Acting Special Envoy Mary Burce Warlick's Remarks for Petroleum Equipment and Services Association Members and Foreign and Civil Service Oil and Gas Industry Training Session Participants

February 8, 2017


 

Houston, Texas

As Prepared for Delivery:

• (PESA President) Leslie Beyer, I appreciate the welcome. A special thanks to the PESA host committee, which I know works throughout the year to fine-tune this course, and opens your corporate laboratories, your trading floors, drilling sites, and your factories to host our officers twice a year.

• This “Oil and Gas Industry Training Course” illustrates a full quarter century of partnership between the State Department and PESA. The Course now spans five U.S. Administrations.

• Under Leslie’s leadership, and building on her own Washington experience, we know that PESA sustains engagement with policy makers through both your Government Affairs and International Trade Policy Committees, in addition to your Washington Fly-In.

• Through oil booms, downturns, and today’s Texas driven energy revolution, energy remains vital to American diplomacy, and your equipment and service sector remains an engine of American exports and ingenuity.

• This may be the first course with a sitting U.S. Ambassador, Lisa Furuta-Toy, who will speak on the panel tomorrow. Other senior diplomats are also graduates, like our Ambassador to Gabon, Cynthia Akuetteh.

• We come to Texas to see the energy economy at work. Most of your companies invest on your factory floor, and not in Washington offices. These trips give us an understanding of the complexities of your global supply chains, and your technologies. This allows us to better defend your intellectual property abroad.

• Energy is of course a key national security interest and a central component of our Foreign Policy. As Secretary Tillerson noted in his confirmation hearing “energy is vital to every economy the world over, so it can be used as a powerful tool to influence, kind of tip the balance of the table in one party’s direction or the other. So it is important that we are watching and paying attention to when this balance is upset.”

• Allow me to share just a few areas of areas that we currently are watching, and where we are engaged, and I know there will be many more in the days ahead.

Western Hemisphere

• Close to home, here in the Western Hemisphere, U.S. and Canadian oil production has increased by 60 percent in a decade, and Mexico and Argentina have just opened their energy sectors. There are opportunities offshore, and also in unconventional oil and gas development, which rely on exports of your sophisticated U.S. equipment and services.

• In the next decade, Mexico plans to invest over $16 billion in new pipelines, as it opens its energy sector for the first time in seventy years. Argentina has also moved to dramatically broaden opportunities for external investment as well under the Macri government.

• To facilitate this change, ENR is at work assisting Latin American regulators through our Energy Governance and Capacity Initiative and the Unconventional Gas Technical Engagement Program. Through these programs, we share U.S. experience and best practices to help strengthen capacity to manage and provide regulatory oversight of the oil and gas sector.

• In fact, we work as partners with the University of Texas at Austin to help share this American knowhow.

• In Argentina, we are strengthening bilateral energy cooperation, assisting Argentina with its energy security goals, and promoting sustainable development of their world-class energy resources.

• ENR is engaging with the Government of Argentina at the federal and provincial level to share best practices for establishing regulations, environmental protection measures, internationally competitive contractual and fiscal regimes, and community engagement

• Because Central America consists of a series of small energy markets, our strategy has been to help the Central Americans connect them, in order to bring down energy costs; improve reliability; and make the region more competitive, including in attracting foreign investment and U.S. equipment exports.

• With our encouragement and facilitation, there has been a tripling of electricity trade between the Central American countries, which has increased the availability of emergency supplies during shortages, reduced spot market prices, and identified necessary infrastructure improvements.

European Energy Security

• Turning to Europe, we are focused on helping our European energy partners achieve greater energy security, through diversification, and to minimize risk and vulnerabilities by reducing dependence on just one large supplier.

• Enhancing energy diversification – diversification of fuels, countries of origin, and routes –is a crucial task for Europe. And this is an area where ENR is providing significant support.

• Crucial to these efforts to bring real diversification to Europe is promoting projects that enhance diversification. These include, in particular, the Southern Gas Corridor and various interconnection projects.

