This record is a partial extract of the original cable. The full text of the original cable is not available.

UNCLAS SECTION 01 OF 02 PARIS 004017 
 
SIPDIS 
 
SENSITIVE 
 
STATE FOR EUR/WE; OES; NP; EB/ESC, AND EB/CBA 
USDOC FOR 4212/MAC/EUR/OEURA 
DOE FOR ROBERT PRICE PI-32 AND KP LAU NE-80 
 
E.O. 12958: N/A 
TAGS: ENRG EPET EIND EINV PREL PGOV FR
SUBJECT: FRANCE: ENERGY SECTOR UPDATE 
 
¶1. (U) This another in a series of occasional updates on the French 
energy sector.  Feedback is welcome to help us make this product as 
useful as possible for our inter-agency USG audience. 
 
Contents: 
 
--  France's energy review recommends greater use of biofuels (para 
2); 
--  .... and greater investment in refining and solar power (para 
3); 
--  First tests of flex-fuel cars launched in eastern France (para 
4); 
--  New Energy Commission appointed (para 5); 
--  French energy imports increase, but nuclear power remains key 
(para 6); 
--  Suez-GDF merger no longer likely (para 7); 
--  France may delay opening of its energy market (para 8); 
--  France and the UK to increase nuclear energy cooperation (para 
9). 
 
¶2. (U) France's energy review recommends greater use of biofuels: On 
May 15, French Prime Minister Dominique de Villepin announced new 
measures to boost the use of biofuels in vehicles in France and 
reduce the country's rising oil bill on its way to a "post-oil" era. 
 New measures aim at increasing the blending of biofuels in cars to 
10 percent by 2015, according to the French Prime Minister.  The 
measures are part of a wide-ranging energy policy review. 
Villepin's objective is to ensure that by the end of the decade 
every French citizen can buy a vehicle able to run on high biofuels 
blends.  In this context, Villepin said he wanted to see a genuine 
network of "green refueling stations," noting that they are already 
a reality in Brazil and Sweden.  He announced that an action plan 
will be presented "by the summer" which will bring together car 
manufacturers, oil distributors, farmers and consumers. 
 
¶3. (U) France's energy review also recommends greater investment in 
refining and solar power: De Villepin also announced other measures 
as part of France's current energy review, including a commitment by 
oil producers to invest four billion euros in new refining capacity 
as well as research by the end of the decade.  The GOF will also 
promote solar power with the state covering half the installation 
cost of solar roofing and a commitment by EDF to buy solar 
electricity at double the current price.  Finally, de Villepin said 
his government was also committed to raising by 50 percent the price 
at which biofuels are bought from farms and other waste storage 
facilities. 
 
¶4. (U) First tests of flex-fuel cars launched in eastern France: To 
promote wider use of renewable energy, France introduced on June 1, 
2006, its first tests of flex-fuel cars that can run on ethanol or 
conventional fuel.  Launched by Industry Minister Francois Loos, the 
tests will be carried out in the Marne region, in eastern France. 
The Marne regional government has a special permit to use the 
ethanol-based E85 fuel to run a fleet of seven Ford flex-fuel cars 
for a year.  E85 is 85 percent ethanol, a biofuel derived from sugar 
beet or cereals.  However, France's biofuel production is mainly 
biodiesel, largely made from rapeseed and then blended with 
conventional diesel.  Some 75 percent of French cars run on diesel 
and this share is expected to grow in the coming years.  E85 is not 
currently authorized in France, but government approval is expected 
by early next year and the fuel should be widely available by 2010. 
During the launch of the tests, Loos commented that biofuels were 
"one way of improving our energy independence, ensuring the 
protection of the environment and providing new markets for French 
agriculture."  Former racecar champion Alain Prost has been 
appointed to head a new French working group on biofuels. 
 
¶5. (U) New Energy Commission appointed: Also on June 1, a new Energy 
Commission was launched in Paris.  Headed by Jean Syrota, the former 
Chairman of the independent French energy regulator, the Energy 
Commission will function as a think tank, drafting proposals on the 
security of energy supply, managing energy risks and other major 
energy issues in view of the French EU Presidency in the second half 
of 2008.  The 75-member Commission includes trade union and 
employers' representatives as well as consumer associations, CEOs 
and economists. 
 
