LNG can play a critical role as a flexible, secure fuel source ensuring diversity of supplies, Amos Hochstein, the former State Department special envoy for International Energy Affairs told Anadolu Agency during the European gas Conference in Austria at the end of January.
Hochstein, who is also the Senior Vice President of Marketing at the Houston-based natural gas company, Tellurian, said that if a country has access to LNG, its supply options are not merely restricted to one or two sources.
'I can rely on five and I can change them. If somebody has an accident in one country, in my source of supply [with LNG], I can go to a trader and I can pick up a cargo tomorrow,' he stressed.
Hochstein, the top energy diplomat under the Obama administration, criticized the Nord Stream II natural gas pipeline project that aims to deliver Russian pipeline gas to Europe through the Baltic Sea.
'If you have a pipeline that works and has supplied its customers, would you build another one for no reason? Usually no,' he said.
He argued that any company from an economic standpoint will always want to spend as little money as possible, spending it only when it will generate revenue.
'When you look at new expensive projects, if pipeline infrastructures are not solving any problems or creating revenue, then they are not economic or market-driven projects. The base line argument for this project is not on economics, but on politics,' he said.
- Baumgarten explosion
He further contested the point against pipeline gas based on safety concerns with the huge explosion at the Baumgarten gas hub, one Europe's major natural gas hubs located near Austria's border with Slovakia on Dec. 12.
He said that the accident showed the vulnerability of pipeline gas in comparison to LNG.
'Pipelines are vulnerable, LNG is not,' he said.
'What I don't understand is how people certain about the security of supply want to build another pipeline that costs tens of billion of dollars that will put everybody further dependent, not only politically but economically, on a piece of metal,' he said.
The freak accident at the Baumgarten gas hub that shut down all of Italy's gas supply was a wake up call, he warned.
However, he contended that with LNG, cargo can be bought and arrive at its destination within 10 hours because cargo today is carried on the seas all around the world.
- US LNG and Europe
U.S. LNG has already changed the dynamics of the worldwide gas market when the U.S. started exporting gas, he said.
The question as to whether U.S. LNG will make inroads in Europe's market is dependent on the market and economics, he added the more that European gas is market and economic-based, more availability of multiple sources will surface.
'The real answer for Europe is that it doesn't matter if physical gas leaves the U.S. shore and arrive in Europe because we are in a global market and what we want is more competition to take advantage of diversity of supply and infrastructure,' he explained.
He advised that companies do what is in their best interest, but in order to access discounted or cheaper LNG, they need diversity from multiple competitive supply sources.
'Your supplier gives you a competitive price and you have an option to buy it or not. When you are a dominant player, you tend not to give competitive prices. We have seen that time and again,' he said.
He cited the example of Eastern Europe where countries have access to only one source of supply and only one piece of infrastructure to bring gas in.
'Then they can't have good prices and tend to have expensive gas. Our message, as Tellurian, is that we want to create the lowest cost LNG as possible,' he said.
He added 'we think our LNG cargoes on the seas will be among the lowest costs in the world. If there are more companies, they will bring down the cost and that's better for the consumer. Instead of thinking in political terms, governments can take into account the changing market dynamics and ensure they have access to LNG at competitive prices.'
- Turkey's smart choices
Hochstein also considers that Ankara has made smart choices for the country's supply security through Floating Storage Regasification Units (FSRU).
'I think Turkey's Energy and Natural Resources Minister Albayrak is right by putting in place LNG import mechanisms. Turkey has the option of LNG, has the option of importing gas from the Iraqi Kurdish Regional Government (KRG), and in bringing East Mediterranean gas and has the option of Russian gas,' he said.
If a country like Turkey has all of these options, then a competitive market will emerge, he said.
'You will get access to the cheapest gas available and you will also be able to gain revenues from the transit costs from the Caspian, to the Middle East, to the U.S., and to the KRG,' he said.
When test studies are complete, Turkey will bring its second FSRU into operation in Dortyol, Hatay - a province in the Mediterranean region. The country's first FSRU was put into operation in December 2016 in the Aliaga region of Izmir.
By Murat Temizer
Anadolu Agency
energy@aa.com.tr