COMMUNICATION FROM THE COMMISSION TO THE COUNCIL AND THE EUROPEAN PARLIAMENT - THE EXTERNAL DIMENSION OF TRANS- EUROPEAN ENERGY NETWORKS
Date: 1997-03-26
Institutions: European Commission
Subjects: electrical energy, energy grid, management of resources, natural gas, security of supply, trans-European network

COMMISSION  OF THE EUROPEAN  COMMUNITIES 

Brussels,  26.03.1997 
COM(97)  125 final 

COMMUNICATION  FROM THE COMMISSION 
TO THE COUNCIL  AND THE EUROPEAN  PARLIAMENT 

THE EXTERNAL DIMENSION OF TRANS-EUROPEAN  ENERGY  NETWORKS 

THE  EXTERNAL  DIMENSION  OF TRANS-EUROPEAN  ENERGY 
NETWORKS 

CONTENTS 

A. 

EXECUTIVE  SUMMARY 

B. 

SITUATION  OF  ENERGY  INTERCONNECTIONS  WITH THIRD 
COUNTRIES 

1. 

Importance  of energy  interconnections  with third countries. 

2.  Situation of natural gas  interconnections  with third countries. 

3.  Situation of electricity  interconnections  with third countries. 

C. 

COMMUNITY  ACTIONS  FOR  IDENTIFYING AND  PROMOTING 
ENERGY  NETWORK  PROJECTS  IN THIRD  COUNTRIES 

4. 

Identification  of trans-European  energy  network  projects  of 
mutual  interest. 

5. 

Identification  of energy  network  projects  of regional  interest. 

6.  Other  Community  actions  of a political nature. 

7.  Community  actions of a financial nature. 

D. 

CONCLUSIONS 

ANNEXES 

I.  Electricity  network  projects  of mutual  interest  (list  and map). 

II.  Natural gas  network  projects  of mutual  interest  (list  and map). 

III.  Overview  of  possible  Community financial  interventions  for 
promoting  energy  policies  and energy  network  projects 
in third countries. 

THE EXTERNAL DIMENSION  OF TRANS-EUROPEAN  ENERGY  NETWORKS 

A.  EXECUTIVE SUMMARY 

The aim of this  Commission  Communication  is to  analyse the main elements to 
be  considered  regarding  natural  gas  and  electricity  interconnections  with  third 
countries  and the  development  of these  networks  on the scale  of the  European 
Continent, of the Mediterranean Basin and, where appropriate, of Central Asia and 
the Middle  East. 

Four main considerations  emerge from the Commission analysis: 

(i) 

(ii) 

(iii) 

(iv) 

there is a good initial level of energy interconnection with third countries of 
Europe  and  of  the  Mediterranean  Basin,  but with  some  missing  links,  in 
particular with the  Balkan and Baltic regions; 

identification of trans-European energy network projects of mutual  interest 
is  well  advanced  under  the  Community  Guidelines  for  the  TENs  in  the 
energy  sector;  28 such projects, each one  involving both Community  and 
non-Community  countries, have been  identified so far; 

identification  of  energy  network  projects  of  regional  interest  in  the  third 
countries concerned has started; however, this is a longer-term cooperation 
process  which  the  Community  will  continue  to  support,  under  the 
SYNERGY energy  policy programme and the PHARE, TACIS and MEDA 
assistance  programmes; 

the framework is in place for Community actions of a political nature for the 
implementation of trans-European and regional energy network projects in 
the  third  countries  concerned  (EC  Treaty,  TEN  Guidelines,  European 
Energy  Charter,  Association  Agreements)  and for  the  implementation  of 
coherent energy policies in these countries (through the SYNERGY and the 
PHARE, TACIS  and MEDA  programmes); 

the  Communitv  financial  intervention  mechanisms  are  also  in  place  for 
supporting  i) the studies  related to TEN mutual interest  projects  (aid from 
the  TEN  energy  budget  line),  ii)  the  studies  related  to  regional  energy 
network  projects  in  the  third  countries  concerned  (aid  from  the  PHARE, 
TACIS  and MEDA  programmes)  and  iii)  in specific cases, the  investment 
related  to  the  above  projects  in  the  third  countries  concerned  (aid  from 
PHARE and  loans from the EIB). 

As  a  general  conclusion,  the  Commission  commits  itself  to  making  use  of  the 
available guidelines, political and financial instruments, where needed, in order to 
support the development of trans-European and regional energy network projects 
in the third countries concerned and their interconnection with the networks of the 
Community.  The  interconnection  of  energy  networks  on  a  wider  scale  will 
effectively  contribute to  improving the security of energy supplies, economic and 
social  cohesion  and  the functioning  of the  internal  market;  it will  also  serve  the 
competitivity,  environmental  protection,  enlargement  and  external  cooperation 
objectives of the  Community. 

B.  SITUATION OF ENERGY INTERCONNECTIONS WITH THIRD COUNTRIES 

1. 

Importance of energy  interconnections with third countries 

The  pursuit  of  the  integration  of  infrastructures  for  the  transmission  of 
electricity  and natural gas within the  Community  is necessarily  accompanied 
by the  development  of  connections  with  third  countries.  These  connections 
respond  both  to  developments  in  economic  trade  and  to  the  need  to 
strengthen  security  of  energy  supply  (diversification  of  sources  and  supply 
routes).  Further considerations  are the improvement of economic  and social 
cohesion, leading to better prospects for political stability and peace, and the 
functioning  of the  internal market  in an enlarged  Community. 

