COMMUNICATION FROM THE COMMISSION TO THE EUROPEAN PARLIAMENT AND THE COUNCIL CONCERNING THE EURO- MEDITERRANEAN PARTNERSHIP IN THE ENERGY SECTOR
Date: 1996-04-03
Institutions: European Commission
Subjects: EU relations, Mediterranean third countries, action programme, cooperation policy, energy policy

COMMISSION  OF THE EUROPEAN  COMMUNITIES 

*** 

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Brussels,  03.04.1996 
COM(96)  149  final 

COMMUNICATION  FROM THE COMMISSION  TO THE 
EUROPEAN  PARLIAMENT AND THE COUNCIL 
CONCERNING  THE EURO-MEDITERRANEAN  PARTNERSHIP  IN THE 
ENERGY SECTOR 

COMMUNICATION  FROM THE COMMISSION  TO THE 
EUROPEAN  PARLIAMENT  AND THE COUNCIL 
CONCERNING  THE  EURO-MEDITERRANEAN  PARTNERSHIP  IN THE 
ENERGY  SECTOR 

1. 

GENERAL  BACKGROUND 

1. 

The Euro-Mediterranean  Conference  in Barcelona on 27 and 28 November  1995 
marked  the start of  a new partnership  to establish  a haven  of peace and  stability 
and  an  economic  area  based  on  free  trade  and  closer  economic  and  financial 
cooperation.  The  political,  economic  and  social  principles  which  will  guide 
relations between  the European  Union  and its Mediterranean  partners are set out 
in the Barcelona  Declaration  adopted  at the  Conference.(1) 

In  this  general  context,  the  objectives  set  for  this  economic  and  financial 
partnership were: 

to accelerate  the pace of  sustainable  socio-economic  development; 
to  improve  the  living  conditions  of  the  populations,  increase  the 
employment  level  and  reduce the  development  gap  in  the  Mediterranean 
region; 
to encourage  regional  cooperation  and  integration. 

2. 

The pivotal  role played by the energy  sector was acknowledged.  It was therefore 
decided to strengthen  cooperation  and intensify  the dialogue in the field  of energy 
policies  and  to  help  to  create  the  appropriate  framework  conditions  for 
investments  and  the activities  of energy  companies. 

This  general  framework  must  meet  the  mutual  interests  of  all  the  parties  The 
cooperation  in the energy  field  must, therefore,  fit  into this framework  although, 
in  itself,  it  meets  these  mutual  interests  in  that,  by  contributing  to  the 
Community's security of supply and to meeting the Mediterranean  partners' socio 
economic  development  needs,  it  is  in  the  interest  of  the  entire  region;  in 
particular,  it  encourages  investment  in  measures to  manage  energy  consumption 
and  production  and  contributes  to  sustainable  development  since  energy  has  a 
decisive  influence  on  the  fundamental  parameters  for  economic  and  social 
cohesion,  namely  economic  activity,  the environment  and the  standard  of living. 

But  these  mutual  interests  in  the  energy  field  extend  beyond  the  strictly 
Mediterranean  region.  In  particular,  this region  is an important  transit  route  for 
energy  products  and,  as  such,  also  contributes  to  the  Community's  security  of 

in 

Algeria,  Cypms, Egypt,  Israel,  Jordan,  Lebanon,  Malta,  Morocco, Palestinian  Authority,  Syria, 
Tunisia  and  Turkey. 

4 4L 

mÊÊiÊÊmmmÈÉiÈm 

supply.  Consequently,  the political,  economic  and  social  stability  of this region 
is also essential  to  safeguard  this transit  route. 

One  consequence  of  this  strategic  function 
is  that  cooperation  with  the 
Mediterranean  countries  in  the  energy  field  will  not  be  possible  without  also 
taking account  of the interests of the regions beyond  and of the cooperation  with 
these  regions  which  could  be  affected  or,  in  any  event,  concerned  by  the 
cooperation  with  the Mediterranean  countries.  These include  the  Gulf  countries 
and  the  Black  Sea  and  Caspian  Sea  countries.  As  the  Community  is  heavily 
committed to a policy of cooperation with the countries and organizations in these 
regions, it will have to ensure balanced development of this cooperation  and keep 
each  of the parties  satisfactorily  informed. 

Parallel  to the Barcelona Conference, a Euro-Mediterranean  Civil Forum was also 
held.  This event  demonstrated,  once again,  the close link between  energy  issues 
and their impact on economic and social  development in the countries concerned. 
This same commitment  on the part  of the civil  sector to the  Euro-Mediterranean 
partnership  was  expressed  at  the  Conference  on  the  importance  of  energy  for 
social  development,  held in Madrid  on 22-23 February  1996 by the International 
Federation  of  Trade  Unions  of  Workers  in  the  Chemical,  Energy,  Mining  and 
Miscellaneous  Industries,  i.e.  the Euro-Mediterranean  trade unions. 

The  efforts  to  develop  a  consistent  policy  on  energy  cooperation  with  the 
Mediterranean  countries must also fit in with the energy policy established for the 
Community,  as  outlined  in  the  Commission  White  Paper,(2)  based  on  common 
objectives  and  mobilizing  all  the Community  instruments: 

The  Community's  energy  policy,  based  on  integration  of  the  energy 
markets  and  of  the  infrastructure  for  transporting  energy  products,  must 
provide consumers  with  greater  security  of supply  in  the Community,  by 
stepping  up  the cooperation  with  the  supplier  countries,  and  at  the  same 
time  support  energy  companies  in  the  Union  in  their  strategy  on 
investment  and  transfer  of technologies  in the countries  in the  region. 

The measures taken to implement the energy  policy  must mobilize all the 
Community  instruments,  particularly  those  for  economic  cooperation, 
research and development policy and the financial instruments for general 
or regional  purposes. 

