EU-US Energy Council: Spend less, get more

On 5 May two senior energy diplomacy figures from the US and European Union spoke of how advances in technology are likely to help Europe increase its energy security, but at lower costs than those previously anticipated. Their remarks were made at the Atlantic Council in the context of a recent meeting of the EU-US Energy Council, a body comprised of top US and EU energy diplomacy leaders that convenes annually and reports to the wider EU-US summit.

Amos Hochstein, Special Envoy and Coordinator for International Energy Affairs, US Department of State, said there should be no doubt about the EU-US Energy Council's commitment to energy security, that this session of the Council had been the most successful and would likely continue into the future.

He observed, “Because we cooperate so closely, on a weekly basis, the agenda is free flow.”

This, he explained, made the level of discussion between the US and EU more concrete, honest and open, and “moves the ball forward” for determining “where we should go from here”.

Calling the Third Energy Package and Energy Union initiatives milestones, and noting that the LNG and storage strategy from Brussels had helped contribute to such success, Hochstein opined that a number of other projects may be moving too slowly. “To some degree there's still a kneejerk reaction to 'what's the next big project?' And, in my mind, if we don't build a single new big project, that would be the best – there's no need for new, multibillion dollar projects.

“The industry, the private sector and technology are moving so fast,” explained Hochstein, “that these big projects become obsolete before they're complete."

A case in point, he said, are the over a decade-long discussions over building a liquefied natural gas (LNG) import terminal on the Croatian island of Krk, whereas the concept had now become a floating storage regasification unit (FSRU) being built there. Now that the political will had arrived to implement the project, he said the private sector was now interested in building it.

According to him, Krk LNG would be not only critical for Croatia, but also for Hungary, Ukraine, Slovakia and Austria, and would signal a new kind of market; the Interconnector Greece-Bulgaria (IGB) was also important for similar reasons, he added.

Regarding what this means for the regional approach, he said: “What it means is that instead of spending tens of billions of dollars, we can spend a lot less, with more participation from the private sector and achieve a far better result, and that is gas-on-gas competition: let gas from pipeline to LNG compete with each other, let different sources of the gas, from Russia, Qatar, or the US compete with, potentially, Kurdish gas from Iraq, Eastern Mediteranean, Australian... doesn't matter. Let the market come in and compete for the gas, together with Russia.”

Hochstein conceded that Russian gas should be a part of the system, but that gas should also flow, not just west to east, but also east to west to achieve a similar liquidity of gas markets in eastern Europe as there is in the west.

Regarding debate over Nord Stream 2, he questioned the commercial need for the project given that the first phase of Nord Stream is only being used at half capacity. However, the operator says this often-repeated statistic is wrong and that in fact it averages 80% capacity.

He commented, “In our view, we've looked at the commercial issues and believe so much gas is coming on the market in the next several years that you can fix the issue of any decline or shortages with the fact that new infrastructure will be put in place, such as LNG terminals and interconnections of pipelines that are allowed to flow in multiple directions.

In terms of politics and energy security, Hochstein said he didn't envision Nord Stream 2 allowing for continued flows through Ukraine, which he said had been a reliable supplier to the market and had existing infrastructure. The situation, he added, would result in devastating effects on the Ukrainian economy, Slovakia and elsewhere.

Progress made in energy security, COP21: Ristori

The Director General for Energy at the European Commission Dominique Ristori reported that the Council noted progress in two main aspects: energy security and implementation of the Paris Agreement. Of energy security achievements, he mentioned the implementation of infrastructure in the Baltic countries which had reduced those countries' dependence upon a sole supplier of energy.

He noted that the EU had agreed a new key gas interconnector – 500 km, from Poland to the Baltic: Gas Interconnector Poland-Lithuania (GIPL), and that the agreement had been signed last year at the occasion of the European Council in October 2015.

“Together, we also had the opportunity to define a clear new policy in the context of diversification of routes and suppliers," he said.

For gas in particular, he said, Europe was confronted with the dominant position of Russia and, after consultation with the EU's main partner, the US, there is a strategy to make better use of LNG and storage for which the EC had recently published a strategy.

He said that Europe's influence had been key to the US decision to cease restrictions regarding exports of oil and gas. “This is absolutely fundamental to have the capacity to exploit such a rapid and fundamental evolution of the global gas market with LNG becoming more liquid, more competitive, with prices going down.”

Ristori expressed his pleasure over Cheniere Energy's first cargo of LNG from the US having arrived in Portugal just a few days prior. There is a high expectation, he added, in European locations other than Poland and Lithuania (who already have LNG import facilities) to be able to access gas from all over the world

He also spoke of the accelerated progress of the Southern Corridor project to bring gas from Caspian Sea sources to Europe, which would create better conditions before 2020.

Finally, he mentioned the development of gas sources from the Eastern Mediterranean Sea, which comprise 800bn m³ which he noted is “two times what we use in Europe every year.”

Ristori said there is a need for better infrastructure in Europe to be able to send gas in both directions for north-south and east-west interconnections. Regarding southeastern Europe, he said the EC was pushing for new areas of infrastructure like the Interconnector Greece-Bulgaria and also a new FSRU on the Croatian island of Krk.

He commented, “With the development in the gas market, with new producers, we have the capacity to organise things with a lesser amount of financing through new technologies.” Ristori added that this was particularly clear for new floating terminals, which he said were less expensive but very operational. “I think we can be confident to organise things adequately in order to reduce our dependence.”

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