Moderator: I’m really pleased to be part of this conversation with Ambassador Pyatt.
And actually, before we get started what I want to do is kind of give a brief personal recap of the conference and what I’ve seen, to set the stage for this discussion.
Generally so far we’ve actually gotten into the role of natural gas as we move forward not only for the sake of decarbonizing higher carbon intensive economies, but also in terms of its value for providing energy security.
We discussed environmental security in that same context. We discussed the role of infrastructure. And of course the topic of the crisis that is currently enveloping Europe, has been front line and center stage.
And today we’ve gotten into topics like hydrogen as well, and I think there’s going to be a lot more on that as the rest of the day sort of rolls on. But certainly gas plays a role there as well and it’s likely going to be different in different places because you’ve got existing infrastructure in some places and other places you don’t, so a lot of optionality.
Mr. Ambassador, I guess what I’d like to do is open it up to you. I know you were just in Europe. Maybe share with us some of your observations from that trip.
A/S Pyatt: First of all, thank you for the conversation, thank you for the invitation. It’s truly great to be here.
You asked what was my takeaway from getting back to Europe. And by the way I lived nine years in Europe as US Ambassador to Ukraine and as US Ambassador in Greece. So this was a return to the neighborhood for me.
What leapt out so strongly for me from this last visit was just how fast the European energy map is changing right now and how much Russia’s invasion of Ukraine and Russia’s exercise of its energy weapon in a very high-handed way has shifted the dynamic around energy and gas issues in Europe today.
Putin’s invasion of Ukraine, the weaponization of energy as a principal aspect of that campaign is something that will ripple across the international market for years to come. Russia today is no longer seen as a reliable energy partner for Europe and I think in so many ways Europe has crossed a Rubicon. There will be no return to business as usual with Moscow.
This has produced a couple of effects. Of course I found in all of my conversations in Turkey, in Romania, in Bulgaria, great appreciation for what the Biden administration has done in terms of mobilizing our energy producers and bringing as much American gas as possible into European markets to deal with the disruption that Putin induced with the invasion of Ukraine. But also a deep resolve on the importance of energy transition.
In Bulgaria I spent two hours with President Radev who wanted to talk about hydrogen. The hydrogen-ready status of Bulgaria’s gas infrastructure.
In Romania, a huge focus on nuclear, on offshore wind, in a country which has one of the EU’s largest endowments of oil and gas.
And in Turkey, all of the above. A sharp focus on non-Russian gas sources including all of the new terminals that have FSRUs that Turkey has put in place and Turkey’s aspirations to leverage that in the neighborhood. But also wind, solar, SMRs.
I think Europe has been remarkably successful since February in hardening itself against Russian weaponization of gas, but we all understand, and it came through very clear in my conversations in the region that the next several years are going to be a challenge, and while most of Europe will, based on the very large reserves that Europe has accumulated be able to navigate through this winter, but the next several winters are also looking ahead.
The last point I would make on the takeaways is the critical importance of fighting Russian disinformation. Again, this is another aspect of Russia’s maligned influence and Russia’s war effort. We need to combat the false narrative that American LNG producers are profiting off of the war, and making the point that US LNG is largely sold on the basis of long-term contracts. And while there are obvious price dislocations, and we can talk about that a little bit later, the profits are not being seized by American companies, right now it’s trading companies many of which are in fact European.
Moderator: It’s interesting you mention that that actually came up today in an earlier panel discussion today about actually who is profiting from the situation in Europe.
But you mentioned something right now about the view within Europe of Russia as a reliable supplier, and helping it to dramatically change. I just want to press on that a little bit. Because, in the winter of ’05, ’06 we saw a disruption in supply through the Ukraine pressure reduction on the system and the pricing dispute. We saw it again in ’08 and ’09.
So this is not the first time we’ve seen any disruption of supply.
I guess the fundamental question is what is what is fundamentally different about this in terms of Russia being not a reliable supplier?
