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February 11, 2016
Atlantic Council

How U.S. LNG Exports Will Benefit European and Global Gas Supply

Speakers:
Bud Coote,
Senior Fellow,
Atlantic Council

Paula Gant,
Principal Deputy Assistant Secretary, Office of International Affairs,
Department of Energy

Christopher Goncalves,
Managing Director,
Berkeley Research Group

Leslie Palti-Guzman,
Director of Global Gas,
Rapidan Group

Fabrice Vareille,
Head of Transport, Energy and the Environment Section,
European Union Delegation to the United States

Moderator:
David Koranyi,
Director, Eurasian Energy Futures Initiative,
Atlantic Council

Location: Atlantic Council, Washington, D.C.

Time: 12:00 p.m. EST
Date: Monday, February 8, 2016

Transcript By
Superior Transcriptions LLC
www.superiortranscriptions.com

DAVID KORANYI: So why don't we get started? Good, actually, afternoon, everyone. Bon appetit, first of all. Please feel free to, whoever did not do so so far, grab some sandwiches and cookies and coffee outside. This is an informal on-the-record luncheon panel discussion here at the Council. My name is David Koranyi. I'm the director of the Eurasian Energy Futures Initiative of the Atlantic Council, that is a joint initiative by the Global Energy Center. Anne Medaglia, the deputy director, is here. Ambassador Morningstar, the director, is traveling in the world, and sends his best regards and wish he could be here. And also on behalf of Ambassador John Herbst, who's the head of the Eurasia Center, let me greet you and welcome you.

Today's a report launch event. We are launching formally a report that was authored by our Resident Senior Fellow Bud Coote. Bud you know very well. He has been the chief CIA energy analyst for decades. And he is the foremost – one of the foremost authorities here in town on Eurasian energy security issues. And we were very happy to tap into his expertise, and have him on board as a resident senior fellow working on all these issues with the global energy center of the Atlantic Council.

I think we gather here at a very opportune time to discuss the very issues associated and discussed in Bud's report, liquefied natural gas, global market developments, trade developments, and the corresponding political insecurity developments. The global gas markets are changing very rapidly. And this is particularly true in the LNG space. Qatar, which is now the LNG exporter giant, will soon be joined by two other giants – one being the United States, the other being Australia. Russia is a major exporter of natural gas via pipelines, is struggling to get off its LNG program the ground. Iran is returning to the markets, but will still face tremendous difficulties and challenges in ramping up its gas production in the first place, and then exporting that gas, particularly though LNG. And on the demand side, we also see dramatic developments on the Asian side, also the European side, which the panel will go into in detail.

We really have a terrific panel, the lineup today. I'm extremely pleased to have such a wealth of expertise on this panel. Joining Bud, to my left, is Paula Gant, who is the principal deputy assistant secretary in the Office of International Affairs at the U.S. Department of Energy. Next to her, Christopher Goncalves, who's the managing director of Berkeley Research Group. Leslie Palti-Guzman, who's the director of global gas at the New York office of Rapidan Group. And then Fabrice Vareille, who is the head of transport, energy and the environment section of the EU delegation to the United States.

The format of today's discussion is the usual format which many of you got used to already attending many Atlantic Council events, is first I will turn to the panel to discuss the reports and the corresponding issues. Each speaker will speak relatively briefly. I will then follow-up as the moderator with a couple of questions, and then in the last half an hour or so I will throw the conversation open to the audience and give you the chance to ask questions and make comments.

Before we get rolling, just one last thing. If you can make sure if you tweet to use the @ACGlobalEnergy handle, and the hashtag, #ACEnergy whenever you tweet about this conversation. Again, this is an on-the-record conversation. So with that, let me turn it to Bud Coote who is the author of the report. Bud, the floor is yours.

BUD COOTE: Well, thank you, David. Thank you for the generous introduction. I see several of my former CIA colleagues managed to sneak in. And they know that I wasn't the chief analyst for all those decades, but I'll accept that. And thanks to all of you for showing up.

The first thing I want to underscore is the long-term nature of investing in LNG facilities, and the long-term nature of the LNG industry – a perspective I want you to keep in mind throughout this afternoon. In January, we witnessed the first LNG tanker carrying LNG from the U.S. Gulf Coast to Europe. Well, some of us witnessed it. Many of you weren't born at the time, because it wasn't this January, it was January 1959. It was literally the first LNG tanker, the methane pioneer. And it picked up LNG cargo at Lake Charles, Louisiana and delivered it to the United Kingdom.

The industry has evolved quite a ways since then. Presently LNG accounts for about one-tenth of the consumption of natural gas worldwide. And it's about one-third of natural gas that is traded internationally. The one-third amounts to about 333 billion cubic meters, of which the U.S. exported one half of 1 percent. That is all going to change, which is why we're here. It's going to change slowly at first. There is only one U.S. export terminal, Sabine Pass, that will be opening in the next couple of years, 2016-2017. 2018 is when we start to see the real surge, at least in U.S. LNG. And that will build rather quickly to a capacity of about 90 billion cubic meters in 2020, probably making the U.S. the third-largest producer of LNG by that time.

As you know, the headlines for LNG prospects have been rather grim recently, questioning whether there are markets for the LNG that is coming. I have some of those headlines, for example: LNG Export Hopes Fading Fast for the United States, LNG Glut Worse than Oil, 85 Projects Dying on the Vine as LNG's Promise Falls Short, and the favorite, There's Total Carnage in the Natural Gas Industry. That's from The Wolfstreet Journal, not to be confused with The Wall Street Journal.

And in fact, there are quite some strong headwinds against the LNG industry at this time. Gas demand growth is down. Prices are much lower than they have been in previous years, when most of these projects were approved and launched. The Japan nuclear industry is rehabilitating, coming back online. So the large demand created by the Fukushima disaster is abating. There's also going to be a lot of competition, especially in the next couple of years, from LNG, mostly from Australia, from coal, from renewables, and also from pipeline gas, especially Russia, which is sitting on a considerable amount of surplus capacity.

But there are also some positive trends. Demand growth has slowed, but it is still growing. IEA recently projected it to increase at a rate of about 2 percent per year through 2020, compared with 1.2 percent for oil. Gas probably will get a boost from the Paris climate conference, much more so if governments adopt policies that promote the use of gas. Pollution is a concern that some of the major gas consumers, China and India, who are seeing increased use of gas and LNG in vehicles, also in shipping for marine transportation. And this is also spurred by increasing restrictions on pollution by vessels.

