RICHARD L. MORNINGSTAR: I’m going to start. I think there are going to be some stragglers continuing to come in from the outside. But I want to say good afternoon and welcome everybody here to the Atlantic Council. For those of you who don’t know me, I’m Dick Morningstar. I’m the founding director and chairman of our Global Energy Center.

It’s great to see such an excellent turnout today to cap off what’s been a historic week, I think, in the world of LNG and global gas markets. Historic events on the Hill. David Koranyi might comment a little more on that in a couple of minutes. But also on Monday I was lucky enough to attend the inauguration of Cheniere’s Sabine Pass LNG Export Facility on the Louisiana Gulf Coast. And I think this occasion constitutes not just a major landmark for Cheniere, but also for the broader U.S. energy industry and global energy markets, and hopefully very much so in Europe, which we’ll be talking about today.

So in the wake of the ceremony in Louisiana, we’re very pleased to host an excellent lineup of speakers today to consider the future of U.S. LNG exports and to assess the impact that American energy resources will have on the energy security of our European allies. This is not a new subject, but it is something I think especially apropos to be talking about this week. We’re especially happy to see such excellent representation from government practitioners and from private sector leaders, who’ve worked on this issue so extensively in the European context. So I’m looking forward to an excellent discussion on the current state and the future trajectory of transatlantic energy engagement and European energy security.

Before turning it over to David Koranyi, who you all – most of you know, I want to mention two things. I think we have available outside the LNG paper that Bud Coote, who is our resident senior fellow and many of you know from his many years as an energy analyst at the so-called agency across the river. And Bud is in the audience, back in the middle. He’s very unpretentious. He always sort of sits somewhere where nobody will see him. (Laughter.) Next to John Roberts, there. Similarly, unpretentious.

And but I also – I also want to mention our Wroclaw Forum that will be taking place on June 2nd through 4th. And I’m glad that Fran Burwell, who’s the director of the Wroclaw Forum, came in and is listening to me mention it, because if I hadn’t she would have found me and she would have killed me. And so I am talking about it. On June 2nd through June 4th, in which we’ll be talking about many of these issues. And hopefully man of you will also be able to attend.

So with that, I will turn things over to David Koranyi, the director of our Eurasian Energy Futures Initiative, who has spearheaded the Council’s work, and the Global Energy Center’s work, on these issues. So, David, it’s all yours.

DAVID KORANYI: Thank you. Thank you, Dick. Good afternoon to everyone. Let me join Ambassador Morningstar in welcoming you here at the Atlantic Council today on a depressingly rainy spring day. As Dick mentioned, I’m David Koranyi, the head of the Eurasian Energy Futures Initiative. Together with Ambassador Morningstar we are spearheading the Atlantic Council’s work on European and Eurasian energy markets and energy security issues. Also gearing up, in addition to Wroclaw, the Istanbul Energy and Economic Summit, which we hold every November in Istanbul.

As Ambassador Morningstar mentioned, we gather here at a very opportune moment to discuss the ramification of U.S. LNG exports on European energy security, in what I would call a fast-changing global policy and market environment. Just last week we witnessed the signing of the landmark Paris climate agreement in New York by many of the leaders who were there in Paris as well. Also last week we, lo and behold, witnessed something extraordinary here in Washington, which was the adoption of a bipartisan legislation on energy modernization in the Senate. And we are hoping that a similar bill will be passed on the House side. Which is very important also in the context of today’s discussion, because it contains provisions on further expediting the LNG licensing procedure and setting deadlines in that procedure.

Next week we are going to have the EU-U.S. Energy Council here in town, which is another major event. And gas will be on the agenda of that Council meeting. And then, as Ambassador Morningstar mentioned, probably the most important event this week, on Monday, we gathered down in Houston then in Louisiana to celebrate the really momentous achievement represented by what I would call a pioneering project by Cheniere’s Sabine Pass, which is the first LNG export terminal in the lower 48. And it’s, indeed, hard to underestimate the impact on European security, the fact that the United States is becoming a major – one of the biggest LNG exporters in the next five years. And many of you in the room actually worked very hard to make that a reality. So I think it’s a celebratory moment in many ways for all of us.

So we have a very rich program today. We have three panels. It’s going to be a long afternoon. Bear with us. The first panel will be on the challenges of European energy security and the European Energy Union. And it’s a panel to set the scene and discuss the progress that the EU has made in the last decade or so on the energy security front, but also talk about remaining challenges for European energy security, with special regard to Central and Eastern Europe, diminishing but continued vulnerability. The second panel will be focusing more on the commercial realities, the global gas market developments. And it will discuss the global gas picture on the supply and also on the demand side, and the implications of a coming LNG glut on European energy security.

And then the last panel on energy infrastructure integration and supply diversification challenge in Europe will finally look at the EU’s LNG strategy under discussion, discussing the remaining infrastructural gaps, bottlenecks in Europe, but also discussing some of the regulatory challenges that the European market faces, and then finally highlight some of the dilemmas that the EU and some of the member states face in terms of gas supply diversification. So as, again, the ambassador mentioned we have a terrific lineup. All three panels consist of what I would say the crème de la crème of transatlantic energy security experts, policy makers, and business leaders.

And I have the pleasure of introducing the first panel that is going to be moderated by Keith Johnson, who is senior reporter with Foreign Policy, and will feature Robin Dunnigan, who is the deputy assistant secretary at State Department responsible for energy diplomacy. And then the government envoys from the Visegrad companies – from Poland, from the Czech Republic, from Slovakia, and from Hungary. I expect a very lively conversation in all three panels. I will come back to introduce the second and the third panel, but now I would like to hand it over to Keith, who is going to moderate the discussion. The one final thing I have to say is that this is an on-the-record conversation. This is live webcast as we speak and it’s going to be on the website eventually as well. And those who tweet, please use the hashtag #ACEnergy. So without future ado, Keith. Thank you.

KEITH JOHNSON: All right. Well, thank you very much, David. Thank you, Ambassador Morningstar. And welcome to all of you to this panel. I think we’ve got three great opportunities to talk about a few of the big issues that affect both economics and security in Europe.

What I wanted to do with our panelists today – we’ve got perspectives from both Central and Eastern Europe, as well as from the U.S. State Department – was to take a few minutes first and let our speakers sort of lay out the view of energy security in terms of the challenges and the opportunities that they see from their respective perches. And I would also like to see if Robin could weigh in and talk about from the State Department, the Bureau of Energy and Natural Resources, sort of how U.S. energy diplomacy has evolved in recent years, especially towards Central and Eastern Europe.

Ambassador Bartuska, would like to start with the perspectives of the Czech Republic? What do you see in terms of energy security?

AMBASSADOR-AT-LARGE VACLAV BARTUSKA: Well, good afternoon, everybody. Thank you for the invitation. It might surprise you, but basically what I saw in my country in the last 10 years is the diminishing importance of the topic of energy security because I think we have always basically done the homework of the last 20, 25 years. There were pipelines for oil and gas built in 1990s and other—contract with Norway since 1997, and a being part now of Norway’s and European gas market fully in the last five years.

So actually, when Russia – well, not Russia, sorry – little green man took Crimea in February 2014, and then Russia started something in Ukraine, we had a Security Council meeting immediately that Sunday. And prime minister asked me: What are the implications for us? What can happen to us? And I said, well, frankly, not much. In both oil and gas we are fairly well-supplied by the pipelines. And that’s what exactly happened. And nothing really happened in the last two years. I didn’t have to answer to anyone else in Central Europe. We have basically seen the famous or fabled energy weapon of Russia simply did not fire in the last two years.

So I would say on this front we basically moved energy security much from the front point of view to the basic market area. It’s now a discussion about what should be the price of gas. For us, the price of gas is formed in the demands of Germany, like Rotterdam and its energy markets. Oil price is global. So, for us, for example, the LNG opening in the U.S. is definitely something we very much welcome. They’ve helped, I think, a little bit in last three years to get it through under here in DOE and elsewhere, this would be the oil exports.

So we welcome another – as we like to say, another boring exporter of oil and gas in the global market. You know, in our part of the world, for Americans – in America, boring is a bad word. In Central Europe, boring is good, OK? (Laughter.) OK, so we love to be bored. You know, we’ve been part of headlines for much of the 20th century, and it’s not really good. So being boring is fine. We welcome another boring supplier to the global market, one which plays by the rules, doesn’t use energy as a weapon, and basically just sells what he has for a decent price. I mean, that’s nice. Welcome.

And what we now definitely watch the most in my country is how far we can spread the present – let’s say Western Europe or not – Western European gas market throughout the continent. And at the present, you basically have one contiguous area of roughly 200 million people – northern France, Benelux countries, Germany, Britain, Denmark, Norway, Czech Republic, Austria – which is fairly well-supplied by natural gas from different places. We have fairly strong position vis-à-vis suppliers. We would love to see that area spread throughout the EU 28 because in the end half a billion people can get much better prices from outside world than just 200 million.

And I believe that the years ahead will be much more difficult for us than the years so far, because globally Europe is the only region in the world, together with East Asia, which doesn’t have enough raw materials and enough energies supplies on its own territory. Every other continent, every other region has enough – Americas, Middle East, Africa, Asia. The East Asia and Europe are the only two regions which seem to be dependent on imports of oil and gas for decades to come. And we should expect much more difficult conditions in decades to come. So the work is on us to make unified market inside the EU, to be better prepared for years to come.

MR. JOHNSON: Fantastic. Robin, I wanted to follow with Europe, and then I’ll come back to the U.S. perspective. But Mr. Ságvári, from the Hungarian point of view, you’re landlocked there in the center of Europe. You’ve got to have a lot of the same energy concerns, or not, as – is it Czechia or Czech Republic these days?

AMB. BARTUSKA: I love Czech Republic. If I might, let’s stick to it. (Laughter.)

MR. JOHNSON: OK, so in the Czech Republic. And so I wanted to follow up on this notion, because when we talk about Europe and energy security, there’s a tendency to sort of be trapped in a time warp to a certain extent. And mentally we always think about to 2006. We think back to 2009, when there were actual physical supply disruptions from Russia. As the ambassador mentioned, post-Crimea there were no actual supply disruptions. There were reverse flows between different countries that, you know, mitigated a lot of the risks. I mean, is it even legitimate to speak about the worries of European energy security in today’s landscape?

AMBASSADOR-AT-LARGE PÁL SÁGVÁRI: Thank you very much. And good morning, everybody. I would say, partly, yes, because Czech Republic’s market is pretty much integrated to the Western European markets, while the Hungarian and the Slovakian and Poland is having a market which still has a much lower liquidity and dependent on a single supplier. So then in the last 10 years, from 2006, a lot has been done. So many investments have happened. For example, in Hungary, we have seven neighboring countries. And we are physically linked to six out of them. And we are working also on the last one. And the current policy is to complete all of that with the reverse flows.

