America’s second shipment of liquefied natural gas (LNG) left Tuesday for Europe, threatening Russia’s lucrative control over natural gas on the continent.
The rise of America as a major exporter of natural gas is an enormous change in way the world gets its electricity and heat, allowing European and Asian countries to have a much broader choice of natural gas suppliers. Though Russian state-owned media deny it, most experts agree that merely selling US natural gas to other countries will seriously undermine Russia’s lucrative energy hegemony.
“According the Platts reporting, a cargo of US LNG exports is due to arrive in Spain, only the second to arrive in Europe since February when US LNG exports began,” Richard D. Kauzlarich, former U.S. ambassador to Azerbaijan and Bosnia, told The Daily Caller News Foundation.
“It is too soon to know whether these limited exports to a specific market signal a broader penetration of the European market,” he said. “Much will depend on the adequacies of the re-gasification infrastructure and storage capacity elsewhere in the European market, and the reaction of Russian and Norwegian producers who will not willingly give up market share to US LNG exports.”
The export of American LNG to Europe has the potential to reduce Russia’s ability to use natural gas 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 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.
“Markets matter more than politics in determining the degree to which US LNG is competitive in an already saturated European market for gas,” Kauzlarich continued. “With the expanded Panama Canal offering cheaper and faster shipping of LNG to Asia, much will depend on which market offers the highest return to the US exporters.We won’t know that for some time. The fact that the US is exporting LNG in either direction, however, will increase US geopolitical clout.”
The Obama administration opposed natural gas exports on environmental grounds before reversing position in late 2014 after the Russian occupation of Crimea.
America is currently building five new LNG export terminals which will be capable of exporting roughly 10 billion cubic feet per day, making the U.S. one of the world’s largest exporters of natural gas. The Department of Energy (DOE) gave final approval for a Palm Beach, Fla., natural gas export terminal to send US LNG abroad in October.
Selling LNG to Europe would have minimal costs and huge economic benefits, according to a study published in December by the 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. 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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