In fact, use of natural gas in transportation is the fastest-growing demand sector for gas, although it remains fairly small. There's also a lack of global competition in providing gas, looking ahead. One positive for the U.S. gas prospects is the lack of the shale gas revolution to gain much traction outside of North America. And there's going to be relatively little growth in gas production by most other producers, with the clear exception of Australia. I think the best news, though, for American LNG prospects is the close match between the goals of U.S. exporters and the European Union.

The European Union launched its proposals for a European Energy Union in February, followed in July by a statement called the Consultation on Strategy for LNG and Natural Gas Storage. And next month, we'll be coming out with several proposals for gas policies and new regulations. And these all focus on the further integration and diversification of the European gas markets, trying to integrate many of the countries that are now relatively isolated. And LNG can play an important part in that, including in the so-called north-south corridor, which the Atlantic Council has written about quite extensively.

This already is anchored by a new LNG import terminal in Poland. Lithuania is also in the process of adding a small import terminal. The region could use more LNG capacity, more access to LNG, especially in the southeastern part of Europe. And EU policy is also promoting the infrastructure to create the links to deliver gas to the areas that need it most. And that would benefit from additional import capacity in the southern part of that region. This is to promote competition, as well as security – security in particular focused on the vulnerability to a single supplier, which we can name as Russia, because that's who it is.

And these countries have already shown that LNG can bring more competition and lower prices. Even, well, seven months now before Lithuania's import terminal was ready for operation, the Russians reduced the price of their pipeline gas by 23 percent. We also saw during the 2009 cutoff of gas through Ukraine, that Greece and Turkey were able to use their LNG terminals to avoid some of the harshest pain that Bulgaria and some other countries to the north suffered because of a lack to that LNG. Europe also has considerable volumes of unused capacity on their west coast, primarily on the Iberian Peninsula, Portugal and Spain, that can't be moved north to France and then eastward to Central and Eastern Europe, because of a lack of pipeline capacity.

In my paper, I do say that that even in a low-price environment, LNG can have a vital impact. When you compare the cost of LNG and delivering it to Europe, it's pretty likely you'll look at the prices in the U.K., Germany. And those are the countries that pay the lowest prices in Europe. It's been shown that the countries with the largest markets and the most alternatives are the ones that do get to pay those lower prices. There are considerably higher prices elsewhere. When Germany was paying $10 per billion BTUs a couple of years ago, other countries in Europe were paying $14 even $15 dollars per million BTU. Those are Asian-like prices.

We also tend to think of Europe as having low growth in demand. And that's somewhat true. But when we look at low – when you look at import demand, it's quite a bit higher, almost twice as high. The IEA, in fact, projected that 2020 demand for gas imports in Europe will be 70 bcm higher than in 2014, and that Europe will be importing 45 bcm more LNG in 2020 – double what it has been importing. And when you look around, there are not many other suppliers who can provide that LNG.

Norway's production is going to be relatively stable. The Netherlands is declining because of constraints they've put on production on their largest field. Qatar has a moratorium on expansion of its North Dome field. Algeria, Nigeria, and Libya have also provided a lot of LNG to Europe, but they don't have the attractiveness at present for the further investment that they would need to complete with the U.S. Other than that, I don't think that there'll be another source of gas until 2020, when we see the southern corridor being completed and Azerbaijan starting to provide gas to southern Europe. About 2020 is probably the soonest we'll see LNG from Yamal or shipments of LNG from the Eastern Mediterranean or East Africa.

Not to rule out Asia as a market to the U.S. LNG. The IEA projects China to need about 90 bcm more gas by 2020. And China's also increasing its regasification capacity, more than doubling it, over 100 bcm in that period. Demand probably will also be spurred by relatively slow progress with shale gas in China, and also I think the slowdown and possible breakdown of the deal with Russia that China signed a year or so ago. We're seeing those problems help spur future demand for gas. And in combination with the pipeline gas that China's increasingly buying from Turkmenistan, with which U.S. gas exports should be competitive.

In conclusion, it is customers that are driving the surge in U.S. LNG capacity. The five projects that are under construction are largely subscribed with customers. And as more customers sign up for long-term contracts, I think we'll see continuation of construction and new capacity. One indication is the recent study that the Department of Energy commissioned on the economic impact of additional exports from the U.S. Previous studies have been commissioned that showed that the U.S. would benefit economically from exports up to about 120 bcm per year – billion cubic meters.

This new study examined the economic impact of increasing that volume from 120 to 200 billion cubic meters. And the conclusions were that overall it would be positive. And this is important because the Department of Energy approves projects. And one of the conditions of those – of that approval is that the companies show that the U.S. economy won't be harmed by additional exports. I think –

MR. KORANYI: Thank you, Bud. Wonderful. This was a succinct summary of your excellent report.

If I may, let me now turn to Paula to talk a bit more in detail about the issues Bud just outlined around U.S. exports. Also on the regulatory side, because as Bud alluded to it, this is still by definition a restricted market, even though DOE and FERC together have been quite expeditious in granting licenses, and now we have larger quantities of gas that will come out. But it's still regulated and it's still restricted. So how do you see those challenges having an impact on U.S. energy exports going forward? And also, the financial commercial challenges that Bud talked about so eloquently, how do you see that impacting U.S. energy exports going forward.

PAULA GANT: OK, first I'd just like to just start with the good news – you know, acknowledging the good news of where we find ourselves. This is the fun part of my job. And knowing a little bit about oil and natural gas markets, just, you know, continuing to draw attention to the extraordinary place in history we find ourselves, with not only knowing we have a domestically abundant hydrocarbon resource in oil and gas, but actually knowing where it is and knowing how to produce it, doing that with great efficiency, and increasingly with the public confidence that it can be done in a responsible manner. And the abundance of that resource has really led to a complete shift in our thinking about our own energy security, and in the dialogues that we have with our trading partners and allies about their own energy security which indirectly, and in some ways directly, impacts our own national security. And that's the great news that we get to work on delivering, and working with our partners to advance every day at the Department of Energy.

What makes this abundance possible is technological innovation and American ingenuity and know-how. Basic research that began in the Department of Energy in 1978, was taken forward by George Mitchell. And many of you know the story from there on. Over the past decade, we've seen an increase in our domestic natural gas production of 40 percent, in large part driven by the increased productive capability of our shale resource, which we have mapped very well over many decades, drilling through it to get to other resources, if you will. So we know where it is. We've perfected the ability to produce it in an efficient manner over time, and continue to do so.