(2) 

Communication of 14 December  1995 from the Commission on an energy policy for the European 
Union  (COM(95) 682). 

2. 

6. 

7. 

8. 

THE ENERGY  CONTEXT 

The  distinctive  features  of  the  energy  context  in  the  region  are  its  substantial 
energy  resources,  in the form  of the oil  and gas fields  closest  to the Community 
market  apart from  the North  Sea resources,  plus the potential  increase  in energy 
consumption,  which  poses both  economic  and  environmental  challenges.(3) 

(i) 

Energy  potential  in the region 

The  region's  reserves  are  amongst  the  largest  in  the  world,  but  it  has  not  been 
possible  to  harness  them  fully,  principally  due  to  the  economic  and  political 
context in the producing countries in the region.  Euro-Mediterranean  cooperation 
in the energy  sector  is designed  to create the conditions to remedy this. 

Crude oil reserves in the region were estimated at 6 030 million tonnes in 
1993;  Algeria,  Egypt,  Syria  and  Tunisia  are  the  Euro-Mediterranean 
partners  concerned;  Libya  alone holds  50% of the reserves. 

The  proven  natural  gas  reserves  are  of  the  same  order  of  magnitude  at 
5 650 billion m3 (5 085  million toe).  They are located in the same regions 
as the oil  reserves.  Algeria  is the leading natural  gas producer  with 64% 
of the  reserves,  followed  by  Libya,  Egypt,  Syria  and  Tunisia. 

According  to  some  experts,  the  undiscovered  reserves  could  total  over 
3. 300 million  tonnes of oil  and condensates and  3 400 billion  m3 of natural  gas. 
A big  effort  could  therefore  be made on oil  and gas prospecting. 

The  existing  infrastructure  has  the  capacity  for  annual  exports  of  162 million 
tonnes  of  oil  and  37 billion  m3  of  natural  gas.  A  substantial  proportion  of 
Algeria's natural  gas exports to the European  Community take the form  of LNG. 
The  principal  destination 
takes 
92 million  tonnes  of  oil  and  oil  products  and  35 billion  m3 of natural  gas. 

the  European  Union  market,  which 

is 

The  Mediterranean  oil  producers  supply  approximately  a  quarter  of  the 
European  Union's  requirements.  As the oil  pipelines are developed,  they 
will  also become  an  important  transit  route. 

As  for  natural  gas,  the  European  Community  imports  10%  of  its 
requirements from  the Mediterranean  partners, principally  Algeria, which 
also  supplies  almost  all the  LNG imported  into the Community.  Despite 
the gas transmission  infrastructure  developed  within  the Community,  the 
Community  will  become  more  dependent  on  outside  gas  supplies  as 
consumption  grows.  Consequently,  with  the  development  of  link-ups 

(3) 

Taken  partly  from  the  Commission  staff  working  papes  entitled  "European  Energy  to  2020: A 
Scenario  Approach",  December  1995 (SEC(95)2283), 

within the Community, production from  the Mediterranean  countries must 
improve  security  of  supply  within  the  Community. 

The  wide  disparities  in  energy  resources  between  the  Mediterranean  partners 
should  lead  to link-ups  for  gas,  oil  and  electricity  transmission. 

9. 

The  Cairo  Conference  in  September  1995  estimated  the  investment  needed  in 
energy  production,  transmission  and  distribution  infrastructure  over  the  next 25 
years  at  ECU  192  300  million.  This  would  be  equivalent  to  12%  of  the 
Mediterranean  partners' GDP over the  same period. 

The  availability  of  fossil  fuel  resources  in  this  region  must  not  overshadow  the 
potential  offered  by  renewable  energy  sources. 

In  the  Southern  and  Eastern  Mediterranean  countries  renewable  energy  sources 
account  for  9.5%  of  the  primary  energy  balance.  Solar  energy  and  wind  power 
offer  the  greatest  potential.  Biomass  also  shows  considerable  potential,  but  it  is 
difficult  to estimate. 

(ii) 

Demand  growth  prospects 

10. 

Population  growth  prospects  are  high  in  the  Mediterranean  partners'  societies, 
although  they  differ  from  one  country  to  another:  by  2020  the  population  is 
expected to grow from  200 million today to 340 million. This population  will be 
concentrated  principally  in  urban  areas,  leading  to  serious  environmental 
problems:  waste,  air  pollution,  lack  of  drinking  water,  etc.  In  response,  the 
countries  primarily  concerned  should  create  2.4  million jobs  every  year  for  the 
next  15 years, whereas at the moment they  are creating just  1.7  million,  without 
taking  account  of  the  increasing  number  of  female  workers  entering  the  labour 
market.  This  demographic  situation  alone  will  affect  consumption  growth  and, 
consequently,  the environmental  risks. 

11. 

(a) 

In  most  of the Mediterranean  partners,  per  capita  energy  consumption  is 
extremely  low (0.9 toe compared with  3.0 in the Northern  Mediterranean 
Community Member  States). Levels such as this are incompatible with the 
economic development which  the Euro-Mediterranean  partnership  wishes 
to  promote.  On  current  trends,  demand  for  energy,  particularly  for 
transport  and  electricity  generation,  could  rise  from  155  million  toe  in 
1992 to around  458 million toe by 2020. This could imply  strong growth 
in  oil  production  in  order to finance  economic  development. 

Demand  for  electricity  could  rise  by  5%  per  year  over  the  same  period 
(compared  with  just  1%  in  the  Community)  to  920  TWh  by  2020 
compared  with  194  TWh  today.  However,  allowing  for  the  population 
growth,  per  capita  consumption  is likely  to  remain  relatively  low  (2650 
kWh)  compared  with  the current  level  in the Community  (6000 kWh). 

12. 