A/S Pyatt: A really good question. I was in Vienna from 2007 to 2010, so I vividly remember that first Ukraine throttling back that and the sense of anxiety among the Europeans at that point.
I think the first thing that’s different is the brutality of the war. This is the greatest threat to European security order since the end of the 2nd World War. It’s the responsibility of one man who is seeking to dismember a sovereign European country. And that is something that I think is right here for so many Europeans.
It was interesting, when I was in Greece, once Greeks saw Ukrainian refugees arriving in Mariupol, a city that I’ve visited, that became famous for its resistance to the Russians, Mariupol has a large Greek minority, so a lot of those refugees ended up in Northern Greece, in Thessaloniki. And people pointed out, to drive from the Greek border to the Ukrainian border is about ten hours. So this is much more immediate I think for most Europeans.
What are the differences that I see in this period and the reason why Russia can no longer seek to manipulate its energy assets as effectively against Europe as it did in the past is all the progress that has been made by multiple US administrations over nearly two decades in working to develop diversification of sources and routes in Europe.
I was enormously proud when I was in Greece to be there for the inauguration of the Southern Gas Corridor and the TAP Pipeline through Greece, Albania, to Italy. I was in Sofia a couple of weeks ago, in part to celebrate the October 1st commencement of the IGB Pipeline, a critical piece of infrastructure to free the Baltic energy island from its reliance on Gazprom.
You’re seeing more FSRUs. I worked very closely with the American-led companies behind the new FSRU in Alexandroupolis. And what’s so striking to me is how this is happening across the continent. The Baltic pipe being completed.
The new announcement on the BarMar Pipeline between Barcelona and Marseille to connect the Iberian gas island to the European mainland.
Parallel to that, of course, is what US industry is doing. It’s very important that the United States is poised to increase by 48 percent by 2025 US LNG export capacity based on currently underway and permitted projects. And US production is going to be a key aspect of dealing with this decoupling of Europe and Russian energy which is now irreversible, but it’s going to create a Russia-sized hole in the global energy market and American know-how, ingenuity and resources are going to be a critical part of filling that hole in a way that stabilizes the global energy picture.
Moderator: I’m glad you leaned into that last bit, because that has also been a subject of discussion throughout the last day and a half here. In particular, one of the certainties associated with developing projects that are targeting European delivery, will that offtake actually be persistent given other stated goals in facilitating more rapid energy transitions, migrating away from carbon intensive fuels.
Just in general in kind of addressing this, could you also address for everybody what the role of the State Department is in terms of US energy as a tool, a foreign policy tool.
A/S Pyatt: Thank you for that.
The first thing I would emphasize is Europe, like the United States, is strongly committed to energy transition. It’s an existential challenge for us. It’s also an opportunity. But if there is one idea I can leave with everybody today, it’s to underline that it is a false dichotomy to say we either have to have energy security or energy transition. We have to work on both. We need to use fossil resources more efficiently and American companies lead the world in areas like CCUS in greater efficiency in terms of methane capture. In every conversation that I’ve had with a fossil fuel group in the country since I took this job, one of my talking points has been the methane pledge that Secretary Kerry and his crack team have been so focused on.
I was talking to somebody from industry yesterday and they used the example of Algeria. This person cited a figure, 14bcm per year in flared gas. That’s lost revenue, aside from the climate impact and it’s an area where we ought to be able to work together and where American technology and American technology providers have a central role.
So we need to do both things. President Biden has been very clear in his support for our energy producers getting product onto the market, at the same time that we continue to double down on the energy transition.
I should say in this regard, when you asked about the role of our embassies, one of the things that I think our embassies should do more of is to get the message out about the IRA, because I think we haven’t done enough to draw international attention to how much of a game-changer the IRA will be in terms of accelerating renewable energy, investments and deployment and the innovation in the United States, which is good for America and good for America’s energy ecosystem, but it’s also going to create spectacular international opportunities.
