Energy

US, Canada Natural Gas Exports Chip Away At Russian Dominance

Canada and America are about to start exporting enormous amounts of liquefied natural gas (LNG), according to a pair of recently published reports by the U.S. Energy Information Administration (EIA) and American Enterprise Institute (AEI).

The rise of North America as a major exporter of natural gas is an enormous change in way the world gets electricity. Suddenly, European and Asian countries have a much broader choice of natural gas suppliers.

“Thanks to the shale revolution, the United States is now on its way to becoming a major exporter of liquefied natural gas (LNG),” AEI economist Dr. Mark Perry wrote in the Monday report. “In February, two LNG cargoes left Cheniere’s Sabine Pass export terminal in Louisiana for Brazil and India.”

EIA estimated Tuesday Canadian natural gas production will more than triple by 2040, matching the projected explosive growth of the American natural gas sector. Much of this new Canadian and American produced gas will be converted into LNG and sold to Europe.

Both countries are already gearing up to sell LNG internationally. In America, five new LNG export terminals are under construction. When finished, they will be capable of exporting roughly 10 billion cubic feet per day, according to Perry, making America one of the world’s largest exporters of natural gas.

“I share the optimism about the potential positive role of these exports on our allies especially in Europe,” Richard D. Kauzlarich, former U.S. ambassador to Azerbaijan and Bosnia, told The Daily Caller News Foundation. “Still, the traditional suppliers there — especially Russia — will not give up market share easily. Nor will Qatar and Norway. The consumers will benefit from lower gas prices but it is unclear which producers will be most competitive in a low-price gas market.”

LNG has the potential to reduce Russia’s ability to use state-controlled companies, such as Gazprom, as a political weapon against America’s allies in Eastern Europe. Russia used interruptions in the natural gas supply in 2006, 2009 and 2015 to put political pressure on Eastern European countries like Ukraine, Poland and the Baltic states. About half of Europe’s imported natural gas comes from Russia. This dependence prevented many of America’s European allies from responding more forcefully to Russian actions in Syria and Ukraine.

Luckily for these countries, increasing Canadian and American natural gas exports allowed them to reduce their dependence on Russian gas and switch suppliers. North American LNG exports could compete against Russian gas, forcing the country to rethink how it treats customers. Increased competition for natural gas in the world market has already reduced Russia’s bargaining power and export revenue.

“We are at an early stage in terms of LNG exports. These initial shipments are part of a series of commissioning cargoes to various parts of the world with commercial shipments not starting until later this year,” Kauzlarich, continued. “Certainly US LNG exports will have a global impact but much will depend on where the markets are for this gas.”

Selling LNG to Europe would have minimal costs and huge economic benefits, according to a study published in December, 2015, by the Department of Energy (DOE). The DOE found exporting American LNG would provide huge environmental benefits that will “address a variety of environmental concerns in the power‐generation sector.”

Exporting natural gas is likely to be a growth industry, as global demand for natural gas is expected to be 50 percent higher by 2035 than it is now, according to the International Energy Agency. Demand for imports of LNG increased 27 percent in Great Britain last year alone.

The explosion of natural gas production in the U.S. and Canada is entirely due to the development of hydraulic fracturing, or fracking. Fracking allowed America to oust Russia as the world’s largest producer of natural gas in 2015. This is an enormous change, as only a decade ago, energy analysts believed the U.S. was destined to become one of the world’s largest LNG importers as natural gas production appeared to be in permanent decline.

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