(b) 

This  growing  energy  consumption  immediately  gives  cause  for  concern 
about the environmental  risks which, in the Mediterranean  region, include 
the added  risk of pollution  of a virtually  landlocked  sea which,  above all, 
is shared  by  all  the countries  in this partnership. 

Ë2jàb» 

In a "business as usual" scenario C02  emissions in the Community 
are  expected  to  rise  from  3150  million  tonnes  in  1990  to  3721 
million tonnes in 2020, i.e. by around  18%.(4) In the Mediterranean 
partners, they  could triple from  287 million tonnes in  1990 to 929 
million  tonnes  in 2020. 

As a transit route for energy products, particularly for tankers, with 
big cities and industrial  complexes developing along its coasts, the 
Mediterranean region is particularly exposed to the risk of pollution 
caused by the transport and use of energy products. Every year oil 
tankers spill 650 000 tonnes of oil into the Mediterranean  Sea. The 
rivers  too  are  highly  contaminated  and  the  principal  deltas  are 
fragile. 

The Mediterranean  partners  suffer  the biggest  water  shortages  in 
the world:  60% of their  renewable  aquifers  are overexploited  and 
on  course  to  run  dry  in  the  medium  term.  Besides  drastic 
environmental  measures to protect  fresh  water,  energy  is the only 
answer to the need  for  desalination  of  sea water. 

The growing consumption cannot be satisfied  by fossil  fuels alone. 
In the Mediterranean  countries renewable energy  sources will  also 
contribute  to  solving  this  problem  and,  more  generally,  the 
environmental  protection  problems  created  by  energy  production 
and  consumption. 

3. 

ACTION  PROGRAMME 

13.  Given  the  strategic  importance  of  the  energy  sector  and  the  pivotal  function  of 
cooperation  in  this field,  the Barcelona  Conference  was preceded  by  a  series  of 
preparatory  events  to  mobilize  the  Community 
institutions,  industry  and 
Mediterranean  partners: 

At the Council  meeting  on  energy  on  1 June  1995, the Presidency  asked 
the Commission to "assign appropriate financial  resources to the objectives 
identified,  within the framework  of the financial  resources to be allocated 

W 

C02 emissions are covered by the Convention on Climate Change, which was ratified in December 
1993. An international protocol is being prepared with a view to further reductions beyond the year 
2000. The Community in turn has adopted a strategy to stabilize emissions at 1990 levels by 2000 

by the European Community  to its framework  programme for  partnership 
with  the countries of the  Southern  and  Eastern Mediterranean." 

At a meeting  in  Athens on 6 and  7 July  1995, the European  Commission 
and  the Mediterranean  partners concluded  that it was necessary  to  define 
a Euro-Mediterranean  action  plan  in the energy  sector  and  to  establish  a 
forum  to monitor it. 

At  their  meeting  with  the  Economic  and  Social  Committee  of  the 
European  Communities  on  19  October  1995,  the  representatives  of  the 
Southern  and Eastern  Mediterranean  states recommended  that the energy 
sector  should  be  one  of  the  specific  fields  for  Euro-Mediterranean 
cooperation. 

At a meeting in Madrid  on 20 November  1995, the energy ministers  from 
Spain, France and Italy and representatives of the Mediterranean  partners, 
of  certain  European  Union  Member  States  and  of  the  European 
Commission declared that in order to promote energy projects, appropriate 
instruments  should  be  introduced.  The  introduction  of  a  specific  chapter 
on  energy  in  the  MEDA  Programme  would  demonstrate  the  importance 
which  Europe  attaches to the energy  sector  in the Mediterranean  region. 

14. 

In this context, the SYNERGY programme has allowed a start to be made on pilot 
cooperation  projects  over the  last  three years.  Some of these  lay  the  foundation 
for  the  general  action  to  be  taken  on  energy  in  the  Euro-Mediterranean 
partnership: 

The action plan on energy and the urban environment in the Mediterranean 
region  which  emerged  from  the  Athens  Conference  in  November  1993 
established  cooperation  with  Southern  Mediterranean  cities  on  energy 
management  and  environmental  protection. 

The  Palestinian  Energy  Centre  set  up  on 28 December  1993 by  decision 
of  President  Arafat  has  been  receiving  financial  support  and  technical 
assistance  since then  under  the  SYNERGY  programme.  The  Palestinian 
Energy  Centre  assists 
the  Palestinian  Authority  on  energy  and 
environmental  issues, particularly on drafting a legal framework,  planning, 
coordination  and  monitoring  of  projects. 

The Tunis Conference  in March  1995 brought together  representatives of 
the  non-European  Union  Mediterranean  countries  to  evaluate  the  energy 
situation  in  the  region  and  suggest  subjects  and  priorities  for  regional 
cooperation. 

The  Cairo  Conference  held  in  September  1995,  in  conjunction  with  the 
World  Bank  and  the  Mediterranean  Energy  Observatory,  raised  the 

jFIÊt 

problem  of  funding  energy  projects  in  the  region  and  proposed  greater 
mobilization  of  savings to this end. 

15. 

The JOULE-THERMIE programme has also allowed closer industrial  cooperation 
with  the  Mediterranean  partners,  in  most  cases  with  local  support:  the  Madrid 
(1995) and Athens (1996) Conferences on renewable energy sources in this region, 
funded  by  the  THERMIE  programme,  made  recommendations  on  faster 
dissemination  of renewable  energy  sources. 

3.1 

Fields  of  cooperation 

16. 

The economic partnership objectives  set by the Barcelona Declaration  adopted at 
the Conference  provide for  participation  in: 

assisting with the economic transition  (establishment  of a free  trade area, 
encouragement  of the private sector and of private investment by Europe 
and upgrading  of economic  infrastructure); 

helping  to  achieve  a better  socio-economic  balance  (by  improving  social 
services,  promoting  harmonious,  integrated  rural  development  and 
environmental  protection); 

supporting  regional  and transfrontier  cooperation. 