I was talking to our Ambassador in Denmark the other day who was pointing to the example of Vestas and their plans to expand where, wind turbine production in Colorado, in response to the stimulus that the IRA will provide. And I think that’s what our embassies do.
I made the point in our conversation before this session. If you look back over 10 years of American diplomacy. America’s leadership in oil and gas has been central our international power. It was central to our success in the 2nd World War. It was central to our leadership in post-war reconstruction. And I see it as a big part of my job to ensure that in this new era of energy transition, that the United States maintains that international role, that international leadership. That’s why we work so hard on initiatives like the Mineral Security Partnership to ensure that the United States continues to play a central role in helping to mobilize the assets, the resources that will drive this energy transition and that we don’t trade an era of European vulnerability to Russian energy resources for an era of European vulnerabilities gaining control over energy supply chains.
That’s what our embassies can do, but also building international partners. Working with our democratic partners and allies in Asia, Japan, Korea, Australia, India. How we work with the European Union where there is literally hundreds of billions and trillions of dollars in capital and goods moving across the Atlantic. We have exactly the same vision in terms of energy transition. We have exactly the same interest in terms of reinforcing the rules-based order and not allowing countries like Wagner in Putin’s Russia to use energy and fossil fuel resources as a means of undermining our democracies and undermining the international security order.
So the more successful we are in energy transition, the more efficiently we use our legacy of fossil fuel assets, the less Vladimir Putin is able to attack our democracies.
So it’s frustrating to me to come back to Washington and to be sometimes caught in this what I see as a completely false narrative that somehow these two goals are in competition with each other. In fact they are complementary. Energy security is reinforced by the success of our energy transition, and we have a big enough government that we can do two things at the same time.
Moderator: It’s interesting you say that as it’s actually a point that I know we’ve been making for decades at the Baker Institute. That diversification and adding options, if you will, in terms of meeting energy needs, is actually a tool for providing energy security. The reestablishment, if you will, of the benefits in the marketplace and providing energy security, because it allows you to arbitrage during the disruptions, right? It allows you to trade. That’s largely what we’ve seen with regard to US energy going to Europe in response to the cutoff of supply.
Can I ask you to get a little specific now. With regards to the tools in the tool kit of the State Department, and the US government more generally, what is being done now and what is being envisioned as a way to provide greater diversification in expanding the energy security benefits that the US in particular sees as a national security measure across the pond, into the Atlantic basin and to Europe? And how does that, if you want to think bigger than that, even matriculate over to our allies in Asia?
A/S Pyatt: Thank you for that. I want to start with the bigger picture which is how disruptive the invasion in Ukraine has been globally. So its impact on food prices and commodity prices in Africa. Its impact on India, a huge democratic partner of the United States, a big bet on LNG and now finds its LNG plans disrupted by the shock that global prices have gone through.
What our embassies can do is all of the above. I think back on my own time in Athens. My partnership and my embassy team’s partnership with our embassy in Bulgaria was indispensable to the success of the IGB Pipeline. Similarly, as I already talked about, the Southern Gas Corridor, the TAP Pipeline, is the culmination of 20 years of American energy diplomacy working with our partners in Europe, and frankly, working against quite explicit Russian effort, Gazprom effort, to preserve European vulnerability.
I saw that in the misinformation that Russia was pumping out in Northern Greece, suggesting that the TAP Pipeline was somehow going to compromise agriculture.
I visited the pipeline under construction I think in 2018. When you went back two or three years later, you literally couldn’t find the pipeline because all of the rapeseed fields and everything else had returned as if nothing had happened there.
But that illustrates how for the Kremlin, and I lived through this so dramatically, of course, during my time in Ukraine. For the Kremlin energy has traditionally been one of the two most effective and pernicious instruments of maligned influence in Europe. That has now been lost through Vladimir Putin’s miscalculation and underestimation of our transatlantic resolve. Europe is never again going to put itself in the position of being vulnerable to that kind of energy coercion. And we now have an opportunity to build a new architecture.