The same story has – the same abundance has also been manifest as the same technologies have been applied to our oil resource. So a similar success story, and it's having similar repercussions on energy security and national security dialogues around the planet, in a very positive way, I might add. It's also led to domestically lower and loss volatile natural gas prices, to the chagrin of some who are producing it, but it's definitely a good thing for consumers and particularly for domestic manufacturing and petrochemical industries. This is really been something that was not forecast, is an incredible windfall for the U.S. economy.

It's also resulted in more advanced thinking and integration of natural gas as a means for achieving our greenhouse gas emissions reductions goals, whether here in the U.S. or in multilateral for a like the COP21 negotiations last December in Paris. As well as it factors into all of our multilateral and bilateral engagements where we're discussing energy security and national security. National gas is present in every one of those conversations, and has allowed us to also expand our thinking about what energy security means, as was manifest in the G-7 energy security principles that were released over a year ago, and also manifest in the IEA ministerial that Secretary Moniz led in Paris in December.

Have broadened thinking about what energy security means, beyond just oil stockpiles, to include natural gas and also to include thinking about clean energy – other clean energy resources. But certainly the abundance of natural gas here and our expectations of what can be produced abroad has allowed us to think about it as a broad means of addressing our climate objectives in the coming years, as well as working with our partners to enhance their energy security. So very exciting times for us, moving over the past decade from thinking about licensing imports of natural gas to licensing exports of natural gas.

As Bud noted, we expect the first commercial cargos to move out of Sabine Pass in the late spring of this year. And while I'm from Lake Charles, I was not around for the first cargo shipment in 1959 – (laughter) – I missed that by a decade or so – I do hope to be there for this – when this cargo moves out. We had a test cargo move out last month, and things are on track for that. Very, incredibly exciting for our country. Also has led to, in localized manners, incredibly transformative job growth, for example, in southeast Louisiana and southwest Texas, that has built up around the optionality that this abundant resource provides for petrochemical and manufacturing industries, which is quite exciting.

As was noted, the Office of Oil and Natural Gas at the Department of Energy is charged by the secretary under his responsibilities in the Natural Gas Act with approving export of natural gas from the United States, whether by pipeline or in LNG. With regard to exports that would go to a country with which we do not have a free trade agreement providing for nationalized treatment of trade in natural gas, we are required to conduct a public interest determination, with the default being the assumption that the export is in the public interest. So the requirement is on us to demonstrate it would not be in order to deny the permit. That has not happened.

We have, as of January 8th, authorized 14 final long-term authorizations to export lower 48 states domestically produced LNG to non-FTA countries. This accounts for 10.82 billion cubic feet a day in authorizations. And there are others that we continue to assess. As was noted by Bud, there is an analysis that's out for public comment right now that our office had commissioned. And that public comment is – closes in mid-February. And as many of you know, I won't be able to comment on any of that, but I refer you to our public statements on that.

We also expect in the very near term that we'll see the first exports of small-scale LNG from Florida to the Caribbean. These are in ISO containers. And we're very excited about the potential this holds to help Caribbean nations begin to integrate natural gas into their energy portfolios. We're very concerned about their continued reliance on fuel oil, both for its cost and stability of supply reasons, as well as we'd like to help them move to cleaner sources of energy for power generation, natural gas being a key component of that strategy for us in the Caribbean and Central America.

Particularly for these nations that don't have experience with natural gas markets, finding ways that they can gain this experience in some – in a variety of means, whether it's ISO containers, LNG, CNG, or other means of getting natural gas into their economies is going to be important so that they develop not only the infrastructure to move the gas where they need it on these islands, but also the institutional infrastructure to engage in natural gas markets and have some confidence because, as I like to say, looking at – through the rearview at the natural gas markets we've left behind really won't tell you much, I do believe, about the gas markets that we're headed into.

This is a completely new dynamic. And helping others and our trading partner and ally group understand what we believe the fundamentals are of this new market is really important to securing their confidence that they can rely on this, which is much like what we do here domestically to ensure our stakeholders that we have a scientific understanding and available knowledge to ensure that the resource is being developed responsibility, with respect for our air, land, and water, and local communities, so that we can continue to produce it.

So I would circle back to the beginning of my statements and point again to the importance of technological innovation in making this abundance a reality. This is, you know, a favorite thing for us at the Department of Energy. Your Office of Science, this is what we do, research and engineering. But it's also a perfect testament of what we continue to do more of. As was announced with the president in Paris, when 19 other country leaders joined him in signing onto Mission Innovation, which will double R&D spending over – on clean energy – over the next five years, combined with a private sector initiative called the Breakthrough Energy Coalition, which will bring many millions more to bear on clean energy innovation.

We are going to need breakthroughs. We are going to need significant innovation to get even further than the commitments that were made in Paris on greenhouse gas emissions reductions, and any hopes of maintaining temperature rises at less than 2 degrees. So we're going to need all-in on that. And we're going to need natural gas as a part of that. So our office will be continuing – at the Department of Energy – continuing to work on ways that we can better understand the nature of the resource, the impacts of developing it, and importantly, working with our trading partners and allies, to develop their own resource.

I would – you know, the stretch goal would be to have a different outcome in China in the next few years, to work with them to find ways that they can develop their resource, because we have a very strategic and strong national interest in other countries developing this resource as well, both from a security perspective as well as from a climate perspective. Thanks, David.

MR. KORANYI: Thank you, Paula. That was wonderful.

Chris, you and Leslie are both following market developments globally, and in Asia and in Europe particular quite closely. So if I may ask you to expand first upon Bud's comments on market dynamics globally, and especially in regard to Asia. And then I will turn to Leslie to focus a bit more on Europe.

CHRISTOPHER GONCALVES: OK. Thanks a lot. The first thing I wanted to say, I think it is indeed a very exciting time for the United States, but also for the LNG industry. Just to put the developments that we've just heard about in some quantitative perspective, and also global industry perspective, the LNG industry, although it's getting a lot of news and press these days because of the U.S. exports and so forth, is still a fairly new industry. On the global scale, it's been around several decades.

