Russia's invasion of the Crimean peninsula and the growing fear that Moscow will use its energy resources to impose its conditions on Ukraine and the European Union have caused a wave of statements from the US that their own energy resources will be used to save Europe. The statement of Gazprom, in which the company threatened to cut off gas supplies to Ukraine, whose debts to the Russian exporter amounted to almost $ 2 billion, added fuel to the fire; In addition, Ukraine violates the payment schedule.
In the situation around the US energy supply, there is one small problem: in the US there is one type of energy that can help Europe in the short term, but this is not natural gas. The United States will not be able to export significant amounts of liquefied natural gas (LNG) for many years, since most of the gas has already been contracted by consumers under signed long-term contracts; In addition, Europe will have to compete with Asia, whose countries are willing to pay much higher prices for the remaining insignificant amounts.
This nuance can be news for the Congress, whose high-ranking members declare that gas supplies to Ukraine will easily stimulate the shaky economy of this country, as well as provide support to its pro-Western government. In his article in the Wall Street Journal, the speaker of the House of Representatives and Ohio Republican from the State of Ohio called on the US to “release” its “natural energy” as weapons against Russian aggressor Vladimir Putin by speeding up the process of issuing LNG export licenses to gas terminals. A number of congressmen are introducing more and more new bills aimed at speeding up the procedure for exporting gas from the US: for example, March 12, Republican from Ohio, Michael Turner, introduced a bill allowing US gas to be exported to all WTO members. On the same day, the ambassadors of Hungary, Poland, the Czech Republic and Slovakia sent letters to the Speaker of the House of Representatives, as well as to the leader of the Senate Majority Democrat from Nevada, to simplify the procedure for exporting gas to save their European allies.
Former Barack Obama’s energy adviser Jason Bordoff said on the pages of the online version of Foreign Policy magazine that the US can use its gas advantage against Russia. The US Strategic Research Institute Heritage Foundation insists that American gas be the backbone of US allies in the Baltic States. The New York Times and the Wall Street Journal wrote about the hysteria in Washington about the transformation of huge reserves of natural gas into a geopolitical asset. This is facilitated by the call of the State Department to use natural gas as an instrument of diplomacy. The main message of the lobbyists: having huge reserves of natural gas, the United States must “pull all the dogs”, as in the old days, to Russia.
At the same time, all the above-mentioned calls overlook one fundamental detail: a simple simplification of the export of American gas will not be able to automatically assist the “friends” in distress, especially if we consider that Asian importers of American gas are ready and able to pay much higher prices for supplies, than anyone. Michael Levy, energy expert of the US Council on Foreign Relations, noted in his commentary to Foreign Policy magazine that he could issue as many permits and licenses as he wanted, but gas operators would not want to lose profits only so that the United States could achieve its geopolitical goals. In his blog on the website of the US Council on Foreign Relations 5, March Levy also wrote about the limited use of American gas as a diplomatic tool.
These statements do not mean that energy exports cannot be used by the United States in the long term. Over the past 5 years, the shale gas revolution using hydraulic shock technology has given access to huge gas reserves, which has already changed the structure of the US energy sector, revived some of the manufacturing industries, and also provided a chance to use gas as an alternative fuel for motor vehicles. Naturally, the export of a part of the gas produced in the United States and, subsequently, of oil, will have a positive effect on the country's trade balance and will throw additional volume of liquidity to world markets. Increasing the number of oil and gas suppliers will reduce the likelihood of supply disruptions and protect market participants from price hikes. The increase in export volumes on the world market will make it possible to realize some foreign policy goals: for example, new sanctions against the oil industry of Iran will cost “less blood”. However, this does not mean that now, when Russia hints at the cessation of gas supplies to Ukraine, as well as the rise in gas prices for Europe, the United States is able to use its gas supplies as a lifeline for Ukraine and Europe. The first thing to understand is that the construction of special gas liquefaction terminals and its injection into special LNG tankers requires years and billions of investments. The US Department of Energy approved only 6 out of more than 30 applications for the construction of LNG terminals for gas supplies to countries with which the US has not entered into free trade agreements. The Bloomberg news agency reported that, according to US Secretary of Energy Ernest Moniz, who spoke at a conference in Houston, Texas, in the first days of March, the ministry actually approved only one license, which means that the gas will not be exported anytime soon. will do. Only one terminal of the company Cheniere Energy, located in Sabine Pass, Louisiana, went through all licensing procedures. The company has received permission and intends to start exporting LNG at the end of 2015. The rest of the LNG terminals that are waiting for their turn, if they are put into operation, then not earlier than 2018.
