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European energy policy a failure, says GDF Suez CEO

GDF Suez’s Mestrallet hits out in speech to WEC 2013

European energy policies are a “failure” which have resulted in increased carbon dioxide (CO2) emissions, reduced energy security and high prices, according to the head of one of Europe’s biggest energy companies.

Gérard Mestrallet, chief executive of French company GDF Suez, said that this failure was compounded by the hesitancy of governments in pursuing shale oil and gas opportunities which could alleviate some of Europe’s economic problems. Speaking at the session, Shale Gas and Oil: Is it Just a Bubble? yesterday, Mestrallet hailed the US’ shale-gas experience and the profound effect it was having on its economy.

“The phenomenon has effected the whole economy by boosting the US’ global competitiveness with a measurable impact on job creation and industrial relocation. At the same time, technology is helping to reduce the environmental impact of exploitation in terms of less pollution and smaller land foot print. Furthermore, a new step is being taken by the acceleration of unconventional oil development,” he said.

The US has become the world’s leading natural gas producer and for the first time in 60 years the country is a net exporter of petroleum products, he noted. Mestrallet said that his company, GDF Suez which employs 219,000 people and has a turnover of €100 million ($135.3m), was focusing on dynamic emerging countries. “In the next 20 years, 90% of global new energy demand will come from non-OECD countries. To meet that increasing demand, all types of energy sources will be needed, coal, renewables and of course natural gas,” he said. “It is little known that two-thirds of the new renewable electricity in the five coming years will come from non-OECD countries.”

Mestrallet was scathing in his description of European energy policies.“European energy policy has failed in all three of its objectives. First the environment. The arrival of coal displaced by cheap US unconventional gas causes a rise in green house gas emissions, only tempered by the economic crisis. The CO2 market is totally inefficient as current market prices show. “The second failure is the farce of the competitiveness of energy. There is a competitive gap with the US. Prices are rising in Europe as they are falling in the US,” he said.

The third failure was the closure of gas-fired power stations rendered inefficient by the subsidies to renewables. “In fact, gas-fired power plants failed to find their economic break-even in a market where renewable energy continues to grow through subsidies regardless of the market needs. GDF Suez, for example, has already closed or mothballed 10,000 megawatts (MW) of gas-fired power plants in the last few years.”

He said GDF Suez and other European companies had shut in a total 50,000 MW of power generation capacity – the equivalent of 50 nuclear power plants. Mestrallet said his company had no intention of pursuing shale oil and gas in France after the government banned it. “Poland and France were identified as the two countries with the greatest potential for shale oil and gas. Poland welcomed it and France banned it,” he said. France has 57 nuclear reactors, operated by EDF, while GDF Suez operates seven reactors in Belgium. “France’s decision means implicitly that France considers there is more risk in hydraulic fracturing than nuclear power,” Mestrallet added.

He said there is no chance of France changing the law in the short term, adding he hoped there could be a reconsideration of the ban when the economic disadvantages of banning exploration are considered. “In France, we have no more oil, gas or coal, if there are to be huge reserves under our feet that could represent some value to be exploited.”

Mestrallet said that France was the exception in Europe and that UK, the Netherlands, Poland and others had opened the door to unconventionals exploration. “The two factors which could force French decision makers to reconsider would be the price of energy and what is happening elsewhere in Europe,” he said.

“The question of competition and job creation is so critical. Europe must use all its means to deal with competitiveness and create jobs, particularly because prices of energy are rising In Europe and decreasing in the US.”

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