The EU talks as Russia flexes energy muscles

Published on Saturday 21 October 2006 00:34

AS EUROPEAN Union leaders yesterday met to discuss the need to wean their economies off oil and gas imported from potentially unstable states such as Russia, the Kremlin delivered a blunt reminder: you need us more than we need you.

Russia's president, Vladimir Putin, and the heads of the 25 EU states were last night meeting over dinner at a summit in Finland, where European leaders were hoping to win new assurances from Moscow. Yet even before the dinner began, Vladimir Chizhov, Russia's ambassador to the EU, coldly warned: "Dependence on Russian energy supplies is an objective fact."

And while Russia was the focus of European concerns over energy yesterday, there are wider fears over other major energy suppliers, especially in the Middle East. EU nations import more than half of their energy needs - a rising trend. They bought in 56 per cent of total energy consumption last year, up from 54 per cent in 2004 and 44 per cent in 1995.

On current trends, 70 per cent of the EU's energy supplies will be imported by 2030. With North Sea supplies of natural gas dwindling, Britain might be forced to import 90 per cent of its needs by 2020 - from some of the most unstable and unpredictable countries.

"The problem is, we will get more and more dependent on imported fossil fuels from politically unstable regions," said Anders Fogh Rasmussen, the Danish prime minister. The answer, EU leaders agree, is to use less energy and to get more from non-imported sources: renewables such as wind and solar power, and nuclear plants.

As EU leaders assembled for the summit in Lahti, Finland, Tony Blair yesterday gave his support for a European Commission plan to cut Europe's energy use by 20 per cent by 2020.

"We have a window of only ten to 15 years to take the steps we need to avoid catastrophic tipping points," the Prime Minister said in letter to fellow leaders. "These would have serious consequences for our economic growth, the safety of our people and the supply of resources, most notably energy."

Europe gets more than a quarter of all its oil and gas from Russia, which has some of the largest energy reserves in the world. But European politicians and executives are increasingly worried that Russia cannot be relied upon to respect either foreign investments in its energy sector, or agreements to supply other nations.

Earlier this year, Russia stopped all gas supplies to Ukrraine as part of a political power-struggle. More than 80 per cent of Russia's gas supplies to Europe flow through Ukrainian pipelines and the move triggered shortages and price hikes across western Europe.

Russia's actions at home are also causing concern. Shell is spending more than $12 billion (6.4 billion) constructing a pipeline from Siberia to Sakhalin, a small Pacific island off the east coast of Russia, and then onto Japan and China.

But Russia is threatening to revoke its permission for the project, part of what the oil industry fears is a wider attempt to exert political control over the energy sector; Shell is now in negotiations to give a stake in the pipeline to Gazprom, the Russian state energy company.

Earlier this week, Mr Chizhov further unnerved international investors by predicting that Russia will not allow any more joint agreements with international energy companies to exploit Russian reserves.

Russia has signed an international treaty guaranteeing that energy contracts and investments are respected. But European leaders do not believe that treaty is being honoured.

"Russia has signed up, but we need to see that put into effect," said Mr Blair's spokesman.

Mr Chizhov flatly rejected Downing Street's version of events. "I cannot accept that," he said. "I don't know of any single international obligation which my country has not honoured."

Concerns about Russia's democratic credentials are growing, with diplomats concerned about recent developments, including the murder of Anna Politkovskaya, a campaigning journalist, and Moscow's increasingly heavy-handed attempts to intervene in Georgia's politics.

EU countries including Sweden were keen to raise such human rights with Mr Putin, but it was clear last night that Europe would not let such issues stand in the way of the need for secure and reliable access to Russian energy.

Resources

• The world's crude oil reserves are estimated at between 2,050 and 2,390 gigabarrels or 380km of oil. (A gigabarrel is one billion barrels.)

• 70%: The highest estimate for the proportion of world supplies that we have consumed. 45 per cent is the lowest.

• 200 gigabarrels (200 billion barrels, or 31 km) of oil were consumed on the planet between 1859 and 1968.

• 258 bn: The estimated number of barrels of oil supplied by Saudi Arabia, which has the largest reserves in the world. In the 1970s the number was 170 billion.

• Russia is estimated to have between 60 and 72.4 billion barrels, while Kazakhstan could have 39.6 billion barrels.