17. 

These three  objectives  call  for  closer  cooperation  in the following  fields: 

(i) 

On  energy  policy,  with  a view  in  particular: 

to  establish  a  regional  forum  for  developing  consistent  energy 
policies.  To this  end,  more  regular  meetings  must  be  organized 
between institutions and experts from  the European  Union  and the 
Mediterranean  partners, within  a more structured  framework; 

to  develop  energy  planning 
the  highly 
complementary nature of the Northern and Southern Mediterranean 
markets and  supply  networks; 

tools  based  on 

to  increase  trade  in  energy  products.  An  appropriate  legal 
framework  should  be  devised  to  encourage  and  promote  regional 
and  transregional  trade; 

to  provide  greater  security  for  private  investment  in  energy 
resources and networks to create a climate conducive to removing 
the obstacles to investment, in order to stimulate private investment 
and  to  modernize  and  restructure  the  industry  and  the  existing 
infrastructure  and  to  promote  renewable  energy  sources  under 
satisfactory  economic  conditions; 

jointly  to  combat  the  greenhouse  effect  and  climate  change  by 
stabilizing  emissions at regional  level. 

18. 

(ii) 

On infrastructure  and networks, with a view, in particular, to developing 
and  linking  up  the  energy  networks  in  the  various  regions  around  the 
Mediterranean. 

19. 

The  action  being  taken  by  the  Community  on  major  gas  and  electricity 
transmission  infrastructure,  after  identifying  projects  of common  interest, 
must in turn make investments in the Mediterranean  partners more secure, 
from  the economic point of view.  Not only do gas supplies depend on the 
availability  of  transmission  networks  in  these  countries,  but  also  the 
efficiency  of the electricity  grids in the Mediterranean  region  depends on 
good interconnection  and, in the long term, the establishment of a network 
around  the Mediterranean  allowing good  use of generating  capacity. 

Once such link-ups have been  recognized  as in the Community's common 
interest,  they  can  be eligible  for  the Community  funding  provided  for by 
the  Regulation  on  financial  aid  in  the  field  of trans-European  networks, 
particularly  in  the form  of joint  funding  for  feasibility  studies on  energy 
projects.(5)  Based  on  the  decision  expected  from  Parliament  and  the 
Council on the Community guidelines on trans-European energy networks, 
the  Commission  will  propose  to  the  Council  that  the  12  partners 
participating  in  the  Barcelona  Conference  recognize  these  projects  as in 
their mutual  interest, within the framework  of the partnership agreements. 

In general,  it is important to coordinate the Euro-Mediterranean  activities 
and  the  assistance  instruments  already  established  by  the  TACIS 
programme for  the Central  Asian  countries. 

The Community  has identified  a series of trans-European  energy  network 
projects  which  it considers to be of common  interest/6* 

20. 

Several  of  the  projects  of  common  interest  identified  concern  the 
Mediterranean  region  and  are  designed  to  establish  or  upgrade  the 
electricity  and gas interconnections between  the European  Union  and the 
Mediterranean  partners,  namely: 

electricity  networks:  Spain-Morocco;  Greece-Turkey; 

(5) 
(6) 

Council  Regulation  (EC)  No  2236/95 of  18 September  1995 (OJ No L 228, 23.9.1995). 
Council common position of 29 June  1995 and European Parliament opinion of 26 October  1995 
at second  reading on the proposal for  a European Parliament  and Council Decision  laying down 
a  series of guidelines  on trans-European  energy  networks (COM(93)685). 

8 

gas networks:  A l g e r i a - S p a i n - P o r t u g a l - F r a n c c; 

Algeria-Tunisia-Italy. 

Depending  on energy  demand  trends  in the Union  and  its Mediterranean 
partners and  on the  pace of development  and  location  of  natural  gas and 
electricity production,  other projects concerning the Mediterranean  region 
could be ready  within  the next few years(7): 

electricity  networks:  Italy-Tunisia;  Morocco-Algeria-Tunisia; 

Turkey-Syria; 

gas networks:  upgrading  of existing gas pipelines; 

gas pipeline from  the Libyan  gasfields; 
gas  transmission  pipeline  from  Central 
Asia/Iran  via Turkey. 

21. 

The Mediterranean  countries have also started a number of projects which 
will  improve gas and  electricity  supplies: 

electricity  networks:  Morocco-Algeria-Tunisia-Libya;  Libya-
Egypt; Egypt-Jordan;  Jordan-Syria-Turkey; 
Egypt-Israel -Palesti ni an Authority-Jordan. 

gas networks: 

Morocco,  Algeria,  Egypt-neighbouring 
countries. 

The networks connecting the Member States and the partner countries will 
have to satisfy  the existing Community standards on environmental impact 
assessments.  A  similar  approach  is  also  recommended  for  projects 
confined  to the partner  countries alone. 

22. 

