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2014-07-07 18:25:00

SOUTH STREAM: NO IDEOLOGY

SOUTH STREAM: NO IDEOLOGY

In the wake of Austrian OMV's deal to build a branch of the South Stream pipeline to Austria, Ulrich Streibl, Senior Vice President Corporate Strategy, OMV, said there was no place for ideology in a decision like the one made by his company to participate in the pipeline which would deliver Russian gas to Autria and markets further afield.

"I don't feel this is a field in which ideologic discussions have any place," he said. Mr. Streibl made his opening remarks at an event entitled The Perspectives for Central and South Europe held in the Austrian capital, Vienna, in a session emphasizing the facilitation of energy flows to benefit consumers.

"Why is Vienna the place to talk about energy?" he asked, answering: "As we sit here, about one-third of the Russian gas that flows to Europe, flows directly by the city of Vienna – only just a few kilometers away we have the largest gas hub in this region, about 40 BCM flow through this hub, about 10% of all gas into Europe, going into Italy and Germany. So Vienna is really a center in the energy scene."

OMV, he explained, was an integrated oil and gas company, among the 30 biggest international independent oil and gas producers worldwide and the largest industrial company in Austria.

However, Mr. Streibl stated that the "energiewende," the transition to a low-carbon economy, was reality. "It has started, there's no denying it, and we're going into that direction," he opined. "The only thing I can't tell you is, is it going to take 30 years? Forty years? Fifty years? Or 80 years until we arrive there?

"What we all know," he continued, "and what I'm absolutely certain of, is that until we get there oil and gas will be absolutely vital to our personal lives, to run our applications and to run our industry."

He said that just by looking at simple statistics, renewables would double: "No question that they will make a strong growth path. The IEA says that by 2035 renewables – in 20 years – they will have doubled, but they will still be below 25% of primary energy that is being produced and used in Europe. That tells us that the other 75% comes from something else, and what we currently believe is that over 50% of that energy comes from oil and gas, and gas with 30% of all primary energy used in Europe, will be the most important fuel in 2035."

According to him, there was no point in playing the fuels off against each other as they would complement each other. "Gas has a role in the energy mix for a very very long time," he added.

He highlighted the strengths of gas: its flexibility in the face of coal and nuclear, for one; its cleanliness; and its availability.

Mr. Streibl's second message, he offered, was that a healthy gas supply system needed diversification of both sources and routes. "Today, Russian gas accounts for 30% of European gas; Norwegian gas is around 20% or so, and indigenous production is still 40% - so most of the gas that we use is produced in Europe, which we believe is good and we should continue doing that.

"The issue we have in Europe is that we're very adverse to modern technologies to make use of what we have," he explained.

He reported that OMV had been producing gas in Austria for 70 years and that it had invested a lot in new technologies. "We have fields in Romania that are 80 years old and they still produce when we use the right technology. Lots of investment, but it works."

OMV was also investing in the North Sea, he said, because it was safe and close to Europe; now the company would also invest in the Black Sea. "It's all about European gas for Europe," he said.

Still, there was nothing bad about Russian gas for Europe, according to Mr. Streibl, who said: "We've had Russian gas in the system since 1968. OMV was the first company in Europe that imported Russian gas, and I can tell you that since that time – 46 years – not one single cubic meter of gas that was promised from Gazprom did not arrive. It's been a safe, reliable partnership, and I think that within a healthy energy mix that has various sources, Russia has a very important role."

Europe would need even more Russian gas in the future, he said, and along with work on indigenous sources the result would be diversification. "And, of course, it's diversification in terms of the routes – networks only function when you have diverse and complex systems."

He added that this was also true for electricity networks, maybe even for transportation networks, explaining that if there was a problem or slowdown with one underground line, another mode could potentially be used.

"So every additional pipeline in the network is welcome and especially in the East we know the infrastructure is not as developed as in the West, so let's work on developing the interconnections, that the pipelines be transnational ones that bring European countries together in a powerful way, via the potential exchange of energy."

From a business perspective, he said, market dynamics should be re introduced into the energy system. "The energy system has been deterred and dragged down by lots of subsidies and regulations that absolutely destroyed competitiveness in the system," he observed, "and with that, destroyed competitiveness beyond the energy industry – it also dragged down competitiveness in Europe as a whole. We can see that when we do comparisons with the US and Asia, Europe is not currently a very competitive place, so we will have to introduce competitiveness into the system."

There was no point in continuing a subsidy system, he contended, because it would never be efficient.

Europe, he continued, currently had about EUR 50 billion in subsidies into mature renewable forms. "You should rather invest in research in development. For a comparison, the largest research institutions in Europe have a budget of EUR 2 billion; we currently put EUR 50 billion into subsidies, so think what can be done with that kind of money by taking it out of subsidies, to move the energy system forward."

Reinstalling the competitiveness of the Emissions Trading System was also crucial, he said.

"It should reflect the damage that fuels do to the environment – the more damage they do, the higher the allocated payments should be. The system's currently not working."

By reinstalling competitiveness in these two areas, he contended there would be a fair and level playing field. "Then, I would have no doubt that we'd have a very competitive fuel – natural gas – for a very long time in the European system," concluded OMV's Ulrich Streibl.

naturalgaseurope.com

Tags: SOUTH, STREAM, AUSTRIA, OMV, GAS

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