To a greater  extent than in the transport  and telecommunication  sectors, the 
integration of the energy networks  in the Community cannot  be conceived of 
independently  from  the question of external  interconnections. 

The integration of natural gas networks in the Community cannot be conceived 
of  independently  from  the  question  of  external  interconnections,  since  the 
principal reserves are outside the Community  and have to be connected with 
the networks  inside the  Community. 

External  electricity  interconnections  allow  greater  economic  efficiency  and 
improved security  of  supply. 

Although the focus  of this  Communication will be on those projects  having a 
trans-European dimension and which are of mutual interest to the Community 
and  the  third  countries  concerned,  reference  will  be  made  also  to  projects 
having a more regional dimension, being of interest to two or more among the 
third countries concerned. 

In the  matter  of  energy  networks,  the  Commission  constantly  bears  in mind 
the need to seek solutions which respect the environment, on the basis of the 
assessment  of the  environmental  impact of the projects. 

2.  Situation of natural gas interconnections with third countries 

The security  of supply  issue 

Development of natural gas networks is taking place against a background 
of  increasing  demand and market  share for  natural gas  in virtually  all EU 
Member States: for the EU as a whole,  it is expected to grow from  around 
20%  of today's energy  balance to around 26% in 2010. At the same time, 
as indigenous EU gas production declines, so dependence on imports from 
third countries is likely to rise significantly from almost 40% today to around 
60%  by 2010,  and possibly  as high as 75% by 2020. 

The October  1995 Commission Communication on "European Community 
Gas Supply and Prospects"1 had, as objectives, the discussion of the future 
direction  of the gas  sector  in the  EC, and the examination  of the  issue of 
security  of supply and what  should be done  at EC level to enhance  it well 
into  the  next  century.  Among  the  Communication's  conclusions  was  that 
both  the  interconnection  of  the  EC  gas  systems  and  the  establishing  of 
connections with certain countries outside the  EC would be crucial for the 
maintenance of security of supply for the EC. It was pointed out that some 
of the strategic interconnections were already identified as common interest 
projects  under  the  Guidelines  for  the  Trans-European  Energy  Networks2, 
and that the extension of the  present  list to  include some of the "missing" 
pipeline links and storage projects identified in the Communication, including 
the  needs of the most vulnerable Member States, would help to bolster EC 
security  of  supply.  In  its  conclusions  on  the  above  Communication,  the 
Energy  Council meeting of 7 May  1996 confirmed that there  is a need for 
further  development  and  interconnection  of  gas  networks  inside  the 
Community  and  outside  with  external  suppliers  and  that  this  will  require 
substantial  investments. 

Current  situation 

The current situation of the natural gas interconnections of the  Community 
with third countries  appears as follows: 

(i) 

gas  pipelines  connecting  the  Russian  gas  resources  to  several 
Community Member States already transit via other C.I.S. countries 
(Ukraine,  Belarus,  Moldavia)  and  via  several  Central  and  Eastern 
European  countries  (Poland,  Slovakia,  Czech  Republic,  Romania, 
Bulgaria); 

i 

COM (95) 478 final of  18 October 1995. 
OJ EC N'  L161 of 29.06.1996 

(ii) 

Algerian gas is delivered to Italy via Tunisia (through the Trans-Med 
pipeline)  and to  Spain and  Portugal via  Morocco  (through the  new 
Maghreb-Europe  pipeline). Algerian gas  is also transferred  by ship 
to  several  LNG  terminals  located  in  Belgium,  France,  Italy  and 
Spain; 

(iii) 

three  submarine  gas  pipelines  connect  the  Norwegian  gasfields of 
the  North  Sea with the  North-West  of the  European continent,  and 
a fourth with the  United Kingdom. 

Future  challenges 

For the Community  and in the context of a widening external dependence, 
future development of gas networks should seek to maintain a high level of 
diversification  of  external  gas  supplies,  from  existing  and  possible  new 
supplier  countries,  to  improve  flexibility  of  gas  transfers  within  the 
Community  and  to  increase  underground  storage.  For  the  medium-term, 
investment plans of the gas companies would give priority to increasing gas 
imports  from  each  one  of  the  existing  suppliers.  For  the  longer  term, 
however, the gas companies are also investigating the possibilities of new 
gas supplies  (through  pipelines  or  LNG facilities). 
In this context, the emergence of Central Asia and the Caspian Basin as a 
new  oil  and  gas  producing  region  with  significant  export  potential  to  the 
European  market  should  be  taken  fully  into  consideration.  Providing  that 
technical/economic feasibility and environmental issues are respected, new 
East-West transmission networks might be developed between the Caspian 
Sea area  and Europe. 
The widening of the gas supply possibilities would be justified by EC's need 
to  diversify  its  supplies  and  to  create  a  climate  of  competition  between 
present  and  potential  future  suppliers,  among  them  the  C.I.S.  countries 
(Russia, Turkmenistan, Kazakhstan and Uzbekistan), those surrounding the 
European  Community  (Algeria,  Norway and  in the future possibly  Iran) as 
well  as  other  more  distant  (LNG)  suppliers  from  the  Middle  East  (Qatar), 
Western Africa  (Nigeria)  and  Latin America. 

For Central and Eastern European countries which generally depend on one 
external gas supplier (Russia), the challenges of the future development of 
gas networks are connected above all with the need to improve security of 
supply together with the search for diversification of supply. Typical projects 
in  these  countries  would  be  interconnection  with  Western  European 
countries, creation of underground storage capacity and participation in the 
new  supply  gas  pipeline  projects.  As  several  of  these  countries  are 
candidates for  accession to the  European  Union, the  security  of their  gas 
supply will become  a Community  issue when they join the  E.U. 

