned to Upper egypt, the area below 28° latitude, where the geology is not yet well understood.
a United states Geological survey (UsGs) report in march 20101 assessed the undiscovered oil and gas resources of the levantine basin province in the eastern
an al
ys is
medIterranean oIl and Gas reserVes, 2012
Source: OME database based on Oil and Gas Journal and US Energy Information Administration.
Mediterranean oil reserves: 68 Gb Mediterranean gas reserves: 8 948 bcm
others 6.4%
others 5.3%
libya 69.2%
libya 16.7%
Israel 3.0%
algeria 17.9%
algeria 50.3%
egypt 6.5%
egypt 24.7%
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mediterranean.2 according to the report, the mean estimates of undiscovered technically recoverable crude oil and natural gas liquids (nGl) resources in the basin are about 1.7 Gb and 3.6 Gb respectively. however, what makes this basin important is its estimated large volume of undiscovered natural gas resources. the UsGs estimates for undiscovered gas volume is about 3,465 billion cubic metres (bcm).
according to another UsGs assessment in may 2010,3 the nile delta contains an estimated 6,321 bcm of undiscovered, technically recoverable natural gas; 1.76 Gb of oil; and 5.97 Gb of nGls.4 By far, the largest resource is estimated to be in the nile Cone.5
the figures pronounced in these assessments are simply eye rowing. large scale offshore discoveries in the levantine basin since 2009 have raised the expectations about the hydrocarbons potential in the eastern mediterranean. the offshore tamar (discovered in 2009) and the leviathan (discovered in 2010) fields are the world’s largest deepwater gas discoveries of the last decade. several other offshore discoveries, albeit much smaller in size, and especially a large discovery offshore southern Cyprus in 2011 (the Cyprus-a field) have significantly augmented perceptions of natural gas potential in the east mediterranean. total amount of gas resources discovered in the region since January 2009 is some 950 bcm.
exPloration eFForts are set to intensiFy
In algeria, the national agency for the development of hydrocarbon resources (alnaft), established in 2007, was given responsibility for managing international licensing rounds. It held so far three bidding rounds in 2008, 2009 and 2010. these bidding rounds yielded disappointing results for the authorities due to very low award success rates. the last round, to which sonatrach for the first time also participated, was the worst to date, with a success rate of 20%. alnaft will launch the tenth licensing round (algeria’s eleventh) which is expected to offer more attractive contractual terms and/or blocks.
In libya, there have been four international licensing rounds after the United nations and United states sanctions against the country were lifted in 2003 and 2004 respectively. three rounds were oriented to oil, while the most recent focused on natural gas. the competition in those licensing rounds was so tough that analysts thought the companies would struggle to make a profit. yet, all the rounds were a success for libya. libya has not held a licensing round since 2007, although it has signed exploration and production licenses with individual companies. In some cases the arrangements for the successful bids in previous rounds were still under negotiation before the civil war broke out in February 2011. the country is expected to change the hydrocarbons law and hold an exploration and production bidding round soon afterwards.
In egypt, the state-owned egyptian General Petroleum Corporation (eGPC) together with the egyptian natural Gas holding Company (eGas) and the Ganoub el Wadi
Petroleum holding Company (Ganope) invite exploration companies to bid for concession areas, which may be in unexplored or relinquished areas. egypt has a long and successful record of attracting international interest from major investors to participate in oil and gas exploration and production activities. a new bidding round offering 15 blocks for exploration of oil has been launched in september 2011 by eGPC with a closing date of 29 march 2012. twelve of the blocks offered in this bid round are located onshore in the Western desert (seven), the eastern desert (three) and the sinai (two), while the others are offshore in the Gulf of suez. eGas intends to launch an international exploration bid round for gas in the coming months. the company will offer 15 blocks in the mediterranean, the nile delta and the northern sinai.
In the east mediterranean, large-scale gas discovery of tamar field offshore of Israel has opened up a new deepwater province. Following this success, the countries in the region has stepped up their exploration efforts. In 2007, republic of Cyprus had launched its first offshore licensing round. In February 2011 the country launched its second licensing round offering 12 offshore blocks with 11 may 2012 as a deadline. lebanon is preparing its first offshore licensing round which is expected to be launched by the mid-2012. syria is also keen to attract foreign companies for hydrocarbon exploration and production activities in order to offset the country’s declining oil output. Before the domestic violence has started, syria had announced an offshore exploration licensing round for three blocks in march 2011. the deadline was extended to mid december 2011 but no bids have yet been reported.
although these eye catching developments have attracted international attention, unconventional hydrocarbons potential of the mediterranean region have been mostly neglected.
