[Premium] EC-Funded LNG Study 'Compromised'

By Thierry Bros

The European Commission has just released its “Follow-up study to the LNG and storage strategy” written by Hungary’s REKK, Tractebel, and UK-based Energy Markets Global. The storage section provides useful and detailed explanations but the LNG part lacks in-depth knowledge and raises compliance issues.

It is strange that Tractebel – a part of major European incumbent Engie – was selected to contribute to an LNG study for EU policy-makers.

It is worth noting that Tractebel's relationship with Engie is not mentioned in the study – except on the cover and page 4 [1].

The study recognises “Business and markets themselves are essential but left completely to itself, there is a high likelihood that incumbent market players would attempt to block new entrants and hold the market back”[2]. So, allowing Tractebel to be part of the study is comparable to the EU Commission asking a 100% Gazprom subsidiary for advice on the Nord Stream 2 mandate it wants to secure from Member States. I’m sure we could be more efficient with EU funds as lobby groups would have provided the same answers for free.

On compliance issues, links between Tractebel – whichever part of Tractebel supervised this study – and Engie should have been clearly disclosed. The remarks on page 188 are therefore a major intellectual breach:

• Cameron LNG is jointly owned by Sempra LNG & Midstream, Engie, Mitsui and Japan LNG Investment, a company jointly owned by Mitsubishi Corporation and Nippon Yusen Kabashiki Kaisha. So, the 75% likelihood of Cameron LNG expansion in 2025 is free marketing for Engie/Tractebel
• Engie has a contract with Yemen LNG. The 90% probability of the war-hit project being back online by 2025 looks strange, given that some US projects score a zero probability.
• While the 0% in Driftwood and Lake Charles could help make sure that no new competitors can enter.

The EU has been rightly pushing for national governments not to pick winners. It is therefore not acceptable for an incumbent – especially one with Engie's record in resisting market liberalisation – to do so in a study paid for by the EU. I’m not sure the interest of the EC is to limit LNG competition to please existing gas suppliers…

On knowledge issues:

• From publicly available information, the study is wrong regarding, for example, US flexibility[3];
• The study doesn’t provide the latest information on European hubs[4].

Those compliance issues and lack of knowledge raise high doubts on this LNG study that cannot be viewed as providing independent advice. I therefore recommend readers to avoid losing their time and stop reading at page 90 once the study is available on-line in a few days.