So then that dramatic feeling, which hit the whole EU but also Central Europe, made so big changes that these investments have happened. While still we have the same – the same physical flow. And believe me, that the natural gas traders in Eastern Europe are very creative to repackage the same volume. But if there is no flow, and the pipes would dry up, then that creativity is not enough. So then we would say that we are the half success. And really two out of the six interconnectors that I mentioned provides us access to stock markets.

And it’s – exactly, there was the project of Nord Stream 2, which just showed us that that – how fragile the strategy just simply to rely on integrating the market to the Western European market, because then this project might block physically the access to the spot markets, as currently we know it is. So our dilemma is – was the following, basically, that just simply integrating to the European market might be not enough. We have to integrate our markets to the global ones, and then we think that the LNG might be an interesting option for Central Europe. And we were pleased to hear that among the seven ships which left Sabine Pass, one of them went to Europe. So the market really underpins what the politicians, the policymakers, and the analysts, so that it can be an interesting option to Europe.

So then that’s really the three something that we are looking for. I think everyone around the table and us for Central Europe, that can be interesting.

MR. JOHNSON: Great. And that’s – and I want to follow up, because don’t worry we’ll get back to Nord Stream 2 for sure a little bit later, as well as the role of U.S. LNG in all of this.

But Mr. Kuderjavy, from the point of view of Slovakia, you’ve got a lot of the same issues that face Hungary and other members of the V4. The sort of physical progress that’s been made in recent years – whether it’s infrastructure, whether it’s regulatory changes and things like that – what does the European Energy Union mean to you in terms of solving some of the energy security challenges that you faced over recent years? And I mean, obviously it’s still a work in progress, but I’d be curious if you could give sort of an interim appraisal of the vision that’s been laid out so far.

JAN KUDERJAVY: OK. Good afternoon. I would like to start by saying that Slovakia is rather typical representative of the countries of the region. We are small. We are very much industrialized and export-oriented. And finally, we do not possess natural resources, including energy resources. That is why we like to listen to the melody of or talkings about how to improve energy security. And last year, maybe you know, the European Council in March adopted new framework strategy that is called Energy Union. And of course we are a big fan of it, because we need diversification in the broadest sense – diversification of sources, suppliers, and the rules.

Slovakia traditionally is 100 percent dependent on energy supplies from Russia. And then I’m not talking only about gas, but that’s related for crude oil and that’s related to the sector of nuclear energy. So basically all these three strategic means of energy we import from Russia. And of course, there are advantages, but there are disadvantages too. And while in our history I’d say reliability of supplies were rather high, but sometimes – back in ’68, when our political changes happen, in that time, in Czechoslovakia, but also recent example is in 2009 there were disruptions of deliveries, and that had a really bad impact on our industries.

So of course energy diversity is very dear to us, and we are trying to find a solution. However, we don’t have access to the sea. We are a landlocked country. And that’s why we are trying to do what is – what is possible in landlocked countries – that is, to try to build interlinkages, interconnectors with neighboring countries. And a good example is neighboring Hungary. We completed a new interconnection last year, gas interconnector. And we hope that that will part of a major interconnector in between Świnoujście LNG terminal with Krk terminal on the island in Croatia.

And on top of that, of course, quite geopolitical issue is Ukraine. And as to the Ukraine, we made some investment and we made available reverse flows of gas. So I would say, yes. Also our position has improved vis-à-vis the past. And today we can get – we can get gas from Western Europe as well. And in such a way all three countries – Hungary, Slovakia, and Poland – we were helping Ukraine since 2014. And practically these three countries supplied last year 100 percent of gas. They did it through the reverse flow.

MR. JOHNSON: Right. OK. You know, and I wanted to follow up on these points, Mr. Janczak, with Poland, because you have an advantage that we don’t have with the landlocked countries, in the sense that you actually do have an outlet to the sea, you have an LNG terminal, right? So it’s a very different competitive advantage. Poland also I guess, through the form of Prime Minister Tusk, was sort of the instigator of the notion of an energy union in the first place. So you have a different perch, a different perspective on things. I wanted to ask you both, you know, how do you see the energy security situation in Poland? And also, how do you see the evolution of the energy union as addressing those issues and vulnerabilities that you do find?

ADAM JANCZAK: Well, thank you. And good afternoon to everyone.

Well, first the – well, I should describe our domestic perception to do what extent the homework has been done. I think the best example how far we are today in Poland compared to the situation 20 years ago is that very specific moment of making LNG terminal in Swinoujscie fully operational, we could in 100 percent substitute our gas supply from the Yamal pipeline. This is per annum around 10 bcm from LNG, and from Germany, namely from the physical reverse flow at Mallnow IP. That means we are fully secure.

But I think all this – the melody we repeatedly – (chuckles) – we are in the certain mode for many years, and the narrative that the corridor from Krk to Świnoujście and vice-versa must be paved and so on. There is one tweak we should – we should really avoid, namely the situation where we will circulate the same Russian molecule in the new setting of interconnectors. That will cost, of course, a lot, and are only partially co-financed or subsidized by the European Commission or Commission from the dedicated financial instrument, which is CEF.

So when we – when we talk about this new architecture, because the Energy Union concept is a story about the new architecture – predominately original architecture – and the draft law that has been recently tabled by Commissioner Šefčovič is inter alia, of course, but also about the regional cooperation and how we want to, well, practically implement a principle of solidarity because so far that was a sort of slogan imprinted to every single piece of our energy legislation, but we were lacking practical solutions.

Now the Commission translated it into the concrete mechanism that will serve SOS gas to the crisis-striked member states if the, let’s say, need or demand on the protected customers – on consumers is satisfied. So this is important step forward. As always, not making everyone absolutely happy, but we think that what makes sense to create regional cooperation is to find such combination of countries where in one group potential deficit countries might sit together with surplus countries. So this is exactly why the Commission decided to put into one basket Poland, Slovakia, and unfortunately without Hungary – but this is another story – and Czech Republic on one side, and Germany, yes? So we are talking about only a crisis situation where the gas is really missing.

Completely different story is the daily scenario when we don’t have to face or manage any sort of emergency situation. And then we will have to, firstly, think about two aspects that are quite important for us. It’s contractual transparency, which means to our understanding that we need to achieve a level playing field effect between Central/Eastern contracts and Western contracts. So, in other words, we should get rid of any abusive clauses that are blocking/harming the development of the market in our part of the continent. And also, we should – we should think about upgrading our interconnectors to make them working bidirectional. That’s a second aspect.

So, as I said, a draft law is on the table now. It has momentum because both co-legislators started to work on that. And there will be a very hard fight, which at the end of the day will show what is the final design of the Energy Union, how far we want to share our national energy security architecture with other neighboring countries, and definitely we are on the right – on the right track. But that will cost us more political effort within the coming months or even years.

MR. JOHNSON: Like everything else in Europe, right?

Ms. Dunnigan, I wanted to ask you, from the point of view of the U.S. And obviously for decades, energy security in Europe has been a priority foreign policy goal. But in recent years whether it’s under Secretary Kerry, former Envoy Pascual, Envoy Hochstein, yourself, energy security, and especially energy security in Europe, seems to have become a relatively important kind of fundamental plank in U.S.-European relations.

And I wanted you to sort of discuss, you know, what are the drivers from the point of view of Washington behind that. I mean, is it just to give more economic and due political security to – including some NATO allies? Is it to push back against certain little green unnamed countries and their exploitation of the energy weapon? Does it have a commercial element in terms of promoting U.S. businesses? If you could sort of walk us through how European energy security is a key plank of U.S. foreign policy, that would be great.

ROBIN DUNNIGAN: Well, first of all, thank you for having me. I always learn something at the events and reports from the Atlantic Council. So I think it’s very helpful to do forums like this.

So you are right, it is not new that the United States has been interested in and supportive of European energy security. I mean, earlier in my career I worked on the Baku-Tbilisi-Ceyhan pipeline, which the United States was a huge supporter of that pipeline, as Ambassador Morningstar knows. We don’t have a single commercial interest in that pipeline.

So the Energy Bureau was created in the State Department out of recognition of the nexus between our national security and energy policy. Energy policy affects economic growth, climate goals, and political stability not only for us, but for our allies and partners around the world. And so Europe’s energy security is very closely tied to our own national security, because Europe’s national security is tied closely to ours.

David mentioned that we have the U.S.-EU Energy Council next week. U.S. Energy Council is chaired by Secretaries Kerry and Moniz on our side, and their counterparts from the European Commission, the High Representative Mogherini, Vice President Šefčovič, and Commissioner Cañete. So I think what we’ll do at this council is, first of all, we’ll take stock. You know, how have we worked together and made progress over the last several years? Europe’s made a lot of progress in the last five years with the third energy package and other steps that my colleagues here have mentioned.

But there are some real, tangible things that we’ve accomplished by working together. And you know, you asked earlier that – do we really need to focus on this? You know, Ukraine, after all, got through the winter and has done OK. That didn’t come without effort. I mean, that came with a lot of diplomatic engagement by Hungary, Slovakia, Poland, the United States, the Commission, some technical changes. But you’re right, I mean, Ukraine go through the winter this year importing more European gas than Russian gas. And that doesn’t mean that Russia won’t continue to supply and the rest of Europe, and that Russia shouldn’t. It will continue to be an important supplier of gas to Europe. But when it is the only supplier for a country it creates a vulnerability, as would any dominate supplier relationship, not just Russia.

So I think when we take stock at the Energy Council meeting next week, we’ll look at some of our progress. I think Ukraine is one area. The Baltics no longer being an energy island is another area where we’ve seen a lot of progress, with the opening of the independence FSRU off the coast of Lithuania, the electrical connections. The southern corridor – we’ve seen ground – the southern gas corridor, bringing Caspian gas into Europe. We’ve had groundbreakings now in Azerbaijan, Turkey, and in a couple of weeks we’ll have one in Greece. That pipe is being laid. It’s being put into the ground. This is a real diversification project that’s actually being built. So real progress. And it’s come from a lot of European and U.S. cooperation.

We’ve also – this is not exactly related but I think it is – the Paris agreement. You know, the Europeans and the United States, we worked very closely together to forge this global consensus on the importance of working together to address climate change. So I think we have a lot of progress to celebrate. I would include in that list the start of U.S. LNG exports. And we talk a lot about how it’s an energy achievement, what happened with the opening, inauguration of Cheniere’s facility at Sabine Pass. But it’s also a foreign policy achievement because the U.S. will be a reliable, market-based supplier to global markets. And that’s not only good for our energy security. It’s good for the energy security of our partners and allies around the world. So I’m very much looking forward to U.S. LNG being part of the diversification solution in Europe and in other countries around the world.

So looking forward, and I think the title of our panel is, you know, what are the challenges, because there’s more work to do. And just looking at U.S. LNG. You know, it doesn’t matter how many molecules we’re putting on the market if once it reaches Europe it can’t enter Europe and then move freely throughout the continent. And so, you know, getting FSRUs in the right places. The one off the coast of Croatia on Krk Island I think makes a lot of sense. Finishing some of the interconnector work that needs to be done. The interconnector between Greece and Bulgaria, for example. You know, there are underutilized LNG terminals in Europe, but there are also a lack of terminals in places where gas really needs to reach, especially in central and southeastern Europe.

