American Exports Cannot Replace Russian Gas To Europe

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WASHINGTON – America’s ability to exploit and use abundant domestic energy –shale oil and gas– has to be celebrated. Energy self sufficiency –now a fact in natural gas and a reachable goal (when combined with imports from Canada and Mexico) in oil– is the best economic news we have had in at least a decade.

America exporting natural gas? 

That said, at least in the short-term, America’s ability to alter energy flows to Europe through the export of our own natural gas is negligible. The notion that US exports would be able to replace all or most of the natural gas that Europe imports from Russia is a mere fantasy.

Therefore it is really surprising to read in a WSJ op-ed by Senators John Hoeven and John McCain, (Putting America’s Energy Leverage to Use, July 29, 2014), that: “Today the US has the leverage to liberate our allies [in Europe] from Russia’s stranglehold on the European natural-gas market”.

American exports cannot replace Russian gas

To put it mildly, this is really a stretch. In fact, it is a fantasy. The US has no such capabilities. Sure enough, as the two Senators argue, the US could produce even more shale oil and gas. Through new legislation they are co-sponsoring, it could be possible to streamline regulations in order to drill more wells in a shorter period of time. It could be possible to expedite the vetting process necessary to authorize the construction of additional Liquefied Natural Gas (LNG) terminals, so that US produced natural gas could be exported. All this is possible.

And there is no doubt that, in the long run, the addition of US natural gas exports to total energy supplies would alter global supply and demand dynamics, therefore improving Europe’s prospects by creating additional sources that could be tapped, as opposed to being forced to buy Russian gas, simply because this is the only game in town.

Europe’s needs

However, the fact is that Europe’s energy needs are colossal. Even if we did  –in record time– all the things that the two Senators recommend, a few years down the line America would be able to supply only a modest percentage of what Europe needs. In other words, we have no way to create –today, or in the near term– an alternative to Russian gas.

Energy policy coordination

Sure enough, if we had a solid transatlantic energy plan (the two Senators support this) that would include new supplies from America, a vigorous European push (aided by US know how) to develop the Old Continent’s substantial shale gas reserves, plus additional imports from Africa, Azerbaijan and other sources, then it would be possible, may be in a decade or more, to create a viable alternative to Russian gas for Europe.

But to say that if America would quickly build a few LNG terminals, then we could ship to Europe all the gas it needs is just not true.

Best export markets in Asia, not Europe

Besides, we have to consider that the most lucrative markets for future US gas exports are in Asia, (where natural gas is much more expensive), and not in Europe. Once the LNG terminals are built, unless McCain and Hoeven plan to have a legal mandate that will force companies to sell to Europe, US LNG exports would go where prices are higher, and that is to Asia.

Therefore, this whole idea that we should push for additional US production so that we can sell to Europe all the gas it needs just does not make a lot of sense.

Use LNG as transportation fuel

There may be other good reasons for streamlining permits and regulations so that it will be easier to bring to market abundant US shale gas supplies.

I for one strongly support the idea pushed by T. Boone Pickens (www.pickensplan.com) of using domestic and relatively cheap US natural gas as transportation fuel, especially for heavy trucks. LNG for trucks is a cost-effective alternative to much more expensive diesel made with imported oil.

However, the idea of boosting US natural gas production so that we can supply Europe all the energy it needs is a dream.

 

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