But when you look at the 10 bcm – or, sorry – 100 bcm, 10 BCFD of exports authorized that we just went through, that represents something like a 25 to 30 percent increase in the global capacity for LNG. It represents maybe 20 percent or so of the target capacity for the end of the decade. There's a very large amount of LNG on the world scale. It's something on the order of magnitude of all of the Qatari production capacity. It's a very significant amount of LNG by global standards. And when you talk about the new study, and the 20 BCFD or the 200 bcm, of course, it's just double that again. So quite a significant development.

With respect to the Asian markets, I think what I'd like to address is a little bit more from a market perspective, as a market analysts view, the conundrum of whether we continue with this grand experiment in light of market developments. We've developed all of this capacity, or these projects, during a time when oil prices were high, oil indexed LNG prices were high, Henry Hub was increasingly – was low and declining.

And now the markets have reversed quite a bit. The oil price collapse is well-known. Just to give numbers, when oil prices were $100 or more and you have long-term LNG in Asia priced, say, at an average slope of 15 percent, that means the price under long-term contracts in Asia would be $15 per MMBTU. When oil prices are $50, that means under the same slope the LNG prices in Asia would be $7.50 per MMBTU. With oil at $25 to $30, of course, it's half that again. So we're talking about $3.50 to $4 per MMBTU. Now you take – of course, Henry Hub has declined at the same time, but not by as much as oil.

We've gone from maybe $4 or $3.50 a couple years ago now to about 2 (dollars), with question about whether we can sustain those low levels. When you take the $2 per MMBTU and you add pipeline costs to get to a liquefaction terminal, average liquefaction costs are widely cited to be about $3 per MMBTU, sometimes lower, sometimes more. Shipping, transit through the Panama Canal, variously referred to being $2.50 to $3.50, let's just say $3 per MMBTU. You don't get U.S. LNG fully loaded cost – on a fully loaded cost basis recovering all capital costs to Asia for a lot less than, say, $7, maybe $7.50 per MMBTU, probably with profit margins and so for close to eight (dollars).

So how do we make this work? And you see similar trends in Europe. And the question comes up all the time in the industry press. You know, is the bloom off the rose? Have we just arrived to the party at the time when the party's over? And you heard all the various headlines that Bud cited. What gets lost in that part of the discussion, from my perspective, though, is what I call the long view. And I think that's – the long view is what actually the industry players continue to pursue, and in their analysis – in our analysis believe to be true, we believe to be true. And that is that demand is responding already to low prices.

If you look back a couple years from – over the last six years, really since the beginning of the significant part of the shale boom. 2008 to '11, I think you had double-digit growth in LNG demand worldwide. 2011 to '14, you had no growth in LNG. Actually, last year we had decline in LNG demand worldwide. And when heard that 2 percent growth, I think it was EIA, through the end of the decade – or it was IEA, I've forgotten – but that's likely to be very flat or even negative growth for a couple years, and then more substantial recovery toward the end of the decade.

So it's quite interesting, when you really do all the math on the global LNG industry, add up all the supply and demand, looking at the outlook, is that the demand starts bouncing back substantially at just exactly the time the U.S. LNG comes to market, 2018, '19, '20. The real outlook for – when you measure that, then, against capacity worldwide, you see that we're oversupplied. I mean, we're still in the process toward the end of the decade of recovering or absorbing the overcapacity that is – has been built or is being built.

It's really not until 2021, 2022, really even more like 2023 that you start to see significant new physical demand, incremental physical demand for LNG capacity that doesn't already exist. So we're oversupplied into the next decade. Again, that timing's not half bad when you consider that 20-, 30-year LNG deals are getting done for first LNG, first supply, 2018, '19, '20. Really, at this point, a lot of the new contracts for new supply are being set for 2020 and forward. So that situation actually lines up reasonably well.

Then comes another factor that I think is absolutely critical for Asia though, that gets lost, again, in the discussion about price spreads and the glut and so forth. And that is that the demand for U.S. LNG in Asia is – it's hard to say this accurately – but I think it's more commercial than it is physical. Even back years ago, when the initial LNG contracts with Asia for U.S. LNG supply into Europe and Asia were being signed, even when in the years just after Fukushima and the years of nuclear shutdowns and sort of deficits and tight markets for LNG, even during that period the Asian buyers knew that they didn't need all of that LNG, or that they might not need all of it.

What they wanted, and I think what all buyers of U.S. LNG want worldwide, is all of the commercial benefits that U.S. LNG brings. And those are several. One is, that it's—because of the Henry Hub pricing, over the long term given oil index pricing or constrained markets in various places around the world, it's an abundant resource and it has the perception, at least, of lower pricing over the long term. Henry Hub now, because of the shale gas revolution, the continuous improvement, is perceived to be something that's going to be more stable and hold at lower levels for longer than, say, oil prices or oil indexed LNG.

Second, because of the tolling model and the way – the commercial structure of the U.S. LNG projects, it has more flexibility. A lot of the sales are on an FOB basis at the United States. They allow for cargo cancellations. They have features in the contracts typically that are not the typical commercial features from the vintage LNG contracts. So it gives the buyers more flexibility on when to take LNG, what their options are when they don't need it, what they can do with it after they take it, where they can send it and so forth. So there are lot of commercial flexibility benefits that are very well-appreciated in the LNG industry.

And then I guess the third benefit is index diversification. Leslie can address Europe, but certainly in the case of Asia it's true that with most LNG, indexed either to Brent oil prices or JCC, Japanese Customs Cleared crude price basket, oil is the metric. And so having a measure of natural gas traded hub index in the whole mix offers a certain kind of risk management or diversification that the buyers like having in their portfolio.

And all of this, even though there's not physical demand – or not sufficient physical demand to justify all these LNG contracts, has an incredible benefit as well because it allows the buyers then – and this is something we're quite involved in – to go and renegotiate with their existing suppliers, or when their contracts are cancelled – not cancelled – when they expire, with their existing supplier to get leverage in the renegotiation of new supply.

So the U.S. LNG is actually a competitive lever in the world market that has a very powerful impact on the commercial terms of trade for LNG coming from other places around the world. Whether it's Australia or Qatar or, in the future, East Africa, this source of supply has had a very big impact commercially on the global market.

And last comment, I mentioned the commercial demand, but there's a fine line between commercial demand for LNG and physical demand, because over the next 10 years, particularly around the end of the decade and just after, you have a lot of contract expiry in Asia. And so even though there's not yet incremental physical demand in most forecasts – I mean, of course, there's always a wide range of scenarios about demand and how quickly the demand sort of recovers and absorbs the surplus in the market.