(iii)  On  industrial  cooperation  and  RTD  with  a  view,  in  particular,  to 
promoting RTD and investment with the aid of partnerships on renewable 
energy  sources  and  energy  efficiency,  water  treatment  and  management, 
oil  prospecting,  production,  refining  and  distribution,  and  electricity 
generation,  transmission  and  distribution: 

the  funding  required  to  develop  electricity  capacity  is  one  of the 
most  important  aspects  of  cooperation  between  the  two  regions, 
particularly  in  view  of the need  for  technology  transfers,  notably 

(7) 

Iran and Libya do  not benefit  from  any  Community  financing  neither can be  eligible  under the 
MEDA  programme. 

for  environmentally  sustainable  use  of  coal  and  to  reinforce 
production  and transmission  infrastructure; 

closer  cooperation  on  energy  RTD  is  one  of  the  key  areas  for 
scientific  and  technical  cooperation  with  the  Mediterranean 
countries  and,  hence,  is  being  examined  carefully  by  the 
Monitoring  Committee  set  up  to  reinforce  the  Mediterranean 
partnership policy  in the research field. At its meeting on research 
on  25  March  1996  the  Council  stressed  the  importance  of  this 
policy  and,  in  this  context,  of  the  role  of  the  Monitoring 
Committee.  Energy  RTD  can  be  undertaken  under  existing 
programmes  such as JOULE-THERMIE  (non-nuclear  energy) and 
INCO (cooperation  with non-member  countries).  The THERMIE 
programme,  in  particular,  provides  a  means  of  disseminating 
technologies,  on  the  initiative  of  bodies  or  industries  in  the 
Member  States or associated  States; 

in  the  field  of  standardization  should  facilitate 
cooperation 
investment  in  link-ups  and,  as  in  the  Community,  in  renewable 
energy  sources. 
In  1990,  with  the  support  of  the  European 
Community,  the European  Committee  for  Standardization  (CEN) 
established  a  unit  with  the  dual  role  of  supplying  third  countries 
with the information  which they need on European  standardization 
and  providing  support  on  standardization  to  the  countries  which 
wish it.  Tunisia, Malta and Israel have already availed  themselves 
of  the  services  of  this  unit.  At  the  same  time  as  encouraging 
standardization  work  on  energy  efficiency  and  renewable  sources 
to  implement  the White  Paper  on  energy  policy,  the  Commission 
will  examine  ways  of  extending  the  unit's  activities  to  these  two 
fields as well. 

3.2 

Security  of  investment 

23. 

24. 

Given the microeconomic and macroeconomic constraints on undertakings and on 
the  Southern  and  Eastern  Mediterranean  States,  increasingly  the  funding 
requirements  will  have  to  be  covered  by  calling  on  private  investment.  This 
presupposes  projects  profitable  enough  to  attract  local  or  international  private 
investors on the one hand and a general framework  providing sufficient  protection 
against the risks on the  other. 

Energy-related  investments are often  strategic and determine economic and social 
development,  particularly  if  they  are  intended  to  meet  local  requirements.  It  is 
therefore  necessary  to create  a favourable  environment  in order to promote such 
investment by starting or continuing reforms of the Mediterranean partners' energy 
industries.  This  should  improve  operation  of  the  markets  and  provide  the 
possibility  to  generate  investment  capacity  in  the  long  term.  However,  most of 
these  countries  find  it  difficult  to  satisfy  this  trend  and  numerous  disparities 

10 

mmmmmmmmmm 

remain  between  them.  This  calls  for  a  specific  approach,  drawing  on  various 
instruments  and  different  from  those followed  in  other  parts of  the world. 

25. 

The major  obstacles militating against  funding  energy  projects  in this region  are 
generally  considered  to be: 

the absence of a sufficiently  detailed  institutional  framework; 
the political risks; 
the  exchange rate risks; 
the difficulty  of  drawing  on local  savings; 
the  complexity  of  organizing  projects. 

26. 

Today's  arrangements  on  technical  cooperation,  exchanges  of  know-how  and 
supply  agreements  between  the  leading  undertakings  from  the  Mediterranean 
partners raise numerous difficulties  for  operating in a climate of true cooperation 
and  joint  investment.  Uniform  regulatory  and  contractual  conditions  must 
therefore  be  defined 
firms.  The 
Mediterranean  partners must  not only  open  up their  markets but  also adopt  rules 
which  are  as  uniform  as  possible  so  that  undertakings  do  not  have  to  adapt  to 
different  regulatory  frameworks  in  each  country. 

to  encourage  investments  by  foreign 

(i) 

European  Energy  Charter 

27. 

Association  of Mediterranean  countries with the Treaty  on the European  Energy 
Charter is mentioned in the work programme adopted at the Barcelona Conference 
as  one  of  the  means  of  creating  appropriate  conditions  for  investment  in  and 
activities by  energy  companies. 

The objective  of the Charter  Treaty  is to promote access  to resources,  trade and 
investment  in  the  energy  sector. 
It  contributes  to  security  of  production  and 
supply  and  pays  particular  attention  to  environmental  protection,  notably  in  the 
form  of the Protocol  on  energy  efficiency. 

For  private  investors,  the  Treaty  offers  a  stable,  non-discriminatory  legal 
framework  removing  the  obstacles  to  investment,  facilitating  negotiations  and 
opening up new prospects.  Certainty that the signatory countries will honour their 
commitments  to  foreign  investors  is  provided  in  the  form  of  acceptance  of 
international  arbitration  in the event  of  any  dispute.  This will  make the energy 
industries more competitive  in  attracting  investment. 

28. 

Consequently, the Charter would provide a satisfactory  response to any investment 
risks.  However, the Commission considers that certain precautions must be taken 
before  proposing  that  the  Mediterranean  partners  which  have  not  yet  signed  the 
Treaty  do so:(8) 

(K) 

Cyprus, Malta and Turkey are the Mediterranean partners which have signed the Charter Treaty 

the Charter Treaty was designed for  a specifically  pan-European  situation, 
tailored  to the eastern  European  countries' economies in  transition  and  to 
the role played  by most Central  and Eastern  European  countries as transit 
routes  for  gas  and  oil  on  its  way  to  the  consumer  countries.  However, 
most  of the Mediterranean  partners  are not yet  in the situation  of  energy 
interdependence  found  in Europe; 

transit  of  energy  products  was one of the key  issues  dealt  with  carefully 
during  the  negotiations  on  the  Charter  Treaty  and  is  one  of  the 
fundamental  components  of the Treaty.  But in the Mediterranean  region 
this transit  role is limited  by the underdevelopment  of the networks; 

the  Treaty  was  negotiated  in  response  to  the  lack  of  a  framework  for 
the  Association 
cooperation  and  of  rules  on  trade  and  establishment; 
Agreements  which 
the 
in 
Euro-Mediterranean  region  will  answer this concern;  moreover,  some of 
the  Mediterranean  partners  are  participating 
in  the  World  Trade 
Organization/9*  Under these circumstances, their accession  to the Charter 
Treaty  would  make little  difference  to the existing  legal  environment. 

the  Community 

concluding 

is 

29. 

