Energy security is not just about one country looking to make sure gasoline prices don’t spike. It’s about natural gas from temperamental suppliers like Russia. It’s about China’s insatiable appetite for coal. It’s about the revolution in “shale gas” production in the United States that is redrawing the strategic and market maps for energy worldwide.
Those were some of the many comments shared by panelists at The Fletcher School’s 10th Annual London Symposium: “The Global Energy Security Landscape,” held on Dec. 8. The event included presentations by two prominent Fletcher alumni—Hungary’s ambassador-at-large for energy security, Anita Orban (F01, F07), and Kelly Sims Gallagher (F00, F03), associate professor of energy and environmental policy and director of the Energy, Climate and Innovation Research Program at Fletcher’s Center for International Environment and Resource Policy (CIERP).
Participants included prominent alumni working in leadership positions in the private, non-profit and public sectors; members of Fletcher’s European Advisory Group; and members of Tufts’ International Board of Advisors. Tufts University Provost David Harris provided the introductions.
An Era of Sweeping, Unexpected Change
“The energy landscape all over the world and also Europe have undergone profound change in the last four to five years,” Orban opened. “Such changes are due to economic, financial, psychological and environmental issues which we were not able to predict five years ago.”
For much of central and eastern Europe, the gas crisis of 2006, sparked by a transit pipeline dispute between Russia and Ukraine, served as a wake-up call. Countries realized the dangers of relying so heavily on a dominant supplier and how inadequate and un-integrated the European supply infrastructure was. Those insights, Orban said, helped jump-start the idea of an alternate pipeline project: the Nabucco pipeline to bring Caspian Sea and central Asian gas across Turkey to Europe.
“My predecessor was the ambassador for Nabucco, which means that 90 percent of his time was doing the diplomatic work of that project.” However, when Orban took over the position in 2010, it was re-envisioned to encompass larger goals for energy security in the region: “Today, about 20 percent of my time is pipeline diplomacy. The rest is an absolutely different story: market integration, energy efficiency and interconnectivity in Europe.”
The shift in the ambassador’s responsibilities is in lockstep with the huge steps the European Union (EU) has made towards market integration. In 2009, the European Commission awarded $3.9 billion euros to support interconnected infrastructure, both to create economic growth and to buoy energy security in the region. The EU is also urging the countries in central Europe to unite their position vis-a-vis the pipeline project, according to Orban.
“For the very first time history of the European Union, the EU is entering into third party negotiations between Azerbajan and Turkmenistan about creating the framework agreement for the trans-Caspian pipeline. This is the first time in the energy field that the EU is becoming a signatory on behalf of all of the member states.”
In addition to the internal dynamics within Europe, Orban addressed the great external factors impacting the European energy landscape. First among them is the global financial crisis, which has produced much lower gas consumption than initially projected and made it harder to get sizable lending, slowing down major energy projects.
The second, indirect factor is the revolution in the shale gas industry in the United States, which has put the country on track to be energy independent and, possibly, a net exporter of energy in the coming decades. Gas prices in the United States are now one-fifth of those in Europe, and one-eighth of those in Asia, according to Orban. Questions surrounding these great disparities loom large for the region: whether and when the United States will enter the market as an energy supplier, how fast additional producers will come on board, and whether the U.S. shale gas revolution will be repeated in Europe.
Meanwhile, as the United States replaces its coal consumption with gas, Europe is importing more of it. “Europe, which wants to be the leader in the green economy, is consuming all of the coal that is being pushed out from the U.S. because of the low gas price,” noted Orban. In Europe, “CO2 emissions grew because of the market.”
Concerns about climate change are also having a major impact. According to Orban, taxes on the refining industry are almost unsustainable compared to Russia or China or other countries. “No one predicted how climate change would affect negatively the competitiveness of Europe.”
In conclusion, Orban added, “I predict that we are facing a brand new energy landscape…. We see a much more sophisticated view of the energy security challenges, which is competitiveness, economic growth, environmental considerations, as well as energy security.”
The “Dash for Gas”
Gallagher also underscored in her remarks how climate change will impact the global energy landscape: “How governments respond to it will significantly alter the options that are available to countries for provision of energy, especially those countries that rely heavily on coal. Since coal is the most carbon-intensive fuel, as soon as there is any time of pricing for carbon, the natural economic response is to shift from coal to an alternative.”
Gallagher noted a likely “dash for gas” and renewables, especially in the United States, where there has been a drastic reduction in net imports of liquid fuel—from 60 percent to 45 percent in the past few years. Across all fuels, import dependence is just 19 percent as of 2011, and the Energy Information Administration (EIA) projects that number will be as low as 9 percent by 2035. “I have to say, the U.S. is feeling pretty smug right now,” said Gallagher.
In addition, she charted the meteoric rise of shale gas production, now 30 percent of all U.S. national gas production. This year’s Annual Energy Outlook report has doubled its previous predictions, concluding that by 2027 the United States will be exporting 1.2 trillion cubic feet of gas to the global gas market.
The only other country that has shale gas resources that could rival the United States’, Gallagher said, is China. But China lacks the technology and infrastructure to exploit its shale gas.
“On the whole, for me as an academic, it’s much more interesting and fascinating to look at China now, because there’s so much activity, and there’s so much to figure out,” she said. “I think that the central government is convinced that climate change is a real threat to China.”
China’s push for diverse energy supplies is further affected by internal politics, she said: The Chinese leadership wants to sustain the high economic growth that the country has seen in past decades, as a way to circumvent any sort of political challenges. There are fears that an energy crunch could affect that economic growth, she said.
“Energy security goes far beyond independence, per se, from oil,” Gallagher said. “And while energy independence is an attractive term politically, for most countries, it is an illusion and extremely costly to achieve.”
--Mike Eckel, F13