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Completing Europe:

From the North–South Corridor to Energy,

Transportation, and Telecommunications Union

Polish-Croatian Economic Forum, 28th of January, 2016

Barbara Koszułap - Deputy Director, International Relations Department, Grupa LOTOS S.A.,

Co-ordinator of the Fundraising Working Group, Central Europe Energy Partners

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Agenda

Central Europe Energy Partners – about the association

Key findings of the report, prepared by CEEP and the Atlantic Council:

‚Completing Europe – From the North-South Corridor to Energy,

Transportation and Telecommunications Union’

Croatia’s benefits from the Corridor’s implementation

Conclusions

About CEEP

Central Europe Energy Partners

represents the interests of the energy and energy-

intensive companies from Central Europe, in order to

strengthen the region’s energy security within the

framework of a common EU energy and energy

security policy.

CEEP represents 26 energy and energy-intensive

companies and organisations from six Central

European countries, employing over 300,000 workers,

with a total annual revenue of more than EUR 50

billion.

It is the first major body to represent the energy sector

companies from the region at the EU level. The aim of

CEEP is to strengthen the region’s energy security

within the framework of a common EU energy and

energy security policy.

CEEP is an international non-profit association, with its

headquarters in Brussels, and a branch in Berlin.

Major Tasks To increase the energy security

of Central Europe, as well asthe European Union as a whole.

To strengthen the idea of energysolidarity within the Energy Union.We do believe that only the commonactivities of all EU Member Statescan be successful in enhancingthe energy security of Europe.

To build relations and facilitatecontacts between Memberorganisations and EU bodies andagencies, individual representativesand associations of energy andenergy-intensive sector companies,as well as international energysector think-tanks and lobbies.

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CEEP’s

members

There are three categories of membership: actual, affiliated and honorary.

Expected members from Bulgaria, Romania, Croatia, Estonia, Hungary, Latvia, Slovenia, Slovakia, and Turkey

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CEEP’s major activities

CEEP is participating in theactivities of many EU institutions

In the European Commission:

European Refining Forum

Transatlantic Trade and Investment Partnership (TTIP)(stakeholder presentations event)

Civil Society Dialogue

Lech Energy Forum

In the European Parliament:

Roundtable on Coal (renamed in 2015:European Roundtable on Coal and Steel)

ITRE and ENVI Committees

Hearings and Workshops

Competition,

Co-operation,

Solidarity

CEEP’s mission and purpose of activity is

convergent with, and supports the concept

of the European Energy Community,

presented in the European Parliament on

the 5th of May, 2010, by former President of

the European Commission, Jacques Delors,

and President of the European Parliament,

Prof. Jerzy Buzek. The Energy Union is

an initiative introduced by the former Polish

Prime Minister, Mr. Tusk, currently President

of the European Council.

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Energy Summit: ‘29 + 1’ Conference

CEEP’s Annual Energy Summit signature series project

A meeting between 29 CEOs from the most important Central European

energy sector companies, and the EU’s Commissioner for Energy.

A unique chance for all participants to ask open questions and express

their own views directly to the Head of the EU's energy policy-making body.

Proceedings held under the ‘Chatham House Rule’: no journalists

or administration officials are allowed to be present during the session.

The CH rule stimulates more open and frank debate.

After each ’29+1’ meeting, a Memorandum is presented to the

Commissioner, which sums up the position of Central European energy

sector companies on key issues affecting the EU’s energy sector.

The first Energy Summit was held in Budapest (2012), the second

in Vilnius (2013), and the third in Bucharest (2014). In 2015, the meeting was

held in Warsaw on the 16th of June.

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Rationale

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A Europe which is whole, free, and at peace:

Economic Integration

Energy Security

Competitiveness and Economic Resilience in a Global Economy

Significant Contribution to Europe’s Climate Goals

Strengthening the transatlantic alliance

Completing energy, transportation, and telecommunications

infrastructure

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A holistic approach, guided by a vision that integrates gas and oil pipelines and infrastructure, electricity

interconnections, rail and road networks, and telecommunications investments.

The N-S Corridor as a critical element of the Juncker plan to leverage public and private investment to strengthen

Europe’s infrastructure, boost economic growth, and enhance energy security.

North–South Corridor as a priority in infrastructure spending.

Setting up priorities within the N-S Corridor’s projects.

European Central Bank to permit limited exceptions to national budget restrictions, when funds are to be spent

on cross-border projects, involving two or more Member States.

The North–South Corridor as a key element of the US–EU agenda.

Establishing a North–South Corridor Forum to foster regular consultations and to generate awareness.

Key Findings

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Preliminary estimates for infrastructure investment up to 2020:

Total of €1.5-2 trillion

Annual average of €150-200 billion

€400 billion for distribution networks and smart grids

€200 billion on transmission networks and storage

€500 billion to upgrade and build generation capacity

€500 billion for the TEN-T programme

€38–58 billion and €181–268 billion capital investment is required to achieve the Commission’s

broadband targets.