Despite  this,  it  nevertheless  seems  less  efficient  to  add  more  frameworks  for 
cooperation,  all  the  more  so  bearing  in  mind  that  some  of  the  Mediterranean 
partners  have  signed  the  Charter  Treaty.  However,  enlargement  of  the  Charter 
Conference  would  be  sure  to  affect  the  efficiency  of  this  body,  which  started 
operation  this  year.  For  this  reason,  the  Community  should  opt  instead  for  a 
gradual  approach using the flexibility allowed by the Treaty to start with observer 
status and then  progress to associated  membership  and, finally, full  membership. 

Observer status makes it possible, for example, to keep oil and natural gas 
exporting  countries  fully  informed  of  the  content  of  the  agreements 
negotiated  between  the signatories on the subjects of importance to them. 

Non-signatories  can  also  participate  actively  in  the  meetings  of  the 
Conference  and its subsidiary bodies as non-voting observers, on payment 
of  a contribution. 

the  countries  and 

international 
Associated  member  status  allows 
organizations concerned to participate and implement certain provisions of 
the  Treaty,  after  negotiating  with  the  Charter  Conference  the  extent  and 
degree  to  which  they  wish  to  participate.  As  with  observer  status,  the 
Treaty  contains  no provisions which  explicitly  place an obligation  on the 
associated  countries  to  sign  the  Charter.  The  content  of the  Association 

Algeria, Morocco and Tunisia have been invited to sit in as observers on all the work of the 
Conference. 
Cyprus, Israel, Malta, Morocco, Tunisia and Turkey. 

(9) 

12 

Agreement  should  be  defined  during  the  negotiations  and  approved 
unanimously  by  the  Conference. 

By  contrast,  signature  of the Charter  is a prerequisite before  accession  to 
the Treaty.  The conditions for  accession  must be approved  unanimously. 

30 

The  Commission  should  therefore  support  consultations  with  the  Mediterranean 
partners  on  their  eventual  participation  in the work  of the Charter  Conference  if 
they  are  not  yet  members  thereof  This  move  should  be  prepared  with  all 
concerned,  primarily  with  the members  of the Charter  Conference. 

In due course, the experience built up with implementation  of the Charter  and of 
the  associated  Treaty  and  the  analyses  by  the  Mediterranean  countries  of  the 
characteristics of the Charter  and  of the means used in  it to attain the  objectives 
could  prompt  these  countries  to join  as  associated  members  or  full  members, 
depending  on their  individual  interests. 

The Mediterranean partners' attitude on accession to the Treaty depends, primarily, 
on their  choice.  They  will  not be able to make this until  they  know the  benefits 
which  the  Charter  can  bring  them.  Together  with  the  Charter  Secretariat,  the 
Commission  will  organize  a briefing  session  for  the Mediterranean  partners and 
industrial  circles  concerned. 

(ii) 

Analysis  of  potential  options to facilitate  investment 

31. 

Clearly,  establishment  of  a  stable  legal  environment  encouraging  market  forces 
must  be  a  priority  in  order  to  encourage  investment  growth.  However,  certain 
partners' economic  and political  situation  offers  no prospect  of rapid,  substantial 
progress  on this point in the  short term. 

The  Commission  will  study  the  options  already  available  or  which  should  be 
developed  to facilitate  investment  in the Mediterranean  partners.  This study  will 
include an assessment of the risks and uncertainties which limit investment  at the 
moment,  the financing  methods available and ways of providing better cover  for 
investment  risks.  It  should  identify  the best  means  of  safeguarding  this type of 
investment  specifically  in  the  energy  sector  while  meeting  the  objectives  of the 
Euro-Mediterranean  cooperation. 

3.3  Organization  of  the  cooperation 

32. 

The Euro-Mediterranean  cooperation  must be  organized  securely  and  efficiently 
so that common interests can be taken into account.  The foundation  must be laid 
for  transfers  of experience and know-how and  dialogue between  the Community 
and the Mediterranean  partners on issues concerning  energy  policy  and strategy, 
energy  prices,  training,  project  binding,  the  institutional  framework  and 
management  of the action  plans,  and  environmental  protection. 

i3 

Two  instruments  will  be  set  up  to  organize  and  monitor  the  cooperation: 
Euro-Mediterranean  Energy  Forum  and  financial  resources. 

the 

(i) 

Euro-Mediterranean  Energy  Forum 

33. 

At  their  meeting  in  Athens  on  6  and  7 July  1995  the  participants  accepted  the 
principle of setting up a Forum for Euro-Mediterranean  energy cooperation.  This 
would  have two principal  objectives: 

to  structure  the  cooperation  between  the  European  Community  and  the 
Mediterranean  partners by promoting inter-administration networks on the 
one hand and data interchange and dialogue with the industry on the other, 
taking  due  account  of  the  interrelation  between  energy  and 
the 
environment  with  a view  to sustainable  development; 

to  develop  the  transparent  mechanisms  necessary  for  the  projects 
envisaged. 

34. 