• 4 bn: The number of barrels of recoverable reserves held by the North Sea - this could rise with technological improvements.

• The UK became a net importer of gas last year, and gets most imported gas from Norway via the Langeled pipeline.

• 28 million: The number of barrels of oil produced by OPEC countries, including Saudi Arabia, each day. Other OPEC countries and their estimated oil reserves in billions of barrels include Iran, 93, Iraq, 100, The United Arab Emirates,92 and Kuwait,92.

• Six oil "supermajors" dominate the world market, of which Exxon Mobil Corporation based in Dallas, Texas is the largest.

Consumption

• The UK consumes around 1.7 million barrels of oil per day.

• In 1970, ten per cent of homes were centrally heated by gas and nine per cent by solid fuel. By 2000, 71 per cent used gas to fuel central heating while just three per cent used solid fuel. According to the Department for Trade and Industry (DTI), in 1970 less than one third of homes in the UK had central heating, but 30 years later 89 per cent did.

• China - the world's fastest growing economy - is expected to be responsible for nearly 15 per cent of world energy consumption by 2025.

• Cars in the United States alone account for a tenth of world petroleum consumption. As the popularity of large SUV-style vehicles rises, fuel efficiency rates are falling.

• In 2003, the biologist Jeffrey Dukes calculated the fossil fuels we burn in one year were made from organic matter "containing 4410 to the 18 grams of carbon, which is more than 400 times the net primary productivity of the planet's current biota". This means each year we use 400 years' worth of carbon plants and animals.

• According to the DTI, domestic consumers in Scotland used 30,299 gigawatts/hour of electricity in 2004.

• The growth in worldwide air travel is also increasing demands for oil. In 2005, the 80 per cent of British airlines registered with the British Air Transport Association used 11 billion litres of fuel, up 3.5 per cent on the previous year.

• The DTI estimates the amount of oil it takes to generate 1 million in economic output fell from 279.4 tonnes in 1994 to 234.7 tonnes in 2004.

• The majority of energy used in British homes (58 per cent) is for heating. Between 1970 and 2000, consumption of energy for lighting and appliances rose by 157 per cent.

Politics

• Saudi Arabia is the world's No 1 oil producer. But there are no elections in the country and freedom of speech is extremely limited. Fifteen of the 19 hijackers on 11 September were Saudis and so is Osama bin Laden. Intelligence agencies in the west suspect rich Saudis of giving covert financial support to extremist groups.

Western states support the ruling royal family and supply the regime with military equipment.

• Massive natural gas reserves in Turkmenistan have allowed one of the world's harshest - and strangest - dictators to remain in power in the central Asian republic.

Saparmurat Niyazov is officially "Turkmenbashi," the Father of the Turkmen. There are no elections and dissent is ruthlessly supressed. But energy reserves mean he can provide people with free gas and electricity, and he has amassed a personal fortune worth $3 billion.

• With 35.9 billion barrels of oil beneath its Delta region, Nigeria has the 10th biggest reserves in the world. But it remains impoverished and indebted, with per capita income of $1,400. Oil has attracted international investors and corruption. The World Bank estimates more than $300 billion of oil wealth has been stolen from the Nigerian people in the last 40 years.

• The Centre for Public Integrity, a Washington thinktank, estimates that the oil industry has spent $420 million over the past six years on US politicians, political parties and lobbyists.

• According to the UK Offshore Operators Association, there are 365,000, jobs in the UK sustained by the offshore oil and gas industry.

• The 19.2-million acre Arctic National Wildlife Refuge in Alaska supports 45 species of land and marine mammals, ranging from the pygmy shrew to the bowhead whale. It also has between 5.9 billion and 13.2 billion barrels of recoverable oil and 39 trillion to 83 trillion cubic feet of natural gas. The Bush Administration wants to allow drilling to recover it .

• China has repeatedly blocked moves for the United Nations to intervene in the humanitarian crisis in Darfur in western Sudan, where government-backed militias are accused of genocide. China has struck an agreement with the same Sudanese government to buy Sudanese oil.

• On 1 January this year, Gordon Brown doubled to 20 per cent the tax levied on North Sea oil operators. Total tax revenues from the North Sea last year exceeded 7 billion.