¶6. (U) French energy imports increase, but nuclear power remains 
key:  In 2005, France spent 38.3 billion euros on imported energy 
(primarily oil and gas) representing 2.26% of GDP (versus 1.8% in 
2004).  Consistent with the relative size of the French economy, 
France ranks as the fourth largest energy consumer among the OECD 
member countries, but ranks only 27th in CO2 emissions, thanks 
largely to its fleet of 58 nuclear reactors, all owned and operated 
by Electricity de France (EDF).  In 2005, they produced 430 TWh in 
electricity, 78% of total electricity production in France, and they 
have a generating capacity of 63 GWe.  France is second only to the 
U.S. in the production of nuclear power (the U.S. economy is five 
times larger than the French economy) and second only to Sweden for 
nuclear power production per inhabitant.  The average age of age of 
nuclear reactors in France is only 20 years.  Nevertheless, in order 
to begin to replace the older reactors in its fleet, construction of 
an EPR (European Pressurized Reactor) demonstrator in Normandy will 
begin in mid or late 2007 and be completed by 2012. 
 
¶7. (SBU) Suez-GDF merger no longer likely: While GOF "activism" 
spurred the idea of a merger between Gaz de France (GDF) and Suez to 
stave off a Suez takeover by Italian energy company Enel, political 
considerations appear to have compromised the planned arranged 
marriage.  A group of members of the National Assembly from the UMP 
ruling party met with Prime Minister Dominique de Villepin on June 6 
and again June 13 to urge him to delay the merger, which involves 
approving a law to privatize GDF.  UMP legislators fear a strong 
backlash against the privatization of what many French people see as 
an integral part of their country's "national patrimony," rather 
than as just another service-providing corporation competing in an 
EU-wide market.  The GDF privatization bill, which calls for the 
government to reduce its share in GDF to 33 percent, would nullify a 
2004 law stating that the GOF stake could not fall below 70 percent. 
 It is not clear whether the plan for a merger will be left as is, 
modified, or abandoned altogether.  On June 7, Economy and Finance 
Minister Thierry Breton told Parliament would have the last word on 
the proposed plan.  A few days later, the Prime Minister said the 
merger would go ahead regardless, a statement which infuriated many 
members of the National Assembly according to UMP Deputy 
Jean-Francois Gonnot.  Interior Minister Nicholas Sarkozy, for his 
part, commented that the merger would probably not go through.  The 
EU Commission continues its investigation into the proposed deal, 
with a ruling expected on July 3.  Meanwhile, Enel hovers on the 
margins, reportedly still interested in Suez. 
 
¶8. (SBU) France may delay opening of its energy market: With the 
2007 Presidential elections in mind, rumors are circulating about a 
possible delay in France's implementation of the last stage of the 
EU Energy Directive allowing residential consumers to choose their 
suppliers beginning on July 1, 2007.  On May 29, the French business 
daily "La Tribune" said that the GOF was planning to keep gas and 
electricity tariffs regulated beyond July 1, 2007.  Citing a 
government document, the paper added that the GOF was planning to 
introduce a "social gas tariff" for certain underprivileged users. 
Furthermore, the paper reported that the government was also 
considering requiring that the distribution networks of utility 
groups Electricite de France (EDF) and Gaz de France (GDF) be 
regrouped into separate divisions if they supplied more than 100,000 
customers.  EDF and GDF have not yet commented on the report.  The 
European Commission is not likely to approve France's "regulated" 
version of open markets.  This, in turn, could jeopardize the 
privatization of GDF.  A recent pronouncement by France's highest 
administrative court, the State Council, stated that the 
privatization of GDF and the law implementing fully open energy 
markets on July 1, 2007, had to be passed simultaneously or very 
close together.  The Government reportedly plans to make a final 
decision in the coming weeks and present a draft energy law to the 
National Assembly by mid-July.  In the meantime, three French unions 
(leftist CGT Energie, and center-right FO and CGC) are calling for 
demonstrations on June 20 against further market opening and GDF 
privatization. 
 
¶9. (U) France and the UK to increase nuclear energy cooperation: On 
June 9, France and Britain announced that they would intensify 
collaboration in civil nuclear energy, creating a joint forum to 
discuss possible cooperation in the sector at a time of deep concern 
over European energy supplies.  The announcement, made at a summit 
between French President Jacques Chirac and Prime Minister Tony 
Blair, coincided with growing speculation that Britain may 
reconsider its current nuclear energy freeze in order to build a new 
generation of nuclear plants to replace its aging reactors.  In a 
statement released after the meeting, the French and British leaders 
said: "The Forum will provide a vehicle to discuss Franco-British 
nuclear cooperation, including research, skills, decommissioning and 
waste management."  The two leaders also agreed to cooperate across 
a broad range of other issues, including defense and European 
policy. 
 
Stapleton