But even if there's not, there can be contractual demand because of the expiry of old vintage contracts that can be replaced with new U.S. LNG contracts. Now, that means some other LNG supplier, some existing supplier somewhere in the world, will be forced into the spot market if they can't find a long-term buyer. And that will, of course, increase hub trading, another benefit to the buyers of liquidity in the market.

So there's a lot of ways in which even though the prices don't line up very well right now, if you project oil prices recovering $50, $60, and if you project some of these trends I've just described in the – both in the physical and the commercial markets, U.S. LNG still looks very attractive. And that's why I think, as Bud mentioned, you know, contracts continue to get signed. There was just news today that one of our clients has signed a long-term SPA with Shell for 20 years of offtake. So the party continues. I'll leave it there.

MR. KORANYI: I'll now turn to you, Leslie, to focus a bit more on the European side of the equation. I mean, Bud talked about the increasing import demand of Europe going forward. You have a lot of policy uncertainties in Europe, both from the political security side, the EU-Russian energy relationship, how it's going to evolve, or pipelines, if we use, to bring in gas from Russia and all that conundrum. You have other policy uncertainties, like the emission trading scheme and its current defunct state, and the potential for the reform that could boost the competitiveness of gas. So there are many uncertainties that can be related back to the LNG import question, and particularly the LNG import from the U.S. question and how commercially viable that's going to be.

LESLIE PALTI-GUZMAN: So not to confuse you a little bit more, but there are many units in the LNG gas world. And we already use BCF per day and bcm per year, so will add million tons per year. (Laughter.) Just joking. But yeah, Europe is definitely a place where I think U.S. LNG will end up. But just before that, I agree with all the previous speakers. This is a big milestone, the fact that in coming weeks we'll see the first shipments of U.S. LNG. But it comes with a lot of anxiety. And if you are one of the buyers of the first cargos, or from the first plan of Sabine Pass, you don't know where exactly your cargo is going to end up going. And that's for two reasons.

One, there are long-term contracts. About 58 million tons of LNG have been contracted out of the first U.S. LNG plan. But, it's not because you're one of those customers that will – you will necessarily use your right to liquefy the gas and export it. And second, you may have contracted this gas, but then you have resold it to a secondary buyer, who may have resold it to a third buyer. So there is nobody in the market right now that an LNG analyst and can tell you for certainty: I know how much U.S. LNG will export and where those cargos are going to go.

So, a few years ago when the whole U.S. LNG story started, there was a lot of certainty that most of it would go to Asia, the Panama Canal is being expanded. And that will be terrific for Asia, who is paying a huge premium, especially post-Fukushima, for its gas. Fast forward 2015, 2016, we're in a very different market. Spot prices in Asia and Europe have converged. It's below – or around $5 per million BTU, and could go lower through 2016 at, especially in Asia, where long-term contracts are still somewhat oil indexed, and so they go along with the plunge on oil prices. So we could really see Europe and Asia prices on the low – $4 per million BTU.

So it means, that the economics of U.S. LNG has changed a lot. But I think that, as we've heard before, as Asian demand is weaker, also amidst slower economic growth, Europe has a lot of attractiveness for LNG in general, not just U.S. LNG. But Europe has many unused regasification capacity, and Europe has a policy called Wheel (ph), at least from the European Commission, to favor LNG to replace declining indigenous supply. And there is this geographical proximity. It's still easier to come from the U.S. Gulf Coast and export the LNG, and go directly to the U.K. or elsewhere in Europe. So there are reasons that make Europe a natural anchor for U.S. LNG.

Now, I wouldn't take it for granted, for several reasons. Yes, Europe needs new imports. And the European gas dependency is growing. Import dependency is growing. In 2015, Russian share of gas market in the European gas market has increased to 31 percent from 30 percent last year. And, you know, Russia's ambition is still to grow in Europe, or at least to stagnate or lose market share. Also, you know, Europe is not a monolithic entity. There is still no one common energy policy, although there are some attempts at that. And at the end of the day, it's the European utilities that are making the decisions to import gas. So whether they are the ones contracting new contracts with Russia or with Qatar or elsewhere, they are the ones making the decisions.

There are a lot of headlines about either a gas price war coming up in Europe. And the winner of this potential gas war is going to be the one that can sustain the longest the low European hub prices that we see now. Among all the producers and exporter of gas to the European Union, the real fight is between Russia and LNG suppliers. If you look at the other pipeline exporters into Europe, they don't really have the capacity to increase their production and export. So we're really talking about Russia that has spare capacity, and the political will to export more to Europe, especially as it experienced a hangover after the honeymoon with China.

So we really see, you know, Russia redirecting its – all this attention towards the European market. And then, U.S. LNG, of course, but there is also Qatar that has a lot of uncommitted supply. And as Asia is full with new Australian supply and other Asian-Pacific suppliers, there is more cargos from the Atlantic Basin available to Europe. So Nigeria, Trinidad and Tobago, and others. So it's a lot of competition into the European gas markets. So the U.S. is coming into a very crowded space.

On the pricing side, I think both U.S. LNG and Russian gas can compete. And when you look – you know, forget about the full cost of U.S. LNG or full cost of Russia, because it's already below that. You know, if you want to compete – and this is what we see how for Russia – they are going for, you know, a pricing strategy over volume strategy. And when you are a U.S. LNG supplier, you are looking at your short-run marginal costs, and you don't really count your program fixed costs. So you forget about your sunk costs of the liquefaction fee that you are paying annually or your, you know, charter rate that you already counted for. And you can go very low.

Now, if European hub prices are going below $4 per million BTU, I'm not sure we'll see U.S. LNG going to Europe. So you know, you really need to look at what the hub price is in Europe. But historically, we saw that the historical suppliers of Europe – Norway, Russia – they've been able, when they wanted to, to manage to increase the hub prices in Europe by withholding supply or doing other kinds of strategies. So it means that they can also make the same strategy reversed.

So if Russia is really determined to lower the price as much as possible to price out other competitors, they will do so. Now, going very low for Russia, it means less state revenue. And that comes at a time where, you know, Russia gets also less revenue from its oil and, you know, not a really great economic situation in Russia. So it's going to be a question of how long, you know, Russia can sustain that. But historically, Russia has always used gas more for political motives and oil for revenues. So maybe that will be the case still.

