Brazil and the Dominican Republic have inked a biofuel cooperation agreement aimed at alleviating poverty and creating economic opportunity. The agreement initially focuses on the production of biodiesel in the Dominican Republic.
EU eases OPEC's fears of biofuels at 4th EU-OPEC Energy Dialogue
The 4th ministerial-level meeting of the energy dialogue between the European Union (EU) and the Organization of the Petroleum Exporting Countries (OPEC) was held in Vienna today. Ahead of the meeting the EU tried to ease fears by the OPEC on the rise of alternative energy sources in Europe. The EU-OPEC Energy dialogue, established in 2004, focused on OPEC's work on carbon-dioxide capture and storage, energy policy but also on the impact of financial markets on oil prices as well as improving market transparency and predictability. Biofuels remained a key point of debate.
German Economics Minister Michael Glos, serving as president of the EU Energy Council at the high-level meeting, said before the summit that burning of fossil fuels must be restricted for climate reasons. However, he reassured OPEC biofuels would be "introduced as a supplement" to fossil fuels. "We do not want to restrict OPEC," he told journalists at the outset of the meeting.
Earlier this year, the European Commission set out its strategy to turn the EU into a low carbon economy. It contains the ambitious target to source 20% of its overall energy mix from renewable energy by 2020. The European Council later translated this in an agreement amongst EU member states to set a 10% minimum target on the use of biofuels in transport by 2020 (earlier post).
OPEC warned earlier that in case of a long-term boom in biofuels it could cut down on investment in oil production, and that in turn a fuel shortage could be the result if biofuels ran into supply problems. The announcement was immediately countered by the chief of the International Energy Agency, who stressed that oil is in no way threatened by biofuels (earlier post).
EU experts reiterated ahead of the meeting that even if biofuels were increasingly used in Europe in the next years, the demand for oil would remain stable. Around 40 per cent of the EU's oil imports come from OPEC countries, and this share will only grow.
Crude oil prices have been hovering below the 70-dollar barrier for a while. Analysts believe that if this barrier is breached prices can climb a lot higher, into the mid-80s range. Glos warned that current prices were "the upper level of what will be tolerable for consumer countries," adding the OPEC had a shared interest in avoiding a global economic slowdown.
El-Bardri indicated earlier this week that OPEC was not considering raising its output at the moment. One reason is that increased input would go into stockpiles, as there is not enough refining capacity, OPEC argued:
energy :: sustainability :: climate change :: ethanol :: biodiesel :: biofuels :: petroleum :: OPEC :: EU ::
Among the participants in the meeting were EU Energy Commissioner Andris Piebalgs, Mohamed bin Dhaen AL Hamli, President of the OPEC conference, Abdalla Selem El-Badri, OPEC Secretary General and Michael Glos, German Minister of Economics.
The EU and OPEC representatives welcomed the progress that had been made since the third meeting of the energy dialogue in Brussels, Belgium, on 7 June 2006. This included: a roundtable on carbon dioxide capture and storage (CCS), held in Riyadh, Saudi Arabia, in September 2006; a workshop on the impact of financial markets on oil price and volatility, held in Vienna in December 2006; a roundtable on energy policies, held in Brussels last month; the launch of a joint study on refining; and other meetings and discussions. The representatives expressed their appreciation for the constructive exchanges of views in all these activities.
The first session of today’s meeting featured presentations by the EU on its recently adopted energy policy and by OPEC on oil market developments and prospects.
The EU presented the energy policy and action plan adopted in March 2007 by the European Council, focusing on sustainability, security of supply and competitiveness. This policy aims to enhance cooperation with key energy producers, transiting countries and major consumers, and calls for further development of bilateral and multilateral energy negotiations and agreements on energy. In addition, climate change is a key driver of the intimately combined EU energy and environment policy. And finally, energy technology becomes increasingly instrumental in improving efficiency and renewable energy sources for addressing climate change, by promoting clean fossil fuel and carbon capture and storage (CCS) technologies. With regard to oil market situation, the EU expressed its concern about expected seasonal increase in demand coupled with possible supply disruptions over the next few months which could lead to tightening in the oil market.
OPEC reiterated in its presentation that the present oil market remains well supplied, with commercial crude oil stocks above five-year average and an increasing level of upstream spare capacity. However, in addition to geopolitical constraints, tightness in the refining sector, which has been recognised as a matter for concern since the second EU-OPEC meeting in December 2005, continues to increase volatility and exert pressure on crude and product prices, in particular, on gasoline prices. OPEC reaffirmed its longstanding commitment to ensuring sound supply fundamentals at all times, and to offering an adequate level of spare capacity, for the benefit of the world at large.
Both sides emphasized the importance of continuously monitoring oil market developments and taking appropriate actions if necessary.
Participants expressed once again their mutual interest in stable, transparent and predictable oil markets, with reasonable prices that are consistent with the need for healthy world economic growth and steady revenue streams for producing countries, and that are conducive to the expansion of capacity to meet rising oil demand. They recognised the importance of secure future demand for crude and products in spurring timely investment both upstream and downstream, thus contributing to greater security of supply.
