Reuters

December 12, 2012

US should let NATO allies tap natural gas exports – Senator Lugar

By Roberta Rampton

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Lugar said increased U.S. exports would augment but not replace the need for the so-called “Southern Corridor” pipeline system to move natural gas from Azerbaijan to Turkey and Europe.

The bill would make export licenses automatic for Turkey, which counts on Iran for 20 percent of its natural gas supplies, and would give NATO allies more leverage in supply contract talks with Russia during the next five years…

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WASHINGTON: The U.S. Congress should give European allies access to burgeoning supplies of U.S. natural gas, Republican Senator Richard Lugar said on Wednesday, proposing a new law that he said would improve energy security in a critical region.

Lugar, the veteran top Republican on the Senate Foreign Relations Committee, said his bill would advance U.S. interests by helping allies in the North Atlantic Treaty Organization (NATO) reduce their dependence on natural gas from Russia, and also would help Turkey wean itself from Iranian supplies.

“My legislation would place NATO allies on equal footing with free trade partners under U.S. law in providing for automatic licenses for U.S. (liquefied natural gas) exports,” Lugar said in a letter to the Senate’s Foreign Relations Committee.

Lugar said increased U.S. exports would augment but not replace the need for the so-called “Southern Corridor” pipeline system to move natural gas from Azerbaijan to Turkey and Europe.

The bill likely will be the last legislation introduced by Lugar. After 35 years in the Senate, he will retire later this month, having lost a primary race earlier this year to a more conservative rival.

Lugar, a long-time advocate for the Southern Corridor who traveled its route in 2006, urged his colleagues to try to advance the bill, which would need to find approval from the Democrat-controlled Senate before it would have a chance of becoming law.

U.S. FACES GAS EXPORT DILEMMA

Lugar’s bill comes as the Obama administration faces tricky decisions on proposals to broaden exports of natural gas beyond countries with which the United States has free trade deals.

Domestic production has boomed, leading to a glut. But domestic manufacturers argue opening up exports would hike their gas prices, and have attracted some strong supporters for their cause in Congress.

Lugar’s proposal would go part way toward liberalizing U.S. natural gas exports while achieving foreign policy goals, his staff argued in a report to his Senate colleagues.

The bill would make export licenses automatic for Turkey, which counts on Iran for 20 percent of its natural gas supplies, and would give NATO allies more leverage in supply contract talks with Russia during the next five years, the report said.

But U.S. exports would not undercut the Southern Corridor, the report said, noting gas from central Asia shipped by pipeline would be cheaper.

LEVERAGE WITH RUSSIA

Russia supplies more than 60 percent of natural gas imports for countries like Austria, Bulgaria, the Czech Republic, Estonia, Finland, Latvia, Lithuania, Poland, Slovakia, Moldova, Turkey and Ukraine.

But Russia’s “astonishingly antagonistic policies” with gas contracts – including cutting supplies to Ukraine in 2006 and 2009 – have raised major policy concerns, Lugar’s report said.

The Southern Corridor from Azerbaijan was designed to reduce Europe’s dependence on Russian gas, but decisions on the route have been complicated by a variety of national and business interests.

Russia is planning a competing pipeline project called South Stream. President Vladimir Putin was present for the first ceremonial “weld” on the project last week.

That project could allow Russia to “tighten its grip on Europe,” Lugar’s report said, urging the United States to remain a key diplomatic player in advancing the Southern Corridor.

SANCTIONS EXEMPTION

Azerbaijan is developing its Shah Deniz 2 offshore gas field with BP, Statoil and a consortium of other companies. The Azeri government and Turkey are building the first leg of a pipeline for that gas to Turkey.

Lugar’s report said U.S. allies would gain more from the Nabucco West plan for the second leg of the Southern Corridor into western Europe than a competing Trans-Adriatic Pipeline (TAP) proposal, which would take a more southern route to Italy.

The National Iranian Oil Company (NIOC) has a minority stake in the Shah Deniz project. But, because of the national security interests involved in the project, the U.S. Congress has given the project an exemption from energy-related sanctions on Iran.

However, if Congress looks at ways to tighten its Iran sanctions in coming months, the exemption could come under scrutiny, particularly if the TAP pipeline route was selected, Lugar said.

“Selection of TAP as currently proposed would weaken the argument that Shah Deniz II and its ancillary projects are of such immense benefit to U.S. security interests that they should trump further sanctions against Iran,” his report said.