Unconventional resoUrces
traditionally unconventional hydrocarbon resources have been considered to be too difficult technically and too costly to produce despite their large potential. recent advances in know-how and technology as well as rising oil prices have led to development of these deposits to be produced at competitive costs. Increased interest in unconventional hydrocarbon resources has been sparked worldwide and the mediterranean region is no exception.
only a few areas in the mediterranean region have been surveyed for unconventional oil resources. Italy, Jordan, Israel, morocco and egypt have identified potential. due to limited scientific data, technical and economic uncertainties related to the development of these resources, active commercial production in the region is negligible today and is expected to be not significant in the next decade or so.
the development of unconventional gas is just beginning in the mediterranean region. Current activities are centered on resource assessment and early exploration stages. shale gas resources, although believed to be widespread, have not yet been quantified for most mediterranean countries. however, available studies show that several
24
countries have good potential in shale gas and tight gas resources.6 available estimates indicate that libya, algeria and France have, by far, the largest shale gas potential in the mediterranean region. many companies are already showing interests in acquiring land access and starting exploration in the region. In 2010, the first hydraulic fracturing operation in a shale gas reservoir in the region took place in tunisia at the el Franig field.
several uncertainties, constraints or challenges will define whether the so-called shale gas revolution in the United states can be replicated in the mediterranean, especially in the north mediterranean. For instance, in october 2011, the French government requested the repeal of all permits related to shale gas exploration activity following a ban by the Parliament on the hydraulic fracturing technique for exploration and production. thus, France became the first country in the world to prohibit this technique. In any case, the contribution of shale gas to the natural gas production is expected to be rather minor in the short to mid-term.7
Mediterranean oil oUtlook to 2030
In the mediterranean region, oil production (including condensate and natural gas liquids) has increased by more than 10% over the last decade, reaching 5.1 million barrels per day (mb/d) in 2010 from 4.6 mb/d in 2000. algeria, libya and egypt account for about 86% of the oil production in the region.
algeria is currently the largest oil producer in the mediterranean with more than 1.8 mb/d produced in 2010, about 36% of the total regional output. algeria’s sahara Blend, its main export crude, is one of the highest quality brands of crude in the world. Until the outbreak of political/ social upheaval in early 2011, libya was the second largest oil producer at about 35% of total mediterranean oil output in 2010, with almost 1.8 mb/d. like algeria, libya produces low-sulphur sweet crude oil which is easy to process and refine into high-value petroleum products. Both economies are highly dependent on oil production and exports which provide a substantial part of their export earnings and government revenues.
according to ome estimates, oil production in the mediterranean region will increase to 5.6 mb/d in 2015, due mainly to contributions from the large producers. From 2015 to 2020, an additional 0.4 mb/d will be produced in the region, bringing the total regional output to 6 mb/d by 2020. most of the increase will come from libya. While crude and condensate production will decline in algeria and reserves in many existing fields in egypt will be depleted, libyan oil production will continue to increase to 2030, barely offsetting the declines in all the other mediterranean countries. the ome expects mediterranean oil production to reach its peak level at around 6.4 mb/d in 2028 and stay at that level to 2030. the mediterranean region’s share in global oil production will remain over 6% in 2030.
oil demand in the mediterranean region has increased more than 65% over the last four decades. oil demand was of nearly 400 million tonnes of oil equivalent (mtoe) in 2010, up from 245 mtoe in 1970. the rate of oil demand growth was most important in the south, especially in the south West while in the north, oil demand growth was moderate. north mediterranean accounted for almost two-thirds of total mediterranean oil demand in 2010, and the remaining third was more or less evenly shared by the south West and south east.
oil demand in the mediterranean region is expected to exceed 470 mtoe in 2030 in the Conservative scenario; some 70 mtoe above the 2010 level. all the increase in oil demand will stem from the south. In the south West, algeria and egypt are the main contributors to the growth, whereas in the south east mediterranean, turkey’s oil demand will increase by 23 mtoe by 2030. Currently, France is the largest oil consumer in the mediterranean region and will remain so, though in absolute terms its consumption will decrease during the period.
total oil demand in the mediterranean in the Proactive scenario8 is expected to remain at about 2010 levels, slightly below 400 mtoe. this is some 80 mtoe less than in the Conservative scenario. In the Proactive case, demand decreases in the north mediterranean. oil demand continues to increase in the south, albeit less strongly than in the Conservative scenario.
