Of the energy consumed in Europe, 50% is imported, so the story here is less about production numbers and more about consumption patterns. Europe is trying to change that by emphasizing the growth of renewable resources in hopes of becoming more self-reliant, and increasing its energy security. Still, the continent consumes quite a bit of coal, oil, and natural gas that it must buy from other places.
Renewable energy
The European Union has a stated goal of generating 20% of its energy from renewable resources by 2020. The reasons for this are twofold. First, the initiative will cut carbon emissions. Second, Europe is immensely dependent on energy imports. If nothing changes, it is likely that continent will import 70% of its energy by 2030.
So far, the EU has stuck to its guns. In 2011, in the face of severe economic challenges, more than 70% of the continent's added electricity capacity came from renewables. It marked nearly a 10% increase from 2000, and all signs seemingly indicate the EU will have no trouble meeting its 20% renewable energy goal. In fact, statistics now indicate Europe will be able to meet 34% of demand with renewable electricity sources by its 2020 deadline.
Top sources for renewable power in Europe include solar, wind, biomass, and hydro power. Last year, solar and wind installations accounted for 26.7% and 21.4% of added capacity, respectively.
Nuclear
Nuclear is huge in Europe. As of this spring, there were 153 nuclear power plants on the continent, and eight more under construction. France leads the way, with 58 plants generating 74% of the country's electricity. The Slovakian Republic, Belgium, and the Ukraine follow, each producing around 50% of their power from nuclear plants.
Winds of change being what they are, we may see substantially different numbers when we check in on Europe in 10 years. After the Fukushima disaster in Japan in last year, Germany, Belgium, and Switzerland all decided to phase out nuclear power. Italy was about to reignite its nuclear program, but promptly switched course. The United Kingdom is still going forward with plans for a fission reactor.
Coal
The U.S. exported 107 million tons of coal last year, and 50% of it went straight to Europe. The continent produced 1.2 million short tons of coal in 2010, but reserves on the continent are depleted, and it's estimated that by 2030, 66% of Europe's coal supply will need to be imported.
Oil
Europe's oily future is grim. If the continent doesn't change its consumption patterns, it will likely be forced to import 90% of its oil by 2030. Right now, 45% of oil imports to the European Union originate in the Middle East. That number is significantly higher than the 22% of imports the United States brings in from the Middle East, and will create energy security problems given the geopolitical risk in that region. Consider that right now, the EU is moments away from going forward with its planned embargo of Iranian oil, and that Syrian product is also currently off-limits.
Natural gas
Europe imports 60% of the natural gas it consumes. That number is expected to continue to rise to 70% or 80% by 2030.
Forty percent of those imports come from Russia, and that relationship has been tenuous at best. Europe is desperately trying to diversify its natural gas imports. Poland and a handful of countries in Western Asia may provide the answer. If not, European dependency on Russian gas imports will likely increase to 60% by 2030.
Geopolitical risk
Immediate investments in the European energy sector face the same risk as other industries, namely that multiple economies are in shambles and no one is quite sure when the continent will right itself again. Though energy stocks are typically the first ones to get pummeled when bad economic news comes out, future global demand is such that they still make for solid long-term investments.
Outside of economic woes, Europe is relatively stable. That being said, the progressive nature of Europe's push for renewables and a reduction in greenhouse gas emissions may affect companies that depend on the region for a major source of revenue.
Further, certain countries like France and Germany have already banned hydraulic fracturing, and there is strong opposition to it in Great Britain, adding uncertainty to the long-term outlook for possible increases production of that fossil fuel.
For the immediate future, however, Europe remains a significant market for oil and gas producers.
Players
Statoil (NYSE: STO)
Europe is far and away the most significant source of Statoil's reserves. Norway's state-owned oil company has 919 million barrels of proved oil and natural gas liquids reserves in its home country. Norwegian natural gas reserves total more than 12.6 trillion cubic feet of natural gas. The company also has reserves in Ireland and the United Kingdom.
The Norwegian Continental Shelf accounted for 71% of Statoil's total production in 2011. Production from the shelf's 44 fields averaged 1.3 million barrels of oil equivalent per day last year.
Eni (NYSE: E)
Italy's Eni typifies Europe's stance on energy. It is as much a member of the big oil family as any other major, but it is very committed to developing alternative energy. While the company maintains focus on producing oil and gas in places like Norway's Barents Sea, it has also has a partnership with MIT and several research centers in Italy to develop solar and biomass technologies.
Total (NYSE: TOT)
France's Total derives well over half of its sales from Europe. In 2011, the company made $59 billion in France and close to $113 billion in the rest of Europe.
Though 20% of Total's 2011 gas and liquids production came from Europe, the company's 1.7 million barrels of oil equivalent in proved reserves is the smallest total for all its geographic regions.
BP (NYSE: BP)
European assets barely show up as a blip on the radar of this British oil major. The company's significant production numbers for liquids and natural gas all come from the U.S. or elsewhere in the world. The continent does figure significantly in sales, however. In 2011, marketing sales volumes in Europe were almost as high as those in the U.S., and nearly triple those for the rest of the world.
Royal Dutch Shell (NYSE: RDS-B)
Based in the Netherlands, Shell has no major projects in Europe. However, its downstream business, refining and gasoline retail, is significant. Despite selling one of its refineries in the United Kingdom last year, 35% of Shell's refining capacity is in Europe. Europe makes up the company's second-largest market for oil product sales volumes after the Americas, and the largest market for chemical sales volumes.
Suggestions for further reading:
- Is Statoil a Good Long-Term Investment?
- Total is Down, but Not Out
- Why Now Is the Time to Buy Coal
- Big Oil's Alternative Investment
- Will Foreign Fracking Flourish or Fizzle?
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