I think U.S. LNG will be part of that solution. It provides Europe – which in many countries still face a dominant supplier situation with flexible market-based pricing, reliable source of gas. If I had to sort of underline where I think the United States and Europe really see eye-to-eye on the importance of energy policy and national security, it really is in the principles of the Energy Union document, that my colleague referenced, diversification of sources, fuel types, and routes. And if a project doesn’t fulfill that goal of diversifying either your fuel type, your source, or your route, then it doesn’t seem to be contributing to the diversification of energy in Europe.

And I think that there have been projects. We’ve already mentioned Nord Stream. A Turkish stream, when that was being discussed, was another such project. I think every time folks get distracted by those sorts of projects you lose sight of what true diversification is. So I’m looking forward to next week, the stock taking and looking forward. There’s more to do. There’s more to do on Ukrainian energy sector reform. There are some infrastructure projects we’d like to get done. We need to implement the Paris agreement. And so there’s more work to do, but I think that we’ve actually some real successes to point to.

MR. JOHNSON: That’s great. Thank you. You know, since you served it up on a platter I wanted to go ahead and grab it – Nord Stream 2 – because you make a reference to this. In March, I believe it was, a number of states, I think it was nine Central and Eastern European states wrote a letter to the European Commission basically calling this project – and for anyone here, I doubt anyone here doesn’t know what Nord Stream 2 is, but it’s a proposed pipeline across the Baltic. It would be an expansion of the existing Nord Stream pipeline, which is about half used already, so why not expand it. It’s a proposed expansion that would bring more Russian gas directly into the European market.

Not very politically popular in Central and Eastern Europe. And I’d just like to hear from the folks on this stage, you know, why not? It’s just a gas pipeline. And it’s coming from a very long-term, reliable supplier. So I’d be curious, you know, what are the specific objections to having an expanded Nord Stream.

AMB. BARTUSKA: Well, if you think that it’s nice to have multiple pipelines – I think there actually used to be the saying that happiness is a multiple pipeline – well, then at the moment we have three pipeline systems which bring Russian gas to Europe. It’s one through Ukraine, one through Poland, Yamal system, and through Baltic Sea. Well, we expect that if there is Nord Stream 2 being built, then probably the Ukraine in transit will be finished. So you will basically go from three systems to just two, and that seems to be less viability. At the same time, I must say that probably my southern colleagues will be much, much more vocal when it comes to Nord Stream.

MR. JOHNSON: All right. Well, then please dive in, because one of the questions – and the ambassador just brought it up – cutting out Ukraine as a transit country. In both 2006 and 2009, the European Commission had issues with Ukraine’s reliability as a transit country. So some would argue that bypassing Ukraine as a transit country is not the worst thing in the world. But I would just like to hear your thoughts on the wisdom of folly of Nord Stream expansion.

Yes, sir.

MR. KUDERJAVY: OK. We have couple of problems with Nord Stream 2 project. You know, we are listening from our partners – major partners. And you state that this is a pure commercial project. But you already indicated a letter of nine prime ministers. And that was not the first one. We already sent three set of letters, starting with energy ministers, continuing with, again, prime ministers. And finally this last letter which was sent in March. And basically problems the following: That problems go, of course, beyond commercial aspect.

We think there might be a problem with energy security as such, because when promises which were given by major shareholder of consortium are fulfilled in the sense that objective is to bypass Ukraine. So that means effectively traditional and most important gas corridor would be abandoned. And that means 140 billion cubic meters. Plus, we have to think of on the ground storages in Ukraine. There is more than 30 billion cubic meters.

And then of course that would mean that three – now there’s three different corridors or routes, will be diminished just to two. And on top of that, these two – that means Nord Stream 1 and 2, plus Yamal – they would go practically the same direction to one EU neighbor country, and that is Germany exclusively. So this is preoccupation as far as security. Then, of course, as it has been mentioned, nor indeed has a clear geopolitical impact. And we’ve got Ukraine. We know what happened in Crimea and we know what’s going on in eastern part of Ukraine.

And of course, EU and U.S. is giving helping hand to Ukraine. So I think it would be a little bit stupid on our side giving them help and on the other hand preventing them to earn something like $2 billion on a yearly basis what is net income to their budget. And of course, there is economic concerns as well, because simply by preventing Ukraine getting this money from transit fees the problem would be they probably will not be able to main their robust gas pipeline system. So again, there is a threat and that the quality of that is going to deteriorate.

And to perhaps last preoccupation is a legal one. So we ask – in those nine neighbor countries, we ask in those letters – commission to consider legal aspect, the whole story. You know, whether it combines with an energy package and so on, and so on. And of course, with the objectives of Energy Union concerning diversification.

MR. JOHNSON: I don’t know if either the gentleman from Poland or Hungary have anything more to say on that?

MR. JANCZAK: Yeah. I would refer to the figure colleague of mine pointed out, namely $2 billion U.S. dollars Ukraine will simply lose if Nord Stream 2 is going to happen. I think we, Europeans, in the EU, we should double think before we say nothing – this is about Nord Stream, we can’t stop that project. We can demonstrate our – well, disagreement for that, or simply stay silent. But before we stay silent, we should double think if this is logical if one day – on Monday we invest $1.8 billion U.S. in the financial assistance to the reform problem for Ukraine. On Tuesday, we make loss on their gas check of $2 billion U.S. So this is mutually conflicting each other.

And that’s also a discussion about the economic rationale of Nord Stream 2, because that is going to cost consortium something like 12 billion euros, while modernization of the existing system – namely the Brotherhood pipeline – will cost only 5 billion euros. So we think we can create a really smart reform program for Ukraine, reinvesting those incomes from the transit tariff into modernization of the existing infrastructure, and creating a solid source of budgetary incomes from for the Ukrainian state.

There is a legal issue also, namely the double standards. Because this is in our – at least, in our understanding, this is not an argument that something has not been applied to the Nord Stream 1, and therefore can be applied Nord Stream 2. The regime – legal regime has changed in the meantime. And this is exactly why the same – (inaudible) – are being applied to the Yamal pipeline, and due to the same reason should be also applied to the onshore and offshore section, under the jurisdiction of member states, to Nord Stream 2.

So this is – in our perception, and the sense in which direction the concept of the Energy Union is going to evolve you asked before. This is exactly a test of, you know, credibility of the – of the entire concept of the Energy Union.

MR. JOHNSON: OK, and see, I want to follow up here with all of you on this point, because everyone we have – by design – but everyone her is from Central and Eastern Europe. The nine signatories of the most recent letter complaining about Nord Stream were from Central and Eastern European countries, most of the prior comments as well. We’ve had a lot of silence from Germans and Italians and French. Doesn’t that sort of put lie to the notion of the Energy Union and sort of a great harmonious vision about what exactly Europe has to do for energy security when there’s such a clear split on the wisdom or folly of Nord Stream 2? Sir?

AMB. SÁGVÁRI: Yeah. It’s exactly what I had in mind. So basically we talked about the legal aspects, the commercial aspects. But actually, the stake is much higher than that. So we talk about – it’s a test of European solidarity, because we have a project which is, simply put, good for Western Europe and bad for Central and Eastern Europe in terms of pricing, in terms of competitivity of the economies. And just simply naming it a commercial project when nine prime ministers just sent letter on that is just – is just to think further for all of us.

So you know, it’s – that needs really a European solution. And then it might go to a way, and a bigger EU-Russia agreement is needed on some things, some technical things regarding that. So what to do with this legal aspect? What to do with Ukraine? And try to agree on all of that on an EU 28 level.

MR. JOHNSON: OK. Great. I was – I’m planning on open to the floor in case anyone has any questions. There should be a few microphones here floating around. I’m pretty sure we got one up here in the right hand corner. I would appreciate it you announced your name, your affiliation, and if you could phrase anything in the form of a question rather than a rant or comment, that would always be greatly appreciated. I don’t know if anyone’s got any questions now they can raise their hands. If not, I’ve got plenty of my own, so. All right. We’ll give you a few moments to think on that.

I wanted to follow up on something Ms. Dunnigan said in terms of the potential for U.S. LNG to help bring liquidity to the market. But you also made a point that I think is relevant. Only one of the seven gas shipments from Sabine Pass went to Europe. And it went to about as far away geographically from Central and Eastern Europe as you can get. I mean, I went into Portugal.

And I wanted to – from all of you, but also from the U.S. perspective: How real is the potential of U.S. LNG to really help European energy security, as long as the overwhelming majority of the LNG import terminals are both underutilized and in Western Europe, and not to this point where they’re needed? I mean, there has not been, after years of discussion, there’s not been that much progress on Krk Island. You know, it took Poland a long time. It took, you know, Lithuania a while to get the floating storage unit up. How big a problem is the LNG infrastructure bottleneck in terms of realizing U.S. potential?

MS. DUNNIGAN: So I think there has been real progress. And the opening of – you mentioned Poland – the opening of the LNG terminal in Poland at the end of last year is a perfect example. I mean, that is an LNG terminal that can import U.S. gas. And I would love to see that happen. I know there has been a lot of talk for a lot of years about a terminal off the coast of Croatia. I think that at the same time the gas market changed, the technology for moving gas changed. I think one thing that Croatia is looking at now – I don’t want to speak for Croatia – but I understand is the possibility of a floating storage and regasification unit. And I think an FSRU, you can move it in a lot more quickly, it’s a lot more affordable, it’s a lot more nimble. And again, that technology has really evolved in the last five or six years.

And there are other – I know Greece is looking at importing possibly natural gas through a new or existing terminals, which could then feed into – when the interconnector with Bulgaria is built, could feed into Bulgaria. So there are options. There is more work that needs to be done on infrastructure. And I think that the projects of common interests and the connecting Europe facility that the Commission has where it’s funding some of these projects is really essential. So I think prioritizing, getting European funds where possible to support some of these priority projects, and moving on them will make a difference.

MR. JOHNSON: Ambassador.

AMB. BARTUSKA: And if I might, the U.S. shale gas revolution already helped create the Europe – back in 2008, 2009, when the U.S. stopped importing LNG because it got self-sufficient. Since 2008, the stock price of TTF Exchange in Rotterdam has been consistently far better than the pipe price of pipe gas from Russia. So that’s been very, very helpful for us, and for northwestern Europe, definitely.

When it comes to LNG now coming to Europe, I think it lightens up one fundamental problem, which is until recently when we talk about European unified market, the onus was always on Central and Eastern Europe, talking about those small, tiny, Central Europeans who didn’t do their homework and didn’t do connections. Well, guess what? The biggest missing link is between France and Spain. Spain has seven large LNG terminals that are used at the fantastic rate of 15 to 20 percent.

