Momentous Time for Energy Trade/Security

It would be hard to overstate the significance of the last three weeks for those of us who care passionately about the future of transatlantic energy trade and security:

  • Some 60 percent of the U.S. House of Representatives voted (Oct. 9) to approve bipartisan legislation to lift restrictions upon the export of U.S. crude oil.
  • The United States and 11 other nations announced (Oct. 5) an agreement in principal on the Trans-Pacific Partnership (TPP) trade deal, including (presumably) the “national treatment of natural gas.”
  • Poland’s Prime Minister, Ewa Kopacz, cut the ribbon on the Świnoujście LNG import terminal (Oct. 12) on the Baltic Sea and said that Poland would soon be independent from “supplies from the East.”
  • Lithuania’s Energy Minister, Rokas Masiulis, also said (Oct. 12) that his nation could receive its first shipment of U.S. LNG in early 2016.
  • Poland and Lithuania announced (Sept. 24) that they had agreed upon how the costs of the 534 km Gas Interconnector Poland-Lithuania (GIPL) pipeline would be allocated among their nations.

House Votes to Lift Crude Export Ban
The U.S. House of Representatives voted 261-159 on Oct. 9 to lift restrictions on the export of crude oil from the United States put into place in the 1970s. Supported by 235 Republicans and 26 Democrats, the bill authored by Reps. Joe Barton (R-TX) and Henry Cuellar (D-TX) was sent to the Senate for further consideration.

The bill, nearly all analysts agree, would likely lead to modest decreases in U.S. gasoline prices and could help spur further oil exploration efforts which have slowed in recent months due to global oil price reductions. In addition to the positive economic benefits, the Barton-Cuellar bill would be welcomed by America’s global allies.

At the inaugural Transatlantic Energy Security Forum™ (Sept. 30), Rokas Masiulis, Lithuania’s Minister of Energy, made the following observations:

“There is a lot of talk right now about whether the United States should lift the ban on oil exports or not. I am a big supporter of lifting that ban. […] Such a decision could have an impact in Eastern Europe, a region where energy and geopolitics often go together. Remember, when you deal with Russia—as we do for oil and natural gas—energy is often priced on geopolitical and not just economic terms. […] Expanding potential oil supplies from the United States would provide a counterbalance to Russia, a nation that is never afraid to leverage their energy resources.”

Jack Gerard, President and CEO of the American Petroleum Institute, struck a similar note: “[This] vote starts us down the path to a new era of energy security, saving consumers billions and creating jobs across the country. American producers would be able to compete on a level playing field with countries like Iran and Russia, providing security to our allies and accelerating the energy revolution that has revitalized our economy.

TPP Trade Agreement Reached by 12 Nations
With obvious implications for the ongoing U.S.-EU negotiations over the Transatlantic Trade and Investment Partnership (TTIP), the United States and 11 other nations announced a deal on the Trans-Pacific Partnership (TPP) on Oct. 5. Although the details of the agreement have still not been made public, TPP presumably includes the “national treatment of natural gas.” That would mean U.S. LNG exports to the other TPP signatory nations (most notably Japan) would no longer be subjected to the U.S. Department of Energy’s procedures that permit LNG exports only to the extent that they are determined by the DOE Secretary to be “in the public interest.” Under U.S. law, LNG exports to nations with which the United States has a free trade agreement that includes the national treatment of natural gas are automatically deemed to be “in the public interest,” and are approved without modification or delay by DOE.

Świnoujście LNG Import Terminal Inaugurated
On Oct. 12, Ewa Kopacz, Prime Minister of Poland, cut the ribbon on her nation’s first LNG import terminal. Located at the Port of Świnoujście on the Baltic Sea, the LNG terminal will have an initial capacity of approximately 5 billion cubic meters (bcm) per year and is set to receive its first LNG cargo in December. The Świnoujście terminal is the second Baltic Sea LNG import facility to be inaugurated in 2015, following Lithuania’s floating storage and regasification vessel—“Independence”—which began service in January.

According to an article in Financial Times, Kopacz said: “I do not exaggerate when I say that this is a historic moment. Poland has achieved a strategic and very important goal. We have gas independence. This infrastructure . . . also brings the possibility of negotiating the price of gas, which will be reflected in Polish pockets.”

U.S. LNG Could Reach Lithuania in 2016
Energy Minister Masiulis also said yesterday (Oct. 12) that shipments of LNG from the United States could, if certain commercial conditions are met, reach Klaipėda as early as 2016. Lithuania currently has a small LNG supply contract with Statoil, but has been actively seeking to forge additional agreements with one or more U.S. LNG producers. The LNG could presumably come from Cheniere Energy’s Sabine Pass project since that will be operating in 2016. (In fact, the first shipments from Sabine Pass are expected before the end of 2015.)

Gas Interconnector Poland-Lithuania
In addition to the Klaipėda and Świnoujście terminals, a major natural gas pipeline project—Gas Interconnector Poland-Lithuania (GIPL)—is another piece of the Baltic Sea energy security puzzle. The 534km pipeline, which will run from Rembelszczyzna in Poland to Jauniunai in Lithuania, is projected to cost €558 million.

The European Commission has identified the pipeline as a major priority and would provide €295 million of the total cost through the Connecting Europe Facility (CEF). Construction of the GIPL project is slated to start in 2016 and a 2019 completion date is contemplated. The initial annual capacity of the pipeline will be 2.3 bcm but this could increase to 4.5 bcm if/when compression stations are added.

According to an Oct. 12 news story in Financial Times, the agreement on how the non-CEF financial obligations will be allocated among Poland, Lithuania, Latvia, and Estonia may be signed on Oct. 15 on the sidelines of an EU summit in Brussels.

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This has indeed been a momentous three weeks for transatlantic energy security, with developments in both the United States and Europe.

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