The two parties believed that the world is becoming increasingly interdependent, with a complex energy system that is steadily developing into a more global and interconnected one, through physical infrastructures and markets. Dialogue, partnerships and transparency were, therefore, considered essential in addressing the world’s energy needs, in a predictable, stable and harmonious manner.
In this connection, they reaffirmed their recognition of the reciprocal nature of energy security, with security of supply and security of demand being two faces of the same coin. It was, furthermore, emphasised that every effort should be made to minimise uncertainties along the supply chain, in order to reduce investment risks and support long-term market stability.
In noting that oil will remain the world’s leading energy source for the foreseeable future, the meeting agreed that, in the long run, on the basis of present information, there are enough conventional and non-conventional oil resources globally to meet the expected significant growth in demand. At the same time, however, both parties welcomed the growing diversity in the energy mix, including renewables. With regard to biofuels specifically, their sustainability was discussed, especially the many potential impacts of their large-scale trade and use for energy purposes. The EU highlighted the scope to tackle such problems through an appropriate policy framework.
The meeting also addressed the current shortages in skilled labour, equipment and services, both upstream and downstream, and rapidly rising costs, which the industry is currently facing, as well as the issue of human resources. A shortage of skilled labour for drilling, engineering, procurement, construction and other services and a downturn in the number of students in energy fields were seen as hampering the industry’s orderly expansion, and thus constituting a serious reason for concern. The meeting, therefore, decided to address this issue in the energy dialogue. It also reiterated the importance of energy technology and its decision to set-up a task force for examining the establishment of an EU-OPEC energy technology centre.
The two parties noted the big contribution that the EU-OPEC energy dialogue could make to broader-based challenges facing mankind, notably environmental harmony, sustainable development and the eradication of poverty. They agreed that cleaner fossil fuel technologies should be promoted, to help foster economic growth and social progress, while contributing to the protection of the environment. They stressed, in particular, the need for the further development and deployment of CCS technology, since this would have a key role in reducing net emissions of greenhouse gases. Both sides recognised once again the essential nature of the Millennium Development Goals and the fact that access by the poor to modern energy services facilitated the achievement of these goals.
Accordingly, they agreed upon the following specific joint actions:
More information:
EU-OPEC Joint Statement: Further significant developments in the EU-OPEC Energy Dialogue - June 21, 2007.
EUX.TV: EU to ease OPEC fears of alternative fuels - June 21, 2007.
Petroleumworld: OPEC might not increase production in coming months: Badri - June 21, 2007.
EurActiv dossier: Geopolitics of EU energy supply - updated June 19, 2007.
German Economics Minister Michael Glos, serving as president of the EU Energy Council at the high-level meeting, said before the summit that burning of fossil fuels must be restricted for climate reasons. However, he reassured OPEC biofuels would be "introduced as a supplement" to fossil fuels. "We do not want to restrict OPEC," he told journalists at the outset of the meeting.
Earlier this year, the European Commission set out its strategy to turn the EU into a low carbon economy. It contains the ambitious target to source 20% of its overall energy mix from renewable energy by 2020. The European Council later translated this in an agreement amongst EU member states to set a 10% minimum target on the use of biofuels in transport by 2020 (earlier post).
OPEC warned earlier that in case of a long-term boom in biofuels it could cut down on investment in oil production, and that in turn a fuel shortage could be the result if biofuels ran into supply problems. The announcement was immediately countered by the chief of the International Energy Agency, who stressed that oil is in no way threatened by biofuels (earlier post).
EU experts reiterated ahead of the meeting that even if biofuels were increasingly used in Europe in the next years, the demand for oil would remain stable. Around 40 per cent of the EU's oil imports come from OPEC countries, and this share will only grow.
Crude oil prices have been hovering below the 70-dollar barrier for a while. Analysts believe that if this barrier is breached prices can climb a lot higher, into the mid-80s range. Glos warned that current prices were "the upper level of what will be tolerable for consumer countries," adding the OPEC had a shared interest in avoiding a global economic slowdown.
El-Bardri indicated earlier this week that OPEC was not considering raising its output at the moment. One reason is that increased input would go into stockpiles, as there is not enough refining capacity, OPEC argued:
energy :: sustainability :: climate change :: ethanol :: biodiesel :: biofuels :: petroleum :: OPEC :: EU ::Among the participants in the meeting were EU Energy Commissioner Andris Piebalgs, Mohamed bin Dhaen AL Hamli, President of the OPEC conference, Abdalla Selem El-Badri, OPEC Secretary General and Michael Glos, German Minister of Economics.
The EU and OPEC representatives welcomed the progress that had been made since the third meeting of the energy dialogue in Brussels, Belgium, on 7 June 2006. This included: a roundtable on carbon dioxide capture and storage (CCS), held in Riyadh, Saudi Arabia, in September 2006; a workshop on the impact of financial markets on oil price and volatility, held in Vienna in December 2006; a roundtable on energy policies, held in Brussels last month; the launch of a joint study on refining; and other meetings and discussions. The representatives expressed their appreciation for the constructive exchanges of views in all these activities.
