Sixth High-level Conference on Reform and Restructuring of Gas Markets
Vienna, Austria, 5-6 April 2001
Introductory comments by Ms. Danuta Hübner
and Executive Secretary of the UN Economic Commission for Europe
Security of Energy Supply and the Role of Natural Gas in the Energy Mix
Ladies and Gentlemen,
I have been involved in your work, in the work of the Gas Centre since I joined the UN two years ago, but it is for the first time that I have the pleasure to welcome you to the High-level meeting.
As it is the sixth such meeting, we can say that this is our tradition now and I think it is a good tradition, certainly worth continuing. Let me begin by expressing my appreciation to Mr. Rutternsdorfer and all colleagues at OMV for hosting this event and for their hospitality of which last night event was an outstanding proof.
Coming to a meeting like this one reminds me that throughout economic history energy has always been the main ingredient of growth. That is why when debating gas issues and problems one has the sense of continuity, but at the same time, a strong sense of change.
In our so deeply diversified Europe, with only few countries with economies in transition for whom this decade will be the one of the completion of transition and with a vast majority of them facing the whole challenge of painful reforms, in this Europe of sharp disparities there is, no doubt, a huge potential for change. This is also true for energy balances, for energy markets and policies. And, as gas is increasingly becoming the fuel of choice, it is also true for gas industry.
What certainly matters is that all these changes do not and will not happen by themselves. They are man-made, done by private sector, accompanied by government policies that remove barriers and provide long term incentives. In gas in particular it is governments, gas companies and international networks and organizations who define and chart this path of change and progress together. That is why the Gas Centre is so important, and that is why this meeting matters so much.
In most countries with economies in transition, the change means conversion to gas because in those countries efficiency, cost and environmental impact are essential for successful transition to market system and for accession to the EU. But we know that the level of gas penetration widely varies through our entire region. When we talk about gas in the context of energy supply security and the role of natural gas in the energy mix, we talk about the whole of our continent, where the demand for natural gas is rising, stimulated by economic and environmental factors, where governments are opening up and liberalising natural gas markets and where import dependency of many countries is rising and will continue to rise in the future. These trends contribute to uncertainty and apprehension, most notably regarding security of gas supplies. These concerns are certainly most acute in Central and Eastern Europe where massive restructuring and deep institutional, but also social changes take place. In any case, however, even if anxieties are highest in Central and Eastern Europe, they are also present in Western Europe.
Import dependence is increasing, the full implications of market liberalization are difficult to predict, the cost of developing incremental sources of supplies is rising, transportation distances to move gas from new reserves to markets are increasing, and transit rights continue to be of concern in some regions. That does not imply that concern over security of supply is very acute at this particular point of time. Gas supplies are flowing normally. Nevertheless, the situation, while not alarming, does call for continued vigilance by both industry and governments. In fact, the underlying long-run fundamentals of energy markets have not changed markedly from those prevailing in the1970s and early 1980s when energy supply and demand were tightly balanced and energy markets rocked by two sharp oil price rises. So, governments can never feel secure about energy security and security of gas supply will remain for years very high on policy agenda. Therefore, it is important to consider ways to strengthen the security of supply of natural gas. No doubt, this concern lies behind the European Commission’s Green Paper on security of energy supply.
The second topic, which we will address this afternoon, is the role of natural gas in the energy mix. Much has changed in this regard. Today, gas is used in a variety of sectors and applications, and it is experiencing significant growth especially as a fuel for electricity generation. It is flexible to use, environmentally friendly compared to other fossil fuels, relatively abundant, with supplies perceived to be relatively secure and reliable. Hence, natural gas could in time increase its share of the energy market by displacing what is not sustainable. Of course, we should not take it for granted. We must ask questions. We must ask whether this trend is desirable. What is the optimal share of natural in the energy mix? Responses would certainly vary across our region.
From the perspective of a gas company it can look simple and clear, more gas sales are normally preferable to less. But, from a public policy perspective, the answer is far less clear. A well-balanced and diversified fuel mix is the safest way for countries to ensure energy peace of mind. Special challenge is found by those countries with economies in transition that are in the process of accession to the European Union. For them, increased reliance on gas is a key component of their efforts to improve compliance with EU environmental regulations. This has impact on price level. For natural gas exporting countries, there is an additional dimension that needs to be considered. Gas consumed domestically is the one that is not available for the export market. Hence, there is an opportunity cost issue. We will be discussing these dilemmas this afternoon.
I think it is good to note – with all those many challenges facing the natural gas industry in Europe in the coming years – that every challenge has its opportunities. Well managed, innovative companies will make it, will continue to grow and prosper in a dynamic and growth oriented market environment.
And it is always good to talk and listen to others. Over the past six years, the UNECE, through its Gas Centre and the Working Party on Gas, has offered a pan-European forum to gas companies and governments of the ECE region where different interests, and sometimes conflicting interests, could meet and develop common understanding. We hope to be able to offer this neutral platform for years to come.
I believe that as long as meetings like this one take place, there is partnership and cooperation. We need it in Europe, where so much remains to be done. I hope this will be the spirit of our debate today.
In closing, I would like to express my thanks and appreciation to all of you that are supporting, and contributing financially, to the work of the UNECE Gas Centre.
Thank you for your kind attention.