Speech of the Prime Minister Mirek Topolánek at the conference Prague Energy Forum 2006 at the seat of the Radio Free Europe on Monday 23rd October 2

Good morning, ladies and gentlemen,

I would like to welcome you to Prague to this significant conference. As Mr. Jensen has already said, we had to win some elections again, nevertheless we have not had a stabile government and therefore, we will have to win also further elections. I have been thinking about the concept of my speech, whether to give a welcome speech of the Prime Minister or to give a speech of a man who has been engaged in energy whole life. Finally I decided, as I knew your programme in the following two days, to get to root of the matter and to mention certain problems, which should be answered at the conference.

Since autumn 2005 and especially since the beginning of this year the attitude of the EU has changed significantly in the sphere of energetic industry. The energetic industry has come to the fore at the highest political levels both at level of the Community and at other forums. As to main events where the energy industry was the principal topic, apart from last two sessions of the European Council in March and June, it is also possible to mention May EU–Russia summit in Sochi or the summit of the G8 in Petrograd. The energy industry, or rather external dimensions of the energy industry and security issues, is one of the main topics of the present Finnish presidency. Just in the first half of the year, three summits were held with China, with South Korea and in the framework of Asian-European meeting (ASEM). Why did the EU and countries of middle and Eastern Europe and also countries of Western Europe start to closely monitor the problems of the energy industry? I think that there are several principal reasons for that. The first one is that in the course of globalization of the world the demand for strategic raw materials increases and competitiveness increases as well. The second reason is that producers are sometimes in instable or even conflict areas and it may have impact on continuity of supplies. Third – in case of oil a market exists, but gas is sold under non-market conditions and rules and there is no linkage between the individual regions. Fourth – emerging higher energetic needs have no fast and cheap solutions. Investments, return of investments at the amount of tens of billions of dollars are a question of tens of years. Fifth – in case of oil it is not only a question of availability of oil, but also of oil products. Capacities of refineries are fully used nowadays and even small deviations cause oscillation of fuel prices. And sixth – and this is a phenomenon, which is debated also within the Finnish presidency – Russia apparently decided to use energy industry as its tool for attainment of world power status. The energy industry, supplies of oil and gas has become a political tool for promotion of Russian interests. Russia wants to control oil production not only within the Council of Federation but also within the Commonwealth of Independent States, it wants to control and it aims at acquiring of key shares in all regional markets. It also wants to penetrate into pricing; it tries to diversify its clients, so as not to be dependant on purchase of oil and gas from the side of the EU.

I described the main theses, and now what is the state in the CR? To speak about countries of Visegrad 4, only Czech Republic partly diversifies resources of oil and gas. In case of oil, it is 1:3 in favour of Council of Federation, in case of gas it is 1:4. Total ability to import oil is at the level of 19 million tons yearly, half of is the capacity of the pipeline Jižní Družba from the Council of Federation and half of it is the capacity of the pipeline Ingolstadt-Kralupy-Litvínov. The real purchase of the Czech Republic is in total 8 million tons per year, 6 million tons of them are from the Council of Federation. The Czech Republic purchases about 10 billion of cubic meters of gas, 75% of this amount are from the Russian Federation and the rest from Norway. And it is possible in fact to change the ratio in favour of Norway. What are risks of it? Thank to the geographical location, the CR became, thanks to the decision that was made 15 years ago, partly independent on supplies from Russia. Nevertheless, attempts to reverse this situation and to deepen energetic dependence on supplies from the territory and across the territory of the former Soviet Union have been emerging recently highlighting economic factors. As an example I would mention a pressure to change raw materials, which are used in Kralupy and a tendency to reverse the Ingolstadt pipeline and thus to cause 100% dependence on Russian oil. The oil production has culminated in the world, which is proved by limited amount of newly discovered resources that do not even cover increase of production. Owing to resources, which are nearly exhausted from the view of the CR, I mean Russian resources, and with regard to the increase of demand in China, India and elsewhere, it is possible to expect lack of oil and costly imports. From the point of view of the CR it is a priority to find alternative fuel resources. In case of natural gas, the production in Russia and the transit across Russia will increase in the future, of course. The problem is the increasing number of consumers, China, India, etc. From the point of view of the CR it is necessity to maintain the level of consumption of natural gas at the present level at least, and to seek for alternative resources of energy, for example Algeria, and alternative transportation routes, and not to continue in uneconomical gas installation in further regions. The increase of world prices of uranium and decreasing resources of this raw material in the CR and finishing of mining of uranium in the CR is other risk factor. I am not going to talk very long, I just want to say that from the point of view of my present position, from the point of view of interests of the CR and, in fact, of the central Europe, we will strive to maintain or to increase and diversify supplies both oil and natural gas and thus not to increase one-sided strategic dependence, which is imprinted in our memory.

I would like your forum, your discussions to outline issues at least, and to try to answer them; it concerns issues of supplies, continuity of supplies, energetic mix and perspectives for the 21st century. I wish your session a lot of success and I am very pleased you have invited me

Thank you for your attention