For those  Mediterranean  Basin third countries which  have  little or  no gas 
production  potential,  the  challenge  will  be  to  take  part  in  regional  gas 
transmission  projects,  in  order  to  gain  access  to  gas  produced  in 
neighbouring  countries  of the same region or  in neighbouring  regions. 

3.  Situation of electricity  interconnections with third countries. 

•  Current  situation 

As  regards  electricity  networks,  the  CENTREL  system  (Poland,  Czech 
Republic, Slovakia, Hungary) was connected synchronously to the UCPTE 
system at the end of 1995. The resulting interconnected network, known as 
TESIS (Irans European Synchronously interconnected System) now covers 
most of mainland Europe, from Portugal to Poland and from the continental 
part  of  Denmark  to  Italy.  Since  October  1996,  a  portion  of  the  Ukrainian 
network has been operating within TESIS, on a trial basis. Although Greece 
is a  member  of  the  UCPTE  organisation,  its  connection  with  the  UCPTE 
network  has  been  interrupted  since  the  beginning  of  the  war  in  former 
Yugoslavia. 

Switzerland  is fully  integrated  into  the  UCPTE  network,  of  which  it  is  an 
active  partner,  with  most  exchanges  between  Germany,  France  and  Italy 
taking place through her  grid. 

Slovenia  has  been connected to the  UCPTE  network  since  1975, when  it 
was still part of former  Yugoslavia,  and now as a member. 

Norway is part of the NORDEL interconnected network, with the insular part 
of  Denmark,  Sweden and Finland. The NORDEL network is connected to 
the  UCPTE  network  through  six  HV  DC  submarine  cables  (two  between 
Norway  and  continental  Denmark,  two  between  Sweden  and  continental 
Denmark, one between Sweden and Germany and one between Denmark 
and Germany). 
The NORDEL network is also connected to the Russian electricity network, 
through  an HV AC/DC/AC  conversion  station located  in the  St  Petersburg 
area,  near the  Finno-Russian  border. 

•  Future  challenges 

The  Balkan  countries  are  not  connected  to  the  UCPTE  network.  Their 
connection 
is  the  subject  of  studies  which  would  recommend  the 
preparatory measures and steps needed, for each country concerned. There 
is however  an interconnected system on a regional scale, which functions 
between  Albania,  Bulgaria,  Greece  and  a  part  of  the  network  of  former 
Yugoslavia. 

The  Baltic  States  are  not  interconnected  to  the  NORDEL  or  to  the 
CENTREL/UCPTE systems. Their interconnection is the subject of ongoing 
studies  in the context  of the "Baltic ring electricity  project". 

Following  the  interconnection  of  the  CENTREL  system  to  the  UCPTE 
network, the interconnections which previously existed with the countries of 
the  CIS  have  been  temporarily  interrupted.  Their  use  raises  broader 
problems  (how to interconnect  and how far?) which need to be answered. 
Several  studies  are  under  way  or  are  foreseen,  covering 
the  basic 
assumptions (synchronous connection or through DC lines and conversion 
stations)  and  the  technical  installations  which  will  be  necessary  to  allow 
exchanges  of  electricity  between  the  countries  of  Western,  Central  and 
Balkan  Europe  on the one  hand, and  Eastern  European  countries  on the 
other. 

The Mediterranean countries are not connected to the UCPTE network but 
projects are in hand (Spain-Morocco) or anticipated (Greece-Turkey) which 
will  result  in establishing  the first  electricity  links  between the  Community 
and the countries  of the Western  and Eastern parts  of the  Mediterranean 
Basin. 

C.  COMMUNITY  ACTIONS  FOR  IDENTIFYING  AND  PROMOTING  ENERGY 

NETWORK  PROJECTS  IN THIRD  COUNTRIES 

4.  Identification  of  trans-European  energy  network  projects  of  mutual 

interest 

•  The TEN  guidelines 

The guidelines  on trans-European  networks  (TEN) for the energy  sector3, 
adopted  in  June  1996,  establish  priorities  and  lines  of  action  for  the 
Community  and  identify  projects of common  interest. 

These  priorities  explicitly  recognise  the  importance  of  the  external 
dimension,  and  include,  for  electricity  networks  and  for  natural  gas 
networks,  respectively: 

"the development of interconnections with the third countries in Europe and 
the Mediterranean  region which contribute to  improving  the  reliability  and 
security  of  the  Community's  electricity  networks  or  to  supplying  the 
Community with electricity" and 

OJECNoL  161 of 29.06.96. 

8 

"increasing the transmission (gas delivery pipelines), reception (LNG)  and 
storage capacities needed to satisfy  demand, and diversification of supply 
sources  and routes for  natural gas". 

In accordance with these  priorities, the  list of projects  of common  interest 
identified by the guidelines  already  comprises  a series  of projects  located 
partly  on  the  territory  of  third  countries.  The  current  list  of  the  guidelines 
contains,  however,  only  the  most  mature  projects.  But  other  projects  are 
already in preparation and the most advanced among these latter are now 
the subject  of a new Commission proposal4, with a view to  supplementing 
the  current  list.  The  extended  list  of  current  and  new  common  interest 
projects  represents  an  important  stage  in the  exercise  of  identification  of 
trans-European  energy  network  projects. 

The TEN projects  of mutual  interest 

This  extended  list  contains,  among  other  projects,  twenty-eight  projects 
which  are at the  same time  of  interest for  the  Community  and for  one or 
more third countries. TEN projects such as these, involving both Community 
and non-Community  countries, will be referred to hereafter  as projects of 
mutual interest. 