And for the U.S., it means that U.S. LNG export facilities could be at risk of underutilization. And each company, each buyer will have their own strategy of when they decide to export and not export. And I anticipate a great level of volatility on how much will be exported from the U.S. seasonally, but also on a yearly basis. You know, we won't see this in levels one year to another year.

So you know, I think there is a unique opportunity right now in the European Union to make a responsible and a historical choice. There is a political will to reduce the dependence on Russian gas, for several reasons that we mentioned earlier. And there is a demand. There is a need for new gas, especially to replace – to replace declining domestic production. There is a supply – U.S. LNG and other LNG supply around the world. So, you know, you need to fit both pieces of the puzzle. But I think the missing element that we don't discuss enough is the ambiguity of the European utilities, that are the one buying the gas eventually.

And Nord Stream 2 expansion I think is a very good illustration of this ambiguity, because although the European Commission has voiced its opposition to the expansion of the pipeline, we have five European partners with Gazprom that are supporting the expansion of the pipeline. And it creates – it's actually a very divisive topic at the European level right now in the European – between countries west and east, it creates a lot of animosity, even. And it's a – it brings back old memories that are not really good to remember at the European Union level. But anyway, I think, you know, we can go more into Q&A regarding the Nord Stream 2 expansion. And Fabrice may mention it. But that's a good illustration that, yes, there will be U.S. energy exports into Europe, but it shouldn't be taken for granted.

MR. KORANYI: Thank you. Thank you, Leslie.

That's actually a perfect segue to our last speaker, Fabrice, who I asked to talk a bit about what the European Union has in mind. You are in the process of forming a European Energy Union. And there are many components to that. And this is going to be a long and protracted process, many challenges to that. But one critical issue that in fact the European Commission is about to publish a set of proposals in two days, if I'm not mistaken, on the 10th of February, is liquefied natural gas and storage strategy.

And we also learned from this discussion so far that this is by and large a commercially driven process. So to what extent can the European Union as a whole, the context of the European Energy Union, facilitate the diversification of resources and the attractive – making the European market more attractive to these LNG supplies?

FABRICE VAREILLE: Thank you, David.

Well, I think in the global situation, which has been described earlier, a situation of LNG abundance and oversupply of LNG, that's obviously a challenge for a producing country that is from the other side of the coin. From the importing country's perspective, that's more an opportunity, so when – especially when you on top of that have some concern about energy security and risks that exist in your geopolitical environment.

So when we look at the EU, and I will want to start with our data which was released last week by Eurostat, we have an energy dependency on import, which was 50 percent in 2014 – 53.4 percent, exactly – which has been – a level which has been stable in the last few years, that is a good 10 percent above the level that we saw in the '70s. And has been said already, the main cause for this high – continued high level of dependency is the decline in domestic production of gas, our coal reserves are depleting, or some sites which are no longer competitive have been closed.

So even though the demand in Europe is expected to – the global energy demand – to flatten out in the next few years, even with the growth of renewables, this high level of dependency will continue, and will continue to be a risk for the EU's security of supply. And (in this kind of life ?), if we take a closer look at gas, of which the EU is the biggest world importer, we – our level of our dependency on imports was at 62 percent in 2010. It's projected to grow at 65 percent by 2020, and 73 percent by 2030. And I think being currently locked in a source from a very few suppliers, I think are Russia and Algeria together amount to almost 90 percent of our current gas import. There is, indeed, a need for diversification.

And it's been demonstrated in the past that this dependency on imported gas is maybe the strongest – the Achilles heel of the EU energy security. And I think this was well shown in the stress tests which were organized in 2014, and revealed that a few member states were extremely vulnerability in case of disruptions in gas supply. So in this context, ensuring that all member states have access to liquid gas markets and diversified sources of supply has become a key objective for the EU, and one main objective of the energy union project, which was adopted last year.

And so with global energy markets set to expand, with new volume coming on-stream from the U.S., from Australia, with Asian prices converging with EU ones, it's clear, I think, from an EU perspective, that LNG provides opportunities to make its gas system more diverse and more flexible and therefore contributing a key objective of the energy union in terms of a secure, resilient and competitive gas supply. So access to LNG could improve the security and resilience of member states, which heavily depend on a single supplier.

The LNG could also bring benefit in terms of competitiveness. At current prices, LNG can be competitive over energy sources, and it makes – LNG flowing into the EU market makes the EU market more exposed to competitive challenges from international suppliers and it brings immediate benefit. And we've seen this in the case of Lithuania when it opened its floating LNG terminal, in terms of its contract with Gazprom, which could immediately be renegotiated in a very significant manner.

In addition to the security and competitiveness agenda, we see also LNG as having the potential to contribute to the EU sustainability agenda. This is something Paula also alluded to. LNG means lower emissions, lower pollutants, lower environmental impact than over fossil fuels. So that's – there is also an interest to look into LNG in the EU from this perspective. So this is why we are coming with an LNG and storage strategy that will be released this coming Wednesday, and that will – I think will set out in details what the EU – what the commission proposes the EU and the member states should do to grab the opportunities that come with this abundance of LNG coming from all over the world, and especially the U.S.

And I think that there are four main things that we have to do to grab these opportunities. First thing is to – is the infrastructure, is to address loopholes that exist in the EU energy infrastructure. As it was said, we have – overall the regasification capacity in Europe is sufficient to address the needs, but it's not optimally distributed. So consideration should be given to having new terminals in appropriate locations, or better access to existing terminals, or better in connecting, allowing more gas hubs to function. In this context also – maybe this is not the subject for today – but we also are looking to how better or greater interconnectivity and across-border use of storage capacity could also improve the EU infrastructure.

The second thing we have to do is to complete the internal gas markets and continue the work to remove the barriers that exist – regulatory or other – that exist to – still exist in Europe. I think we've done a lot of progress in this regard, in implementing EU legislation such as with a package that I've helped developing functioning and liquid gas market. But we need to continue this work so that liquid gas hubs can function with transparent market-based allocation mechanisms, and where we eliminate unnecessary regulatory and commercial barriers.

Third thing that we should be doing is strengthen our already good cooperation with international partners to promote free, liquid and transparent LNG markets, and to remove obstacles to trading of LNG on global markets – and, I think, to produce also in a responsible manner. And in this context, the U.S. is clearly a key partner. And I think the EU is arguably a market of choice for U.S. LNG.

