Samuele Furfari: “If Russia cuts the gas tap, it can forget its dream of selling gas to China one day”

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Credit: Egmont Institute

Photo: Egmont Institute

The EU has made remarkable progress in improving its security of supply over the last decade and should not worry that Russia will cut off its gas supplies, says Professor Samuele Furfari in an interview with Energy Post Brussels Correspondent Hughes Belin. A long-time senior advisor at the European Commission, Professor Furfari, author of a brandnew provocative book in French – “Vive les énergies fossiles!” – says the world has entered a new energy paradigm as a result of an abundance of energy. He is convinced that Russia will not turn off the gas tap if only because it wants to be seen as reliable potential supplier to China. Ukraine, he says, can solve its energy problem by banning corruption in the energy sector and improving its deplorably poor energy efficiency.

Samuele Furfari is a well-known, flamboyant and highly respected figure in Brussels energy circles. As a longtime advisor to the Director-General for Energy at the European Commission – in addition to his work as professor in energy geopolitics at the Free University of Brussels – he is often reluctant to voice his opinions in public. But he has just had a new book out in France which minces no words. It is called “Vive les énergies fossiles!” – Hurray for fossil fuels – a title which is bound to make him some enemies among renewable energy enthusiasts.

But according to Furfari, the EU was built on the promise of “abudant and cheap energy” and renewables cannot deliver this at this stage. Fortunately, from his point of view, the world has never had such an abundance of fossil fuels as it has today – and this abundance has never been more widely distributed. The shale gas revolution, he says, is just beginning. This has huge implications not only for renewable energy, but also for the EU’s security of supply, which has improved drastically, and for Russia’s position in the world energy market, which is much more vulnerable than most people realise.

Energy Post’s Brussels correspondent Hughes Belin (colleague of our other Brussels correspondent, Sonja van Renssen) had a wide-ranging and fascinating in-depth interview with Professor Furfari.

Q: The issue of energy security is not new to the EU: already in 2000, the European Commission issued a green paper on the matter. What has been done since then?

A: The issue of security of energy supply goes back to the prehistory of the EU! It is an issue EU leaders have always had in the back of their mind and will always have, because we are poor in energy resources. Improving our security of supply doesn’t mean we have to become energetically independent, but to manage well our dependency. And there, the EU has developed a three-fold strategy: 1. Diversify our energy resources (including renewables, efficiency and nuclear) 2. Diversify our suppliers and 3. Diversify our supply routes from a single supplier.

Q: Have we followed this strategy so far?

A: All in all, the whole strategy has been implemented efficiently. On the first point, the EU acknowledges that it should not use a single type of energy: Poland does coal, Spain does solar, France does nuclear, Sweden does biomass, Finland does peat, Germany does gas, etc. This diversity at the level of the EU leads to a well-diversified energy mix. Let’s remember too that no-one in the world has developed such ambitious policies for renewables and energy efficiency.

On the second point, we have been diversifying our suppliers: Qatar is today one of our big suppliers of natural gas, which wasn’t the case a few years ago. Finally, you hear it constantly: we don’t stop developing alternative routes to get natural gas. Frankly, we have made giant leaps in improving our security of energy supply in the last 13 years.

Q: What’s left to do?

A: I don’t think we should change the strategy. It’s more a spirit we have to develop. At the Messina Conference in June 1955 when the European Community was created, the founding fathers said there wouldn’t be any future for the Community “without abundant and cheap energy”. That remains the fundamentals of any strategy, because, like it or not, the laws of physics tell us that there can be no material welfare without energy consumption. Dreaming of the opposite is to deny physical science. In the longer term, we also have to search for new energies, be they renewable, fossil or nuclear. The answer to your question is therefore: we still have to promote a lot more innovation, which stems from R&D, which in turn stems from fundamental research.

Q: Is it dangerous for the EU to be “too” dependent on Russian gas? Does the current crisis threaten EU gas supplies?