So the French-Spanish connection which is missing, and the French-Italian connection which are missing highlights the fact that, well, actually, we really need to create a unified European market. I see a gentleman who might say something about it later on, Rhomengi (ph), so I hope to hear from that. But, yeah, I really believe that creating unified European market of half a billion people is not a single issue in Central and Eastern Europe. It really covers much of the continent. And you need more profit from having more interconnections and then you have access to physical flows in time of need.

MR. JOHNSON: That’s great. Yes?

AMB. SÁGVÁRI: I think from a buyer’s perspective, by 2020 we all have a bright future – much, much brighter than we have today, because the investment that has already been done, and they are on the way, it will pay off when the new sources would come online. So we are counting on the possibility of the southern corridor for our region, the Black Sea offshore potential, and of course LNG is a very serious option. And it’s not just about the U.S. LNG, but the whole global LNG market, which will be an oversupply situation. And we think that we play kind of a swing market role by 2020. So compared to what we have today and what will be the situation around 2020, that seems to be much different and much favorable as a – from the point of view of a buyer.

MR. JOHNSON: Mmm hmm, fantastic. I didn’t know if anyone in the audience here had any questions they’d like to pose. Going once, going twice? I did have one – I wanted to pick up something you mentioned earlier when you said there’s no – we don’t have domestic resources. You know, we don’t have domestic energy resources in Europe. It’s one of the few areas, like Asia, that doesn’t have enough to meet its future needs. And I think the gentleman from Slovakia made a similar point.

The U.S. also had declining resource base a few years ago, and greatly increased its reserves of natural gas by embracing hydraulic fracturing. Now, obviously this is a pretty toxic topic in Europe, but, you know, the geology is there in a lot of places – France, the U.K., Poland had some experiences with it, Romania perhaps. So there were bits and pieces of prospects and hope. And I wanted to ask you, because we sent all this time talking about different ways to import energy, whether it’s U.S. LNG or different pipelines or, you know, the southern corridor. Are there really intrinsic political, environmental, geological obstacles to just fracking in Europe? Anyone want to take that?

AMB. BARTUSKA: I think, if I may? At the end of the day, when you go through all the geology and everything else, there’s one fundamental difference between Europe and the U.S. And it’s the ownership of the mineral rights. And that’s a fundamental thing. In Europe, you can own the land, but you never own what’s below the ground. The sovereign owns it. So if somebody comes and says I would like to frack in your garden, the answer is usually frack off because – (laughter) – no, there’s nothing to gain from it.

Now, I went in the U.S. to Bakken Field in North Dakota, I went to Eagle Ford in Texas. Eagle Ford is – the area of Karnes used to be the poorest county in Texas. And suddenly, thanks to oil, tight oil, has plenty of millionaires. Bakken Field is a godforsaken place in North Dakota, where people suddenly have money, thanks to – or because they have mineral rights as well as the land rights. I think this single difference defines the major opposition to anything like fracking in Europe, because what we see in Europe is that in many places opening any type of mine is very difficult – any.

And opening a fracking mine – I think Poland has experienced this recently, which wasn’t only geology, but also the fact that people simply didn’t like much the idea of somebody pumping plenty of water with chemicals underground. So I am not really sure that a shale gas boom or tight oil boom is possible in Europe, quite honestly. I can speak for my country, which – you know, we have – we tend to joke about it, but it’s a very sad joke. I mean, we say in Europe that we have moved from NIMBY to BANANA.

MR. JOHNSON: What’s BANANA?

AMB. BARTUSKA: NIMBY is not in my backyard. BANANA is the absolutely nothing anywhere near anyone. (Laughter.) It’s a very sad joke. If you want to remain an industrial country, a pretty rich country, I mean, we have to sometimes build something.

MR. JOHNSON: Right. Fair enough. Any ideas? Because the State Department had promoted, you know, unconventional gas development all around the world as well. But I wasn’t sure if that was still, you know, one of the things that it’s trying to do in order to bolster, you know, European security.

MS. DUNNIGAN: Well, what we did – so, you know, the U.S. has an all-of-the-above energy strategy. We used fracked gas, fracked oil, renewables, nuclear. This is all-of-the-above energy, you know, strategy has worked or us and makes us more secure. We’ve never said to another nation: You should – you must do nuclear. You must do frack – you must frack for natural gas or oil. But what we have said is that if you want to do that, if you’re looking into doing it, we just went through a revolution here, and we have a lot of lessons learned, right? We’ve learned what works, what doesn’t, how to work with local communities, how industry and local regulators can work together, what are the best practices?

So we do have the unconventional gas technical engagement program, UGTEP, which works with governments – local and subnational governments, and communities, if they are interested in fracking, to sort of share our lessons learned. But in the end, every nation has to make its own choice. I would say, though, that – this is a true story – I was once lectured in Europe – and I won’t tell you the country – about the dangers of fracking. And the next question was, when are you going to send us your fracked LNG?

You know, so I mean there is – you do need – you have to have a strategy that has diverse sources. And that might not include fracking. But you know, there has to be a range of fuel types. And I think the European Energy Union strategy recognizes that. So where we can be supportive, where countries are interested, we’re very happy and helping. But it’s up to each nation to determine its own mix.

MR. JOHNSON: Fantastic. Sir.

MR. JANCZAK: I fully agree with this. Perfectly suit the strategy from 2014 and the recent documents. And I can talk only about the political barriers, but we should make one step backward to 2013 when heads of V4 countries created a coalition against any new regulations to be enforced on our – on all, in fact, EU member states regarding the fracking itself. So we think that there are regulations, from environmental impact assessments and on the various water framework directive.

And this is, you know, frankly enough, speaking openly. But I think those countries, like Germany or France, that decided to impose on themselves moratoriums, that’s very tempting to create more regulatory barriers at the EU level. And this is exactly what the V4 countries like to avoid. So just about the politics. On geology, I think – at least in the case of Poland, we should wait a bit more. Definitely need more drillings and more samples to be double checked.

MR. JOHNSON: You’re making the Energy Union sound like a dream project, by the way, there. So, yes, we’ve got a question here from a gentleman in the audience.

Q: Thank you. It’s Dana Marshall with Transnational Strategy Group.

And I wonder if I may could ask Robin or colleagues from some of the EU member states as well to give us a little bit of a scene setter for next week’s Council meeting. What would – in particular, I’d be interested to know what areas of focus the U.S. side might have for the Commission? What areas might you suggest that they should focus more attention on, more priority, more funding? And of course, from the EU side as well, what do you see as the areas of priority in Brussels across the table next week.

MS. DUNNIGAN: I think the Commission and the United States are very closely aligned on where we see the priorities and the strategic projects. I think – you know, the projects – the priority list for infrastructure projects was something like 250 projects long. And then that list has since been narrowed. And I think that all of the projects that we would see from our perspective as important infrastructure projects are on the narrowed projects of common interest.

I think looking at this Energy Council, it’s coming at an interesting time. It’s getting toward the end of this administration in the United States. I don’t know that it will be the last, but it’s – you know, we’re getting to the end. But we’ve had a few really important developments, the Paris agreement and the signing of the agreement on April 22nd. That really does set the stage for how the European Union and the United States work together not only on our own commitments but helping our partners and allies around the world implement their own commitments. I think that’s one big change.

The ongoing crisis between Russia and Ukraine – Ukraine’s energy independence I think continues to be a focus, and energy sector reform in Ukraine. Getting some of these other infrastructure projects done, like I said, I think we’re very much aligned on how we see moving forward – how we see those projects moving forward. I think – I do think – I don’t want to overemphasize it, but since today’s conference is about LNG, I do think that the changes in global markets on the gas side are relevant. And I think both the United States and the European Union, the Commission, see that a better supplied global market that has a little more flexibility for buyers will have an impact on European energy security.

And so I think that this week’s opening of the Sabine Pass and the inauguration, and the first shipment reaching Portugal last week, is, again, an area where we see very aligned interests. So I’m looking forward to next week. I think we will map out how we continue to work together going forward. And I think we can also, like I said before, you know, sort of count off some real successes in the way we’ve worked together.

MR. JOHNSON: I don’t know if anyone from Europe wanted to add to that? Please.

MR. KUDERJAVY: Perhaps one thing, a part of diversification, which is dear to all of us, I think it is important to mention that a couple of our countries have objectives – supplementary objectives in its energy policies that comprises also improvement of nuclear safety. Let’s say, in Slovakia, it’s also a big issue. And then of course what Robin has said about COP21 results. Let’s say we are preoccupied with renewables, of course. And we want to increase share of carbon-free or low-carbon electricity generation. Generally, of course, we are aiming at – or trying to lower our energy consumption. And then things like continuing to build oil and fuel storages – storage facilities, yeah, let’s say in Slovakia we have then for about roughly just under 100 days. But any improvement in that is, of course, good. And after all, last thing is energy efficiency.

MR. JOHNSON: Right. That’s good.

MS. DUNNIGAN: I’m sorry, just to add quickly, my colleague, the deputy assistant secretary from the Department of Energy, Polly Gant, will be on the next panel. And she can speak to this much better than I can. But we also have a range of technical issues that we cover under the Energy Council. So things like energy efficiency and fuel standards and electric vehicles and regulatory issues – the Department of Energy leads two working groups covering those issues. And so those will be part of the dialogue as well. But Paula’s much more conversant than I am on these issues.

MR. JOHNSON: Well, thank you very much. I wanted to thank our panel for a great discussion today. Very enlightening on Europe. I think we’re about of time here. I did want to let you know we’ve got a second panel that will be up. We’re going to have a 15-minute break. So if you could be back here around 3:20 that would be great. Thank you very much. (Applause.)

(END)

Atlantic Council

U.S. LNG Exports and European Energy Security Conference

Challenges to European Energy Security and the European Energy Union

Introductions:

Richard L. Morningstar,

Founding Director and Chairman, Global Energy Center,

Atlantic Council

David Koranyi,

Director, Eurasian Energy Futures Initiative,

Atlantic Council

Speakers:

Vaclav Bartuska,

Ambassador-at-Large for Energy Security, Ministry of Foreign Affairs,

Czech Republic

Robin Dunnigan,

Deputy Assistant Secretary of State for Energy Diplomacy,

U.S. Department of State

Adam Janczak,

Deputy Director of EU Economic Department, Ministry of Foreign Affairs,

Republic of Poland

Jan Kuderjavy,

Director of Department of Economic Diplomacy, Ministry of Foreign and European Affairs,

Slovak Republic

Pál Ságvári,

Ambassador-at-Large for Energy Security, Ministry of Foreign Affairs and Trade,

Hungary

Moderator:

Keith Johnson,

Senior Reporter,

Foreign Policy

Location:  Atlantic Council, Washington, D.C.