A list of these  mutual  interest  projects  is annexed; it contains: 

(i) 

11 electrical network  projects  of mutual interest, of which: 

•  2  interconnection  projects for the Mediterranean area; 
•  4  interconnection  projects for  Mainland Europe; 

•  5 interconnection  projects for  Northern  Europe, and 

(ii) 

17 natural gas network  projects  of mutual interest, of which: 

•  2 pipeline  projects on the Mediterranean axis; 
•  8 pipeline  projects on the  East  European axis; 
•  2 pipeline  projects on the  North European axis; 
•  5 LNG reception terminals. 

Twelve of these twenty-eight  mutual interest  projects  involve one or  more 
third country candidates for accession to the European Union. Six of these 
twenty-eight  mutual  interest  projects  involve  a  Member  State  of  the 
European  Economic Area. 

4  COM (96) 390 final, of 24.07.96  and Council common position of 28.01.97. 

9 

5.  Identification of  energy  network  projects  of regional  interest 

Further to the  identification of TEN projects of mutual interest, there is also a 
need  to  identify  energy  network  projects  of  interest  specific  to  the  third 
countries  concerned, referred to hereafter  as projects of regional  interest. 
Such  identification  requires  a  particular  exercise  of  cooperation  and  of 
coordination among the third countries concerned and with the Community, for 
which  the  SYNERGY  energy  policy  programme  and  the  energy  "sub-
programmes" of the PHARE, TACIS and MEDA assistance  programmes are 
and will be efficient  instruments. 

For the Central and Eastern European countries  (including the  Baltic States) 
and the  C.I.S..  the  PHARE  and TACIS  programmes  are  contributing  to  the 
identification of energy  network  projects of  regional interest, through  studies 
such as the "Gas Interconnection Study" or the "Study of the Interface between 
the  Extended West-European  Power  System  and  Its Eastern  Neighbours". 

The  Commission  has  organised, among  others, two  major events  under the 
SYNERGY  programme:  a  conference  in  Budapest  ("East-West  Gas  and 
Electricity  Interconnections",  October  1994) and a workshop in Bratislava (on 
"Trans-border  co-operation in the Natural Gas Sector  in Europe", April 1996) 
which have dealt with the  subject  of energy  interconnections  in the area. 
It should  be  noted  in particular  that,  following  the  Bratislava  conference,  an 
EU-CEEC Gas Experts Contact Group was set up which among other  issues 
will deal with the Trans-European  Networks for gas,  including tasks  such as 
the identification of interconnection requirements and priorities. This group had 
its first  meeting  in October  1996 in Brussels. 
Moreover,  the electricity  undertakings  of the countries around the Baltic Sea 
have initiated cooperation among themselves, in the framework of the "Baltic 
ring electricity  project" studies. 
The Commission has started a coordinated exercise in the case of the Balkan 
area  by  creating,  within  the  Black  Sea  Regional  Energy  Centre  (located  in 
Sofia), a task force on "Balkan Interconnections", supported in the framework 
of the SYNERGY programme. The idea of such a task force was launched at 
the  Thessaloniki  conference  on  Balkan  energy  interconnections  (October 
1995).  The  task  force  held  its  inaugural  meeting  in  September  1996  in 
Brussels  and  agreed  to  work  on the  basis  of  a one-year  programme  under 
which it will collect data and evaluate projects by the end of 1997, with a view 
to establishing  priorities. 

The  Commission  is  supporting  a  coordinated  approach,  under 
the  TACIS 
Inter-State Oil and Gas Pipeline Programme (INOGATE), to the development 
of regional and trans-European  pipeline  infrastructure  in the CIS. 

10 

For the  Mediterranean  Basin countries,  several conferences  have  laid down 
the basis for further cooperation on energy matters, including network projects. 
At the Trieste conference (June 1996) a special Energy Forum was instituted 
to structure energy cooperation, including on the subject of energy networks. 
Moreover,  in  1995  the  electricity  companies  from  the  countries  of  the 
Mediterranean  Basin  (from  Community  Member  States  and  from  third 
countries)  formed  the  SYSTMED  study  group  in  order  to  collect  data  and 
evaluate  projects  with  a  view  to  interconnecting  all the  countries  round  the 
Mediterranean. 

For those third countries which are candidates for accession to the European 
Union, most of the projects of regional interest that will be identified under this 
exercise  would  qualify  for  becoming  TEN  common  interest  projects,  once 
accession  is effective. 

6.  Other Community  actions of a political  nature 

Beyond its essential contribution to the identification of projects of mutual and 
regional interest, the Community will continue to encourage the interconnection 
of energy networks on the scale of the European continent by other actions of 
a political nature, aiming at protecting investment and establishing the right of 
transit,  securing  political  support  for  individual  mutual  interest  projects  and 
implementing coherent  energy policies. 

•  Energy  Charter  Treaty 

Effective implementation of the Energy Charter Treaty (ECT) will contribute 
to  securing  energy  investment  in  the  signatory  third  countries  and 
establishing the  right  of transit  on networks  across these  countries. 
Following the signing of the Energy Charter Treaty and the Energy Charter 
Protocol  on  energy  efficiency  and  related  environmental  aspects  on  17 
December 1994, the process of ratification by the European Community and 
the  Member  States  is  ongoing.  Ratification  by  at  least  30  countries  is 
necessary for the Treaty to enter  into force; meanwhile, the Treaty will be 
applied by most  of the contracting  parties on a provisional basis. 
Negotiations  have  started for defining the "rules of the game" for the pre-
investment phase of projects. 
Preliminary  steps  are  also  being taken  by the  Secretariat  of the  Charter, 
with  Commission  support,  in order  to  have  more third  countries  from  the 
Mediterannean  Basin signing the Charter  as associated  Members. 