Financial requirements

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Total costs of the projects, identified in this report,

as strategically important and critical to the

completion of the Corridor, amount to an estimated

€50.5 billion:

€27 billion for energy

€20 billion for transport

€3.5 billion for telecommunications

The European Union should reprogramme and

dedicate existing funds, to promote and co-fund the

infrastructure projects most critical to the timely

completion of the North–South Corridor, as identified

and outlined in this report.

Prioritising theNorth–South Corridor

Total Project Cost Breakdown

Energy Transport Telecommunications

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Reprioritising available funds in the Connecting Europe Facility–Energy (CEF-E), to ensure

that the top priorities enjoy access to CEF-E funding.

Streamlining access to the funds of the Connecting Europe Facility–Transport (CEF-T).

Doubling the share of Connecting Europe Facility funds allocated to telecommunications

infrastructure.

Prioritising infrastructure investments in the national development plans of the Member States.

Focusing EU resources on key corridor connectors, to demonstrate the viability of the North–

South Corridor as a whole.

Top priorities for theNorth–South Corridor

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Earmarking of €3.5 billion to a bi-directional North–South Backbone Gas Pipeline from Lwówek, (Poland), to Sisak, (Croatia).

Developing the 15 bcm/y Backbone Pipeline which will pass through the Czech Republic, Slovakia, and Hungary.

Connect the Backbone Pipeline to re-gasification plants in Poland and Croatia.

Enabling physical reverse flow interconnectors between Hungary and Romania, as well as Hungary and Croatia.

Strengthening the connection between the North-South Corridor and Western Europe.

Completing Europe’s strategic oil infrastructure by building the Pan-European Oil Pipeline and extending the Odessa-Brody oil

pipeline.

Creating new electricity connections between Nordic and continental European markets.

Top priorities for theNorth–South Corridorin the energy sector

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Additional key elements in the energy sector include:

Developing linkages to Lithuania, Latvia, and Estonia, to strengthen open-market

infrastructure in north-eastern Europe and end the isolation of the Baltics.

Developing the Ionian Adriatic Pipeline and bi-directional interconnectors with Romania

and Bulgaria, as a means to tap into the Southern Gas Corridor, currently under

development, and to further integrate the Balkans into the European energy market.

Implementing large-capacity flows to Ukraine, to diversify energy supplies and enable

Europe to leverage the country’s extensive storage facilities.

Taking advantage of the opportunity presented by the Trans-Anatolian Pipeline (TANAP)

Construction to begin: March, 2017.

TANAP will connect Azeri gas to the Southern Gas Corridor.

Avoiding delays in the operational schedule will be crucial.

Top priorities for theNorth–South Corridorin the energy sector

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Energy projects to beprioritised along theNorth–South Corridor

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The SouthernGas Corridor

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On the 29th of September, 2015, in New York, responding to the initiative of Ms. Kolinda Grabar-Kitarović, the President

of Croatia, the Heads of Central European States held a meeting. The gathering served as an opportunity to discuss and

define the common needs of the region’s respective countries, from the point of view of the further development of an

integrated energy market, with particular emphasis on Croatia's role in this process.

The report, prepared in 2014, by CEEP and the Atlantic Council, titled: ‚Completing Europe - From the North-South Corridor to

Energy, Transportation and Telecommunications Union’ was a starting point for the discussion that followed.

The meeting’s participants agreed that the successful implementation of the Corridor would be a milestone in the European

integration process, and it will strengthen Europe’s energy security.

Meeting of Heads of Statesof Central Europe –New York, 29th of September, 2015

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The 7th edition of the Atlantic Council’s Energy and Economic Summit which took place on the 18th -

20th of November, 2015, in Istanbul, led to a meeting between Croatia’s President Kolinda Grabar-

Kitarović and CEEP’s President of the Board of Directors, Paweł Olechnowicz, which allowed them to

discuss the key issues related to the Corridor’s implementation.

The atmosphere, in which this conversation took place, and the positive outcome of the talks,

ensured the basis of further, fruitful co-operation on this key project.

Meeting of CEEP’s President of the Board of Directors, Paweł Olechnowicz, with Croatia’s President Kolinda, - Istanbul, November, 2015

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The strengthening of Croatia’s position in Europe.

Croatia could become a regional energy hub.

Croatia’s bargaining power will increase, owing to the country’s modern, flexible gas infratructure, facilitating

Zagreb’s negotiations with potential suppliers.

Croatia will be able to further diversify its supply of energy resources.

The Corridor will enhance Croatia’s and Europe’s energy security.

Croatia’s benefits from the Corridor’s implementation

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A key conclusion is that the most promising approach is to realise the Corridor step-by-step, as a set of bilateral

projects with strong, overarching co-ordination – in ownership and the operations of commercial operators.

The investor perspective offers a mixed picture: some parts of the Corridor offer a viable business case, others

will need public funding – which is justified by the very strong rationale of security of supply.

The Corridor, thus, needs to be granted due priority with much attention paid to the policy level, concerted

regulatory initiatives, and a market-based realisation approach – Co-ordination at the EU level will also be

necessary.

The North-South Corridor is not only a perfect way of diversifying the directions of supplies of crude oil, natural

gas and electrical energy, but also an opportunity for Polish and Croatian companies to take part in investment

projects, which are key for Europe’s energy security.

Conclusions

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Let’s think

and act!