The pressing nature of the issues currently faced by the North Sea market requires industry to communicate its needs to EU policy-makers when setting the energy policy agenda. The extent to which the offshore industry can succeed in doing so will be key to ensure its future sustainability.
The European Commission’s push toward the creation of a European Energy Union, aiming to make energy in Europe more secure, affordable and sustainable, stepped up a gear last month with the release of the ‘Summer Package’ of reforms to existing energy policy initiatives.
This latest set of reforms is yet another indication that energy policy-making is increasingly considered as a European policy to be tackled with a coordinated and centralized approach in the EU institutions.
Despite plenty of discussion about the UK’s relationship with the European Union since May’s election, the EU’s latest plans for the future of energy mix in Europe have failed to raise attention outside of Brussels.
With challenging and unstable market conditions for the oil and gas industry, particularly in the North Sea, and its long-term sustainability in question, the EU’s Energy Union plans will directly impact upon the industry’s future and the surrounding economy.
So what role could the North Sea play in the European Energy Union?
The Commission could choose to support the market and improve business conditions to the extent that they could reverse the discouraging trends that the North Sea is currently experiencing.
The policy measures could tackle barriers to investment, as well as facilitate exploration and production activities of untapped European oil and gas resources.
With the upcoming review of the Renewable Energy Directive next year, much of the EU’s focus for the Energy Union will be on new renewable energy production and consumption targets – goals to achieve Europe’s ambitious climate change policy.
The current target for 2020 requires the EU to fulfill at least 20% of its total energy needs with renewables and this is expected to increase to 30% for 2030.
Considering the EU’s recently adopted 40% target for the reduction of greenhouse gas emissions by 2040, the odds seem stacked against the offshore industry in the North Sea and the commodities upon which it is based.
Another key focus of the Energy Union strategy, however, is the promotion of the security of European energy supply.
The outbreak of the ongoing crisis in Ukraine and fraying relations with Russia has provoked some soul-searching in the corridors of the European Commission to find the best solution for the EU’s import dependency on Russia.
The challenge for Brussels is to strike the fine balance between the lack of reliability provided by the increasing renewable energy production in order to reach targets and securing the energy supply in Europe without a dependence on imports.
Increasing indigenous energy production from all available energy resources is an Energy Union measure that is gaining political momentum in policy discussions.
In order to do so, the harnessing of the North Sea’s resources should be a central component of the Energy Union strategy. With the collapse of oil prices over the past year and the long-term decline in North Sea oil production, however, the ability of the offshore oil and gas industry’s ability to contribute to the strategy in an sustainably profitable way is in jeopardy.
The EU envisages that 55 percent of energy consumption will be produced by oil and gas in 2030. Without the continued role of North Sea oil and gas in the European energy mix, the EU’s plans for an Energy Union would be inconceivable.
It is the decision of the North Sea industries to decide to engage with EU policy-makers to ensure that the realities of the market can be addressed for the Energy Union strategy to be fulfilled.
What is certain is that the impact of the decisions taken in Brussels for the Energy Union makes the 500-mile distance between Aberdeen and Brussels appear to be much closer than a map makes it appear.
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