That architecture entails taking a European bas system that was oriented very strongly towards Russian pipeline gas, and reengineering it to focus on the Mediterranean, opportunities in Algeria and Egypt; Israel, Cyprus, offshore.
I was talking earlier to a Spanish colleague about again, the importance of the mid-cap pipeline connecting all of Spain’s resources in terms of LNG regassification and storage, connecting that reservoir to the European mainland in a way that will build European resilience.
So gas, LNG is going to be part of the story. In Europe over the next several years, many years, but also both of us are committed to this transition and that’s why for me infrastructure like FSRUs is interesting because there’s a much lower risk of that becoming a stranded asset as transition proceeds apace in Europe. But I also know, I have a lot of Greek shipbuilder friends who made a lot of money off of FSRUs and LNG tankers, but I also understand how constrained the global market is and how supply chain issues, even if a country wanted to buy more FSRUs and deploy next year, it’s more of a half-decade project than it is a next year project.
That’s again why 2023, 2024 is going to be so important, and it’s so important that we continue the work that the Biden administration has emphasized in terms of our transatlantic solidarity.
I think within Europe it’s very important that Europe continues to work on integration of its energy system and how to ensure that those countries which are resource secure are able to provide resources to countries that are less secure, and that’s why I was in Bulgaria. That’s why what Romania has done and Moldova is so important. Why what Greece and Bulgaria are talking about in North Macedonia is so important to Serbia. You can sort of go across the EU-27 and through all of the neighbors. Dealing with the disruptive effects of Putin’s invasion of Ukraine is not a one-year project. It’s going to be a project for this whole decade.
The end state is going to be faster deployment of clean energy technology, less reliance, dramatically reduced reliance on Russian oil and gas. And a resolve to never again be in the position where Russia and the Kremlin can use the threat of a cutoff to manipulate policy choices and economic options.
But it’s going to take work, and our diplomacy is integral to that.
Moderator: You mentioned one word which is infrastructure, which has been central to a lot of discussions here over the last day and a half. I’m not going to ask you specifically about US permitting. It’s a domestic issue.
A/S Pyatt: Which I’m not responsible for. [Laughter].
Moderator: That’s exactly why I’m not going to ask you that. But I will ask you about the infrastructure initiatives that the State Department has been engaged in in Europe and other places around the world, and then if you can expand on that beyond gas and talk a little bit about hydrogen and where you see that going in Europe and how the State Department’s playing a role.
A/S Pyatt: Thank you for asking that. I’d love to talk about both of those.
First of all, infrastructure per se, and Europe is the best example. I had the opportunity last week to spend some time talking to Senator Sullivan from Alaska. He in his State Department incarnation had my job, when he was the State Department’s Assistant Secretary for Economics and Energy, they were one bureau in those days. And he talked about how much he worked on the CPC Pipeline and continuing to push that ahead.
That’s another example of how the United States global diplomatic platform is an unmatched asset to help create opportunities for private sectors, but also to drive forward with these multinational projects. Thank goodness we got CPC done. We got BCC done in terms of the Caspian. The Southern Gas Corridor, probably the most significant single example. And building that kind of alternative is what has helped to insulate Europe against the most severe repercussions of Putin’s weaponization of energy.
We need to be doing the same thing now in the energy transition era. Again, that’s why I point to the example of the Mineral Security Partnership because it’s an effort by the State Department to build an international coalition, a global coalition of both critical minerals producing countries and critical minerals utilizing countries in order to reinforce standards of transparency, economic and social and environmental standards, and not allowing these resources to fall into the hands of our adversaries.
You asked about hydrogen. I have a great example which I lived through when I was Ambassador to Greece. A Boston-based company called Advent Technology. Advent started out, their first product was a small hydrogen fuel cell that was sold to the US Marine Corps for charging all of the radios and sat devices and things that a Marine has to carry around these days called the Honey Badger. I was excited. They were a company headquartered in Boston with a research facility in Patras, Greece.