A: Everything hangs from what you mean by “too dependent”. Common wisdom says you shouldn’t put all your eggs in the same basket. Western European countries have been dependent on Russian gas for more than 30 years. Eastern European countries for even longer and sometimes fully so – that’s the case for the Baltic States and Finland. Did a country complain before the crisis of January 2006?

Energy security is like tango: you need two partners which like each other, know each other and know what the next moves will be. We are no longer in 1973 or 1979 when the energy weapon was used to impose geopolitical choices. This is not possible anymore, on one hand because fossil fuel reserves are abundant and much better distributed than we thought just a few years ago, and on the other hand because we live in a globalised world. You cannot annoy a customer without it having an impact on all other customers in the world.

I sincerely think we have entered a new energy paradigm which will impose a pax energetica. As evidence for it, I would point out that despite the high tensions of the last few weeks in terms of international relations we haven’t had the slightest problem with energy supply.

Q : If the situation escalates in Ukraine, do you think Russia might again cut the gas tap to Ukraine?

A: Russia needs a partner to continue to dance the energy tango. It cannot afford to cut the gas tap to Ukraine because this would penalise the EU. On top of that, it would lead to the assumption that it already cut the tap in January 2006 and January 2009, which Russia denies. If it did so only once, it can definitively forget to hope to sell its gas to China one day. Relations between China and Russia are definitely less harmonious than those between Russia and the EU.

Q: Is it serious for the EU to plan to supply Ukraine with gas?

A: In the specific case of Ukraine, we now have a gas pipeline which ducks the country in the north, meaning that Germany, France and the Netherlands can be directly supplied with Russian gas. We have also developed a strategy for gas stocks similar to the one we adopted for oil stocks during the oil crises. EU member states have to be able to ensure gas supply to vulnerable customers during 30 days, which in practice translates into gas stocks of 30 days of consumption. And that changes everything!

We have also developed so-called “reverse flows”. With a few taps and metres of pipes around the compressors that push gas into pipes, you can reverse the direction taken by the gas. Today, we can have gas flowing from west to east, something that was impossible in 2009. That’s what I call “the plumber strategy” to show that a very simple idea has changed the paradigm we were stuck in, i.e. that Eastern European countries are exclusively dependent on Russian gas. It’s not true anymore.

On top of that the EU is diversifying its supply points. For example if on the Croatian island of Krk we manage to build an LNG terminal linked to Hungary, it will even be possible to supply Ukraine with gas coming from outside of Europe.

Q: What are the problems to solve in Ukraine to reform its energy sector and make it sustainable, efficient and secure? What are the options for its development?

A: I see two: rule of law and energy efficiency. It’s no secret that energy in this country was subject to shameful unlawful profits. There have been corruption and strange solutions for its gas supply. It is urgent to restore credibility by applying strict governance in the energy domain – and other domains, naturally.

As far as energy efficiency is concerned, the energy intensity of Ukraine in 2011 was 1,619 toe/M€, i.e. 11.3 times worse than the EU-27. Imagine the potential for energy savings! Before saying Russian gas is expensive, you need to insist on the terrible energy wastage in Ukraine. Even compared to Poland, which has an energy intensity of 330 toe/M€, Ukraine is five times less efficient. I think this is the place to start.

Gas in Ukraine is mostly used in housing and the industrial sector; it is almost not used to generate electricity, which comes from nuclear and coal. You have to quickly start refurbishing buildings and probably in the simplest and cheapest way: isolate roofs. You don’t need big strategies or huge financing to make gas consumption fall drastically – gas that the country cannot afford.

On top of that, domestic consumers only pay 20% of the price of gas imported from Russia. That cannot continue. Ukraine is part of the Energy Community, of which one goal is to create an energy market in each member state. With such a level of subsidisation, the country is far from fulfilling this objective. It has to correct this as soon as possible because energy efficiency is triggered by real price signals.

Q: What is the potential to strengthen EU energy security through our indigenous sources: energy efficiency, renewables and shale gas?