In both scenarios, the north mediterranean remains the largest oil consuming sub-region accounting for more than half of the total mediterranean oil demand in 2030. the south West and south east each account for some 20% - 25%.
transport will remain the mediterranean region’s largest oil consuming sector. It will account for more than 55% of the total oil consumption by 2030. oil demand for power generation will decline in the region as a whole. oil will be replaced mainly by natural gas and renewable energy sources over the period.
the mediterranean region relies on oil imports today and it will continue to do so in the period to 2030. net oil imports (crude and products) in the region were more than 170 mtoe in 2009. this picture will not change dramatically in the period to 2030. the north will continue to import large Source: OME database.
medIterranean oIl ProdUCtIon, 1990-2030
others egyptsyria algerialibya mb/d
GEM I Global energy for the mediterranean
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volumes of oil but import levels will remain flat or decline slightly. the decline in oil production in the south east combined with an increase in consumption will aggravate the sub-region’s oil balance such that its net oil import requirements will grow much faster than in the north. In contrast, the net oil balance of the south West will maintain an upward trend, with a surplus of 191 mtoe in the Proactive scenario and 165 mtoe in the Conservative scenario by 2030. In sum, overall oil import dependence of the mediterranean region will decrease in the next 20 years in both scenarios.
By 2030, incremental oil production in the region will come from the south West only. It will outpace increases in oil demand from the south according to the Conservative scenario. however, libya is the only country in the region that will be able to enhance its ability to export oil during the forecast period. algerian oil production is expected to fall way below the 2009 levels by 2030. In addition, egypt and syria will become net importers in the near future.
In the Proactive scenario, additional oil demand in the south mediterranean by 2030 is less than half of what
it is envisaged in the Conservative scenario. decrease of oil demand in the north is significantly more than in the Conservative scenario. therefore, increases in oil production in the whole region will easily outpace growth in demand, and as a result the mediterranean net oil imports will decrease significantly by 2030.
Mediterranean natUral gas oUtlook to 2030
natural gas production in the mediterranean region increased by more than 41% between 2000 and 2010, from 137 billion cubic metres (bcm) to 194 bcm. the south West is the lead producing sub-region with a 87% share of mediterranean gas output in 2010. half of this comes from algeria alone.
natural gas production in the mediterranean region is expected to further increase from 194 bcm in 2010 to 316 bcm in 2020 and to 364 bcm by 2030. the pace of the increase will be faster between 2010 and 2020 than in the following decade. algerian gas production will plateau
Notes: Net trade is the difference between production and apparent demand. CS = Conservative Scenario; PS = Proactive Scenario. Source: OME database.
medIterranean net oIl trade, 1990-2030 medIterranean Gas ProdUCtIon, 1990-2030
2020 2030
37.9%
medIterranean oIl demand, 1990-2030
Notes: “Other” includes consumption primarily in commercial and services, and agriculture sectors. “Other transformation and losses” includes all transformation processes, e.g. refining, excluding power generation.
Mtoe
500
400
300
200
100
0
2009 2020 2030
Cs CsPs Ps20001990
2009 2020 2030
Cs CsPs Ps20001990
bcm
400
350
300
250
200
150
100
50
0
Source: OME database.
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after 2026 so total mediterranean gas production will slow thereafter. the share of the mediterranean region in world gas production will increase to more than 8% by 2030.
Between 2010 and 2030, natural gas production in algeria and egypt will almost double and will more than triple in libya. algerian gas production will increase the most in the region in absolute terms, up 70 bcm. Production in egypt is expected to rise by 56 bcm, and in libya by 40 bcm, if radical changes are introduced into upstream regulatory, fiscal and contractual terms. thanks to recent discoveries, ome expects Israel’s gas production to approach 25 bcm by 2030, compared to some 3 bcm today. By 2030 the four largest gas producers—algeria, egypt, libya and Israel—will account for 97% of total natural gas production in the mediterranean, compared with about 87% today.
natural gas demand in the mediterranean region increased from 108 mtoe in 1990 to around 290 mtoe in 2010.9 this dramatic increase led to the share of natural gas in the region’s total primary energy demand to expand from 15% in 1990 to 28% in 2009. the outlook is for it to be over 30% by 2030. In the ome outlook, demand for natural gas in the mediterranean region reaches 407 mtoe in the Proactive scenario and 500 mtoe in the Conservative scenario by 2030.
