and CHRISTINE BUURMA
Russias military intervention in Ukraine is bolstering
the case for easing restrictions on exports of the US boom in
natural gas production, according to energy analysts and
Russia, the worlds second-largest producer of natural
gas after the US, twice since 2006 has cut supplies of the
fuel to Ukraine, a conduit for energy to Europe
. Greater access to US
supplies would blunt the ability of Russia to use energy as a
weapon, according to supporters of lifting export curbs.
One immediate step the president can and should take is
to dramatically expedite the approval of US exports of
natural gas, House Speaker John Boehner, an Ohio
Republican, said Tuesday in a statement.
President Vladimir Putin said during a news conference that
Russia is canceling the price discount on natural gas for
Ukraine because it owes money to Russian gas giant OAO
Gazprom. At the same time, President Barack Obamas
administration is preparing a financial-assistance package
for Ukraine that would include $1 billion in loan guarantees
to help the nation offset reduced energy subsidies, according
to a White House statement.
US producers and industry groups see the regional tensions as
another reason to speed approval of pending LNG- export
Having more of our gas reach the market will reduce
volatility and provide diversity, Karen Harbert,
president of the US Chamber of Commerces 21st Century
Energy Institute, told reporters on a conference call. The
institute released a report citing Ukraine has having the
least energy security among the top 25 energy-consuming
American companies need the US Energy Departments
permission to export liquefied natural gas to countries that
lack a free-trade agreement with the US, such as those in the
European Union. LNG-export project
s also need to pass a
Federal Energy Regulatory Commission environment
al and safety review.
The Energy Department is weighing approval of at least 24
applications from companies including Cheniere Energy and
Kinder Morgan to export the liquefied version of the fuel in
tankers after approving six applications since 2010,
including five within the past year.
While Ukraine has been in a state of political unrest for
months, the situation became particularly tense over the
weekend after Putin sent troops to occupy Crimea, a peninsula
in southeastern Ukraine where pro-Russian sentiment is high.
American natural gas can ease the vulnerability of the
region to supply constraints, Dan Whitten, a spokesman
for Americas Natural Gas Alliance, a Washington-based
industry group, said in an e-mail. We hope and believe
that some of our abundant natural gas can make its way to our
friends in Europe to reduce this vulnerability.
The Obama administration is brokering a trade deal with the
28-nation European Union, though the talks are still in
relatively early stages, and negotiators dont expect a
deal until at least the end of the year. The US doesnt
have free- trade deals with Ukraine or Russia.
While the US didnt expedite liquefied natural gas
export permits after Japans nuclear disaster in 2011,
Russias intervention in Ukraine has already begun to
shape the energy and trade debate on Capitol Hill.
The Department of Energys approval process for
LNG exports is unnecessarily putting our allies at the mercy
of Vladimir Putin, House Energy and Commerce Committee
Chairman Fred Upton, a Michigan Republican, said in a
statement. Now is the time to send the signal to our
global allies that US natural gas will be an available and
viable alternative to their energy needs.
Senate Finance Committee Chairman Ron Wyden, an Oregon
Democrat, plans to ask Treasury Secretary Jacob J. Lew at a
panel hearing this week how US trade and investment can be
used to respond to Russias actions in Ukraine, Keith
Chu, a committee spokesman, said in an e-mail.
The Obama administration has halted bilateral trade and
investment talks with Russia, said Trevor Kincaid, a
spokesman for the US Trade Representatives Office. As
recently as December, Russian officials met with US Trade
Representative Michael Froman to discuss the possibility of
boosting trade between the two nations through by increasing
investment and standardizing regulations.
The US Commerce Department announced Monday it will lead a
trade mission to Moscow and St. Petersburg in September,
according to a notice in the Federal Register.
Even if the Energy Department were to approve the remaining
LNG-export applications immediately, the fuel wouldnt
be ready for market. Proposed terminals, which cost billions
of dollars to build, must also pass the Federal Energy
Regulatory Commissions environment
al and safety review.
The commission has approved just one of the LNG-export project
s reviewed by the Energy
Department since 2010. That facility, Chenieres Sabine
Pass terminal in Cameron Parish, Louisiana, wont be
operational until at least late 2015.
Russian gas supplies to Ukraine were disrupted temporarily in
2006 and 2009, and reduced in 2008, because of pricing and
debt disputes, cutting off deliveries to southeastern Europe
The US needs to get its LNG exports in place sooner
rather than later, Zach Allen, president of Pan
Eurasian Enterprises, a Raleigh, North Carolina-based tracker
of LNG cargoes, said in a phone interview. Any supply
source of LNG to increase the resilience of European markets
to short-term swings would be a good thing.
Prices of some LNG cargoes to Europe jumped above $30 per
million British thermal units as a result of the disruption
in 2009, Allen said. Besides physical supply disruptions, the
unrest in Ukraine could pose financial complications for the
gas trade if the US and its allies impose economic sanctions
on Russia, he said.
Russias Gazprom says it now provides about 30% of the
natural gas that powers electricity generators, furnaces and
factories across the region, and Europe buys about a third of
the 4.2 million bbl of crude that OAO Rosneft pumps daily.
If Russian gas supplies through Ukraine are shut for a
prolonged period of time, UK gas for delivery next
winter could jump above $13/MMBtu (80 pence), Francisco
Blanch, global head of commodity research at Bank of America
in New York, said in a note to clients Tuesday. Gas for
next-month delivery on ICE Futures Europe in London settled
A reduction in European and Ukrainian use of Russian natural
gas would harm Gazprom if the company cant find
Its really a question of whether Putin wants to
shoot Gazprom in the foot, Anders Aslund, a senior
fellow at the Peter G. Peterson Institute for International
Economics in Washington, said in a phone interview. He said
Russias sales to Europe have already declined by 30%
since 2009. In the meantime, Europe has increased its imports
of the fuel and increased storage, Aslund said.
The European Union has been diversifying its energy portfolio
to rely less on Russian natural gas for more than a decade,
Kevin Book, managing director of ClearView Energy Partners, a
Washington-based energy consultancy, said in an e-mail.
At the same time, US natural gas production has surged due to
advances in drilling techniques, including hydraulic
fracturing or fracking. Europe has already benefited from
diverted LNG cargoes that would have gone to the US and coal
exports from the US, Book said.
While there arent any short-term opportunities to
reduce the existing European reliance on Russian natural gas,
medium-term options include imports from the US and other
suppliers, he said.
European interest in US gas exports is likely to grow,
but economic considerations are likely to predominate,
Book said. US companies dont export out of the
kindness of their hearts, and Europe
an customers dont buy
with indifference to price.