SEE Countries Need to Address Dependence on Coal, Energy Imports

The region of Southeast European (SEE) has the capacity to be an active player on the European energy map but to fulfill that potential it needs to addresses a number of issues affecting its energy mix, including dependence on energy imports, dilapidated production facilities, transmission and distribution losses and inefficient infrastructure, advisory firm A.T. Kearney said.

The SEE region is overly dependent on carbon-intensive coal and is not fully exploiting nuclear energy and natural gas. The SEE countries as a whole emit nearly 30% more CO2 to supply one unit of energy, relative to the EU27 average and remain highly dependent on imports of crude oil, petroleum products, natural gas, and transformed electricity, A.T. Kearney said in a recent regional report which covers Slovenia, Croatia, Bosnia and Herzegovina, Montenegro, FYROM, Serbia and Kosovo.

The advisory firm encourages SEE countries to work together to optimize technology and invest in equipment to quell losses in production, transmission and distribution of electricity, to attract more private investments in renewable energy and align their legislation to the directives of the EU Third Energy Package.

On the backdrop of the Ukraine conflict between the EU and Russia - which has made SEE and EU energy security an even more pressing issue, better and smarter cooperation among all regional and EU stakeholders would be essential in the next few years, with developing a joint SEE master energy master plan being an essential component, the report said.

DEMAND FOR OIL PRODUCTS OUTSTRIPS DOMESTIC PRODUCTION

The demand for petroleum products outstrips domestic production as SEE countries have very limited oil supplies, making them largely net importers of crude oil. Only 20% of the oil refined in SEE refineries comes from oilfields within the region due mostly to the depletion of existing oilfields and few opportunities for new exploration.

At the same time, some SEE countries, such as Serbia, have significant reserves of shale rock suitable for oil production, but so far they have not acquired the technology or developed a business case to exploit these resources, the advisory firm said.

SEE REFINERIES NEED TO OVERHAUL BUSINESS MODEL

Findings cited in the report suggest that within the next three to five years, all but one of the six SEE refineries will need to change their operating models, undergo regional consolidation, or even close their doors as they face overcapacity and a lack of operational efficiency while producing limited amounts of value-added petrochemical and lubricant products.

On this backdrop, SEE refineries have options going forward, including pursuing cross-border collaboration and consolidation - Slovenia and Croatia, for instance, could integrate their supply chains, allowing Slovenia to secure some of Croatia’s spare refining capacity; securing a more cost-effective supply of crude; and developing smarter investment strategies.

GAS LINKS/LNG INFRASTRUCTURE, POWER TRANSMISSION EFFICIENCY IN FOCUS

Gas pipeline and liquefied natural gas terminal infrastructure that connects SEE to gas-rich regions will be crucial to establishing a sustainable supply, A.T. Kearney said, recommending that SEE countries speed up the development and implementation of EU-compliant legislation that promotes competition in the gas market.

On the electricity market, the SEE region could bridge its import gap by improving the efficiency of transformation, transmission, and distribution.

At the same time, the region's electricity generation infrastructure - particularly its thermal power plants (TPPs), is in need of improvement, the report said. "Many TPPs are approaching the end of their life cycles (most will be shut down over the next five to 10 years), which means countries will need to invest heavily in new thermal generation capacity."

Source: SeeNews