Establishment  of  such  a  Forum  is  warranted  by  the  fact  that  the  framework 
created by the Barcelona Conference does not provide with a structure  specifically 
for  energy-related  issues (transfer of know-how, exchanges of information,  better 
use of oil, gas and coal, development of energy networks, improvements in energy 
efficiency,  promotion of renewable energy sources and environmental protection). 
Without  calling  into question  the general  cooperation  arrangements  made by the 
Barcelona  Conference  or the bilateral  agreements, the  administrations  concerned 
must be given  a means of meeting and  developing joint  strategies or cooperation 
projects  under  the responsibility  of the Ministerial  Conference. 

(a) 

Composition  and operation of the Forum 

35. 

The  Forum  is  a  body  for  political  dialogue  with  the  energy  authorities  at 
ministerial  and/or  administration  level  from  the  various  partners  in  the  Euro-
Its  efficiency  will  depend  on  its  membership, 
Mediterranean  cooperation. 
consisting  of  representatives  of  the  participating  States  who  will  then  be 
responsible,  in  turn,  for  implementing  the  cooperation  measures  in  their  own 
countries  and  promoting  projects  of common  interest between  them. 

The  Forum  must  operate  in  accordance  with  the  guidelines  issued  by  the 
Euro-Mediterranean  Ministerial Conference. The Ministerial  Conference provided 
for by the Barcelona Conference  for  monitoring Euro-Mediterranean  cooperation 
must  coordinate  the  activities  of  the  Forum  with  the  other  bodies  set  up  for 
cooperation  at  Euro-Mediterranean  level  and  its  powers  must  fit  in  with  those 
conferred  on the Euro-Mediterranean  Monitoring  Committee  for  RTD. 

36. 

The  Commission  is  willing  to  provide  every  possible  assistance  for  effective 
operation  of  this  Forum.  However,  it  considers  that  in  any  partnership  all  the 
partners  must  take  their  share  of  the  responsibility  and,  accordingly,  will  make 

14 

€£MJÊ& 

arrangements with its partners for them to participate in the Forum  on acceptable 
terms. 

37. 

Since  the  energy  cooperation  must  involve  circles  outside  the  Forum,  whether 
financial  institutions, undertakings or trade unions, the Forum's rules of procedure 
will  have to allow  these  outside  partners to voice their views.  The Commission 
in turn will support all appropriate initiatives to facilitate collaboration by industry 
and the trade unions from  the north and south of the Mediterranean  in the Forum's 
work. 

(b) 

Tasks of the Forum 

38. 

The Forum's first task will  be to provide all  parties  concerned  with  a permanent 
framework  for dialogue and exchanges of information.  In this respect, it will have 
an important  role to play  in  ensuring better  mutual  understanding. 

But  the  Forum  must  also  add  a  regional  cooperation  dimension  to  project 
development  by  introducing  a  "Euro-Mediterranean  interest"  label  for  projects 
contributing  to this cooperation.  The Forum  could  award  this label  on the basis 
of  criteria  yet  to  be  decided.  These  would  give  priority  to  projects  submitted 
jointly  by  at  least  two  countries.  Such  a  label  would  allow  easier  access  to 
Community funding for these projects, while complying with the financial  and the 
selection  regulations. 

Finally, the Forum will have to draw up and publish a five-year action plan.  This 
action  plan  will  be  approved  by  every  member  of the Forum.  Every  two years 
the Forum  will  draw up and publish  an appraisal  of implementation  of the action 
plan  over the two previous years. 

(ii) 

Financial  resources 

39. 

Euro-Mediterranean  cooperation in the energy  sector must fit in with the existing 
financing  arrangements.  However,  in  order  to  make  better  use  of  the  limited 
resources  available,  the  Community  needs  to  develop  a  flexible  political  and 
economic  cooperation  strategy  in  an  attempt  to  make the Community's  interests 
compatible  with the interests  of its Mediterranean  partners. 

It  is  therefore  essential  to  find  appropriate  financial  mechanisms  to  attain  the 
energy objectives of the partnership and to contribute towards attaining its general 
objectives. 

(a) 

Financial and technical support measures  (MEDÂ) 

40. 

On  several  occasions  during the preparatory  process for  the  Euro-Mediterranean 
partnership,  it was proposed  that financial resources should  be made available: 

15 

at the Council meeting on energy on 1 June  1995 the Presidency asked the 
Commission  to  "assign  appropriate  financial  resources  to  the  objectives 
identified,  within the framework  of the financial  resources to be allocated 
by the European  Community to its framework  programme for  partnership 
with  the countries  of the Southern  and  Eastern  Mediterranean"; 

at a meeting in Madrid  on 20 November  1995, the Energy  Ministers  from 
Spain, France and Italy and representatives of the Mediterranean  partners, 
of the  European  Union  Member  States and  of the European  Commission 
declared that in order to promote energy projects,  appropriate  instruments 
should be introduced.  The introduction  of a specific  chapter on energy in 
MEDA  would  demonstrate  the  importance  which  Europe  attaches  to  the 
energy  sector  in the Mediterranean  region. 

MEDA is designed to support the Mediterranean partners' efforts  to improve their 
social  and  economic  structures  and  to  soften 
the  potential  social  and 
environmental  impact  of economic  development. 

41. 

In accordance with the objectives and procedures for MEDA, the Commission will 
facilitate  measures  to  coordinate  and  deal  with  energy  projects.  In  consultation 
with  the  Mediterranean  partners,  it  will  lay  down  the  specific  objectives  of 
cooperation  in  this  field  and  define  the  project  selection  criteria.  It  will  take 
account  of  the  Forum's  role  in  defining  the  broad  lines  of  action,  while 
maintaining  the  specific  procedures  laid  down  in  the  MEDA  Regulation. 
Consequently,  the justification  for  such  an  approach  in  MEDA  will  depend  on 
demonstrating the importance of these countries for the European  Union from  the 
energy  point  of  view  and  the  energy  challenges  created  by  the  population 
problems. 