• Key to these efforts is to sustain momentum on the Southern Gas Corridor, including the Trans-Adriatic Pipeline (or TAP). This network of pipelines will bring to Europe by 2021 new volumes of gas from a new source – Caspian gas from Azerbaijan.

• Gas imports from major regional suppliers of course can and should still be a part of the European energy mix, but Europe’s market needs to be open and competitive. Everyone should play by the rules.

• Another way Europe is looking to enhance energy security -- and where our bureau has provided significant support -- is by building additional LNG infrastructure, including floating storage and regasification units, that will help facilitate the delivery of LNG from the U.S. and elsewhere to Europe.

• Thanks to the work you do here in Texas, a more robust global trade in LNG is already playing a transformative role in the European energy market. European officials not only welcome, but seek, U.S. oil and gas exports, which started flowing to Europe a year ago.

• This transformation of the gas market has already had a dramatic impact in Europe – most prominently in Lithuania, where that country’s decision to move forward with a LNG terminal gave it new leverage with respect to its sole supplier, which previously accounted for 100% of that country’s gas supply.

Eastern Mediterranean

• Another good example of the link between traditional foreign diplomacy, energy diplomacy and Houston, is our work in the Eastern Mediterranean.

• The successful exploration, production, and export of natural gas resources in the Eastern Mediterranean will increase regional cooperation and energy security in the Middle East and beyond, and could serve as a catalyst for increased political stability in this strategically vital region.

• Discoveries offshore Israel, Egypt, Cyprus, and potentially Lebanon have already redefined regional relationships and, if managed successfully, could continue to improve economic and political cooperation in the region.

• For example, the recently concluded gas deal between Jordan and Israel will lead to the first infrastructure linking the two countries since the 1994 peace treaty.

• Houston-based Noble Energy discovered two large gas fields, Tamar and Leviathan, off the coast of Israel in 2009 and 2010. Together these gas fields have enough gas to meet Israel’s domestic needs with surplus volumes for export. The discoveries offshore Israel spurred exploration in nearby Cyprus where, in 2011, Noble discovered the large offshore Aphrodite field.

• Increased interest in developing energy resources in the Eastern Mediterranean, coupled with positive developments in Egypt’s investment climate, led to additional exploration in Egypt, which in turn yielded last year’s discovery by Italian firm Eni of the Zohr field, the largest discovery to date in the region.

• Successful development of the Eastern Mediterranean’s energy resources presents complex challenges, but also offers opportunities and incentives for regional cooperation. Although energy issues alone will not solve the political differences in the Eastern Mediterranean or broader Middle East, they provide incentives to accelerate political accommodation, encourage compromise, and promote dialogue.

Counterterrorism/ISIL

• Unfortunately, energy is also a resource that can be used by others for all the wrong reasons. And so a core priority is our work within the United States Government interagency to counter the exploitation of energy resources by violent extremists.

• We have made significant progress in degrading ISIL’s ability to benefit from energy resources. We have affected ISIL’s ability to generate oil revenues, and they're starting to encounter difficulty governing in light of fuel shortages.

• Coalition airstrikes have reduced ISIL’s ability to exploit oil and natural gas in Iraq and Syria. The terrorist group’s oil output and ability to benefit from resources under its control is highly variable because it is constantly adapting methods to avoid Coalition attacks. However, ISIL controls less territory and exploits fewer resources in Iraq and Syria compared to last year at this time.

• We’ve been working to degrade and dismantle ISIL’s exploitation of energy resources from the wellhead to refineries, and every step in between.

• When we needed industry expertise to help keep equipment out of the hands of terrorists, we came to PESA member companies for advice – and then worked to assure that our trading partners worked off the same list.

• Counterterrorism will remain a core priority and focus of our team as this effort intensifies.

Conclusion

• I hope these highlights of just a few areas of our ongoing work streams has helped to paint a picture of some of the many ways in which we are seeking to integrate U.S. energy security interests and points into our foreign policy agenda and diplomatic engagement.

• Thank you again for our continued partnership.