Time:  1:45 p.m. EDT

Date:  Thursday, April 28, 2016

Transcript By

Superior Transcriptions LLC

www.superiortranscriptions.com

RICHARD L. MORNINGSTAR:  I’m going to start.  I think there are going to be some stragglers continuing to come in from the outside.  But I want to say good afternoon and welcome everybody here to the Atlantic Council.  For those of you who don’t know me, I’m Dick Morningstar.  I’m the founding director and chairman of our Global Energy Center. 

It’s great to see such an excellent turnout today to cap off what’s been a historic week, I think, in the world of LNG and global gas markets.  Historic events on the Hill.  David Koranyi might comment a little more on that in a couple of minutes.  But also on Monday I was lucky enough to attend the inauguration of Cheniere’s Sabine Pass LNG Export Facility on the Louisiana Gulf Coast.  And I think this occasion constitutes not just a major landmark for Cheniere, but also for the broader U.S. energy industry and global energy markets, and hopefully very much so in Europe, which we’ll be talking about today.

So in the wake of the ceremony in Louisiana, we’re very pleased to host an excellent lineup of speakers today to consider the future of U.S. LNG exports and to assess the impact that American energy resources will have on the energy security of our European allies.  This is not a new subject, but it is something I think especially apropos to be talking about this week.  We’re especially happy to see such excellent representation from government practitioners and from private sector leaders, who’ve worked on this issue so extensively in the European context.  So I’m looking forward to an excellent discussion on the current state and the future trajectory of transatlantic energy engagement and European energy security.

Before turning it over to David Koranyi, who you all – most of you know, I want to mention two things.  I think we have available outside the LNG paper that Bud Coote, who is our resident senior fellow and many of you know from his many years as an energy analyst at the so-called agency across the river.  And Bud is in the audience, back in the middle.  He’s very unpretentious.  He always sort of sits somewhere where nobody will see him.  (Laughter.)  Next to John Roberts, there.  Similarly, unpretentious. 

And but I also – I also want to mention our Wroclaw Forum that will be taking place on June 2^nd through 4^th.  And I’m glad that Fran Burwell, who’s the director of the Wroclaw Forum, came in and is listening to me mention it, because if I hadn’t she would have found me and she would have killed me.  And so I am talking about it.  On June 2^nd through June 4^th, in which we’ll be talking about many of these issues.  And hopefully man of you will also be able to attend.

So with that, I will turn things over to David Koranyi, the director of our Eurasian Energy Futures Initiative, who has spearheaded the Council’s work, and the Global Energy Center’s work, on these issues.  So, David, it’s all yours.

DAVID KORANYI:  Thank you.  Thank you, Dick.  Good afternoon to everyone.  Let me join Ambassador Morningstar in welcoming you here at the Atlantic Council today on a depressingly rainy spring day.  As Dick mentioned, I’m David Koranyi, the head of the Eurasian Energy Futures Initiative.  Together with Ambassador Morningstar we are spearheading the Atlantic Council’s work on European and Eurasian energy markets and energy security issues.  Also gearing up, in addition to Wroclaw, the Istanbul Energy and Economic Summit, which we hold every November in Istanbul.

As Ambassador Morningstar mentioned, we gather here at a very opportune moment to discuss the ramification of U.S. LNG exports on European energy security, in what I would call a fast-changing global policy and market environment.  Just last week we witnessed the signing of the landmark Paris climate agreement in New York by many of the leaders who were there in Paris as well.  Also last week we, lo and behold, witnessed something extraordinary here in Washington, which was the adoption of a bipartisan legislation on energy modernization in the Senate.  And we are hoping that a similar bill will be passed on the House side.  Which is very important also in the context of today’s discussion, because it contains provisions on further expediting the LNG licensing procedure and setting deadlines in that procedure.

Next week we are going to have the EU-U.S. Energy Council here in town, which is another major event.  And gas will be on the agenda of that Council meeting.  And then, as Ambassador Morningstar mentioned, probably the most important event this week, on Monday, we gathered down in Houston then in Louisiana to celebrate the really momentous achievement represented by what I would call a pioneering project by Cheniere’s Sabine Pass, which is the first LNG export terminal in the lower 48.  And it’s, indeed, hard to underestimate the impact on European security, the fact that the United States is becoming a major – one of the biggest LNG exporters in the next five years.  And many of you in the room actually worked very hard to make that a reality.  So I think it’s a celebratory moment in many ways for all of us.

So we have a very rich program today.  We have three panels.  It’s going to be a long afternoon.  Bear with us.  The first panel will be on the challenges of European energy security and the European Energy Union.  And it’s a panel to set the scene and discuss the progress that the EU has made in the last decade or so on the energy security front, but also talk about remaining challenges for European energy security, with special regard to Central and Eastern Europe, diminishing but continued vulnerability.  The second panel will be focusing more on the commercial realities, the global gas market developments.  And it will discuss the global gas picture on the supply and also on the demand side, and the implications of a coming LNG glut on European energy security. 

And then the last panel on energy infrastructure integration and supply diversification challenge in Europe will finally look at the EU’s LNG strategy under discussion, discussing the remaining infrastructural gaps, bottlenecks in Europe, but also discussing some of the regulatory challenges that the European market faces, and then finally highlight some of the dilemmas that the EU and some of the member states face in terms of gas supply diversification.  So as, again, the ambassador mentioned we have a terrific lineup.  All three panels consist of what I would say the crème de la crème of transatlantic energy security experts, policy makers, and business leaders.

And I have the pleasure of introducing the first panel that is going to be moderated by Keith Johnson, who is senior reporter with Foreign Policy, and will feature Robin Dunnigan, who is the deputy assistant secretary at State Department responsible for energy diplomacy.  And then the government envoys from the Visegrad companies – from Poland, from the Czech Republic, from Slovakia, and from Hungary.  I expect a very lively conversation in all three panels.  I will come back to introduce the second and the third panel, but now I would like to hand it over to Keith, who is going to moderate the discussion.  The one final thing I have to say is that this is an on-the-record conversation.  This is live webcast as we speak and it’s going to be on the website eventually as well.  And those who tweet, please use the hashtag #ACEnergy.  So without future ado, Keith.  Thank you.

KEITH JOHNSON:  All right.  Well, thank you very much, David.  Thank you, Ambassador Morningstar.  And welcome to all of you to this panel.  I think we’ve got three great opportunities to talk about a few of the big issues that affect both economics and security in Europe. 

What I wanted to do with our panelists today – we’ve got perspectives from both Central and Eastern Europe, as well as from the U.S. State Department – was to take a few minutes first and let our speakers sort of lay out the view of energy security in terms of the challenges and the opportunities that they see from their respective perches.  And I would also like to see if Robin could weigh in and talk about from the State Department, the Bureau of Energy and Natural Resources, sort of how U.S. energy diplomacy has evolved in recent years, especially towards Central and Eastern Europe. 

Ambassador Bartuska, would like to start with the perspectives of the Czech Republic?  What do you see in terms of energy security?

AMBASSADOR-AT-LARGE VACLAV BARTUSKA:  Well, good afternoon, everybody.  Thank you for the invitation.  It might surprise you, but basically what I saw in my country in the last 10 years is the diminishing importance of the topic of energy security because I think we have always basically done the homework of the last 20, 25 years.  There were pipelines for oil and gas built in 1990s and other—contract with Norway since 1997, and a being part now of Norway’s and European gas market fully in the last five years. 

So actually, when Russia – well, not Russia, sorry – little green man took Crimea in February 2014, and then Russia started something in Ukraine, we had a Security Council meeting immediately that Sunday.  And prime minister asked me:  What are the implications for us?  What can happen to us?  And I said, well, frankly, not much.  In both oil and gas we are fairly well-supplied by the pipelines.  And that’s what exactly happened.  And nothing really happened in the last two years.  I didn’t have to answer to anyone else in Central Europe.  We have basically seen the famous or fabled energy weapon of Russia simply did not fire in the last two years.

So I would say on this front we basically moved energy security much from the front point of view to the basic market area.  It’s now a discussion about what should be the price of gas.  For us, the price of gas is formed in the demands of Germany, like Rotterdam and its energy markets.  Oil price is global.  So, for us, for example, the LNG opening in the U.S. is definitely something we very much welcome.  They’ve helped, I think, a little bit in last three years to get it through under here in DOE and elsewhere, this would be the oil exports. 

So we welcome another – as we like to say, another boring exporter of oil and gas in the global market.  You know, in our part of the world, for Americans – in America, boring is a bad word.  In Central Europe, boring is good, OK?  (Laughter.)  OK, so we love to be bored.  You know, we’ve been part of headlines for much of the 20^th century, and it’s not really good.  So being boring is fine.  We welcome another boring supplier to the global market, one which plays by the rules, doesn’t use energy as a weapon, and basically just sells what he has for a decent price.  I mean, that’s nice.  Welcome.

And what we now definitely watch the most in my country is how far we can spread the present – let’s say Western Europe or not – Western European gas market throughout the continent.  And at the present, you basically have one contiguous area of roughly 200 million people – northern France, Benelux countries, Germany, Britain, Denmark, Norway, Czech Republic, Austria – which is fairly well-supplied by natural gas from different places.  We have fairly strong position vis-à-vis suppliers.  We would love to see that area spread throughout the EU 28 because in the end half a billion people can get much better prices from outside world than just 200 million. 

And I believe that the years ahead will be much more difficult for us than the years so far, because globally Europe is the only region in the world, together with East Asia, which doesn’t have enough raw materials and enough energies supplies on its own territory.  Every other continent, every other region has enough – Americas, Middle East, Africa, Asia.  The East Asia and Europe are the only two regions which seem to be dependent on imports of oil and gas for decades to come.  And we should expect much more difficult conditions in decades to come.  So the work is on us to make unified market inside the EU, to be better prepared for years to come.

MR. JOHNSON:  Fantastic.  Robin, I wanted to follow with Europe, and then I’ll come back to the U.S. perspective.  But Mr. Ságvári, from the Hungarian point of view, you’re landlocked there in the center of Europe.  You’ve got to have a lot of the same energy concerns, or not, as – is it Czechia or Czech Republic these days?

AMB. BARTUSKA:  I love Czech Republic.  If I might, let’s stick to it.  (Laughter.)

MR. JOHNSON:  OK, so in the Czech Republic.  And so I wanted to follow up on this notion, because when we talk about Europe and energy security, there’s a tendency to sort of be trapped in a time warp to a certain extent.  And mentally we always think about to 2006.  We think back to 2009, when there were actual physical supply disruptions from Russia.  As the ambassador mentioned, post-Crimea there were no actual supply disruptions.  There were reverse flows between different countries that, you know, mitigated a lot of the risks.  I mean, is it even legitimate to speak about the worries of European energy security in today’s landscape?

AMBASSADOR-AT-LARGE PÁL SÁGVÁRI:  Thank you very much.  And good morning, everybody.  I would say, partly, yes, because Czech Republic’s market is pretty much integrated to the Western European markets, while the Hungarian and the Slovakian and Poland is having a market which still has a much lower liquidity and dependent on a single supplier.  So then in the last 10 years, from 2006, a lot has been done.  So many investments have happened.  For example, in Hungary, we have seven neighboring countries.  And we are physically linked to six out of them.  And we are working also on the last one.  And the current policy is to complete all of that with the reverse flows.

