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Jean-Francois Cirelli, former Vice President of GDF Suez (now Engie) – France

15.06.2015 / Energyboardroom

The former vice president of GDF Suez (now Engie), and energy specialist, discusses the importance of gas as an energy of the future and its potential coexistence with renewable energies.

What is your general assessment of the new energy deal?

We are living in a world where the situation of energy companies and utilities is changing. As far as utilities are concerned in France and Europe, the situation is definitely not cyclical. Our business model is evolving and utility companies need to adapt in order to survive the next 20 years. The evolution of the E&P sector stems from a combination of crumbling oil prices and expensive project costs, which constitute a critical challenge for the future. We must address these two combined negative aspects.

You are a great advocate of natural gas. How do you perceive the evolution of our energy mix in the near future?

Europe stands out from the rest of the world by failing to consider natural gas as a fuel for growth. I believe that we should give natural gas the chance it deserves. Various factors can explain this situation but overall, policy makers voluntarily dismissed natural gas from their vision of a sustainable and efficient energy mix for the future. In Europe, natural gas, although cheap and viable, symbolizes our alleged dependency towards Russia. The gas industry must therefore issue more compelling arguments on the essential role of this energy for the future. I hope that the energy conference held in France at the end of the year will enable stakeholders to understand the importance of this energy.

You also support an optimal co-existence between gas and renewable energies?

The disastrous position in which we find ourselves results from low coal prices. Our governments are supposedly fighting against CO2 emissions, but have replaced gas with coal unlike the US which are going in the right direction . The question today is: how to keep our CCGTs going in Europe? The first solution would be to pay the appropriate price for CO2. The second one is to develop re-emission schemes for CO2.

What is actually your assessment regarding the controversial shale oil and gas debate in France?

First of all we must understand the particularities of the country we live in. We have to convince the players that shale represents a potential solution for the future. We also have to recognize that France doesn’t carry the same culture, system and rights than in the US for example. The public raises legitimate concerns regarding environmental protection and the consequences of these technologies. The main issue is the absence of scientific debates around this issue. We have banned fracking with the exception of geothermic energy. The public debate is not founded upon objectives facts but rather stems from an irrational fear. I don’t believe the situation will change in the near future. How may one be convinced to adopt a rational approach? One solution consists in showcasing the success of shale oil & gas in other countries like the UK. The government should at least consider initiating an exploration process. Aside from potential environmental concerns, the government fully dismissed the shale issue to not overshadow the green transition process initiated by Francois Hollande’s Government.

How do you see the future of oil within the energy mix?

There is a discrepancy between the industry’s and the public’s perception of oil in the future. The industry considers that fossil fuels will continue represent around 70% in the next 20 years while the public, influenced by policy makers, expects a growth of renewables. The issue for policymakers is to promote unconventional fuels without being accused of antiquated thinking.

Which renewable energy is more likely to grow in the future?

Solar energy is definitely the most promising due to its lower costs. Offshore wind energy won’t develop unless prices decrease. The responsibility does not only lie in the hands of providers. Engineers ultimately make the decisions. Changing a turbine at the end of the network requires a decree of more than 100 pages! Oil engineers are asking more on the other hand. The energy industry is very conservative and refuses to change the successful methods of the past.

Does the storage of CO2 emissions represent a credible alternative?

CO2 emission storage is too costly. We haven’t developed the adequate technologies to provide this service unless it is subsidized. In the meantime, CO2 emission storage has really not proven to be successful, partly because it is very difficult to get a return on investment.

How do you sustain energy efficiency?

Energy efficiency has become a very fashionable concept. However, if energy efficiency were so simple to achieve, it would already have been done in the past. I am in favor of it, but I, at least recognize the cost implications. Again the real question we must address is whether the industry or households will finance energy efficiency?

You were chairman and CEO of Gaz de France SA from 2004 to 2007, before becoming deputy CEO and COO of GDF Suez, position you held till last November. Let’s go back to the historical merger of GDF and Suez in 2008, which was quite a bold bet at the time. Can you tell our readers how it was successfully completed?

Merging companies is a strenuous process, especially at the time since it required the approval of the commission for privatization and the consent of two French Presidents. After more than 3 years of lengthy negotiations, the merger was finally approved. Only toward the end of 2008 were we able to conclude the operation. You must remember that during the negotiations, both companies had to continue conducting their businesses. Overall, the merger was the right decision considering the energy mix of the time. It was important to erect a major energy player in France, alongside Total.

How did you manage to go from public service to the management of an international private company?

The transition was not necessarily as difficult as you may consider. Our job was to convince our employees that the merger made sense for the interest of the people. I very much value the public sector but I am more comfortable working in the private sector. In retrospect, I am proud to have participated in the creation of the single currency between 1995 and 2002, alongside former President Jacques Chirac, and contributing to further economic cooperation between France and Germany.

What must be done to preserve the French energy model in upcoming years?

The French energy landscape has already changed drastically. All our companies are facing many challenges. Our business models have been under stress. Many companies disappeared, despite being profitable in the past. We have to accelerate the transformation of our industry in the next 10 years. We have relied too much on rental situations and me must constantly invest and think in the long term.

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