The fourth thing that I think we have to do is to support more use of LNG as an alternative fuel. Where it's used is consistent with the EU long-term sustainability goals. So this is more use of gas as a complement to renewable, or use of LNG in shipping and heavy-duty vehicles to replace fuels like diesel and heavy oil, which have a much bigger environmental impact. In doing that, though it's important to keep in mind the overall environmental impact with regard to methane emissions along the LNG supply chain. So that's something that is also, I think, important for us.

So the LNG strategy that's going to be available in a couple of days will highlight all of that. And I invite you to look at it as soon as its released in two days. Thank you.

MR. KORANYI: Thank you, Fabrice.

Let me just pull up one question to you and Paula on your third point, that is engaging with international partners. And that is, and I understand that this is a somewhat controversial issue, but I would like to pick your brains on what's the thinking in Brussels and in Washington about the inclusion of LNG trade in TTIP. Is it relevant? And if it is, in what form? Is it a preference from the European side? And what's the reaction from the U.S. side to include specifically LNG exports, liberalization in the context of TTIP?

MR. VAREILLE: Right. I'm not sure I will describe this question as being controversial between the EU and the U.S. There's been a lot of talk about whether we would need to have a separate chapter or whether energy provisions could be scattered across the agreement. And I think that's not the main issue. The main issue is that we want the TTIP to – we see it as an opportunity to set standards and rules when it comes to free and transparent trade of energy and gas, and also when it comes to producing a responsible production of those energies.

So I think there is a good conversation ongoing on that. I think the lifting of the oil ban maybe has made it a little bit easier, because this program now is not sort of really presenting an obstacle in the negotiation. Really whether or not we need a chapter is a bit of a theoretical discussion. What we want is really to have substantial provisions that can help create a free, transparent, and liquid global LNG markets, and all our energy sources, in fact.

MR. KORANYI: Paula, in full agreement?

MS. GANT: I would say yes. (Laughter.) Exactly what Fabrice said. I think it's important to look at TTIP in the context of our larger relationship in very strong, common objectives with the EU and its member countries, and that we have a very strong mutual interest in transparent and liquid LNG markets globally, natural gas markets regionally, as well as, and as importantly, ensuring that we have the right information, we're taking the right steps to ensure that the resource is being produced responsibly, and that the public has confidence that that is happening, because that's what's going to continue to underpin this market.

As David well knows, we are in the process of negotiating a TTIP with our European counterparts. And issues such as how natural gas will be treated will be determined in that process, along with other priorities that Fabrice just referenced. I mean, importantly, making sure that we have open access to energy markets on both sides of the Atlantic is a vital principle underpinning those negotiations. But also, our mutual engagement in other multilateral fora, like the G-7 for example, where we're very strongly aligned with our European counterparts and partners.

MR. KORANYI: Wonderful. I have many more questions, but in the interests of time, let me now throw the floor open. Please wait until the microphone gets to you, identify yourself, and please keep your question as brief and humanly possible so that many of you will have the chance to ask questions.

Questions? Please, sir, in the back.

Q: Hi. I'm Haik Gugarats with Argus Media.

There are a couple of strains and maybe contradictory strains that comes out of discussions like this. One is, you know, U.S. LNG or Australian LNG or alternative sources of supply can go to Europe and either displace Russia or, you know, help from the security perspective and so forth. And the basis for that assumption is Gazprom is a political animal. Then, you know, on the other side, they supply prices to Europe in response to lower LNG prices. So maybe they are an economic animal. I mean, like, are both a selling point to advocate greater exports from the U.S., or just a reflection of reality that maybe we just don't understand what their marketing strategy is, whatever, what their pricing is.

MR. KORANYI: Do you want to?

MS. PALTI-GUZMAN: Yeah. Well, I think it's counterproductive to say that, you know, Europe can tomorrow not rely anymore on Russian gas. You know, Russian gas is here to stay. Now, the question is, as Europe needs extra gas, will this gas come even more from Russia, or from other sources? And you know, we should not confuse capacity and what's really going to be exported. So if Russia builds a second land of Nord Stream 2, right now they don't have new contracts yet. So it's not because you build a line that the line will be fully utilized. And it's not because you build liquefaction export terminals of LNG that you will necessarily export the full amount of your capacity.

MR. KORANYI: Chris.

MR. GONCALVES: I just have one thing on that. That was a very interesting question. And one thing I think – Leslie's referred to the gas price war theory that's out there. And clearly Gazprom has adjusted. It's also done things in arbitration, like adjust its pricing to hub basis from oil indexation, despite its view that it should be on oil indexation, because it had to, because that's where the market was going and it wanted to keep a certain minimum market share. So you see the same thing from the Qataris, that they do things to keep market share when they have to, but if they don't have to, since they have a monopoly on the gas or LNG coming out of their country, why not get the best price you can for it?

I don't know. I mean, I always find the thing about Gazprom being political or economic sort of like a false dichotomy. I mean, I think it's both. But the question about getting more gas and competing in Western Europe, or in Europe generally, is very interesting right now, because I think what gets forgotten is that there are some capacity constraints. The extra capacity they have, is in Ukraine. So without the north European – with the looping or the redundant line on Nord Stream, they have constraints on the existing Nord Stream line. They have constraints on the Yamal line. And South Stream didn't get built. And Turk Stream's not going to get built. And so their opportunity to move more gas into Europe is from Ukraine. It creates a really interesting problem for this issue of are they political or are they economic?

MR. KORANYI: Thank you. Anybody else from the panel? Any additional questions? Please raise your – sir.

Q: Thank you. Gabriel Uribe with the CSIS Energy and National Security Program.

So I want to ask what role do you think Eastern Mediterranean gas will play in the region, especially in terms of for European imports, since that region is supposed to come online around the same time, as well as what role that'll pay in terms of U.S. national interests for the region? Thank you.

MR. KORANYI: Anybody feeling the burning desire to answer this question?

MS. PALTI-GUZMAN: Yeah. Well, I think its nat gas is first for the domestic markets of those countries who found the gas. So Egypt just found, you know, more domestic fields. And that will be used first for their domestic market, because they have a huge energy crisis and huge shortage. So they need first the gas for themselves. Same for Israel. They've been producing and consuming their gas for three years now. And Cyprus, you know, they have the will also to develop their gas supply, but they need to find more, to attract more investors, and make it happen.