So then that dramatic feeling, which hit the whole EU but also Central Europe, made so big changes that these investments have happened.  While still we have the same – the same physical flow.  And believe me, that the natural gas traders in Eastern Europe are very creative to repackage the same volume.  But if there is no flow, and the pipes would dry up, then that creativity is not enough.  So then we would say that we are the half success.  And really two out of the six interconnectors that I mentioned provides us access to stock markets. 

And it’s – exactly, there was the project of Nord Stream 2, which just showed us that that – how fragile the strategy just simply to rely on integrating the market to the Western European market, because then this project might block physically the access to the spot markets, as currently we know it is.  So our dilemma is – was the following, basically, that just simply integrating to the European market might be not enough.  We have to integrate our markets to the global ones, and then we think that the LNG might be an interesting option for Central Europe.  And we were pleased to hear that among the seven ships which left Sabine Pass, one of them went to Europe.  So the market really underpins what the politicians, the policymakers, and the analysts, so that it can be an interesting option to Europe.

So then that’s really the three something that we are looking for.  I think everyone around the table and us for Central Europe, that can be interesting.

MR. JOHNSON:  Great.  And that’s – and I want to follow up, because don’t worry we’ll get back to Nord Stream 2 for sure a little bit later, as well as the role of U.S. LNG in all of this. 

But Mr. Kuderjavy, from the point of view of Slovakia, you’ve got a lot of the same issues that face Hungary and other members of the V4.  The sort of physical progress that’s been made in recent years – whether it’s infrastructure, whether it’s regulatory changes and things like that – what does the European Energy Union mean to you in terms of solving some of the energy security challenges that you faced over recent years?  And I mean, obviously it’s still a work in progress, but I’d be curious if you could give sort of an interim appraisal of the vision that’s been laid out so far.

JAN KUDERJAVY:  OK.  Good afternoon.  I would like to start by saying that Slovakia is rather typical representative of the countries of the region.  We are small.  We are very much industrialized and export-oriented.  And finally, we do not possess natural resources, including energy resources.  That is why we like to listen to the melody of or talkings about how to improve energy security.  And last year, maybe you know, the European Council in March adopted new framework strategy that is called Energy Union.  And of course we are a big fan of it, because we need diversification in the broadest sense – diversification of sources, suppliers, and the rules.

Slovakia traditionally is 100 percent dependent on energy supplies from Russia.  And then I’m not talking only about gas, but that’s related for crude oil and that’s related to the sector of nuclear energy.  So basically all these three strategic means of energy we import from Russia.  And of course, there are advantages, but there are disadvantages too.  And while in our history I’d say reliability of supplies were rather high, but sometimes – back in ’68, when our political changes happen, in that time, in Czechoslovakia, but also recent example is in 2009 there were disruptions of deliveries, and that had a really bad impact on our industries. 

So of course energy diversity is very dear to us, and we are trying to find a solution.  However, we don’t have access to the sea.  We are a landlocked country.  And that’s why we are trying to do what is – what is possible in landlocked countries – that is, to try to build interlinkages, interconnectors with neighboring countries.  And a good example is neighboring Hungary.  We completed a new interconnection last year, gas interconnector.  And we hope that that will part of a major interconnector in between Świnoujście LNG terminal with Krk terminal on the island in Croatia.

And on top of that, of course, quite geopolitical issue is Ukraine.  And as to the Ukraine, we made some investment and we made available reverse flows of gas.  So I would say, yes.  Also our position has improved vis-à-vis the past.  And today we can get – we can get gas from Western Europe as well.  And in such a way all three countries – Hungary, Slovakia, and Poland – we were helping Ukraine since 2014.  And practically these three countries supplied last year 100 percent of gas.  They did it through the reverse flow.

MR. JOHNSON:  Right.  OK.  You know, and I wanted to follow up on these points, Mr. Janczak, with Poland, because you have an advantage that we don’t have with the landlocked countries, in the sense that you actually do have an outlet to the sea, you have an LNG terminal, right?  So it’s a very different competitive advantage.  Poland also I guess, through the form of Prime Minister Tusk, was sort of the instigator of the notion of an energy union in the first place.  So you have a different perch, a different perspective on things.  I wanted to ask you both, you know, how do you see the energy security situation in Poland?  And also, how do you see the evolution of the energy union as addressing those issues and vulnerabilities that you do find?

ADAM JANCZAK:  Well, thank you.  And good afternoon to everyone.

Well, first the – well, I should describe our domestic perception to do what extent the homework has been done.  I think the best example how far we are today in Poland compared to the situation 20 years ago is that very specific moment of making LNG terminal in Swinoujscie fully operational, we could in 100 percent substitute our gas supply from the Yamal pipeline.  This is per annum around 10 bcm from LNG, and from Germany, namely from the physical reverse flow at Mallnow IP.  That means we are fully secure.

But I think all this – the melody we repeatedly – (chuckles) – we are in the certain mode for many years, and the narrative that the corridor from Krk to Świnoujście and vice-versa must be paved and so on.  There is one tweak we should – we should really avoid, namely the situation where we will circulate the same Russian molecule in the new setting of interconnectors.  That will cost, of course, a lot, and are only partially co-financed or subsidized by the European Commission or Commission from the dedicated financial instrument, which is CEF.

So when we – when we talk about this new architecture, because the Energy Union concept is a story about the new architecture – predominately original architecture – and the draft law that has been recently tabled by Commissioner Šefčovič is inter alia, of course, but also about the regional cooperation and how we want to, well, practically implement a principle of solidarity because so far that was a sort of slogan imprinted to every single piece of our energy legislation, but we were lacking practical solutions.

Now the Commission translated it into the concrete mechanism that will serve SOS gas to the crisis-striked member states if the, let’s say, need or demand on the protected customers – on consumers is satisfied.  So this is important step forward.  As always, not making everyone absolutely happy, but we think that what makes sense to create regional cooperation is to find such combination of countries where in one group potential deficit countries might sit together with surplus countries.  So this is exactly why the Commission decided to put into one basket Poland, Slovakia, and unfortunately without Hungary – but this is another story – and Czech Republic on one side, and Germany, yes?  So we are talking about only a crisis situation where the gas is really missing.

Completely different story is the daily scenario when we don’t have to face or manage any sort of emergency situation.  And then we will have to, firstly, think about two aspects that are quite important for us.  It’s contractual transparency, which means to our understanding that we need to achieve a level playing field effect between Central/Eastern contracts and Western contracts.  So, in other words, we should get rid of any abusive clauses that are blocking/harming the development of the market in our part of the continent.  And also, we should – we should think about upgrading our interconnectors to make them working bidirectional.  That’s a second aspect.

So, as I said, a draft law is on the table now.  It has momentum because both co-legislators started to work on that.  And there will be a very hard fight, which at the end of the day will show what is the final design of the Energy Union, how far we want to share our national energy security architecture with other neighboring countries, and definitely we are on the right – on the right track.  But that will cost us more political effort within the coming months or even years.

MR. JOHNSON:  Like everything else in Europe, right?

Ms. Dunnigan, I wanted to ask you, from the point of view of the U.S.  And obviously for decades, energy security in Europe has been a priority foreign policy goal.  But in recent years whether it’s under Secretary Kerry, former Envoy Pascual, Envoy Hochstein, yourself, energy security, and especially energy security in Europe, seems to have become a relatively important kind of fundamental plank in U.S.-European relations. 

And I wanted you to sort of discuss, you know, what are the drivers from the point of view of Washington behind that.  I mean, is it just to give more economic and due political security to – including some NATO allies?  Is it to push back against certain little green unnamed countries and their exploitation of the energy weapon?  Does it have a commercial element in terms of promoting U.S. businesses?  If you could sort of walk us through how European energy security is a key plank of U.S. foreign policy, that would be great.

ROBIN DUNNIGAN:  Well, first of all, thank you for having me.  I always learn something at the events and reports from the Atlantic Council.  So I think it’s very helpful to do forums like this.

So you are right, it is not new that the United States has been interested in and supportive of European energy security.  I mean, earlier in my career I worked on the Baku-Tbilisi-Ceyhan pipeline, which the United States was a huge supporter of that pipeline, as Ambassador Morningstar knows.  We don’t have a single commercial interest in that pipeline.

So the Energy Bureau was created in the State Department out of recognition of the nexus between our national security and energy policy.  Energy policy affects economic growth, climate goals, and political stability not only for us, but for our allies and partners around the world.  And so Europe’s energy security is very closely tied to our own national security, because Europe’s national security is tied closely to ours.

David mentioned that we have the U.S.-EU Energy Council next week.  U.S. Energy Council is chaired by Secretaries Kerry and Moniz on our side, and their counterparts from the European Commission, the High Representative Mogherini, Vice President Šefčovič, and Commissioner Cañete.  So I think what we’ll do at this council is, first of all, we’ll take stock.  You know, how have we worked together and made progress over the last several years?  Europe’s made a lot of progress in the last five years with the third energy package and other steps that my colleagues here have mentioned.

But there are some real, tangible things that we’ve accomplished by working together.  And you know, you asked earlier that – do we really need to focus on this?  You know, Ukraine, after all, got through the winter and has done OK.  That didn’t come without effort.  I mean, that came with a lot of diplomatic engagement by Hungary, Slovakia, Poland, the United States, the Commission, some technical changes.  But you’re right, I mean, Ukraine go through the winter this year importing more European gas than Russian gas.  And that doesn’t mean that Russia won’t continue to supply and the rest of Europe, and that Russia shouldn’t.  It will continue to be an important supplier of gas to Europe.  But when it is the only supplier for a country it creates a vulnerability, as would any dominate supplier relationship, not just Russia. 

So I think when we take stock at the Energy Council meeting next week, we’ll look at some of our progress.  I think Ukraine is one area.  The Baltics no longer being an energy island is another area where we’ve seen a lot of progress, with the opening of the independence FSRU off the coast of Lithuania, the electrical connections.  The southern corridor – we’ve seen ground – the southern gas corridor, bringing Caspian gas into Europe.  We’ve had groundbreakings now in Azerbaijan, Turkey, and in a couple of weeks we’ll have one in Greece.  That pipe is being laid.  It’s being put into the ground.  This is a real diversification project that’s actually being built.  So real progress.  And it’s come from a lot of European and U.S. cooperation.

We’ve also – this is not exactly related but I think it is – the Paris agreement.  You know, the Europeans and the United States, we worked very closely together to forge this global consensus on the importance of working together to address climate change.  So I think we have a lot of progress to celebrate.  I would include in that list the start of U.S. LNG exports.  And we talk a lot about how it’s an energy achievement, what happened with the opening, inauguration of Cheniere’s facility at Sabine Pass.  But it’s also a foreign policy achievement because the U.S. will be a reliable, market-based supplier to global markets.  And that’s not only good for our energy security.  It’s good for the energy security of our partners and allies around the world.  So I’m very much looking forward to U.S. LNG being part of the diversification solution in Europe and in other countries around the world.