11 

•  Securing  political  support  for trans-European  mutual  interest  projects 

The  Treaty  establishing  the  European  Community  (Article  129  (c)  para  3) 
enables the Community to co-operate with third countries for the promotion 
of  projects  of  common  interest  and  to  ensure  the  interoperability  of 
networks.  In  this  context,  the  guidelines  for  the  trans-European  energy 
networks  (Art 6,  para  7)  provide that,  "where  parts of  projects  of  common 
interest  are  situated within the territory  of third  countries, the  Commission 
may,  by  agreement  with  the  Member  States  concerned,  put  forward 
proposals (...)  for the projects also to be recognised as of reciprocal interest 
by the third countries concerned, in order to facilitate their implementation". 
If a  problem  arose  for  one  or  other  of the  projects  of  mutual  interest,  the 
Commission  could  start  this  procedure  without  delay. 

The  question  of 
interconnections,  and  more  generally  of  energy 
infrastructures,  appears  among the topics of common  interest  identified in 
the  Association.  Partnership  and  Cooperation  or  Trade  and  Cooperation 
Agreements concluded with the majority of the third countries mentioned in 
this communication.  These  agreements  can therefore  serve,  if necessary, 
as  a  legal  basis for the  development  of specific  initiatives. 

• 

Implementation  of coherent  energy  policies 

(including 

their  environmental  and 

The restructuring of the energy sectors and the progressive  implementation 
of coherent  energy  policies by the third countries concerned, most of them 
experiencing  low  levels  of  energy  efficiency  in  their  economies  and  high 
levels  of  external  dependency  for  their  energy  supplies,  is  also  a  factor 
contributing to the sound development  of energy network projects.  Indeed, 
energy  policy  measures 
fiscal 
dimensions)  promoting  the  rational  use  of  all  energy  products  should  be 
adopted.  Moreover,  tariffs  should  progressively  at  least  cover  the  cost  of 
supplying  energy  products  (source/border  price  plus  transmission  and 
distribution  cost).  In such a  context,  energy  network  companies  operating 
in third  countries  concerned  will  be  able  to  generate  cash  flow for  paying 
investment 
running  costs,  maintenance  work  and  a  share  of  their 
programmes. However, progress towards more coherent energy policies will 
also depend on the pace at which the third countries concerned achieve the 
global  restructuring  of their  economies. 
The  "Oil  and  Gas  Pipeline  Initiative",  funded  under  the  TACIS  Inter-State 
Pipeline  Programme  (INOGATE),  is worth mentioning  in the same context, 
of the  implementation  of  coherent  energy  policies  in a  group  of  countries 
where  development  of pipeline  infrastructure  remains  a  key  issue. 

12 

7.  Community actions of a financial nature 

The  European  Community  has  already  put  in  place  a  set  of  financial 
intervention  mechanisms,  through  its  programmes  and financial  institutions, 
which  can  be  mobilised  in  favour  of  energy  network  projects  in  the  third 
countries concerned. The aim is to create the required energy policy  context 
and to support these projects financially at the stage of  feasibility studies and, 
where  appropriate,  at  the  stage  of  capital  investment,  supplementing  the 
operators' own funds. 

•  Supporting the  implementation  of coherent  energy  policies 

including  those  which  favour 

The  SYNERGY  energy  policy  programme  allows  the  Community  to 
cooperate  with  third  countries  in  the  development  of  coherent  energy 
policies, 
the  development  of  energy 
interconnections  and  networks.  Among  other  actions,  most  of  the 
conferences  and  workshops  on  East-West,  Balkan  and  Mediteranean 
energy  interconnections  referred  to  in  section  5  above,  as  well  as  the 
Balkan Task  Force, have been financially  supported under the  SYNERGY 
programme. 
The PHARE and TACIS programmes are  also supporting actions favouring 
the restructuring of the energy sectors \n the third countries concerned and 
the MEDA  programme  might  do so  in the future, 
Comparable  activities  could  be  proposed  in the  framework  of  the  "Lomé 
Convention",  Article  107  which  provides  for  the  encouragement  of 
cooperation  between ACP  countries  in the  energy  sector,  in particular  for 
the extension of electricity networks between ACP countries, as wei! as for 
cooperation between these countries and adjacent countries benefiting from 
Community financial  support  (e.g. Algeria  and Morocco). 

•  Financing  studies for  energy  network  projects 

The  specific  financial  resources  assigned  to  the  trans-European  energy 
networks  (the  TEN-Energy  budget  line)  can  be  mobilised  for  the  co-
financing  of  the  feasibility  and  other  studies  relating  to  the  projects  of 
common interest identified by the guidelines for the trans-European energy 
networks.  In  the  case  of  trans-European  mutual  interest  projects,  this 
possibility is also open for the study of the parts of these projects which are 
located on the territory of third countries; such a possibility has already been 
used by the Commission in its 1995 and 1996 decisions for financial support 
to studies for TEN projects. 

13 

In the case of energy network projects of regional interest, (co)financing of 
feasibility  and  other  studies  should  call  on  resources  from  the  available 
assistance  programmes  (PHARE.  TACIS.  MEDA).  In  fact  a  number  of 
studies  have  already  been  financed  by  PHARE  (e.g.  the  "Gas 
Interconnection  Study"  (1995)  and  the  "Baltic  Gas  Study"  (1996))  and 
TACIS.  Such financing is expected to continue where required. 

