Neverovič Delivers Colo. Keynote Address

Jaroslav Neverovič
Former Energy Minister of the Republic of Lithuania
Keynote Address (Abbreviated)
West Slope Colorado Oil and Gas Association Annual Banquet
Grand Junction, Colorado

February 27, 2015

Thank you for that warm introduction and for the great honor of serving as your keynote speaker at this important meeting.

I stand before you tonight knowing that the West Slope natural gas industry faces some very difficult challenges. Low prices are keeping too much gas in the ground and, ironically, the primary reason why prices are depressed is that recent advances in technology and techniques have unlocked many new U.S. shale basins and made recovery of energy from other, older fields now feasible.

To put it directly: there is a U.S. natural gas supply/demand imbalance—too much supply and too little demand.

Clearly, the path to a better future lies in boosting demand by developing additional markets for gas produced here on the West Slope and elsewhere in America.

While it is projected that U.S. domestic consumption of natural gas will grow to meet new demand in the electric power and industrial sectors, the only real new markets lie overseas—in nations such as Lithuania.

Yes, this is a challenging period, but the oil and gas business has always been cyclical. So, don’t lose faith!

After all, the International Energy Agency predicts that primary energy demand worldwide will increase by 37 percent by 2040. With investment in new technologies and a favorable regulatory climate, the United States is better positioned to take advantage of this global demand growth than nearly any other country.

So, I am convinced that better days lie ahead for those who make their living in the Piceance Basin.

But, before I speak about why I think this will happen, first let me tell you a little bit about the country that I come, a small nation along the Baltic Sea that I imagine very few of you have had the opportunity and pleasure to visit.

Lithuania is located in Northeastern Europe. We have approximately three million people and a landmass of 25 thousand square miles—which is about the size of the state of West Virginia.

Lithuania is situated at a relatively high latitude—our capital, Vilnius, sits at 54 degrees north, which is just three degrees south of Sitka, Alaska. However, we have a relatively mild climate.

Lithuania was originally occupied by fragmented Baltic tribes. These were united by Mindaugas who was proclaimed king in 1253, and, at one point, the Grand Duchy of Lithuania stretched all the way from the Baltic Sea through modern day Belarus and Ukraine to the Black Sea.

Lithuania and Poland were then united in a commonwealth that lasted for more than 200 years until it was partitioned in the late 18th Century by the Russian Empire, Prussia, and Austria, with the largest area of Lithuanian territory becoming part of the Russian Empire.

During World War I—on February 16, 1918—the Council of Lithuania proclaimed our independence from Russia and the reestablishment of the Lithuanian state. Sadly, this period of independence lasted only until June 1940, when the Soviet Union illegally annexed Lithuania under the notorious Soviet-Nazi, Molotov-Ribbentrop Pact.

As you know, the Nazis invaded the Soviet Union and occupied Lithuania until the Soviets forced their eventual retreat in 1944. The second illegal Soviet occupation of Lithuania lasted for nearly five decades.

You can be proud that the United States of America was the only nation—besides the Vatican—to never recognize the Soviet occupation of the Baltic states.

Lithuania proclaimed its independence again on March 11, 1990. The Soviets responded by instituting an energy and economic blockade and by attacking and killing civilians and border guards.

Fortunately, after the fall of the Soviet Union, Lithuania’s independence was widely recognized, and in 2004, Lithuania joined both NATO and the European Union.

So, you might ask, why do I spend so much time bringing up history?

It is because I want to explain to you that freedom is not granted forever… you have to fight for it… you have to protect it. I also want you to understand why energy security is such a big deal in Lithuania.

During the Soviet occupation, the energy infrastructure in Lithuania—as well as Ukraine and other states—was designed specifically to make us totally reliant on oil and natural gas from Russia.

After Lithuania declared its independence in 1990, it took a while for us to get our energy act together, but we’ve been making steady progress, especially in recent years.

The United States has long played a crucial role in encouraging and supporting us. For example,  in 2004, President George W. Bush delivered a speech as Lithuania became a NATO member. “Anyone who would choose Lithuania as an enemy,” he said, “has also made an enemy of the United States of America.”

And then a few years later Vice President Dick Cheney gave a fiery speech outlining the administration’s goals for democratic freedoms, free-market economies, and energy security in Europe.

We may guess that Russian president Vladimir Putin was listening carefully as he responded by ordering the shutdown of the crude oil Druzhba Pipeline that supplied Lithuania’s Mažeikiai refinery. Ironically, Druzhba means “friendship” in Russian.

In the aftermath of the Druzhba oil pipeline shutdown, Lithuania’s total reliance on Russian gas also became a problem. With the support of U.S. companies—among others—we began exploring options to reduce our 100 percent dependence on Gazprom, the Russian state-controlled export monopoly.

Our quest for fuel diversity led Lithuania to enter into a ten-year lease with Norway’s Höegh LNG for a floating storage and regasification vessel—appropriately named “Independence.” This vessel began operating on January first of this year at the Lithuanian port of Klaipėda on the Baltic shore.