I think regionally there are great potential of cooperation. But as we know, it's a very geopolitical-heavy place. So all the pieces of the puzzle need to fit. But I think for Europe, it will take some time. And again, it's already a very crowded space. So you know, I think if they were to develop it as LNG, maybe there would be fast-track development. You know, we see a lot of floating LNG being developed. But you know, first and foremost, domestic market, and then regional, before global and further out to other neighbors.

MR. KORANYI: And if I may just add to that, having been dealing with the East Med resources, it's also deep offshore. So the costs associated with the production of the upstream resource will be quite prohibitive, given the current price environment in Europe. So that's going to put a further limit to how much gas will come out from the Mediterranean, and in what form it can make it to Europe.

Dana, please.

Q: Thank you. It's Dana Marshall with Transnational Strategy Group. Bud, congratulations on this report. It's very nice to see a colleague of long standing.

I had a question about – and this was discussed a little bit in the panel, but I wonder if we could draw folks out – on whether there is a – even a medium-term practical implication of the Paris climate agreement on all of this. I mean, one thing that jumps to mind, for example, is the Chinese building of coal-fired plants, not just in China but in their near-abroad. Might we see, once this thing starts to take some effect, some impact on that?

And just one very small question for a colleague from the EU delegation: What is the timing of the gas policy study? I didn't quite catch what you said. Thank you.

MR. KORANYI: Fabrice, let's start to the second question.

MR. VAREILLE: Sure. Well, there's going to be a lot of policy initiatives that are going to come out this year from the commission. The one I referred to, so LNG and storage strategy, which was announced last year, will be released the day after tomorrow. So it's very soon.

And just maybe one word on COP21 – the outcome of COP21 – I think a lot of countries in their INDCs that they submitted on the road to Paris have indicated that gas had a role to play in terms of reducing their greenhouse gas emission. I have not seen yet an analysis of all INDCS that would focus on that particular aspect. And that would be really interesting to know a little bit more about what – if you aggregate all those commitments from 190 – I don't know how many – I think 180-something have tabled INDCs. So if you will aggregate these commitments with regard to increased use of gas as a means to reduce their emissions, that would be really interesting. But I don't think this work has been yet carried out.

MR. KORANYI: And really the question, if I may add to Dana's question, is CCS and gas. And I meant to ask you, from you, Paula, if Mission Innovation has a gas CCS component, or that's part of the thinking at DOE right now, to make that an integral part?

MS. GANT: So I think it's a great question, and one that I think we're going to see the answer to it manifest itself over the coming months. The types of INDCs that were committed to at COP21 have elements of our own climate action plan that the president rolled out a few years ago, that has natural gas as a vital particularly near-term component of getting to the emission reductions we need, while also meeting our economic and security objectives. Again, that's why it's so important for us to continue to work with our partners to help them understand the resource – because it's different everywhere, the rocks are different – and what technologies can be brought to bear to produce it, and what we're learning, because we're getting better at it over time.

And working with them in technical and scientific exchanges, as well as working through the – so there are efforts that are focused – like, the Clean Energy Ministerial, which is focused on implementing technologies and practices that are known around resources that are known. And then we have mission innovation, which has 20 countries involved. And its partner initiative I mentioned, the Breakthrough Energy – the Breakthrough Energy initiative, I think?

MR. KORANYI: Coalition.

MS. GANT: Coalition, thank you. Getting my words confused. That is focused on that next level, the innovation that we need to see to get beyond what's currently within our grasp. And there's a piece of that that will be focused on natural gas. The details of what these investments are going to be are going to be sorted out for us and the countries over the coming months and years. But there are things, as Fabrice mentioned, around focusing on better measurement, detection and mitigation of methane emissions from natural gas systems.

So we're maximizing the climate benefits of this expanded use of natural gas by minimizing leakages from the system, as well as continued evolution and progress in how we produce the resource, so we not only increase the productivity of those efforts but also minimize the impacts on other resources, like air, land and water, and communities. And then, as David notes, we have absolutely an imperative to make sure that we are further developing and advancing the deployment of technologies that capture carbon from natural gas systems, particularly power generation.

The sequestration piece will be streams of research that are already underway. Sequestration's pretty much the same whatever the source of carbon – speaking as an economist, not as an engineer. If there's an engineer in the room, I'm sure you'll argue with me at some point. But what we really need to do is take the – there is some great work that's been done on carbon capture from natural gas systems, power systems, and further develop that, and identify the means by which that can be deployed. And that is certainly going to be a focus of ours and our partners. It's a great question.

MR. KORANYI: Wonderful. Unfortunately, we ran out of – Bob, just a very, very short one, please.

Q: OK, I'll try to be short. Bob Ichord, recently retired from the State Department, so I can be more provocative.

But the – I mean, obviously Asia's a key market. And it's going to grow. And the demand is going to grow there. The real question has been, to some extent, where are those – sort of, what's the transition and the anchor loads that are going to be able to obtain that? Because in the last few years, we've had high oil prices and countries have – whether it's Thailand, Indonesia, India, China have all built a lot of coal plants. And the financing is – pushes in that direction.

So I think this issue of how rapid can the transition be? And can the U.S., together with Canada and Mexico, because all of us are working together and last year at CERA the three ministers talked about exports. And you didn't mention Canada very much, but they have a lot of potential in the future too. So what's the potential for the U.S., Mexico and Canada to enter into some relationships with a lot of the Asian countries to try to really force this transition to cleaner fuels? And gas is obviously a natural in that process.

MR. KORANYI: Paula?

MS. GANT: I'll take that one. It's certainly something we're very much focused on right now. There soon will be convened the North American Energy Ministerial, where the secretaries and ministers from our three countries will meet. A key motivation for the timeliness of this meeting is their joint commitment that North American leadership is particularly important right now, following COP21, and given the domestic – the North American energy abundance we're experiencing. Whether it's oil, natural gas, energy efficiency, or renewables we have an incredible abundance, and an opportunity to lead, whether it's in multilateral or bilateral fora, and with our partners in the EU as well. So incredibly important time. Very much a focus of the administration right now.

MR. KORANYI: Wonderful. Again, in the interests of time, I'm going to have to close it down. I think it was an excellent conversation. Stay tuned for more events. On this very topic, we plan to convene a larger conference sometime in late April, around the time when the first commercial shipments will be coming up from the U.S. to talk a bit, again, about these issues. Tomorrow afternoon, if I'm not mistaken, we have a great event on Iran and the Iranian petroleum contract, which I think will be also very interesting.

So, again, thank you very much. Thanks for the panel. Let's give them a great round of applause. (Applause.)

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