The Resilience of Energy Supply Chains of the EU - Case Study Example

THE RESILIENCE OF ENERGY SUPPLY CHAINS Student’s Name: Code + Course name Professor’s name University City, State Date Introduction Disruptions of energy supply chains impact negatively on the firms that engage in the production and transportation of energy products. The resilience of the supply chains for the natural resources is a mandatory necessity that deals with such disruptions. Since energy is a fundamental asset in all economies, such disruptions may also impact adversely on the society and the economy. Previous literature has covered the resilience of the energy supply systems, risk management in supply chains and the disruption strategies. However, the resilience of the energy supply chains is the primary focus of the essay. Moreover, previous literature contained generalized ideas pertaining the resilience of the supply chains for oil and gas on a global basis. The essay narrows down the scope to the resilience of the European oil and gas supply chains. Risk Management and Resilience The procedure of detecting threats, possible strategies, and the countermeasures to manage the emergent supply chain disruptions constitutes risk management and resilience. Resilience refers to the potential of a system to regain its initial operations after the occurrence of a disruption. Therefore, the resilience of the oil and gas supply systems refers to the capability of the systems to bounce back to their normal operations following a disruption. The Role of the European Union Europe has witnessed an increasing demand for energy; particularly oil and natural gas thereby yielding increasing levels of oil and gas imports to meet the soaring demand (Deloitte 2010). In the quest to improve the resilience of the supply chains to guarantee the uninterrupted availability of petroleum and gas, the European Commission has established a security program that caters for the security issues associated with the energy supply chain. Some of the strategies and initiatives developed to enhance the resilience of the energy supply chain encompass new infrastructure projects, specific legislative frameworks, crises response mechanisms for oil and gas and the construction of pipelines. The Protection of Energy Infrastructure Apparently, the critical infrastructure associated with the supply of petroleum and natural gas are transport and energy. Oil and gas transport utilizes sea carriers to a large extent thereby necessitating port and maritime safety. The ISPS (International Ship and Port Facility Security) code is one of the recent strategies established by the European Union (EU) to enhance the security of the port and maritime carriers and facilities. The Code has developed preventive measures that deal with unlawful acts and threats in the harbor facilities and international trade. The Port Security Directive is the other complementary measure to the ISPS Code. The Directive requires all member states to define the periphery of all the ports that require the implementation of security measures. Moreover, it provides the framework that governs the application of the measures besides evaluating their conformity to the standard recommendations (European Commission 2012d). The European Program for Critical Infrastructure Protection (EPCIP) is the other activity that aims at enhancing the protection of energy and transport infrastructure pertaining the production and supply of oil and natural gas resources. The program directs all the member countries to identify the pertinent infrastructure and plan for the safety of the infrastructure within their boundaries. The development of a standard procedure to govern the identification of the critical infrastructure and the implementation of the standard protection measures is the other responsibility of the Commission with support from the member states. It is proper to opine that the decision of the Commission to engage the member states in the identification of the critical infrastructure and the potential protection measures is rewarding. Apparently, the individual members of the Commission understand the critical infrastructure that plays a pivotal role in the transportation and production of oil and natural gas. As a result, integrating their information into the general protection measures is a mandatory necessity for the success of the security mission. The other strategy of the Commission concerns the establishment of a network of the individuals that operate the critical energy infrastructure. The principal objective of the network concerns sharing pertinent information regarding the potential threats to the energy infrastructure. The Thematic Network on Critical Energy Infrastructure Protection (TNCEIP) is responsible for enhancing the cooperation and understanding of the operators to enable them to protect critical energy infrastructure. The network concentrates on the external threats that face the sector. Such threats include risk management and cyber security and the assessment of threats (Urciuoli et al. 2014). It is evident that the network enables the operators of the critical energy infrastructure to share security and threat information regarding the previous and possible threats that may face the sector. By so doing, the individuals learn the proper ways of dealing with disruptions in the event of their recurrence. Foreign Politics Currently, the European Union speaks as a single entity in