the north mediterranean had a dominant share at 70% in the region’s total gas demand in 1990. two countries, Italy and France, accounted for 60% of that demand. algeria followed with a share of 14%. since 1990 the situation has changed with demand for gas growing so strongly in the south mediterranean that its share in the regional total increased from 29% in 1990 to 43% in 2010. a major driver was a policy approach to promote natural gas for domestic use in order to free up oil for export in producing countries in the south West. natural gas use has also been increasing in gas-importing countries in the south east sub-region, particularly in turkey.
natural gas demand in the north increases steadily to 190 mtoe in 2020 in the Conservative scenario. then it continues to increase at a slower pace to stand at
more than 200 mtoe by 2030. this region’s share in total mediterranean gas demand falls from 57% in 2010 to 41% in 2030, largely due to robust growth in the south mediterranean. on the other side of the mediterranean, population growth and economic expansion significantly increase the demand for natural gas. In the south West, gas demand reaches 179 mtoe in 2030 in the Conservative scenario. the south east follows the same trend with gas demand to increase at 114 mtoe by 2030, a lot more than twice 2010 levels.
Under the assumptions of the Proactive scenario, gas demand in the north increases moderately until 2020 and even slower thereafter. demand for natural gas still increases firmly in the south, but at a slower pace than in the Conservative scenario. like in the Conservative scenario, the north retains its status as the largest gas demand centre of the mediterranean. among the mediterranean countries, egypt is expected to become the largest gas consumer by 2030. Power generation will remain the largest gas-consuming sector, accounting for half of total gas demand in 2030 in the Conservative scenario and 46% in the Proactive scenario.
Currently the mediterranean region as a whole is a net importer of natural gas. the south West sub-region is a net exporter largely due to production in algeria, egypt and libya. But those exports are outweighed by imports in the north and south east countries. the outlook to 2030 foresees that the mediterranean region will remain a net gas importer in both Conservative and Proactive scenarios.
the north and south east sub-regions will import more natural gas as consumption grows and production declines (in the north) in both scenarios to 2030. While the north will need larger import volumes, the south east’s import requirements will grow at a faster rate. despite the high growth of its gas demand, the south West sub-region will remain a net gas exporter. For the whole mediterranean region, the level of import dependence will decrease by 2030. It is only 24% in 2030 in the Proactive scenario, due to demand side management measures, large deployment of renewable energy sources and increased fuel diversification.
Notes: “Other” includes consumption primarily in commercial and services, and agriculture sectors. “Other transformation and losses” includes all transformation processes, e.g. refining, excluding power generation.
CS = Conservative Scenario; PS = Proactive Scenario Source: OME database.
medIterranean Gas demand, 1990-2030
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Gas exPort PotentIal oF soUth medIterranean CoUntrIes, 2010 and 2030
algeria, egypt and libya—the three largest gas-exporting countries in the mediterranean—export natural gas mainly to europe. algeria’s export potential is expected to increase to more than 85 bcm in 2030 in the Conservative scenario and 108 bcm in the Proactive scenario. libya will expand its export potential to 42-47 bcm by 2030. Israel is expected to emerge as another major exporter during the outlook period with gas exports at about 7 bcm by 2030. maintaining its current gas export levels to 2030 under the Conservative scenario could be a challenge for egypt. By 2030, these four countries could export 142 bcm in the Conservative scenario and 191 bcm in the Proactive scenario, compared to less than 80 bcm of gas exports in 2010.
although gas export infrastructure capacity might be sufficient to meet export levels by 2030 in regional level, this will not be the case in individual country bases. For instance, Israel, Cyprus and libya will need to create new or expand substantially export infrastructure capacity to meet their expected export levels.
challenges and oPPortUnities
major social events taking place in south mediterranean countries since last year have raised concerns about the oil and gas supplies from and through the south mediterranean. the impact of the “arab spring” on oil and gas production in tunisia and egypt has been quite limited. the suez Canal and the sumed Pipeline in egypt, and the transmed gas pipeline from algeria to Italy through tunisia continued operating normally. however, natural gas flows to Israel via the east mediterranean Gas Pipeline and to Jordan and syria through the arab Gas Pipeline were interrupted 14 times due to attacks against the infrastructure in the sinai. those frequent interruptions put the importing countries in a difficult situation with regards to their gas needs.
on the energy side, the main impact of the social unrest was the interruption of oil supply from libya. the end of hostilities paved the way for the return of foreign companies. against expectations, and thanks to an
outstanding work, the oil production is nearly back to pre-war level. Gas flows through the Greenstream pipeline to Italy was also resumed in mid-october 2011 after the supplies were shut on 22 February 2011.