In theory, the volume of gas that can be supplied through LNG terminals awaiting approval of their applications is enough to satisfy 2 / 3 in Europe’s annual gas consumption. Even if only a few LNG terminals will be built in the end, the likely export volumes will theoretically be able to provide Europe with a significant amount of gas that it consumes annually (gas consumption by European countries is approximately 18 trillion mNUMX / year). In practice, the situation is as follows: before allocating funds for the construction of modern LNG terminals, LNG suppliers must conclude long-term gas supply contracts with existing consumers. Those terminals that have already received permission from the Department of Energy have contracts for the supply of LNG to energy companies in Japan, South Korea and India. For example, Japanese companies have signed contracts for the supply of LNG with 3 from 4 LNG terminals, which have already received permission from the US Department of Energy. Of the European companies, only a few players signed long-term contracts for the supply of American LNG. At the same time, of all contracts signed by European companies, the share of contracts involving so-called “Portfolio gas sales”, in which the buyer can receive gas as needed (which is what Europe needs to replace gas supplies from Russia) is negligible. In other words, even when LNG terminals in the United States are commissioned and reach maximum capacity (this happens in 6 of the year), most of the total LNG volumes will be contracted by companies from Asia.
Another obstacle [to the American LNG on the way to Europe (note lane)] is the price factor. Until recently, natural gas in the United States was a cheap energy source, but not because of a revolution in hydraulic hammer technology, but because of an oversupply in the energy market. Over the past few years, the cost of gas at the Henry Hub gas terminal [the main pricing platform on the US gas market (lane note)] has varied within 2 - 4 dollars per 1 million British thermal units. However, due to severe frosts and rising gas consumption, prices rose sharply: in the first week of March, the price at the Henry Hub terminal was 7 dollars for 1 million British thermal units, which was the highest price. This is important for export, because gas must be liquefied and transported over a distance of thousands of kilometers, which increases its market price. Logistics costs for supplying gas to Europe are expected to increase the price by approximately 4 dollars, while similar costs for supplying gas to Asia will increase the price of 6 dollars (due to the greater distance). In addition, since gas becomes more expensive on the domestic market, it becomes more difficult to allocate gas for export. Most European countries buy Russian gas at a price of 10-11 dollars for 1 million British thermal units, which already creates a lot of competition for American LNG. LNG is supplied to countries in Asia at higher prices than to other regions - at 15 dollars for 1 million British thermal units. This price provides American gas with market positions, since Japan needs gas to replace the affected nuclear power plants, while China hopes to reduce the environmental burden created by the local energy sector with gas. It also means that American LNG exporters will look primarily towards consumers in Asia who are ready to pay a higher price, and not towards consumers in Europe who are not willing to pay a higher price.
Nevertheless, in the US arsenal there is still one “energy weapon” that can help Europe solve some of its problems, but which the Obama administration is not in a hurry to use and which horrifies European “green” - cheap coal available in the US in huge quantities. In recent years, because of the gas revolution in the United States, "King Coal" [as American industry analysts call coal because of its widespread use (lane note)] has been removed from its pedestal in the US energy market. In this regard, the natural substitute for the domestic market is the external one. In 2012, the United States set a world record for coal exports, and despite a clear decline in 2013, the US coal industry showed one of the best results in the whole world. history coal exports.
Despite all the talk about the "coal starvation" in China, Europe was and remains the main importer of American coal. Unlike LNG terminals, coal terminals operate at full capacity; in contrast to the rather complicated regulatory mechanism in the field of gas export, coal is sold freely; Europeans do not need to build expensive new terminals to import coal. There is only one problem: coal, unlike gas, causes significantly more harm to the environment, because during combustion it emits 2 times more carbon dioxide. Europe over the years sought to reduce emissions of carbon dioxide into the atmosphere in order to make the energy industry environmentally friendly, even though due to the expensive natural gas of its own production and cheap American coal, these attempts have been difficult for the last few years.
However, as Europe fights against such challenges as energy security in the long term, global warming and the fear of losing competitiveness, while at the same time wanting to eliminate the threat of a sudden failure of energy supplies from Russia in the short term, coal can become the US export energy source, which will restore the balance.