The EastMed project and the dilemmas of energy strategy

The unprecedented energy crisis unfolding in Europe is the result of the European Union’s stubborn and one-sided preoccupation with the Green Deal (which is important in itself). The bloc has, at the same time, shown blatant disregard for two equally important aspects of sustainable energy, namely: a) energy security – i.e. an adequate supply of natural gas for its member states ; and b) the fight against energy poverty which, even before the crisis, affected 54 million European citizens.

The crisis caught Europe completely off guard. It has cost European households and businesses around €1 trillion, a huge amount of European wealth that goes into the pockets of natural gas producing countries and companies. In addition, this has a knock-on effect on electricity prices. This is approximately the sum spent by all national recovery and resilience funds, as well as other support mechanisms.

Meanwhile, the crisis has opened the door for nuclear power and natural gas to be included in the EU’s ‘sustainable financial taxonomy’, a set of rules that limits what activities qualify as environmentally friendly investments. of the climate. These were excluded before the crisis broke.

The inability to deal with the crisis is compounded by the inability of the European Council and EU energy ministers to find a common line on the issue. They continue to ignore a proposal submitted in 2014 by Greece, which was then head of the EU presidency, for the creation of a European mechanism to hedge against sharp fluctuations in gas prices across the bloc. within the framework of community solidarity.

At the same time, the main suppliers to the EU (Russia, Norway, the United States and Qatar) continue to increase their share and revenues from energy-hungry and import-dependent Europe. The continuous under-investment of Western companies (ExxonMobil, Total, BP, etc.) in oil and gas creates the conditions for new crises by 2050, during which natural gas will be used as a transition fuel. At the same time, the increase in revenues and the geopolitical influence of state oil companies (Aramco, Gazprom, China Petroleum, etc.) will naturally impact the geostrategic balance.

The crisis has highlighted Europe’s energy security as a major growth priority, as well as the necessary measures against energy poverty. Finding new sources of supply and new supply routes for natural gas has become a fundamental pillar of strategic autonomy. The natural gas deficit in 2021 in the EU, which generated the energy crisis, amounted to 40 billion cubic meters (bcm), according to the International Energy Agency (IEA). This highlights the need to build the EastMed gas pipeline for Europe (and Greece).

A fully operational EastMed could provide the EU with 20 bcm/year – or 50% of the EU’s deficit in 2021 – and help bring down exorbitant gas prices from $25/MMBtu to $5/MMBtu, which is the rate for industries in countries like Israel and Egypt.

The US State Department’s non-paper by which Washington distanced itself from the construction of EastMed (much to the satisfaction of Turkish President Recep Tayyip Erdogan, who saw a chance to revive discussions on a pipeline that would cross the Turkey, a prospect that has been avoided so far) and the numb reaction of the governments that supported the project compel a sensible debate around the emerging aspects of Greece’s national energy strategy. Also, they call for answers to a number of legitimate questions:

1. Why was the State Department non-paper released in 2022, the year the EastMed study is expected to be completed? What is the link between the Eastern Mediterranean Security and Energy Partnership Act (East Med Act) and the 3+1 cooperation program (Greece-Cyprus-Israel + USA)?

2. Has there been previous cooperation with Allied governments and partners of Greece, Cyprus and Israel supporting the project? If so, why was there no public reaction?

3. Can the United States express the reasoning behind its opposition to both the NordStream 2 gas pipeline – because it increases the dependence of Germany and the rest of Europe on Russia – and EastMed, which is the only new gas pipeline that could reduce dependence on Russia while supplying Europe from a new source and via a new route?

4. What is the reason for the publication of a non-paper when the United States did not ask to fund the project, which is funded by the EU and the joint venture between the Greek utility DEPA and Italian Edison?

5. Is there a single feasibility study that calls into question the viability of the project? Has such a study surfaced? The answer is no. In fact, at the last Economist conference in July 2021, the company behind the project presented a study which showed that the project would be financially viable and directly competitive with all LNG options.

6. Why is EastMed compared to the prospect of regional electricity interconnectors, such as the EuroAsia interconnector, when Greece had actually planned both projects since 2013 and identified them as Projects of Common Interest (PIC ) – i.e. key infrastructure projects aimed at completing the European internal energy market?

Since 2014, Greece ranks sixth in the world for the production of green electricity per capita via photovoltaic units and sixth in Europe for the production of electricity by wind energy. Like its European peers, Greece is engaged in an ambitious program of green energy transition. However, the big question remains: how to move forward in the green transition in the absence of a regular supply of cheap natural gas in the years to come? And we still have to answer the question of what are Greece’s energy options today to exploit the undeniably rich resources to the south of the island of Crete.

Greece pays 6 billion euros a year to import hydrocarbon products, and this is expected to rise to 10 billion in the coming years. This raises key questions around its national strategy at a time when countries like Norway, the UK, Denmark and others say they will exploit the sum of their hydrocarbon resources.

Professor Yannis Maniatis is a former Minister of Environment, Energy and Climate Change.

Previous Validea Kenneth Fisher Strategy Daily Upgrade Report - 01/22/2022