ENERGY AS A VECTOR FOR SUSTAINABLE GROWTH AND REGIONAL INTEGRATION.
draft of Romano Prodi’ s contribution to IV Euro-Mediterranean Energy Forum 
“ENERGY AT THE MEDITERRANEAN: SUSTAINABLE GROWTH AND REGIONAL HARMONIZATION”
Barcelona, 11, 12 and 13 March 2009
Already fifteen years ago, here in Barcelona, at the EuroMediterranean Conference, cooperation in Energy has been a central issue .
Energy was seen as a possible important engine to move toward a more balanced cooperation in industry and technology, and raised many hopes of mutual benefits. These hopes have only in part been achieved.
Of course, among the many flows of goods, services and people, between the southern and the northern rims of the Mediterranean sea , that of Energy is one of the most significant .The EU depends from Mediterranean Energy exporting countries for 36 % of its gas and 20% of its oil, and from the point of view of producing countries EU gets 86% of the gas exported and 49 % of the oil.
But the flow of energy south to north and that of money from north to south has not resulted in a balanced cooperation in the whole Energy system, as it had been hoped . This has some how limited development and growth of the whole southern Mediterranean area.
The consumption of Energy pro capita in the north in fact is still between 5 and 10 times higher then in the south.
An insufficient Infrastructure for distribution and transport of energy, and an inadequate integration of networks, are still a main constraints to the localization of new industries and services in the southern areas.
One of the reasons behind this situation is that not enough attention has been given to the creation of industrial ,technological and scientific capacity in the area .
The three long and challenging gas pipelines Transmed ( gas from Algeria and Lbia), GME (Magreb, Europa ), Greenstreem ( Libia), and Medgaz (Algeria to Europe) have been built mainly with turn key contracts which did not contribute much to the growth of know in the Sothern Rim.
The construction of new energy infrastructures goes on thanks to an almost exclusive flow of systems and components from the north with very little technology transfer. It could have started instead a positive collaboration creating a new industrial base.
But it is still possible to improve, although time to do it is limited.
The southern Mediterranean area has good reserves of oil and gas but not very large ( 5% of the total worldwide compared to 65% in middle east ).
(Oil 7.1 bil. tons, (Libia 67%, Algeria 20%) . Gas 8000 bil. cubic meters ( Algeria 57%, Egypt 22% ) )
In the Mediterranean area, as a whole ,there will be a shift in the contribution to the total demand from different energy sources in the next ten years .
Relevant growth of gas , (up to 31% from 22), stability of coal (13% ),and decrease of oil (down to 42% from 49% ) and nuclear (down to 9%) from 12% .
In this scenario it is not yet considered here the relevant possible contribution of energy from wind ( Morocco , Tunisia, Egypt and Turkey ) and sun (the southern Mediterranean area has the highest potential in the world in terms of exposure and meteorological conditions). Especially in the case of solar energy a revolution will surely happen very close as soon as the breakthrough now in the pipeline of technological development will be industrialized.
Nor it is yet in the picture the option that energy is exported not in form of primary source, but as electricity produced in the southern countries.
It is important to realize also that, accounting for their internal growth and for the changes in production capacity, Egypt and Syria will become importers from exporters , while Libya and Algeria will be able to significantly increase their export.
In this picture there are three possible strategic lines of action, to make of energy a relevant factor in a fruitful and deeper cooperation in the Mediterranean area.
A. Better integration of southern capabilities in the design, financing and construction of the next generation of large infrastructures related to Gas
B. Improvements in the harmonization of regulations on Electrical Energy among EU and the other Mediterranean countries.
C. Joint development of large projects for the utilization of renewable energies (especially solar) to produce electricity and desalinate the sea water.
A. Large infrastructures for Gas.
New projects such as and Galsi ( pipeline from Algeria to Italy through Sardinia), the set of GNL terminals in Egypt , or the ambitious design to bring north to Algeria the Nigerian Gas, promoted by NEPAD (New Partnership for Afican Development) Should be seen from the very beginning as opportunities for development of Southern Mediterranean Countries.
Starting from the financing phase the Europen Bank for Investments , which since Barcelona 1995 hag been in charge of favoring projects mutually beneficial, should ask a larger involvement of industrial capacity from Southern Mediterranean Countries then in the past.
Very important in this direction is the political support of the European Union and of the Governments in the Region.
B . Harmonisation of regulations for Electricity.
The development of a much larger system for producing , tansporting and distributing electricity is crucial to the development of the Region. On the basis of estimates by OME (the Mediterranean Observatory for Energy ) the Invesments required up to 2020 are around 250 billion euros .
The Governments in the area have acted to attract foreign capital , but , up to now the Independent Power Projects have not been successful enough and the burden for development is mainly on local state owned companies .
However the integration of the electricity systems between North and South has anyway a high potential and may create the condition for new fruitful investments in the field.
The creation of a Euro-Magreb market for electricity ( Rome declaration December 2003 ) offers the opportunity to optimize the utilization of the primary energy resources in the Magreb with a local production of electricity to be transported and distributed in the EU through new power lines across the Mediterranean..
Less problems of Power Plants Localization, Technology Tranfer, more electricity in the south for local use , would all be clear benefits along this line.
All of this requires a framework of coordination of the different national systems in order to offer to each operator the freedom to develop his own system within commonly agreed rules.
Along this same line a deeper dialogue with the South , when European Union principles are declared and directives issued , could be very beneficial.
C. Joint projects on renewable energy.
In countries such as USA and Germany the largest contribution to new installed electrical power in the past three years has been from wind and sun
The fastest growing industrial sector has been that of solar cells production and installation.
And still the local situation in terms of solar exposure and meteorological conditions is much better in the South Mediterranean Countries then any where else in the word.
The opportunity for a fast and strong development of solar energy in this large area is definitely relevant as soon as the new technologies will allow it to reach te so called ‘grid parity’ (cost of energy produced equal to that of the energy in the network). And here the grid parity will be already reched at costs of the solar power installations 40% higher then for example in Germany.
The benefits would be huge:
– extremely low impact on environment in terms of CO2 emissions
– much lower need of investment for local distribution of electricity because of possible grass root localization of small plants . Remote areas would have energy with no need of power lines.
– Possible utilization of use of direct solar energy to desalinate large quantities of water helping to solve one of the problems of the area without CO2 emission .
– Great opportunity to develop a local industry for production and installation of solar power plants . The mass market would in fact start in this part of the world much before anywhere else thanks to better exposure and meteo.
This is why projects like Desertec or Solar Plan and others described here, may sound ambitious now, because of the still high cost of solar power, but may become very realistic much sooner than we think.
All these three lines of strategic action have in common two elements
The first is a very concrete effort to use energy not only as a tradable good , but as a direct agent of cooperation in the Mediterranean and of accelerated development in the Southern Countries .
The second is the need for a large source of financing of solid, long term project with a strong industrial participation of the South.
The whole Area, therefore, would highly benefit from the existence of a financial institution fully dedicated to support these huge investments .
These are moments of special suffering of the developing countries from the global crisis and he need for direct support is greater then ever.
The old idea of a EuroMediterranean Bank would have strong new reasons to to be brought to light again.