these events have changed and may further change the whole picture of the hydrocarbon sector in the region. return of foreign investors, especially for upstream, in the south mediterranean countries will largely depend on the stability of the political situation and how investor- friendly the (future) governments will be. algeria has already given indications that a new impetus will be given to foreign investment in exploration and to attract foreign companies. this is expected to be achieved by revising the hydrocarbon law. although egypt will continue to be a net gas exporter to 2030, its future gas export situation is highly dependent on government policies and the degree and timing of how they are implemented. meanwhile, countries not impacted by the “arab spring” also reconsider their policies to attract investors.
although recently discovered major gas reserves in the east mediterranean could, in the long term, be a potential game changer, their geo-political implications will be more pronounced. Converting these reserves into production capacity will be perhaps less challenging than establishing infrastructure to export the excess production.
Governments in the south mediterranean have three key priorities to address: demand side management policies specifically focused on domestic energy pricing and subsidies to ensure rational use of resources; further development of oil and natural gas resources by stimulating exploratory efforts and accelerating the development of known fields; and upgrade the use of natural gas within the economy so that it could release relatively higher-value hydrocarbons for export.
addressing the challenges and seizing the opportunities in the oil and gas sectors in the mediterranean region will require formulation of a comprehensive strategy which would also take into account of enhanced co-operation with all stakeholders as well as interactions with other sectors of the economy.
Notes: Export potential is the calculated difference between production and apparent demand. CS = Conservative Scenario; PS = Proactive Scenario. Source: OME.
1 UsGs (2010), “assessment of Undiscovered oil and Gas resources of the levant Province, eastern mediterranean”, Fact sheet 2010-3014, march, UsGs, Boulder, Colorado.
2 the area covers onshore and offshore territory including the Gaza strip, Israel, lebanon, syria and Cyprus.
3 United states Geological survey (UsGs), “assessment of Undiscovered oil and Gas resources of the nile delta Basin Province, eastern mediterranean”, Fact sheet 2010-3027, may, UsGs, Boulder, Colorado.
4 the estimates for undiscovered resources represent technically recoverable oil and gas resources, but if found, could be produced using currently available technology and industry practices. so, no attempt was made to estimate economically recoverable resources.
5 the UsGs assessment covers two areas: the nile margin reservoir assessment Unit (onshore and near-shore area in northern egypt with numerous discoveries) and the nile Cone assessment Unit (in deeper water and less drilled area).
6 see, energy Information administration/advanced resources International, World shale Gas resources: an Initial assessment of 14 regions outside the United states, Washington, dC, april 2011.
7 For a detailed discussion see, ome (2011), “Unconventional Gas: hype or reality for the euro- mediterranean region?”, october, ome, nanterre, France.
8 this scenario assumes significant improvements in energy efficiency and demand side management as well as wider use of renewable energy sources.
9 reflecting the economic downturn, mediterranean gas demand fell by 6 mtoe in 2009 after fifteen years of uninterrupted growth. however, the decline was only in the north mediterranean countries. today, the mediterranean region accounts for 10% of global natural gas demand.
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28
THE CONTExT: TOWARdS SOLAR PV COMPETITIVENESS
In less than a decade, installations of Photovoltaic (PV) power have shown high growth rates around the world and solar PV sector has become a $100 billion business with global reach.
among the factors contributing to this growth were governmental incentives, significant capacity additions from existing and new entrants, and continual innovation. PV module and system prices have fallen dramatically and by 2011 global installed capacity exceeded 65 GW
Roberto Vigotti Director Electricity OME
grid Parity oF solar Pv in Mena electric Markets
an al
ys is
GEM I Global energy for the mediterranean
(Giga Watt); as consequence of this growth PV electricity generation cost continuously decreases. the contrary trend is shown by electricity prices for end-users and fossil fuel prices for thermal power plant operators.
the intersection of PV electricity generation cost and electricity and fossil fuel price trends is defined as “grid- parity” and “fuel-parity” and indicates cost neutral PV installations. PV systems have already been the least energy cost option for off-grid solutions in sunny regions. In the 2010s PV will also become the least energy cost option for on-grid roof-top systems and PV power plants in many regions in the world.
FIGURE 1. COMPEtItIvENESS: twO PERSPECtIvES
PV installed on rooftops
Large installations (rooftops or ground mounted)
Dynamic Grid Parity for electricity consumers the moment at which, in a particular market segment in a specific country, the present value of the long-term revenues from a PV installation is equal to the long-term cost of receiving traditionally produced and supplied power over the grid.
Generation Value Competitiveness for utilities the moment at which, in a specific country, adding PV to the generation portfolio becomes as equally attracti