Mr. Chairman,
Ladies and Gentlemen,
I have been involved in your work, in the work of the Gas Centre since I joined
the UN two years ago, but it is for the first time that I have the pleasure to welcome you
to the High-level meeting.
As it is the sixth such meeting, we can say that this is our tradition now and I think
it is a good tradition, certainly worth continuing. Let me begin by expressing my
appreciation to Mr. Rutternsdorfer and all colleagues at OMV for hosting this event and
for their hospitality of which last night event was an outstanding proof.
Coming to a meeting like this one reminds me that throughout economic history energy
has always been the main ingredient of growth. That is why when debating gas issues and
problems one has the sense of continuity, but at the same time, a strong sense of change.
In our so deeply diversified Europe, with only few countries with economies in
transition for whom this decade will be the one of the completion of transition and with a
vast majority of them facing the whole challenge of painful reforms, in this Europe of
sharp disparities there is, no doubt, a huge potential for change. This is also true for
energy balances, for energy markets and policies. And, as gas is increasingly becoming the
fuel of choice, it is also true for gas industry.
What certainly matters is that all these changes do not and will not happen by
themselves. They are man-made, done by private sector, accompanied by government policies
that remove barriers and provide long term incentives. In gas in particular it is
governments, gas companies and international networks and organizations who define and
chart this path of change and progress together. That is why the Gas Centre is so
important, and that is why this meeting matters so much.
In most countries with economies in transition, the change means conversion to gas
because in those countries efficiency, cost and environmental impact are essential for
successful transition to market system and for accession to the EU. But we know that the
level of gas penetration widely varies through our entire region. When we talk about gas
in the context of energy supply security and the role of natural gas in the energy mix, we
talk about the whole of our continent, where the demand for natural gas is rising,
stimulated by economic and environmental factors, where governments are opening up and
liberalising natural gas markets and where import dependency of many countries is rising
and will continue to rise in the future. These trends contribute to uncertainty and
apprehension, most notably regarding security of gas supplies. These concerns are
certainly most acute in Central and Eastern Europe where massive restructuring and deep
institutional, but also social changes take place. In any case, however, even if anxieties
are highest in Central and Eastern Europe, they are also present in Western Europe.
Import dependence is increasing, the full implications of market liberalization are
difficult to predict, the cost of developing incremental sources of supplies is rising,
transportation distances to move gas from new reserves to markets are increasing, and
transit rights continue to be of concern in some regions. That does not imply that concern
over security of supply is very acute at this particular point of time. Gas supplies are
flowing normally. Nevertheless, the situation, while not alarming, does call for continued
vigilance by both industry and governments. In fact, the underlying long-run fundamentals
of energy markets have not changed markedly from those prevailing in the1970s and early
1980s when energy supply and demand were tightly balanced and energy markets rocked by two
sharp oil price rises. So, governments can never feel secure about energy security and
security of gas supply will remain for years very high on policy agenda. Therefore, it is
important to consider ways to strengthen the security of supply of natural gas. No doubt,
this concern lies behind the European Commission’s Green Paper on security of energy
supply.
The second topic, which we will address this afternoon, is the role of natural gas in
the energy mix. Much has changed in this regard. Today, gas is used in a variety of
sectors and applications, and it is experiencing significant growth especially as a fuel
for electricity generation. It is flexible to use, environmentally friendly compared to
other fossil fuels, relatively abundant, with supplies perceived to be relatively secure
and reliable. Hence, natural gas could in time increase its share of the energy market by
displacing what is not sustainable. Of course, we should not take it for granted. We must
ask questions. We must ask whether this trend is desirable. What is the optimal share of
natural in the energy mix? Responses would certainly vary across our region.
From the perspective of a gas company it can look simple and clear, more gas sales are
normally preferable to less. But, from a public policy perspective, the answer is far less
clear. A well-balanced and diversified fuel mix is the safest way for countries to ensure
energy peace of mind. Special challenge is found by those countries with economies in
transition that are in the process of accession to the European Union. For them, increased
reliance on gas is a key component of their efforts to improve compliance with EU
environmental regulations. This has impact on price level. For natural gas exporting
countries, there is an additional dimension that needs to be considered. Gas consumed
domestically is the one that is not available for the export market. Hence, there is an
opportunity cost issue. We will be discussing these dilemmas this afternoon.
I think it is good to note – with all those many challenges facing the natural gas
industry in Europe in the coming years – that every challenge has its opportunities.
Well managed, innovative companies will make it, will continue to grow and prosper in a
dynamic and growth oriented market environment.
And it is always good to talk and listen to others. Over the past six years, the UNECE,
through its Gas Centre and the Working Party on Gas, has offered a pan-European forum to
gas companies and governments of the ECE region where different interests, and sometimes
conflicting interests, could meet and develop common understanding. We hope to be able to
offer this neutral platform for years to come.
I believe that as long as meetings like this one take place, there is partnership and
cooperation. We need it in Europe, where so much remains to be done. I hope this will be
the spirit of our debate today.
In closing, I would like to express my thanks and appreciation to all of you that are
supporting, and contributing financially, to the work of the UNECE Gas Centre.
Thank you for your kind attention.