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Petroleum Review

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The European Union (EU) is refusing to give up on Russia and its neighbours as stable energy partners for the future, despite the largely inconclusive summit between member states and Moscow last month (October) in Mafra, Portugal, writes Keith Nuthall. It failed to make progress on the demands from the European Commission (EC) for reciprocal liberalisation in Russian energy markets, should the EU allow Russian companies — notably Gazprom — a free hand in member states' gas sectors. However, the two sides agreed a new 'early-warning mechanism' funnelling improved information between Brussels and Moscow on looming potential energy supply and demand problems.

Also, minutes from the preparatory meeting between EU Energy Commissioner Andris Piebalgs and Russia's Energy Minister showed both sides have agreed to assess 'possible barriers to energy trade between the EU and Russia', be they 'political, legal, economic, financial or technical …'

Meanwhile, the European Bank for Reconstruction & Development (EBRD) is also continuing its mandate to develop former Soviet and Warsaw Pact markets — planning to lend Russian energy company Pechora Energy up to $50mn to explore and develop the Luzskoye oil field in the Timan-Pechora basin, the Komi Republic, in the northern Urals. The EBRD is also planning a $100mn funding package to allow the Galnaftogaz 'OKKO' service station chain to expand from western Ukraine to cover the whole country. Continued efforts in the region have been underlined by EU Energy Commissioner Andris Piebalgs making an official visit to Turkmenistan, discussing cooperation with this key natural gas producer. Diplomatic ties have improved since the death last year of independent Turkmenistan's first president, the dictatorial and erratic Saparmurat Niyazov.

In other EU oil and gas news:

— The first meeting of the Transatlantic Economic Council, designed to solve regulatory clashes between the US and the EU has struck a preliminary agreement on biofuel standards. EU and US experts have identified which existing standards for pure biofuels are compatible and will by 31 December identify areas for additional progress in 2008.

— The European Parliament has called for the EU's solidarity fund for disaster aid to be better focused on earthquake damage repairs. MEPs have also called on the EC to draft a pan-European earthquake action plan.

— The EC is considering proposing binding controls on pollution that can be emitted by industry, through reform of the EU integrated pollution prevention and control directive. It gives member states wide latitude to determine the strictness of compulsory pollution permits, but proposals being drafted say emission limits could in future be based on mandatory EU guidelines.

— The European Court of Justice (ECJ) has weakened the value of saleable carbon dioxide (CO2) emission permits which would be issued to road users and auto manufacturers, should road transport be included in the EU emissions trading regime from 2013. The ECJ ruled that national EU governments could withdraw such permits, if it considered too many had been released, without compensation.

— The French and German governments are clashing over the formula for CO2 emission caps on new vehicle models. Germany wants luxury and larger cars to have more leeway to emit CO2, while France wants a flat rate.

— The EU Council of Ministers has blocked EC proposals that flat rate road taxes be scrapped across Europe in favour of levies varied according to vehicle CO2 emissions. Whilst Ministers accepted the need for 'fiscal measures in passenger car taxation for the purpose of discouraging environmentally damaging behaviour', they did not agree an EU directive was necessary mandating this in all 27 member states.

— The EC is taking Malta to the ECJ, seeking an order that it allow competition within its service station sector. State-owned Enemalta currently enjoys a legal monopoly for importing, storing and wholesaling petroleum products within Malta, claims Brussels.

Date:  31.12.2007

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