The first session of today’s meeting featured presentations by the EU on its recently adopted energy policy and by OPEC on oil market developments and prospects.
The EU presented the energy policy and action plan adopted in March 2007 by the European Council, focusing on sustainability, security of supply and competitiveness. This policy aims to enhance cooperation with key energy producers, transiting countries and major consumers, and calls for further development of bilateral and multilateral energy negotiations and agreements on energy. In addition, climate change is a key driver of the intimately combined EU energy and environment policy. And finally, energy technology becomes increasingly instrumental in improving efficiency and renewable energy sources for addressing climate change, by promoting clean fossil fuel and carbon capture and storage (CCS) technologies. With regard to oil market situation, the EU expressed its concern about expected seasonal increase in demand coupled with possible supply disruptions over the next few months which could lead to tightening in the oil market.
OPEC reiterated in its presentation that the present oil market remains well supplied, with commercial crude oil stocks above five-year average and an increasing level of upstream spare capacity. However, in addition to geopolitical constraints, tightness in the refining sector, which has been recognised as a matter for concern since the second EU-OPEC meeting in December 2005, continues to increase volatility and exert pressure on crude and product prices, in particular, on gasoline prices. OPEC reaffirmed its longstanding commitment to ensuring sound supply fundamentals at all times, and to offering an adequate level of spare capacity, for the benefit of the world at large.
Both sides emphasized the importance of continuously monitoring oil market developments and taking appropriate actions if necessary.
Participants expressed once again their mutual interest in stable, transparent and predictable oil markets, with reasonable prices that are consistent with the need for healthy world economic growth and steady revenue streams for producing countries, and that are conducive to the expansion of capacity to meet rising oil demand. They recognised the importance of secure future demand for crude and products in spurring timely investment both upstream and downstream, thus contributing to greater security of supply.
The two parties believed that the world is becoming increasingly interdependent, with a complex energy system that is steadily developing into a more global and interconnected one, through physical infrastructures and markets. Dialogue, partnerships and transparency were, therefore, considered essential in addressing the world’s energy needs, in a predictable, stable and harmonious manner.
In this connection, they reaffirmed their recognition of the reciprocal nature of energy security, with security of supply and security of demand being two faces of the same coin. It was, furthermore, emphasised that every effort should be made to minimise uncertainties along the supply chain, in order to reduce investment risks and support long-term market stability.
In noting that oil will remain the world’s leading energy source for the foreseeable future, the meeting agreed that, in the long run, on the basis of present information, there are enough conventional and non-conventional oil resources globally to meet the expected significant growth in demand. At the same time, however, both parties welcomed the growing diversity in the energy mix, including renewables. With regard to biofuels specifically, their sustainability was discussed, especially the many potential impacts of their large-scale trade and use for energy purposes. The EU highlighted the scope to tackle such problems through an appropriate policy framework.
The meeting also addressed the current shortages in skilled labour, equipment and services, both upstream and downstream, and rapidly rising costs, which the industry is currently facing, as well as the issue of human resources. A shortage of skilled labour for drilling, engineering, procurement, construction and other services and a downturn in the number of students in energy fields were seen as hampering the industry’s orderly expansion, and thus constituting a serious reason for concern. The meeting, therefore, decided to address this issue in the energy dialogue. It also reiterated the importance of energy technology and its decision to set-up a task force for examining the establishment of an EU-OPEC energy technology centre.
The two parties noted the big contribution that the EU-OPEC energy dialogue could make to broader-based challenges facing mankind, notably environmental harmony, sustainable development and the eradication of poverty. They agreed that cleaner fossil fuel technologies should be promoted, to help foster economic growth and social progress, while contributing to the protection of the environment. They stressed, in particular, the need for the further development and deployment of CCS technology, since this would have a key role in reducing net emissions of greenhouse gases. Both sides recognised once again the essential nature of the Millennium Development Goals and the fact that access by the poor to modern energy services facilitated the achievement of these goals.
Accordingly, they agreed upon the following specific joint actions:
- A workshop on the oil refining sector, including the implications of biofuels, to take place in Brussels end 2007 or early 2008.
- A study on the impact of financial markets on the oil price and volatility, with the terms of reference to be developed jointly in the coming months.
- An enhanced discussion on CCS cooperation, leading up to a roundtable in the first quarter of 2008.
- The development by the task force of the concept and operations of an EU-OPEC Energy Technology Centre, including the cooperative framework on education and training in the energy sector, with a report to be presented to the next annual meeting of the EU-OPEC Energy Dialogue.
More information:
EU-OPEC Joint Statement: Further significant developments in the EU-OPEC Energy Dialogue - June 21, 2007.
EUX.TV: EU to ease OPEC fears of alternative fuels - June 21, 2007.
Petroleumworld: OPEC might not increase production in coming months: Badri - June 21, 2007.
EurActiv dossier: Geopolitics of EU energy supply - updated June 19, 2007.
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