Financing investment for energy network projects 

In  the  Community,  economically  viable  energy  network  projects  do not 
encounter  insurmountable  problems  of  financing.  They  are  generally 
profitable  projects -  energy  companies  are  able to recover  costs through 
tariffs - which can gather private financing  in addition to the operators' own 
resources.  In  these  circumstances,  investment  subsidies  are  limited  to 
assistance  for  structural  purposes  (mainly  by  the  European  Regional 
Development Fund). When solicited, Community lending instruments (mainly 
the EIB) may also intervene to supplement the financing  of some energy 
network projects. These are the "rules of the game" in the Community. 

In  line with  the  pre-accession  strategy,  similar  conditions  should prevail, 
progressively,  and comparable  financial  instruments  should  gradually  be 
made available for the financing of investments relating to energy network 
projects in the candidate third countries of Central and Eastern Europe and 
of the Mediterranean Basin.  In fact, as agreed at the Copenhagen Summit 
(in June 1993) and confirmed since then, a proportion up to 25% of the total 
PHARE funding may be allocated in the form of aid to the financing of TEN 
projects, to the extent that these  projects are  given a high priority by the 
Community and the third country(ies)  concerned. Trans-European mutual 
interest projects and the regional interest projects which would emerge from 
the  concertation  structures,  as  described  in  section  5  above,  should  be 
considered as good candidates for receiving such financial assistance for 
the investment,  if needed. 

The lending instruments (mainly the EIB) are also in place. They should be 
able to take  into consideration, according to their intervention criteria and 
where appropriate acting in concert with other international financial bodies 
(for example the EBRD and the World Bank), investment projects for energy 
networks in the third countries concerned. 

14 

Loan guarantees from the European  Investment  Fund (EIF) could also be 
made available for such projects, provided they contribute to the pursuit of 
Community  objectives,  and only  in the case  of cross-border  projects  with 
adjacent  countries. 

An  overview  table  of  the  above  possibilities  for  Community  financial 
intervention  is annexed. 

D.  Conclusions 

The  above  examination  of  the  external  dimension  of  the  energy  networks 
allows the following considerations to be stated: 

a) 

b) 

The current situation of energy interconnections between the Community 
and  the  third  countries  of  Central  and  Eastern  Europe  and  of  the 
Mediterranean  Basin  shows  a  good  level  of  interconnection,  with  the 
exception  of  electricity  interconnections  with  the  Mediterranean  Basin 
and electricity and natural gas interconnections with the Balkan and the 
Baltic  regions.  Increased  imports  of  natural  gas  and  exchanges  of 
electricity  are  anticipated  in  Europe  and  a  series  of  energy  network 
projects  have been proposed. 

The  identification  of trans-European  projects  of  mutual  interest  is well 
advanced  : 28  such  projects  have  been  identified  (see  list  in annex). 
Among these, several natural gas projects are under construction, some 
being very  near to completion, and one  major  natural gas  project  (the 
Algeria  -  Morocco  -  Spain  pipeline)  having  just  been  completed. 
Electricity networks projects are in general less advanced, most of them 
being  at  the  studies  or  authorisations  stages.  For  all  these  projects, 
information on progress  is given in the annex. 

Steps have been initiated by the Commission in order to put in place the 
collaborative  structures  which  will  lead to  the  identification  of  regional 
interest  projects  for  the  main  regions/areas  concerned  in  Central  and 
Eastern  Europe and in the Mediterranean Basin. 

15 

c) 

The  financing of feasibility and other studies relating to trans-European 
projects of mutual interest can be taken into consideration by the TEN-
Energy  programme  to the  extent  the  projects  proposed to be studied 
have  clear  implications  for  the  electricity  and  gas  supply  of  the 
Community. 

Studies relating to energy network projects of regional interest can call 
on the PHARE-TACIS-MEDA assistance programmes. 

d)  As  regards financing  the  investment  of  projects  in the  third countries 
concerned, the mobilisation of the operators' own resources and of other 
sources  of  private  financing  would  be  systematically  sought.  The 
Community  will  be  able  to  intervene,  where  necessary,  by  specific 
assistance (as in the case of the PHARE programme), by loans (EIB) or 
loan  guarantees  (EIF)  insofar  as  projects  meet  the criteria  specific to 
these financial instruments or institutions and are also given high priority 
by the third countries concerned. Other financial institutions such as the 
EBRD and the World Bank may also contribute to such investment. 

From  its  analysis  of  the  external  dimension  of  the  energy  networks,  the 
Commission draws the five following conclusions: 

e) 

The  Community  should  continue  supporting  the  implementation  of 
coherent energy  policies in the third countries concerned (through the 
SYNERGY energy policy programme and the PHARE, TACIS and MEDA 
assistance programmes) which is an essential condition for the rational 
development  of energy networks. 

f)  Where required, the Commission will be ready to take all accompanying 
political  initiatives  within  the  appropriate  framework  (Energy  Charter 
Treaty, EC Treaty, TEN Guidelines, Association and other Agreements) 
to  establish  a  more  favourable  context  for  the  realisation  of  energy 
network projects of mutual (trans-European) and regional interest in the 
third countries concerned. 

g) 

The Commission will continue to make use of the available Community 
programmes  in order  to  support  the  development  of  energy  network 
projects in the third countries concerned.  In particular: 

16 

Co-financing of studies related to energy network projects may, where 
appropriate, be provided from the TEN budget line, in the case of  trans-
European  mutual  interest  projects,  and from  the  PHARE, TACIS  and 
MEDA programmes in the case of regional interest projects. 