A: We can never insist enough on the importance of energy efficiency – and not only in Ukraine – but this is unfortunately not enough. Over the last 20 years, our energy intensity went from 204 toe/M€ to 152 toe/M€ i.e. a drop of 25%. But during this period, our consumption went from 1,665 Mtoe to 1,759 Mtoe. Energy efficiency is not enough to avoid energy consumption. As for renewables, we went from 8% to 14% in 5 years’ time. That’s far from sufficient to ensure our energy security. Shale gas still has to be implemented in the EU, even if for a few years Germany has been producing tight gas without any concerns from the public. You don’t mention nuclear, which contributes a lot to energy security. In the 1980s we could have energy security, thanks to nuclear becoming a mature technology. All of it is important, but we will still need in the medium term, and perhaps beyond that, reliable imports.

Q: It is therefore indispensable to secure new external supplies. What are the most realistic options?

A: Contrary to what you unfortunately hear too often, world energy resources have never been as abundant as today. The peak oil theory is based on assumptions which are constantly denied by facts. That’s why I talk about a “counter-revolution” in my latest book [see Box at the end].

But even if very abundant, you have to get this energy into the EU and at a competitive price. Our gas suppliers by pipeline (Algeria, Norway, Russia and even Libya) will not disappear. We also need to bring more gas through pipelines and this justifies all the hype about the Southern Corridor. But we also need LNG terminals with which we can make the most of gas spot markets. The Middle East, where you have plenty of natural gas, Mozambique and West Africa, Canada, the Levantine Sea and many other regions, are potential suppliers of competitive energy in the medium term. Of course you can also count on shale gas. Not necessarily from the US but perhaps from Argentina. All of this is still to build and in ten years’ time our energy supply will be very different from today.

Q: Finally, how can we reconcile environmental constraints with competitiveness and security of supply?

A: European energy policy is there to serve its citizens, allow industry to be competitive and mitigate environmental impact. These three pillars are of equal importance. Favouring one or the other sooner or later leads to an imbalance. The difficulty is that you cannot run quickly in three directions at once. You have to acknowledge that you need to go forward with determination but that there is no instant revolution. In the energy field, the counting unit is the billion, the time unit is the decade and the territory is the whole world. Wisdom in energy policy means admitting this hard reality. If experts know it, the general public and most of the policymakers ignore it. You have to teach them. You, the media, have an important role to play in explaining this very complex issue.

Samuele Furfari is Professor at the French-speaking Free University of Brussels, where he teaches energy geopolitics. He has a PhD in applied sciences and a degree in chemical engineering from the same university. Samuele joined the European Commission in 1982, where he has spent his entire career on energy matters. He is currently advisor to the Director General for Energy in Brussels, but speaks in a personal capacity in this interview.

pic book samuele (1)Hurray for fossil fuel – an energy counter revolution – (Vive les énergies fossiles ! – La contre-révolution énergétique) Samuele Furfari, ed. Texquis ISBN 978-2-930650-06-7

In his latest book published in French last March, Professor Samuele Furfari breaks a well-anchored myth: fossil fuels have never been as abundant as today. He demonstrates that the quarantine imposed by OPEC in the early 1970s has come to an end thanks to technology and new maritime territories open for exploration and exploitation. He outlines a broad panorama of global oil and gas resources being discovered and yet to be exploited. The shale gas revolution is just beginning, he says, and the implications for geopolitics are huge, since it reshuffles the cards of power at a global level. He questions the cost of an energy transition to a low-carbon economy in Europe through expensive options such as renewables whereas the rest of the world is reaping the benefits of abundant and cheap fossil energy. “While the public awaits an energy revolution”, he says, “it doesn’t realise that the counter-revolution has already been completed”. And a very didactic demonstration follows during 350 pages of facts and figures as if the Professor was talking to you face-to-face. A refreshing update on the global development of oil and gas, and its implications for geopolitics.

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