CEEP in Washington, D.C.: Central Europe ready for a gas partnership with the United States

The United States can support Europe, especially Central Europe, by influencing its energy security policy. When it comes to the EU-11’s gas dependency on one supplier, the trade role that the US can play will be an integral part of a better and fairer world. This was argued by Marcin Bodio, the CEO of CEEP, at the 3rd Transatlantic Energy Conference, that took place on April the 4th, 2016, in Washington, D.C.

This conference edition focused on the theme: ‘American gas for Europe’. In his well-received speech, Mr. Bodio broadly covered the topic of LNG, as well as touching upon such areas as the EU’s proposed Energy Union, the TTIP, and the crucial North–South Corridor. He also looked at how gas markets are developing globally, including Gazprom’s response to the ongoing changes. The EU-11’s gas dependency on one supplier was also highlighted, whilst all of these topics were underpinned by the subject of energy security.

“This is something of a European fixation, but a vitally important one. As energy is the universal cornerstone of our civilisation, Europe is, and will remain in the foreseeable future, a net importer of energy, one of the biggest in the world. Europe has always been concerned with energy and energy security policy, and has constantly been in search of new sources of energy, to fuel the growth and well-being of its societies. So, as the US has a lot to offer Europe, in that respect, it comes as no surprise that energy and the security of energy supply have been subjects of the transatlantic debate for a long time,” Mr. Bodio proclaimed.

It is worth remembering that CEEP’s involvement in promoting political and commercial relations between European and American partners, was initiated during the two editions of the LNG Europe–US Roundtables, which were both held in 2015, the first in May in Brussels, and the second in November, in Washington D.C. By bringing together European and American senior political officials, as well as business executives representing LNG, CEEP managed to discuss the current trends within their respective energy sectors. The talks also placed an emphasis on the security of supply of energy to Europe, and resulted in drafting progressive, practical solutions based upon potential LNG trading, and LNG investment co-operation between Europe and the US.

According to Mr. Bodio, “current exchanges and debates continue to be important for enhancing Europe’s security of supply, through reinforcing the partnership with the US, in the context of LNG imports, especially as the global security landscape and Russia’s uneasy relationship with the West are issues growing in complexity. The crisis in Ukraine, and the repeated attempts to use energy exports as tools, with which to exert political pressure and influence, by Europe’s major gas supplier, have highlighted the need for solidarity and collaboration within Europe, and with partners beyond its frontiers. The United States can support Europe, especially Central Europe, by influencing its energy security policy.”

The CEO of CEEP further argued, to his largely American audience,  that exporting gas to Europe is deemed to be in the US national interest, as well. Expectations of future supply will impact on market stability and infrastructure investment decisions, made today. The US shale gas boom will also have a great impact on the competitiveness of the European gas market and its energy security. “We are all aware that, recently, the first shipment of LNG departed from the LNG Sabine Pass hub in Louisiana. We believe that there will be increasingly more shipments directed towards Europe this year, as some of the long-term contracts have already been negotiated, and it means that their economic conditions are competitive enough, when compared with the Russian pipeline offer,” Mr. Bodio underlined.

Although CEEP thinks that the European Union needs fair partnerships, a recent study (‘Energy Union Choices – A Perspective on Infrastructure and Energy Security in the Transition’) shows that under normal market conditions, Europe does not need any new import capacities. The analysis proves that the current gas infrastructure is sufficient to ensure security of supply in 2030, in Europe, even within a high demand scenario. Therefore, CEEP agrees with the opinion of the study’s authors, that there is no need for new import capacity, from Russia to Germany, as in the case of the proposed Nord Stream 2, but we should think further about diversification. In this context, Mr. Bodio mentioned the Baltic Pipe, which is on the PCI list, between Denmark and Poland .When completed, it will transport natural gas from Norway to Poland, via Denmark.

As for a specific Central European perspective, the CEO of CEEP stressed that the EU-11 is, overall, significantly more dependent on Russia as a supplier of energy than the EU-15. This is particularly applicable in the case of natural gas. “Whilst the EU-15 imports about 21% of their gas supplies from Russia, the EU-11’s share is 60% (as of 2013). As a comparison, the entire EU-28’s average is about 27%. However, the dependency on Russian gas supplies within the EU-11 is relatively uneven: Croatia does not import any Russian gas, and Romania relies on Russia for only about 15% of their supplies. As of 2013, the Baltic States, on other hand, were 100% dependent on Russian supplies, whilst Bulgaria’s share stood at 97%. This picture has changed, recently, particularly in the case of Lithuania, with dependency on Russian imports dropping to below 50%, as the LNG terminal in Klaipeda was put into commercial operation, and it started receiving LNG exports from Norway,” Mr. Bodio noted.

The EU-11’s vulnerability, due to its high dependence on a single supplier of gas, means that the region is in fundamental need of a backbone gas transmission network along the North-South Gas Corridor. In CEEP’s opinion, such a core connection could lead from Poland, via the Czech Republic, Slovakia, and Hungary, and across the Western Balkans to Croatia. “We believe that the comprehensive development of such a Corridor would enable Central Europe to gain access to additional suppliers, and effectively distribute gas resources across the entire region. Soon, Poland will launch commercial operations in its newly-constructed LNG terminal in Świnoujście. An additional LNG import facility has been proposed for the Croatian Krk island – a floating offshore terminal. Implementation of these LNG projects, together with complementary investments in gas infrastructure (cross-border and internal pipelines), would allow the EU-11 to gain direct or indirect access to LNG imports, both via the Baltic and  Adriatic Seas,” CEEP’s CEO  maintained.

In this context, many respected US energy experts have been backing the idea of LNG exports to the EU. “Thanks to the development of LNG technology, the construction of gas facilities in the US and Europe, the expansion of domestic networks, as well as interconnections between the EU Member States, we find ourselves in a situation, where we are no longer bound to purchase gas from one source only. The European Union, and especially the Central European region, require further attention, and could well be a focal point of the US in the context of energy supplies. In order to obtain that, we should deepen our relations to create the appropriate conditions for ensuring the security and continuity of supply, as well as our mutual business development. Let us remember that the gas industry is not about the short-term; we are thinking about the energy needs of the world from 2030 to 2050,” Mr. Bodio firmly concluded.

Jan Jujeczka, Spokesperson, CEEP