Co-financino  of  investment  related  to  energy  network  projects  may, 
where  appropriate,  be  provided  in the  form  of  aid for  projects  to  be 
implemented in the third countries which are candidate for accession to 
the European Union (e.g. under the PHARE programme). 

h)  Where  appropriate  and  according  to  the  rules  specific  to  each 
instrument,  the  Commission  would  recommend  the  use  of  other 
Community  financial  instruments  (EIB  loans  and  EIF  guarantees)  in 
favour  of  energy  network  projects  of  mutual  (trans-European)  and 
regional interest  to be implemented in the third countries concerned. 

i) 

The Commission invites the Authorities of the Member States and of the 
third countries concerned to collaborate closely and to mobilise in order 
to develop and interconnect energy networks on a wider scale, with the 
aim  of  improving  security  of  energy  supply,  economic  and  social 
cohesion and the functioning of the internal market and contributing to 
the  competitivity,  environmental  protection,  enlargement  and  external 
cooperation objectives of the Community. 

17 

ANNEX  I 

THE EXTERNAL DIMENSION OF TRANS-EUROPEAN  ENERGY  NETWORKS 

I.  LIST OF ELECTRICITY NETWORK  PROJECTS OF MUTUAL INTEREST 

The development of electricity connections of the Community with third countries 
concerns  three  areas:  the  Mediterranean  area,  mainland  Europe  and  Northern 
Europe. 

Mediterranean area 

d9  Greece-Turkey  (*): 

connections  between  the  two  countries  through 

North-eastern Greece. 

First section (in Greece): under construction. 

connection  by  submarine  cable  between  Southern 
Spain and the Moroccan  network. 
Under construction. 

d13 Spain-Morocco (*): 

Mainland Europe 

d2  Germany-Poland (**):  strengthening  of  connections  between  the  two 

countries. 

Feasibility studies. 

d5 

Italy-Switzerland  (*): 

strengthening  connections  between  Northern  Italy 
and Switzerland. 
First  line: under construction. 
Second line: authorisation  procedures. 

d8  Greece-Balkan  countries  (**): 

strengthening of connections between Greece and, 
respectively,  Albania,  Bulgaria  and  ex-Yugoslavia, 
including the  restoration  of the connection with the 
North of ex-Yugoslavia  and the  UCPTE  network. 

Feasibility  studies. 

d16  EU-Belarus-Russia-Ukraine (**): 

development  of connections  and interface  between 
the (extended)  UCPTE network and the networks of 
third  countries  in  Eastern  Europe,  including  the 
relocation  of 
the  HV  DC  conversion  stations 
operating previously between Austria and Hungary, 
Austria  and the  Czech  Republic  and Germany  and 
the  Czech  Republic. 

Interface  study and feasibility  studies. 

Northern Europe 

d3  Germany-Norway  (*):  connection  by  submarine  cable  between  Northern 
and  Southern  Norway 

(UCPTE) 

Germany 
(NORDEL). 

Authorisation  procedures. 

d10  United Kingdom-Norway  (*): 

connection  by  submarine  cable  between  North 
eastern/Eastern  England  and  Southern  Norway 
(NORDEL). 

Feasibility  studies. 

d11  Netherlands-Norway  (*): 

by 

between 
submarine 
connection 
North-eastern  Netherlands  (UCPTE)  and  Southern 
Norway  (NORDEL). 

cable 

Feasibility  studies and seabed survey. 

d14  Baltic Ring: Germany-Poland-Russia-Estonia-Latvia-Lithuania-Sweden-

Finland-Denmark-Belarus (*). 

strengthening and developing connections between 
the  networks  of  these  countries  by  overhead  lines 
and/or submarine cables. 

Feasibility  studies. 

(*)  Project  of common  interest  identified by the Guidelines  on TEN-Energy. 
(**)  Project proposed by the  Commission as being of common  interest  (see 

COM (96) 390). 

13 

d15  Sweden-Norway  (**):  strengthening  of  the  connections  between  the  two 

countries. 

Feasibility  studies and authorisation  procedures. 

(**)  Project  proposed  by the Commission as being of common  interest  (see 

COM (96) 390). 

2o 

THE EXTERNAL  DIMENSION  OF TRANS-EUROPEAN  ENERGY  NETWORKS 

II.  MAP OF ELECTRICITY  NETWORK  PROJECTS OF MUTUAL  INTEREST 

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THE EXTERNAL  DIMENSION  OF TRANS-EUROPEAN  ENERGY  NEPWORKS 

ANNEX II 

I. 

LIST OF NATURAL GAS NETWORK PROJECTS OF MUTUAL INTEREST 

The development of natural gas pipeline connections of the Community with third 
countries  is  made  along  three  axes  (Mediterranean,  East-European,  North-
European)  which  correspond  to  the  three  principal  external  production  areas 
(Algeria,  Russia,  Norway)  on  which  its  supplies  depend.  The  development  of 
liquified  natural  gas  (LNG)  reception  capacities  is  another  way  of  linking  the 
Community with external  production areas. 

Mediterranean axis 

h4  Algeria-Spain-Portugal-France (*): 

construction of new gas pipelines to allow Spain and 
Portugal initially, and subsequently France and other 
countries, to be supplied from Algeria via Morocco. 