international affairs. Some of the activities of the Union on a global basis include fighting sea piracy and other forms of terrorism in the emerging economies, responding to disasters, conflict resolution, and contributing towards international understanding. It also strives to strengthen its relationships with the major global powers such as the USA, Russia, China, and Japan. A good example of the international relations is the EU-Russia energy dialogue held in 2000. The Union for Mediterranean, the Black Sea Synergy, the Central Asian Strategy and the Eastern Partnership are the other cases involving the cooperation between the EU and other nations. For instance, the Black Sea Synergy targets to enhance democratic reforms and economic development to achieve political development and stability in the regions that surround the Black Sea. It suffices to state that the Synergy among other international treaties is instrumental towards enhancing the resilience of the transport and energy infrastructure. It is also certain that peace does not prevail in an economy led by an unstable government since political instability yields internal conflicts that paralyze trade and business. The Eastern Partnership has also played a pivotal role towards the diversification of the energy supplies for the EU since it has strengthened the ties between the EU and states in the Southern Caucasus and Eastern Europe. The introduction of new trade pacts between the EU and Belarus, Azerbaijan, Armenia, Moldova, Ukraine and Georgia has also widened the scope of oil and gas supplies for the EU. Moreover, the partnership among the EU27 members has been instrumental in the achievement of democratic reforms, energy security, and economic integration through the development of the Euro-Mediterranean Partnership (EUROMED). The partnership encompasses the 27 member states of the EU, the 16 states in the Southern Mediterranean region, and Middle Eastern and African countries that produce and export oil and gas. The Central Asian Strategy has also fostered the relationship between the EU and Central Asian states such as Kazakhstan, Tajikistan, Uzbekistan, Turkmenistan and Kyrgyz Republic. Apparently, the partnerships reveal the devotion of the EU towards enhancing the resilience of its oil and gas energy supply chains. The fact that the Commission is striving to improve its relations with all the neighboring states that engage in the drilling, processing and distribution of oil and natural gas implies that the other sources will supplement the occurrence of a disruption of the supply from one source. The Management of Crises The EU strives for a properly-functioning and stable energy market to ensure the accessibility of energy supplies even in the midst of a crisis. The Directive 2009/119/EC and the Regulation 715/2009 require the member states to store a minimum level of oil and natural gas in their reservoirs equivalent to 61 days of regular daily domestic utility. The member states should release part or whole of their emergency stocks in the event of a possible interruption in the supply of crude oil and other petroleum products (Council Directive 2009). The EU has also implemented strategies that would reduce its overdependence on oil and natural gas (European Commission 2012). The decision of the EU to set a minimum stock of petroleum and gas products that would serve the country normally without any deficit for 61 days is appropriate. It guarantees the availability of the oil and gas products for a long enough period to provide room for the termination of the crisis. The minimum stocks also ensure that the crisis does not disrupt the normal supply of petroleum products among the EU member states. Conclusion The resilience of the oil and natural gas supply systems in the EU entails the current and future strategies that target to guarantee the continued supply of the energy resources in the region regardless of the occurrence of a disruption. In the quest for a sustainable supply of oil and gas in the region, the EU has invested significantly in the protection of critical energy infrastructure. It has fostered its relations with foreign nations and reduced its overreliance on the energy resources by diversifying the portfolio of suppliers and seeking alternative suppliers. The EU has set a minimum amount of stock to ensure the availability of oil and gas in crises and other disruptions such as terror attacks and natural disasters. Reference List Christopher, M & Peck, H 2004, ‘Building the resilient supply chain’, International Journal of Logistics Management, vol. 15, no. 2, pp. 1-13 Council Directive 2009, ‘Stocks of crude oil and petroleum products: Summaries of EU legislation’, available from: http://europa.eu/legislation_summaries/energy/external_dimension_enlargement/en0006_en.htm Deloitte 2010, ‘Downstream oil-short term resilience and longer term security of supply’, Final Report for DECC. European Commission 2012d, ‘EU legislation on maritime security, available from: http://ec.europa.eu/transport/maritime/security/doc/legislation_maritime_security.pdf The European Commission 2012, ‘The Changing oil value chain: Implications for security of supply’, European Policy Brief. Urciuoli, L, Mohanty, S, Hintsa, J & Gerine Boekesteijn, E 2014, ‘The resilience of energy supply chains: a multiple case study approach on oil and gas supply chains to Europe’, Supply Chain Management: An International Journal, vol. 19, no. 1, pp. 46-63. Read More