Trump 'energy dominance' policy pits Washington against Moscow
Published by Joseph Green,
Reuters are reporting that, last July, US President Donald Trump stood beside his Polish counterpart, Andrzej Duda, in Warsaw and promised to help wean the nation off Russian energy imports. He offered US fuel as an alternative, “so that you can never be held hostage to a single supplier.”
Trump was tapping into longstanding European concerns about Russia’s ability to shut off natural gas supplies – which it has done in past pricing disputes. US lawmakers say Russia’s influence over energy has proven effective in silencing critics of its human rights abuses.
Six months after Trump’s trip, Poland has contracted for imports of US LNG, crude oil, and coal, and announced it will not renew a gas supply deal with Russia’s state-owned Gazprom when it expires in 2022 – halting an exclusive and troubled relationship dating to 1944.
The episode exemplifies a key goal of Trump’s 'energy dominance' agenda – using rising energy exports to bolster Washington’s geopolitical influence.
The policy also seeks to boost domestic production through rollbacks of environmental regulations and expanded energy leasing in federal territories, but those efforts have so far had little impact.
Trump nonetheless inherited a booming oil and gas industry that has given his administration more international clout in energy markets than any White House has enjoyed in decades.
US oil output has risen to more than 10 million bpd for the first time since 1970 thanks to improved drilling technology that dates back years. Natural gas output has also soared, making America the world’s top producer of the fuel.
It remains to be seen how successfully the administration will play its strong hand. Obstacles include environmental opposition to new pipelines and other energy projects at home, competition from other big exporters abroad, and potential trade disputes.
But early signs are promising. Lithuania, Ukraine, China, Japan, South Korea and Vietnam are among the more than 30 countries that have recently cut US energy supply deals over the past two years – many for the first time.
The administration also hopes to use energy exports to reduce yawning trade deficits with partners – particularly with China, which last year exported goods to the US worth US$347 billion more than it imported.
China has become a top customer of US LNG and is now the second-largest buyer of US crude behind Canada. China’s state oil company signed a preliminary agreement in November to invest in a US$43 billion LNG export facility in Alaska, which would compete with Russia’s Yamal LNG export terminal in the Arctic.
While US exports are soaring, its imports are falling – reducing its economic and political dependence on oil-producing nations in the Middle East and elsewhere.
Since 2005, US net petroleum imports have plunged to just 4 million bpd, from 12.5 million bpd, with the share coming from OPEC falling to about a third from more than half.
The now-repealed US oil export ban dated back to an era of feared fuel shortages after Arab members of OPEC imposed an embargo against the US in retaliation for US support of the Israeli military.
Former Soviet bloc nation Lithuania received its first cargo of US LNG in August – an event Lithuania’s foreign affairs minister called “crucially important for the whole region.”
Ukraine has borne the brunt of Russia’s near-monopoly of gas supplies to Europe over the years. State energy company Gazprom has cut off gas to Ukraine, and onward to Western Europe, during price disputes in deep winter, and imposed bans on customers reselling gas to other countries.
The Kremlin and Gazprom have said those disputes were driven by commercial, not political, matters. Gazprom’s deputy CEO Alexander Medvedev downplayed the impact of US energy shipments on the region.
Russia aims to solidify business ties in Western Europe with a proposed gas pipeline under the Baltic Sea to Germany – the Nord Stream 2. US Secretary of State Rex Tillerson said in Warsaw on 27 January that Washington views the project as a threat to Europe’s energy security.
In addition, Russia may have enough spare capacity to threaten US drilling companies with a price war if American policy irks the country enough.
Past price wars with OPEC nations have triggered bankruptcies in the US, including in 2014 when Saudi Arabia opened the spigots. But OPEC eventually relented as oil prices tanked, trimming output and paving the way for a US recovery.
Even if the US struggles to win market share in its competition with cheaper piped gas from Russia, the availability of an alternative will blunt the impact if Russia cuts supplies off again, and reduce its ability to dictate long-term restrictive contracts with its customers.
Read the article online at: https://www.lngindustry.com/liquefaction/09022018/trump-energy-dominance-policy-pits-washington-against-moscow/
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