42.  Without  calling into question  the bilateral  nature  of a large part of MEDA,  such 
an  integrated  approach  would  create  the  synergies  needed  between  the  various 
bilateral  types of cooperation.  In this way, MEDA will  develop energy  measures 
going beyond  simply attaining the energy policy objectives described in point 3.1 
and  also  contributing  to  other  more  general  objectives  such  as  environmental 
protection,  political  stability,  social  integration,  peace and  prosperity. 

(b) 

Fourth framework RTD programme 

43. 

The  participants  at  the  Barcelona  Conference  wished  to  promote  research  and 
development  and  tackle  the  problem  of  the  widening  gap  in  scientific 
performance,  taking  account  of the  principle  of  mutual  benefit.  To this  end,  the 
cooperation  will  focus  particularly  on: 

stepping  up  the  Mediterranean  countries'  own  research  capacity  and 
helping to train  scientific  and technical  staff by increasing participation in 
joint  research  projects; 

16 

participation  by  qualified  research 
institutes  and  higher  education 
establishments  in  the  European  and  Mediterranean  countries  in  joint 
research  projects  based  on  the  creation  of  scientific  networks  on  clearly 
defined  subjects. 

44. 

Against  this  background,  it  must  be  added  that  a  large  number  of  the  specific 
programmes under the Community's fourth  framework  research and technological 
development  programme,  particularly  the  programmes  on  the  environment  and 
technology,  health  and  society,  renewable  resources,  urban  development, 
information  technologies  and  communications  technologies,  allow  scientific  and 
technological  research  institutions from  the Mediterranean  partners to participate 
on  a  case  by  case  basis,  without  any  financial  contribution  from  the  specific 
programmes  concerned. 

45. 

The twelve Mediterranean  partners can  participate in the specific  programme on 
non-nuclear  energy  and  in the INCO programme, within the limits laid  down by 
the programmes. 

research  bodies  from  these  countries  can  be  associated  with  the  projects 
submitted  by  European  undertakings  in  the JOULE  programme,  without 
any financial contribution  from  the  programme.  This  programme  is thus 
an  instrument  for  implementing  projects  of  Euro-Mediterranean  interest, 
such  as the  INTERSUMED  project  bringing  together  energy  companies 
from  throughout  the Mediterranean  region  to  integrate  renewable  energy 
sources in the electricity  system  (joint  JOULE-INCO project); 

under  the  THERMIE  programme,  dissemination  schemes,  measures  to 
promote small firms and concerted action can accompany  projects on new 
energy  technologies  to  demonstrate  their  industrial  viability  at  the 
technological  feasibility  stage (excluding  all  commercial  considerations). 
These activities could be carried out in these countries without them being 
entitled  to participate; 

joint scientific  and technical research projects and support measures on the 
use of renewable  energy  sources, particularly  sustainable  management  of 
natural  resources, can be funded  by the INCO-DC program m e.(10) This has 
earmarked  ECU  3 million 
of  which 
ECU  1.34  million  will  be  for  funding  non-Union  countries  under  the 
JOULE  programme; 

non-nuclear 

energy, 

to 

research  on  the  energy  and  technology  prospects  in  the  Mediterranean 
region, particularly  analyses of the economic, financial  and environmental 
impact  of  energy  choices,  can  also be undertaken  in  these programmes 

(10) 

Part of the INCO programme intended for the developing countries. 

17 

(c) 

SYNERGY programme 

46. 

The  SYNERGY  programme  must  provide  a  means  of  putting  the  various 
cooperation  activities  in  a  consistent  framework,  by  helping  the  countries 
concerned  to  define  a  comprehensive  energy  policy. 
In  the  process,  the 
programme  must  support  the  preparatory  stages  for  defining  projects  for 
submission for MEDA funding  and encourage the partners to start activities. The 
SYNERGY programme could also provide support for  operation of the Forum in 
addition  to  the  support  from  MEDA.  The  division  of  labour  between  the  two 
programmes  must yet be decided. 

47. 

SYNERGY has already funded  training, planning and assistance activities with the 
Mediterranean  partners and has been allocated  ECU  9 million for  1996, of which 
one third  should  go towards  funding  activities  with  the  Mediterranean  partners 

If the Council  were to adopt the SYNERGY programme,  cooperation  with these 
countries  will  be  able  to  continue  on  a  multi-annual  basis,  involving  all  the 
Member  States in the activities. 

4. 

CONCLUSIONS 

48. 

On the  basis  of  the  areas  of  cooperation  in  the  energy  field  emerging  from  the 
Barcelona Conference, the lines along which the Commission intends to work are: 

establishment  of  a  Euro-Mediterranean  Energy  Forum  allowing  joint 
management  of  the  energy  cooperation,  by  establishing  a framework  for 
meetings  and  exchanges  of  information  between  the partners; 

initiation  of  consultations  with  the  Mediterranean  partners  on  their 
eventual  participation  in  the  work  of  the  European  Energy  Charter 
Conference,  if they  are not  already  members; 

study  on the options available or which  should  be developed  to  facilitate 
investment.  The  Commission  will  submit  a  report  containing  the 
appropriate  proposals to the European  Parliament  and the Council  in one 
year; 

cooperation  with 
the  partnership 
the  countries  concerned,  under 
agreements,  on the implementation  of projects  of common  interest  in the 
field  of  trans-European  networks,  taking  account  of  the  measures  to 
combat  climate change; 

facilitation  of  measures  to  coordinate  and  deal  with  energy  projects,  in 
accordance  with  the objectives  and  procedures  for  MEDA. 

18 

ISSN  0254-1475 

COM(96) 149 final 

DOCUMENTS 

EN 

12  11 

Catalogue number  : CB-CO-96-165-EN-C 

ISBN 92-78-02590-9 

Office  for Official  Publications  of the European Communities 

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