NEWS: Foreign Policy: The Geopolitics of Gas Exports

February 12, 2014

The Department of Energy on Tuesday approved its sixth license for the export of U.S. liquefied natural gas (LNG) to countries without a free-trade agreement. While the approval is welcome news, the backlog of applications still awaiting action remains discouraging. Following yesterday’s approval, Foreign Policy magazine highlighted the House Energy and Commerce Committee’s new report detailing the geopolitical benefits of expanding U.S. LNG exports and the urgent need for faster approvals. The article points to increasing bipartisan support for LNG exports, and the need to act quickly before the window of opportunity closes. House Energy and Commerce Committee Chairman Fred Upton (R-MI) stated, “The U.S. must embrace its new role as a leader in energy diplomacy and act now on LNG exports before it’s too late.” 

2/11/14

The Geopolitics of Gas Exports

Why lawmakers from both parties, and plenty of countries overseas, are desperate to speed up U.S. energy exports

The Energy Department approved the construction of a new multi-billion terminal for exporting U.S. natural gas overseas, only the sixth green light the Obama administration has given during 18 months of bitter political jousting over how to best take advantage of the United States' sudden energy abundance.

Proponents of greater energy exports in Congress, as well as the growing number of countries that want to buy U.S. natural gas, are pushing the White House to sign off on projects more quickly. The Obama administration is still mulling whether to clear the way for the construction of another 25 export facilities. If approved, the new facilities could have the capacity to liquefy and export nearly 35 billion cubic feet a day of natural gas.

There's a catch, though. U.S. law makes it extremely difficult for American companies to export natural gas to countries that don't have free trade agreements with Washington. Companies that want to sell to those countries need to persuade the Energy Department that the deals would be in the U.S. national interest, a criteria without a formal definition. That makes the approval process a lengthy and byzantine process that is deeply frustrating for would-be purchasers of U.S. gas. At the same time, big gas producers such as Qatar and Australia are ramping up their own gas-export capabilities, threatening to close the window of opportunity for U.S. exporters.…

Increasingly, export proponents are pointing to the potential geopolitical benefits of exporting U.S. energy to make their case and win political support on the Hill. A recent report prepared by the House Energy and Commerce Committee found, for example, that American gas could bolster friendly nations while helping to undermine energy powerhouses like Russia that frequently act against U.S. interests.

"An increased American contribution to global energy markets can enhance national security by supplanting the influence of the troublesome participants currently dominating those markets, especially Iran and Russia," the report argued.…

Many U.S. allies are beginning to run out of patience. Europeans and Asians alike are clamoring for greater access to U.S. gas, which even with the cost of liquefaction and transport would still be cheaper than what's currently sold in their countries. Unlike the market for crude oil, there is no global market for natural gas, which leads to stark price differences from one region to another. Asian natural gas prices have recently been about four times the U.S. price, while European prices average about three times as much.

Proponents of greater U.S. exports also point to the way Russia has been able to exert increased control over the Ukraine, a nominal U.S. ally whose natural gas supply is firmly dependent on the Kremlin's good graces. To many Europeans, the Ukraine has been a cautionary tale about the dangers of relying too much on Russian gas to meet their energy needs, making an American alternative increasingly attractive. Parades of European and Asian diplomats have landed on the Hill to argue for an overhaul in U.S. export policy.

"It's an interesting situation, we are in the same defense alignment (NATO), but we are unable to trade the energy resources which are so important for us, not only for the economy but in terms of national security as well," said Simonas Satunas, the deputy chief of mission at the Lithuanian Embassy in Washington.

Lithuania is 100 percent dependent on a single Russian pipeline for its natural-gas imports, and is building a new LNG terminal to be able to diversify its energy sources and start importing LNG by early 2015. Lithuania would like to count the United States as one of its potential suppliers.

Japan, another close U.S. ally, has also increased its reliance on expensive, imported natural gas since the March 2011 nuclear accident at Fukushima, which led to the shuttering of all of Japan's nuclear reactors. Japan's trade deficit is soaring, and government officials are concerned about how energy costs are undermining economic competitiveness.....

Read the full article online HERE.

###