3 Apr 2014 More
US Natural Gas Not a Threat to Russiaposted by Brown Books @ 12:30 0 Comments
Natural Gas Not a Threat to
For those out there who believe the
can use its huge reserves of natural gas to sway Russian influence in the Ukraine,
they may just want to think again. The US
may very well have its supporters. On
top of that, it is expected to produce more than 2 tcf of natural gas this year
alone. But undercutting Russia’s
role in the region is easier said than done.
In the oil and gas business, nothing is immediate. For one thing, most US LNG contracts have already been promised to
Asia—for the next two
years. Besides that, US
gas supplies are a private business.
Unlike other countries where energy commodities are run by the
government, these private companies make their decisions based on price, supply
and demand, not geopolitical matters.
cannot force that upon private-sector companies," says Tim Boersma, fellow
at the Energy Security Initiative at the Brookings Institution. "There are
rare examples of the government forbidding companies to sell a product
somewhere, for example Iran, but to sell somewhere for arguably a lower price
than the company could get elsewhere" is unrealistic.”
Not just a matter of who, where, and when
Besides that, the
oil and gas revolution is only five years into its existence. In industry terms, that’s means it’s still in
its infancy. With not even 200 pipelines
in operation, US
infrastructure is woefully inadequate.
Case in point: Supplies of natural gas and propane could not even make
their way to the American Northeast this winter from the South where
record-cold temperatures created a shortage in supply. To think that America
can somehow divert massive resources to Europe is just a
Just look at the facts. According to the CIA World Factbook, the
exported 46 bcm of natural gas in 2012.
While that may sound like a lot, Qatar
exported 114 billion bcm, and Russia
200 bcm. While a promising future lies
ahead for the US,
the numbers show that it is still down the road apiece. Even now, there are 20 US
companies awaiting federal approval for LNG export services.
But the need for an all-out confrontation may not even be necessary. "You don't need to replace it all, you need to show
[ Ukraine] has
alternatives," says William Frohnhoefer, managing director of research
The Russian economy is dangerously dependent upon natural gas and oil exports for revenue. If
were to have an alternative source, this cut undercut the Russian hand
considerably. "If Ukraine
and other countries dependent on Russia
can wean themselves away, they will be emboldened to seek other sources, and
that would be the U.S.,"
Besides, the primary market for US companies is made-up of countries which have free-trade agreements. Right now, many European countries like the
do not have such agreements with the US.
Getting back to
Asia, right now more
than 80 percent of all contracts for US natural gas exports are committed by
contract to countries in the Pacific Rim. To pull out of those contracts could prove
not only expensive and time consuming, but impossible.
The problem with the
And there’s the mounting debt the
already has with Gazprom, the Russian state-run natural gas company. Ukraine
already owes Gazprom more than $2 billion and there’s no indication it can pay
it anytime soon. With the country in as
much debt as it is, which American company is going to be the first to take on
"The problem is
Ukraine doesn't have
the ability to pay for this gas," Misra said, adding that Kiev "has
been historically bad about paying gas debts. Even if we could ship this gas to
Ukraine, they don't
have the ability to pay for it,” says Kartik Misra, senior analyst at
Misra believes it won’t be until at least 2016 before any LNG exports can reach the
Ukraine. By then, the crisis will be long over.
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