European Commission Releases Energy Security Strategy, Further Defining Opportunities for US Energy Companies in Europe

June 9, 2014

The situation in Ukraine is causing the European Union (EU) to quickly rethink its energy security policy and reduce its dependence on Russian gas. As detailed in our earlier alert, the European Council recently took unprecedented steps to expedite its energy agenda and called on the European Commission (the EU’s executive branch) to develop a course of action.

On May 28, the European Commission issued its comprehensive European Energy Security Strategy and an underlying study. In line with the council’s recent recommendations, the commission’s strategy focuses on diversifying external energy supplies, upgrading energy infrastructure, developing domestic resources and unifying the EU’s energy policy.

At the outset, the commission proposes immediate “stress tests” to simulate a disruption of the gas supply in a given area. From these tests, authorities can assess where vulnerabilities exist and accordingly implement coping strategies before winter. This most likely will involve the installation of reverse-flow mechanisms on existing pipelines to allow the delivery of gas in either direction, depending on need.

For the long term, the commission listed several proposals covering key areas, including:

  • Linking interstate energy infrastructure. As an extension of the initial stress tests, this will ensure that supply disruptions are managed by directing energy flows as needed. Thirty-three specific projects have been identified as critical to this process, and they align with boosted interconnectivity targets for 2030.
  • Diversifying external suppliers and importing methods. Every day, Europe spends over €1 billion ($1.36 billion) on imported energy, to cover just over half of its total consumption. It imports nearly 70 percent of its natural gas, more than a third of which comes from Russia. To remedy this, the commission seeks to increase ties with new suppliers through different routes, particularly by expanding the Southern Gas Corridor through pipeline construction projects and development of the Mediterranean Gas Hub, and by substantially increasing liquefied natural gas (LNG) imports from the United States and others.
  • Increasing domestic energy production. While renewable energy is a key focus, the sustainable production of fossil fuels is also a primary concern and would include efforts to develop shale gas and the continued production of coal.
  • Unifying energy policy. The commission calls not only for increased coordination amongst member states in this area, but also for the use of “one voice” when negotiating external agreements that could impact energy security, including the implementation of joint gas-purchasing initiatives across the member states.

To facilitate the achievement of these goals, a list of 250 projects needed to strengthen interconnectivity and otherwise develop energy infrastructure (including the 33 that the commission identified as critical) are eligible for €5.85 billion ($7.96 billion) in EU co-funding under the new Connection Europe Facility (CEF) program. In addition, these projects will enjoy an expedited permitting process, and the commission has vowed to intensify its support and help accelerate their implementation by bringing together relevant stakeholders.

The heads of member state governments will discuss the commission’s proposals at the European Council’s next meeting on June 26. They are expected to be adopted and swiftly set in motion.

As Europe’s plans become more defined, so do the opportunities for U.S. companies to take part in the transformations of the EU energy market.

Questions? Ask any member of the McGuireWoods energy team in the United States and Europe. These attorneys have the knowledge, experience and connections to advise and assist you in the changing European energy landscape.

The full text of the proposed European Energy Security Strategy is available online.