I got to watch and know this company as they went through their IPO, and it as good fun to see what happened after their IPO. All of a sudden there was a lot more money for new lab equipment and nice uniforms for everybody. But now Advent was able to secure 80 million euros in EU Recovery and Resilience Funds for a largescale hydrogen fuel cell storage project in Northern Greece.
It’s a great example of how both the EU and the United States are progressing on this energy transition and using different tools to achieve that, but also the win/win character of collaboration across the Atlantic in these areas.
I mentioned my conversation with President Radev in Bulgaria. He was very focused on options for Bulgaria to leverage its wind resources in particular, for the development of green hydrogen as a utilization of existing pipelines which were constructed to bring Russian gas to Europe to distribute green hydrogen. I think you’re going to see more and more of that.
My DOE counterparts point out first of all, a lot of this is still theoretical, and say countries need to focus in the first instance on mitigating their lignite coal power. And again, the Greece example is the one I know very well. What I did in Greece working with the Greek government on new FSRUs, expanded terminal in Revithoussa, a dramatic increase in US LNG deliveries has been indispensable for that government’s accelerated phaseout of lignite power. And I think we’re going to continue to see that across Europe.
But this question of how you future-proof legacy gas infrastructure for a hydrogen era is vitally important.
Another issue of interest to me from our standpoint, which I will be continuing to work on with my colleagues from Secretary Kerry’s office is one of the hardest to abate of the hard to abate sectors, global shipping, which has a significant carbon footprint today and where hydrogen is almost certainly going to be part of the answer. Along with a period probably of transitioning to LNG. But in terms of powering global shipping and everything that we’ve taken for granted in terms of containerized trade and global commerce, powering those by something other than just fossil fuel.
So these are all connected. Again, I am profoundly optimistic that the United States is optimally positioned to walk and chew gum at the same time. I can say that to this audience. When I say that in Europe, people don’t really understand the vernacular, but the idea that we can actually do two things at once and that both are urgently important.
I think 2022 will be remembered as a hinge moment, a truly turning point because of two things that came together. One is the invasion of Ukraine and the extraordinary violation that it represented of the norms and standards that have built prosperity during the post-war era in Europe. And second is the IRA and the political consensus that represents in the United States to invest in and to accelerate energy transition.
Moderator: So conscious of time, I’m getting the hook, so to speak. But I do want to ask one question because I think it’s been the thing that has been the central theme of every conversation that I’ve been privy to in the discussions on the stage throughout this North American Gas Forum. But in terms of US natural gas resources and their importance for energy security not only domestically but internationally, what do you see the role of gas playing in the short term and the long term? So the next five years and the next twenty years?
A/S Pyatt: My crystal ball isn’t very good on the medium and long term, and I think most of us would not have predicted the shale gas revolution in the United States and all the changes that that brought. The extraordinarily fast reduction in solar costs, not to mention that Putin would behave so outrageously in Ukraine.
So I think we have to be very humble in terms of your 20 year horizon.
Certainly on your five year horizon, LNG is going to remain a critical part of the global energy mix, and in particular dealing with this significant decoupling between Europe and Russia, and the hole 136bcm - the hole that that is going to leave in European energy supplies and in global energy markets. Some of that hole is going to be filled by greater efficiency. Some of that hole will be filled by accelerated deployment of renewables. But American LNG is going to play a critical role there. And it’s going to play a critical role in helping to stabilize global markets in the face of Russia’s actions.
The United States is committed to maintaining a very rigorous sanctions regime against Russia as long as it persists in its actions. That is inevitably - and that is the spinoff in my confirmation hearing where I was asked about Russia’s ability to continue to profit off of its oil and gas resources even as it systematically violates Ukrainian sovereignty. But I think our ability to be a reliable supplier, to be a good partner especially with Europe, to build long term relationships and to demonstrate the environmental bonafides that the United States and US industry is going to put us in a very, and put the US industry in a very important place in the transatlantic relationship, but also globally.
Moderator: Thank you.
Source: U.S Department of State, Bureau of European and Eurasian Affairs