But even before “Independence” was officially welcomed to Klaipėda, it had already had a tangible impact in Lithuania. Once the vessel was built and on its way from the shipyard in South Korea in mid-2014, the natural gas price offered by Gazprom immediately fell by more than 20 percent.

When the monopolist saw that Lithuania had an alternative, they started negotiating instead of bullying.

So, enough from the past. Let’s fast forward to the present.

Lithuania and our neighbors of Poland, Latvia, and Estonia are shining examples of the transformative nature of freedom, democracy, and open markets.

We have studiously followed America’s example, and we are some of the world’s fastest growing economies. For example, Lithuania’s GDP stood at about $10 billion dollars in 1990. It is now approaching $50 billion!

However, we still need America’s cooperation to reach our full potential. And, what we need most right now from the United States is a competitively-priced, long-term supply of natural gas.

For a year or so, I have been involved in talks with U.S. companies that are either producing gas and eager to export it or are developing liquefaction export facilities to become part of the global gas market.

Many of those companies have applied to the Department of Energy for licenses to export LNG to nations without free trade agreements with the United States, such as Lithuania and—in fact—all of Europe.

The first of these U.S. export terminals will become operational later this year, yet all of the most advanced projects are “fully subscribed,” meaning they have no liquefaction capacity left to sell. Nonetheless, more than a dozen other companies—with gas capacity left to sell—are waiting to get their export licenses.

And so, in every meeting with U.S. government officials, Lithuanian diplomats and politicians always ask the same question: Given how much natural gas America now has in reserve, why limit gas exports at all? It makes no sense, particularly when there are no export restrictions for American coal, wind turbines, or solar panels.

We are told that the Natural Gas Act of 1938 permits U.S. natural gas exports only to the extent that the Secretary of Energy deems them to be “in the public interest.”

But this is 2015, not 1938! And, it’s not just a matter of fixing an old law but a matter of sound economic policy as well. With LNG exports freely open, thousands of  jobs will be created in the United States, more taxes will be paid locally and nationally, and greater economic activity will occur across your economy.

America’s oil and gas revival means that the United States will soon become a net exporter of natural gas. And, the shale revolution has led to excess supplies of light crude oil as well.

Why not share a fraction of America’s oil and gas abundance with your friends who truly need it and are ready to be your partners in the global energy market?

As the continuing violence in Ukraine makes clear, the peace and prosperity of our region is no longer certain. And, we do not have the luxury of waiting years for greater energy security. Current events force us to measure time in months and days.

Lithuania is doing its part. We have an LNG import terminal and we are working to expand transmission pipelines internally and to our Polish, Baltic, and Finnish neighbors.

The time has come for the United States to do its part, too. The time has come for America to lift its self-imposed limits on the export of natural gas and otherwise expedite the export of this energy commodity!

To borrow a line from my dear friend, Lithuania’s Ambassador to the United States, Žygimantas Pavilionis: The time has come for America to become more “American” when it comes to energy.

Why should ordinary Americans care about what happens in Europe?

Why should you care if our energy supplies are secure?

The obvious answer is that it is not in anyone’s interest when energy becomes a political weapon, especially when it becomes an instrument of war. We have to work together to take away that weapon by creating viable global energy markets, especially for natural gas.

But, there is another answer as well.

Your brothers and sisters in Europe—especially in nations such as Lithuania that have long known the burden of the unwelcome yoke of occupation—share your values and your aspirations. Together, we stand upon the bedrock principles of individual freedom, free markets, and respect for human rights.

America is fortunate that your nation stretches from “sea to shining sea,” spanning literally the entire continent from Maine to Monterey.

Europe ends where Asia begins, and ours is an amazing, complicated, intriguing, and frustrating part of the planet, but we are finally beginning to speak and act with greater unity.

The European Union, as you know, is a political framework that permits 28 countries to work towards something that might—someday—become the United States of Europe. Already, today, we are not all that different from the United States. And so, not surprisingly, we want what you want.

We want robust economies, plentiful jobs, and rising living standards. We want clean skies, affordable energy, and a stable climate. But, mostly we want freedom and sovereignty.

We want to sleep peacefully at night, content in knowing that our borders are secure from foreign invasion and our energy systems free from political blackmail and monopolistic tyranny.

Help us to achieve these goals by providing us with expedited and sustained access to your oil and gas.

Let us work together for energy prosperity and, in the process, greater global peace and stability.

Less than two weeks from today—on March 11—Lithuanians will celebrate the 25th anniversary of our reestablished independence. Think about it! We have only been free again for a quarter of a century.

So, in the spirit of freedom and solidarity with which I stand here tonight, let me close these remarks by reciting the most famous passage from your Declaration of Independence:

“We hold these truths to be self-evident, that all men are created equal, that they are endowed by their Creator with certain unalienable Rights, that among these are Life, Liberty and the pursuit of Happiness.”

Indeed!

Thank you.

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