So looking forward, and I think the title of our panel is, you know, what are the challenges, because there’s more work to do.  And just looking at U.S. LNG.  You know, it doesn’t matter how many molecules we’re putting on the market if once it reaches Europe it can’t enter Europe and then move freely throughout the continent.  And so, you know, getting FSRUs in the right places.  The one off the coast of Croatia on Krk Island I think makes a lot of sense.  Finishing some of the interconnector work that needs to be done.  The interconnector between Greece and Bulgaria, for example.  You know, there are underutilized LNG terminals in Europe, but there are also a lack of terminals in places where gas really needs to reach, especially in central and southeastern Europe.

I think U.S. LNG will be part of that solution.  It provides Europe – which in many countries still face a dominant supplier situation with flexible market-based pricing, reliable source of gas.  If I had to sort of underline where I think the United States and Europe really see eye-to-eye on the importance of energy policy and national security, it really is in the principles of the Energy Union document, that my colleague referenced, diversification of sources, fuel types, and routes.  And if a project doesn’t fulfill that goal of diversifying either your fuel type, your source, or your route, then it doesn’t seem to be contributing to the diversification of energy in Europe. 

And I think that there have been projects.  We’ve already mentioned Nord Stream.  A Turkish stream, when that was being discussed, was another such project.  I think every time folks get distracted by those sorts of projects you lose sight of what true diversification is.  So I’m looking forward to next week, the stock taking and looking forward.  There’s more to do.  There’s more to do on Ukrainian energy sector reform.  There are some infrastructure projects we’d like to get done.  We need to implement the Paris agreement.  And so there’s more work to do, but I think that we’ve actually some real successes to point to.

MR. JOHNSON:  That’s great.  Thank you.  You know, since you served it up on a platter I wanted to go ahead and grab it – Nord Stream 2 – because you make a reference to this.  In March, I believe it was, a number of states, I think it was nine Central and Eastern European states wrote a letter to the European Commission basically calling this project – and for anyone here, I doubt anyone here doesn’t know what Nord Stream 2 is, but it’s a proposed pipeline across the Baltic.  It would be an expansion of the existing Nord Stream pipeline, which is about half used already, so why not expand it.  It’s a proposed expansion that would bring more Russian gas directly into the European market.

Not very politically popular in Central and Eastern Europe.  And I’d just like to hear from the folks on this stage, you know, why not?  It’s just a gas pipeline.  And it’s coming from a very long-term, reliable supplier.  So I’d be curious, you know, what are the specific objections to having an expanded Nord Stream.

AMB. BARTUSKA:  Well, if you think that it’s nice to have multiple pipelines – I think there actually used to be the saying that happiness is a multiple pipeline – well, then at the moment we have three pipeline systems which bring Russian gas to Europe.  It’s one through Ukraine, one through Poland, Yamal system, and through Baltic Sea.  Well, we expect that if there is Nord Stream 2 being built, then probably the Ukraine in transit will be finished.  So you will basically go from three systems to just two, and that seems to be less viability.  At the same time, I must say that probably my southern colleagues will be much, much more vocal when it comes to Nord Stream.

MR. JOHNSON:  All right.  Well, then please dive in, because one of the questions – and the ambassador just brought it up – cutting out Ukraine as a transit country.  In both 2006 and 2009, the European Commission had issues with Ukraine’s reliability as a transit country.  So some would argue that bypassing Ukraine as a transit country is not the worst thing in the world.  But I would just like to hear your thoughts on the wisdom of folly of Nord Stream expansion.

Yes, sir.

MR. KUDERJAVY:  OK.  We have couple of problems with Nord Stream 2 project.  You know, we are listening from our partners – major partners.  And you state that this is a pure commercial project.  But you already indicated a letter of nine prime ministers.  And that was not the first one.  We already sent three set of letters, starting with energy ministers, continuing with, again, prime ministers.  And finally this last letter which was sent in March.  And basically problems the following:  That problems go, of course, beyond commercial aspect. 

We think there might be a problem with energy security as such, because when promises which were given by major shareholder of consortium are fulfilled in the sense that objective is to bypass Ukraine.  So that means effectively traditional and most important gas corridor would be abandoned.  And that means 140 billion cubic meters.  Plus, we have to think of on the ground storages in Ukraine.  There is more than 30 billion cubic meters. 

And then of course that would mean that three – now there’s three different corridors or routes, will be diminished just to two.  And on top of that, these two – that means Nord Stream 1 and 2, plus Yamal – they would go practically the same direction to one EU neighbor country, and that is Germany exclusively.  So this is preoccupation as far as security.  Then, of course, as it has been mentioned, nor indeed has a clear geopolitical impact.  And we’ve got Ukraine.  We know what happened in Crimea and we know what’s going on in eastern part of Ukraine. 

And of course, EU and U.S. is giving helping hand to Ukraine.  So I think it would be a little bit stupid on our side giving them help and on the other hand preventing them to earn something like $2 billion on a yearly basis what is net income to their budget.  And of course, there is economic concerns as well, because simply by preventing Ukraine getting this money from transit fees the problem would be they probably will not be able to main their robust gas pipeline system.  So again, there is a threat and that the quality of that is going to deteriorate. 

And to perhaps last preoccupation is a legal one.  So we ask – in those nine neighbor countries, we ask in those letters – commission to consider legal aspect, the whole story.  You know, whether it combines with an energy package and so on, and so on.  And of course, with the objectives of Energy Union concerning diversification.

MR. JOHNSON:  I don’t know if either the gentleman from Poland or Hungary have anything more to say on that?

 MR. JANCZAK:  Yeah.  I would refer to the figure colleague of mine pointed out, namely $2 billion U.S. dollars Ukraine will simply lose if Nord Stream 2 is going to happen.  I think we, Europeans, in the EU, we should double think before we say nothing – this is about Nord Stream, we can’t stop that project.  We can demonstrate our – well, disagreement for that, or simply stay silent.  But before we stay silent, we should double think if this is logical if one day – on Monday we invest $1.8 billion U.S. in the financial assistance to the reform problem for Ukraine.  On Tuesday, we make loss on their gas check of $2 billion U.S.  So this is mutually conflicting each other.

And that’s also a discussion about the economic rationale of Nord Stream 2, because that is going to cost consortium something like 12 billion euros, while modernization of the existing system – namely the Brotherhood pipeline – will cost only 5 billion euros.  So we think we can create a really smart reform program for Ukraine, reinvesting those incomes from the transit tariff into modernization of the existing infrastructure, and creating a solid source of budgetary incomes from for the Ukrainian state.

There is a legal issue also, namely the double standards.  Because this is in our – at least, in our understanding, this is not an argument that something has not been applied to the Nord Stream 1, and therefore can be applied Nord Stream 2.  The regime – legal regime has changed in the meantime.  And this is exactly why the same – (inaudible) – are being applied to the Yamal pipeline, and due to the same reason should be also applied to the onshore and offshore section, under the jurisdiction of member states, to Nord Stream 2. 

So this is – in our perception, and the sense in which direction the concept of the Energy Union is going to evolve you asked before.  This is exactly a test of, you know, credibility of the – of the entire concept of the Energy Union.

MR. JOHNSON:  OK, and see, I want to follow up here with all of you on this point, because everyone we have – by design – but everyone her is from Central and Eastern Europe.  The nine signatories of the most recent letter complaining about Nord Stream were from Central and Eastern European countries, most of the prior comments as well.  We’ve had a lot of silence from Germans and Italians and French.  Doesn’t that sort of put lie to the notion of the Energy Union and sort of a great harmonious vision about what exactly Europe has to do for energy security when there’s such a clear split on the wisdom or folly of Nord Stream 2?  Sir?

AMB. SÁGVÁRI:  Yeah.  It’s exactly what I had in mind.  So basically we talked about the legal aspects, the commercial aspects.  But actually, the stake is much higher than that.  So we talk about – it’s a test of European solidarity, because we have a project which is, simply put, good for Western Europe and bad for Central and Eastern Europe in terms of pricing, in terms of competitivity of the economies.  And just simply naming it a commercial project when nine prime ministers just sent letter on that is just – is just to think further for all of us.

So you know, it’s – that needs really a European solution.  And then it might go to a way, and a bigger EU-Russia agreement is needed on some things, some technical things regarding that.  So what to do with this legal aspect?  What to do with Ukraine?  And try to agree on all of that on an EU 28 level.

MR. JOHNSON:  OK.  Great.  I was – I’m planning on open to the floor in case anyone has any questions.  There should be a few microphones here floating around.  I’m pretty sure we got one up here in the right hand corner.  I would appreciate it you announced your name, your affiliation, and if you could phrase anything in the form of a question rather than a rant or comment, that would always be greatly appreciated.  I don’t know if anyone’s got any questions now they can raise their hands.  If not, I’ve got plenty of my own, so.  All right.  We’ll give you a few moments to think on that.

I wanted to follow up on something Ms. Dunnigan said in terms of the potential for U.S. LNG to help bring liquidity to the market.  But you also made a point that I think is relevant.  Only one of the seven gas shipments from Sabine Pass went to Europe.  And it went to about as far away geographically from Central and Eastern Europe as you can get.  I mean, I went into Portugal. 

And I wanted to – from all of you, but also from the U.S. perspective:  How real is the potential of U.S. LNG to really help European energy security, as long as the overwhelming majority of the LNG import terminals are both underutilized and in Western Europe, and not to this point where they’re needed?  I mean, there has not been, after years of discussion, there’s not been that much progress on Krk Island.  You know, it took Poland a long time.  It took, you know, Lithuania a while to get the floating storage unit up.  How big a problem is the LNG infrastructure bottleneck in terms of realizing U.S. potential?

MS. DUNNIGAN:  So I think there has been real progress.  And the opening of – you mentioned Poland – the opening of the LNG terminal in Poland at the end of last year is a perfect example.  I mean, that is an LNG terminal that can import U.S. gas.  And I would love to see that happen.  I know there has been a lot of talk for a lot of years about a terminal off the coast of Croatia.  I think that at the same time the gas market changed, the technology for moving gas changed.  I think one thing that Croatia is looking at now – I don’t want to speak for Croatia – but I understand is the possibility of a floating storage and regasification unit.  And I think an FSRU, you can move it in a lot more quickly, it’s a lot more affordable, it’s a lot more nimble.  And again, that technology has really evolved in the last five or six years.

And there are other – I know Greece is looking at importing possibly natural gas through a new or existing terminals, which could then feed into – when the interconnector with Bulgaria is built, could feed into Bulgaria.  So there are options.  There is more work that needs to be done on infrastructure.  And I think that the projects of common interests and the connecting Europe facility that the Commission has where it’s funding some of these projects is really essential.  So I think prioritizing, getting European funds where possible to support some of these priority projects, and moving on them will make a difference.

