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US gas export debate tips to geopolitical edge

05.07.2013  |  HP News Services

Keywords: [US gas exports] [shale gas] [Obama] [energy security]


WASHINGTON -- For more than a year, the debate over whether the US should export some of its natural-gas bonanza has centered on how exports could affect the US economy and manufacturing.

Increasingly, though, the geopolitical implications of exporting US gas are shaping the debate, with proponents optimistic that the potential dividends for US national security could tip the scales in their favor.

Proponents of US gas exports, including current and former lawmakers, say that exporting some US gas would bolster America's relations with allies in Europe and Asia, weaken the hold of major energy producers such as Russia and help further isolate Iran. Critics worry any strategic advantage would be outweighed by eroding the benefit cheap energy offers US industry at home.

Lawmakers on the House Energy and Commerce Committee's energy and power subcommittee will examine the "direct political implications" of the US gas boom at a hearing Tuesday.

"Opening trade in natural gas with our closest allies is clearly in the national security interest of the United States," said former Sen. Richard Lugar (R., Ind.), who championed the idea of exporting gas to North Atlantic Treaty Organization allies before leaving the Senate after the 2012 election.

The wrangling over how best to take advantage of US energy resources reflects a huge shift. Since the 1970s, US dependence on foreign energy suppliers constrained its foreign policy. Today, proponents of strategic exports believe the US could turn energy to its advantage.

The US gas boom is already having an impact on global energy relations, even before the US has exported any significant amount. Liquefied natural gas from the Middle East once meant for the US has been diverted to Europe instead, freeing countries there to renegotiate onerous gas contracts with Russia.

The prospect of significant volumes of US gas flowing onto the world market has US allies clamoring for access.

"New flow of LNG supply from the US to Asia is an essential game changer that would contribute to energy security as well as economic and geopolitical stability in Asia," said Toshimitsu Motegi, Japan's minister of economy, trade and industry, in a speech Friday in Washington, D.C. He said he hoped approval of gas exports to Japan would be the first order of business for Ernest Moniz, who is awaiting Senate confirmation as secretary of energy.

India's ambassador to the US has publicly pleaded for US gas as a way to get cleaner-burning fuel. Companies from the UK, Spain, South Korea and India have signed preliminary contracts to import gas from the US if the government approves export projects. Even countries such as Germany, which have traditionally relied on Russia for gas, have told US lawmakers they are interested in access.

Some 20 export projects are awaiting approval by the Department of Energy, which has to approve deals with countries with whom the US doesn't have a free-trade agreement. The Department of Energy hasn't given a decision date, but a department official told Congress in late April that decisions could come in a matter of weeks.

Some powerful groups are skeptical of the merits of sending big volumes of US gas overseas. Dow Chemical helped form a coalition of energy-intensive companies that say that shipping gas abroad could raise prices for gas at home, undermining a competitive advantage.

"We could make a very strong case that we could maintain or drive United States influence through an increasingly strong, robust US economy that is exporting more goods overseas" instead of shipping raw materials, said Kevin Kolevar, vice president for government affairs at Dow.

Proponents of gas as a geopolitical weapon have proposed legislation that would expedite export approvals for NATO allies and Japan. Exporting gas "is an opportunity to strengthen our economy and strengthen our hand in the world," said Rep. Tim Ryan (D., Ohio), a co-sponsor of a House bill.

However, legislation automatically granting export approval to certain countries could diminish the appeal of formal US trade agreements and might "remove valuable US leverage in international trade negotiations," said Michael Levi of the Council on Foreign Relations in House testimony last month.

Even China, whose demand for natural gas is expected to soar in coming decades, could be a market for U.S. gas exports, proponents say. That would help improve the US trade balance and help China address pollution caused in part by reliance on burning coal, they say.

"It would also put us in a better place when we go to do various negotiations with the Chinese, whether that's on issues such as North Korea or others," said Rep. Mike Pompeo (R., Kan.), a co-sponsor of the House legislation who said he would raise those issues at Tuesday's hearing.

Dow Jones newswires

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P. Thomas Cox, PhD


Keystone XL would divert Canadian and North Dakota oil from refineries in the Midwest to the Gulf Coast where it could be refined and exported. Many of these refineries are in Foreign Trade Zones where oil will be exported to international buyers without paying U.S. taxes.

Gulf Coast refineries are instituting expansions to accommodate exporting more products to higher paying foreign markets. USA prices are lower than most countries so USA oil companies have incentive to export rather than help America to be more competitive through lower energy prices. Why should we divert production for increased exports that will not benefit the heartland of America? The only way our extracted shale oil resources can lower gas prices to Middle America is to develop pipelines only to our inland waterways nearest port, not to the Gulf Coast refineries for export.

By lowering cost of oil transportation (shorter pipelines & inexpensive inland waterways by barge) cost of gas at heartland gas stations will be less to American consumers. Why pipe all the way to the Gulf coast then back to the Heartland increasing transportation cost? By increasing traffic on our inland waterways, we bring down waterway expenditure per ton traveled saving Federal dollars. The USA must consider its overall competitiveness, thus the most efficient transportation mix of shorter pipelines and inland water transportation will yield greater competitive advantage to the Heartland.

On the other hand, the greater risk is to extend Keystone XL through the Ogallala Aquifer that supplies water to 8-States that cities towns and irrigated agriculture depends on. Given the recent drought in the Midwest, without irrigation from this aquifer, food prices around the world would have skyrocketed since USA agriculture production makes up food deficits in many regions. Once contaminated, since it takes years for water emanating from the sand hills of Nebraska to migrate all the way south to the Texas panhandle, such contamination becomes a very long problem. Food security trumps energy security every time. Therefore we must have our priorities in order.

Additionally, Heartland States are being depopulated due to lack of opportunity. Why should we allow USA and International oil companies dictate further profits and growth for Louisiana and Texas, where opportunities already exist, since export industries are fully competitive internationally? It is time for the federal government to give permits for greater refinery capacity nearer the shale oil source thereby eliminating unnecessary movement to export oriented refineries on the Golf Coast. Additional transport savings and job creation, as outlined above, will help the Heartland States slow depopulation, which deters human capacity required for economic sustainability.

One last observation, it seems that BP and Shell, basically international oil corporations, are investing more in the USA than are EXXON

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