Algeria - Morocco - Spain (up to Cordoba) pipeline: 
in operation since  November  1996. 
Extensions  to  the  North-East  and  the  North-West: 
feasibility  studies and authorisation  procedures. 

h5  Algeria-Tunisia-Italy (*): 

strengthening of the transport capacity of the trans-
Mediterranean  gas  pipeline  to  Italy  from  Algerian 
resources. 

First pipeline:  in operation for  several years. 
Second pipeline: construction  near completion. 

East-European  Axis 

f9  Austria-Hungary  (**):  connection  between 

the  networks  of  the 

two 

countries. 

First pipeline  : in operation since  1996. 
Second pipeline  : feasibility  studies. 

2Z. 

f10  Austria-Slovakia  (**):  connection  of  Austria  to  underground  storage 

capacity  in Slovakia. 

Construction near completion. 

f12  Greece-Albania  (**):  connection  between 

the  networks  of 

the 

two 

countries. 

Feasibility  studies. 

h6  Russia-Ukraine-UE  (*): 

increasing transport capacity to the European Union 
from  Russian  resources  via the  main existing axis, 
through Ukraine, Slovakia and the Czech Republic. 
Pipeline system  in operation for  several years. 
Upgrading  investment will be needed. 

h7  Russia-Belarus-Poland-EU (*): 

creation  of  a  second  transport  axis  from  Russian 
resources  to  the  European  Union  via  Belarus  and 
Poland. 

Eastern  Germany  -  Western  Poland  section:  in 
operation since  1996. 
Other sections: authorisation procedures and under 
construction. 

h11  Bulgaria-Greece  (*): 

improvement  of  the  gas  transportation  network  in 
Bulgaria to ensure supplies from Russian resources 
to the new gas network  in Greece. 

First phase: commissioned  in 1996. 

h 13  Germany-Czech  Republic-Austria-ltaly (**): 

construction  of  a  system  of  connecting  pipelines 
between  the  German,  Czech,  Austrian  and  Italian 
gas networks. 

First section in Western Austria: under construction. 
Second  section  (the  main  PENTA  pipeline) 
in 
Central Austria: feasibility  studies. 

23 

h14  Russia-Ukraine-Slovakia-Hungary-Slovenia-ltaly (**): 

construction  of  a  new  gas  pipeline,  from  Russian 
resources to  Italy. 

Feasibility studies. 

North-European axis 

hi  Norway-France (**): 

construction  of  a 4th  gas  pipeline  from  Norwegian 
resources  (North Sea) to the  Continent. 

Under construction. 

h3  Norway-Denmark-Sweden-Finland-Russia-Baltic  States  (**): 

creation  and development  of  connections  between 
the  networks  of  these  countries  with  a  view  to 
setting up an integrated gas  network. 

Feasibility  studies. 

LNG reception terminals 

e4  Spain (*): 

•  LNG of  Huelva (extending existing terminal). 

In operation since 1996. 

•  LNG of Cartagena  (extending  existing terminal) 

Pre-feasibility studies. 

•  LNG in Galicia  (new terminal). 

Project postponed. 

e5(a) Portugal (**): 

LNG on the Atlantic coast  (new terminal). 

Feasibility  studies. 

e6  Greece (*): 

LNG in Attica  (new terminal). 

Under construction. 

ZH 

g3  France (*): 

in  Western  France 

LNG 
terminal). 

(extending  existing 

Pre-feasibility studies. 

g4 

Italy (*): 

Construction  of  a  new  LNG  terminal  to  allow 
diversification of supplies, in particular for electricity 
generation. 

Authorisation procedures. 

Project of common interest identified by the Guidelines on TEN-Energy 

(*) 
(**)  Project proposed by the Commission as being of common interest (see COM (96) 390). 

zs 

THE EXTERNAL DIMENSION  OF TRANS-EUROPEAN  ENERGY  NETWORKS 

II.  MAP OF NATURAL GAS NETWORK PROJECTS OF MUTUAL INTEREST 

Existing networks. 
Trans-European  projects  of mutual interest. 
Other trans-European  projects. 

IQ 

THE EXTERNAL DIMENSION OF TRANS-EUROPEAN  ENERGY  NETWORKS 

ANNEX III 

OVERVIEW  OF POSSIBLE  COMMUNITY  FINANCIAL  INTERVENTIONS FOR 
PROMOTING  ENERGY  POLICIES AND ENERGY  NETWORK  PROJECTS IN 
THIRD COUNTRIES 

ACTIONS  >/ 

^ , / T H l RD 
^/COUNTRIES 

NORWAY 
and 
SWITZERL. 

CEEC 
(including 
Baltic States) 

CIS 

MED 

Supporting  the 
implementation 
of  energy 
policies: 

•  Community 
initiatives 

•  Third country 
initiatives 

Co-financing  of 
studies: 

•  For TEN mutual 
interest  projects 

•  For regional 

interest  network 
projects 

Financing  of 
investments: 

•  Aid 

•  Loans 

•  Guarantees for 
loans to cross-
border  projects 
in adjacent 
countries. 

-

SYNERGY 

SYNERGY 

SYNERGY 

PHARE 

TACIS 

MEDA 

TEN 

TEN 

TEN 

TEN 

PHARE 

TACIS 

MEDA 

EIB 

EIF 

PHARE 

EIB 

EIF 

EIF 

EIB 

EIF 

i 
i 
i 
| 

z? 

ISSN 0254-1475 

COM(97)12S  final 

DOCUMENTS 

EN 

12  11 

Catalogue number  :  CB-CO-97-120-EN-C 

ISBN 92-78-17492-0 

Office  for Official  Publications of the European Communities 

L-2985 Luxembourg