MR. JOHNSON:  Ambassador.

AMB. BARTUSKA:  And if I might, the U.S. shale gas revolution already helped create the Europe – back in 2008, 2009, when the U.S. stopped importing LNG because it got self-sufficient.  Since 2008, the stock price of TTF Exchange in Rotterdam has been consistently far better than the pipe price of pipe gas from Russia.  So that’s been very, very helpful for us, and for northwestern Europe, definitely. 

When it comes to LNG now coming to Europe, I think it lightens up one fundamental problem, which is until recently when we talk about European unified market, the onus was always on Central and Eastern Europe, talking about those small, tiny, Central Europeans who didn’t do their homework and didn’t do connections.  Well, guess what?  The biggest missing link is between France and Spain.  Spain has seven large LNG terminals that are used at the fantastic rate of 15 to 20 percent. 

So the French-Spanish connection which is missing, and the French-Italian connection which are missing highlights the fact that, well, actually, we really need to create a unified European market.  I see a gentleman who might say something about it later on, Rhomengi (ph), so I hope to hear from that.  But, yeah, I really believe that creating unified European market of half a billion people is not a single issue in Central and Eastern Europe.  It really covers much of the continent.  And you need more profit from having more interconnections and then you have access to physical flows in time of need.

MR. JOHNSON:  That’s great.  Yes?

AMB. SÁGVÁRI:  I think from a buyer’s perspective, by 2020 we all have a bright future – much, much brighter than we have today, because the investment that has already been done, and they are on the way, it will pay off when the new sources would come online.  So we are counting on the possibility of the southern corridor for our region, the Black Sea offshore potential, and of course LNG is a very serious option.  And it’s not just about the U.S. LNG, but the whole global LNG market, which will be an oversupply situation.  And we think that we play kind of a swing market role by 2020.  So compared to what we have today and what will be the situation around 2020, that seems to be much different and much favorable as a – from the point of view of a buyer.

MR. JOHNSON:  Mmm hmm, fantastic.  I didn’t know if anyone in the audience here had any questions they’d like to pose.  Going once, going twice?  I did have one – I wanted to pick up something you mentioned earlier when you said there’s no – we don’t have domestic resources.  You know, we don’t have domestic energy resources in Europe.  It’s one of the few areas, like Asia, that doesn’t have enough to meet its future needs.  And I think the gentleman from Slovakia made a similar point.  

The U.S. also had declining resource base a few years ago, and greatly increased its reserves of natural gas by embracing hydraulic fracturing.  Now, obviously this is a pretty toxic topic in Europe, but, you know, the geology is there in a lot of places – France, the U.K., Poland had some experiences with it, Romania perhaps.  So there were bits and pieces of prospects and hope.  And I wanted to ask you, because we sent all this time talking about different ways to import energy, whether it’s U.S. LNG or different pipelines or, you know, the southern corridor.  Are there really intrinsic political, environmental, geological obstacles to just fracking in Europe?  Anyone want to take that?

AMB. BARTUSKA:  I think, if I may?  At the end of the day, when you go through all the geology and everything else, there’s one fundamental difference between Europe and the U.S.  And it’s the ownership of the mineral rights.  And that’s a fundamental thing.  In Europe, you can own the land, but you never own what’s below the ground.  The sovereign owns it.  So if somebody comes and says I would like to frack in your garden, the answer is usually frack off because – (laughter) – no, there’s nothing to gain from it.

Now, I went in the U.S. to Bakken Field in North Dakota, I went to Eagle Ford in Texas.  Eagle Ford is – the area of Karnes used to be the poorest county in Texas.  And suddenly, thanks to oil, tight oil, has plenty of millionaires.  Bakken Field is a godforsaken place in North Dakota, where people suddenly have money, thanks to – or because they have mineral rights as well as the land rights.  I think this single difference defines the major opposition to anything like fracking in Europe, because what we see in Europe is that in many places opening any type of mine is very difficult – any. 

And opening a fracking mine – I think Poland has experienced this recently, which wasn’t only geology, but also the fact that people simply didn’t like much the idea of somebody pumping plenty of water with chemicals underground.  So I am not really sure that a shale gas boom or tight oil boom is possible in Europe, quite honestly.  I can speak for my country, which – you know, we have – we tend to joke about it, but it’s a very sad joke.  I mean, we say in Europe that we have moved from NIMBY to BANANA. 

MR. JOHNSON:  What’s BANANA?

AMB. BARTUSKA:  NIMBY is not in my backyard.  BANANA is the absolutely nothing anywhere near anyone.  (Laughter.)  It’s a very sad joke.  If you want to remain an industrial country, a pretty rich country, I mean, we have to sometimes build something.

MR. JOHNSON:  Right.  Fair enough.  Any ideas?  Because the State Department had promoted, you know, unconventional gas development all around the world as well.  But I wasn’t sure if that was still, you know, one of the things that it’s trying to do in order to bolster, you know, European security.

MS. DUNNIGAN:  Well, what we did – so, you know, the U.S. has an all-of-the-above energy strategy.  We used fracked gas, fracked oil, renewables, nuclear.  This is all-of-the-above energy, you know, strategy has worked or us and makes us more secure.  We’ve never said to another nation:  You should – you must do nuclear.  You must do frack – you must frack for natural gas or oil.  But what we have said is that if you want to do that, if you’re looking into doing it, we just went through a revolution here, and we have a lot of lessons learned, right?  We’ve learned what works, what doesn’t, how to work with local communities, how industry and local regulators can work together, what are the best practices? 

So we do have the unconventional gas technical engagement program, UGTEP, which works with governments – local and subnational governments, and communities, if they are interested in fracking, to sort of share our lessons learned.  But in the end, every nation has to make its own choice.  I would say, though, that – this is a true story – I was once lectured in Europe – and I won’t tell you the country – about the dangers of fracking.  And the next question was, when are you going to send us your fracked LNG? 

You know, so I mean there is – you do need – you have to have a strategy that has diverse sources.  And that might not include fracking.  But you know, there has to be a range of fuel types.  And I think the European Energy Union strategy recognizes that.  So where we can be supportive, where countries are interested, we’re very happy and helping.  But it’s up to each nation to determine its own mix.

MR. JOHNSON:  Fantastic.  Sir.

MR. JANCZAK:  I fully agree with this.  Perfectly suit the strategy from 2014 and the recent documents.  And I can talk only about the political barriers, but we should make one step backward to 2013 when heads of V4 countries created a coalition against any new regulations to be enforced on our – on all, in fact, EU member states regarding the fracking itself.  So we think that there are regulations, from environmental impact assessments and on the various water framework directive. 

And this is, you know, frankly enough, speaking openly.  But I think those countries, like Germany or France, that decided to impose on themselves moratoriums, that’s very tempting to create more regulatory barriers at the EU level.  And this is exactly what the V4 countries like to avoid.  So just about the politics.  On geology, I think – at least in the case of Poland, we should wait a bit more.  Definitely need more drillings and more samples to be double checked.

MR. JOHNSON:  You’re making the Energy Union sound like a dream project, by the way, there.  So, yes, we’ve got a question here from a gentleman in the audience.

Q:  Thank you.  It’s Dana Marshall with Transnational Strategy Group.

And I wonder if I may could ask Robin or colleagues from some of the EU member states as well to give us a little bit of a scene setter for next week’s Council meeting.  What would – in particular, I’d be interested to know what areas of focus the U.S. side might have for the Commission?  What areas might you suggest that they should focus more attention on, more priority, more funding?  And of course, from the EU side as well, what do you see as the areas of priority in Brussels across the table next week.

MS. DUNNIGAN:  I think the Commission and the United States are very closely aligned on where we see the priorities and the strategic projects.  I think – you know, the projects – the priority list for infrastructure projects was something like 250 projects long.  And then that list has since been narrowed.  And I think that all of the projects that we would see from our perspective as important infrastructure projects are on the narrowed projects of common interest.

I think looking at this Energy Council, it’s coming at an interesting time.  It’s getting toward the end of this administration in the United States.  I don’t know that it will be the last, but it’s – you know, we’re getting to the end.  But we’ve had a few really important developments, the Paris agreement and the signing of the agreement on April 22^nd.  That really does set the stage for how the European Union and the United States work together not only on our own commitments but helping our partners and allies around the world implement their own commitments.  I think that’s one big change.

The ongoing crisis between Russia and Ukraine – Ukraine’s energy independence I think continues to be a focus, and energy sector reform in Ukraine.  Getting some of these other infrastructure projects done, like I said, I think we’re very much aligned on how we see moving forward – how we see those projects moving forward.  I think – I do think – I don’t want to overemphasize it, but since today’s conference is about LNG, I do think that the changes in global markets on the gas side are relevant.  And I think both the United States and the European Union, the Commission, see that a better supplied global market that has a little more flexibility for buyers will have an impact on European energy security.

And so I think that this week’s opening of the Sabine Pass and the inauguration, and the first shipment reaching Portugal last week, is, again, an area where we see very aligned interests.  So I’m looking forward to next week.  I think we will map out how we continue to work together going forward.  And I think we can also, like I said before, you know, sort of count off some real successes in the way we’ve worked together.

MR. JOHNSON:  I don’t know if anyone from Europe wanted to add to that?  Please.

MR. KUDERJAVY:  Perhaps one thing, a part of diversification, which is dear to all of us, I think it is important to mention that a couple of our countries have objectives – supplementary objectives in its energy policies that comprises also improvement of nuclear safety.  Let’s say, in Slovakia, it’s also a big issue.  And then of course what Robin has said about COP21 results.  Let’s say we are preoccupied with renewables, of course.  And we want to increase share of carbon-free or low-carbon electricity generation.  Generally, of course, we are aiming at – or trying to lower our energy consumption.  And then things like continuing to build oil and fuel storages – storage facilities, yeah, let’s say in Slovakia we have then for about roughly just under 100 days.  But any improvement in that is, of course, good.  And after all, last thing is energy efficiency.

MR. JOHNSON:  Right.  That’s good.

MS. DUNNIGAN:  I’m sorry, just to add quickly, my colleague, the deputy assistant secretary from the Department of Energy, Polly Gant, will be on the next panel.  And she can speak to this much better than I can.  But we also have a range of technical issues that we cover under the Energy Council.  So things like energy efficiency and fuel standards and electric vehicles and regulatory issues – the Department of Energy leads two working groups covering those issues.  And so those will be part of the dialogue as well.  But Paula’s much more conversant than I am on these issues.

MR. JOHNSON:  Well, thank you very much.  I wanted to thank our panel for a great discussion today.  Very enlightening on Europe.  I think we’re about of time here.  I did want to let you know we’ve got a second panel that will be up.  We’re going to have a 15-minute break.  So if you could be back here around 3:20 that would be great.  Thank you very much.  (Applause.)

(END)