Ukraine Crisis: Will Obama Allow Shale Exports To Eastern Europe?

  • Date: 04/03/14
  • Timothy Gardner, Reuters

Supporters of U.S. energy exports have pounced on the crisis in Ukraine to press their case for faster approvals of liquid natural gas (LNG) projects and for an end to a decades-long ban on exports of most U.S. crude oil.

LNG supplies from the United States could help some Western European countries react to any Russian aggression in coming years, but the added transportation costs could make the fuel too expensive for others in Central Europe who are likely to remain dependent on their neighbors, energy experts said.

As Russian President Vladimir Putin’s forces tightened their grip on the Crimea peninsula in the Ukraine on Monday, the moves heightened concerns that the crisis could worsen and that Russia could slash its shipments of natural gas to Europe, about half of which are sent through Ukraine via pipeline.

The United States is the world’s top natural gas producer, due in recent years to hydraulic fracturing, known as fracking, and horizontal drilling. Surplus U.S. energy could go a long way to providing Europe an alternative to Russian supplies, supporters say.

“Russian oil companies and the Russian state would view U.S. energy exports as the chief competitor to one of their target customers - that being Europe,” said Joe McMonigle, who was chief of staff at the Department of Energy under former President George W. Bush.

The view that President Barack Obama could brandish energy exports as a tool to deflate Russian power over Europe is one espoused by many in U.S. foreign policy circles.

“The U.S. energy transformation of recent years gives us options we didn’t have several years ago. So we ought to explore using those options,” said Richard Haass, the president of the Council on Foreign Relations think tank.

Since 2011, the U.S. Department of Energy has conditionally approved six proposals to export LNG to countries with which the United States does not have free-trade agreements.

The approvals total some 8.5 billion cubic feet per day of LNG – more than the 6 bcf per day Russia exports through pipelines through the Ukraine to Europe. More than 20 U.S. projects await approvals.

But it is uncertain how much of that would be available to Europe as countries in Asia have entered contracts to buy much of it.

McMonigle and other supporters of unfettered exports have classified the DOE’s approval rate as a “go-slow” approach, especially given the lead time between approval and actual exports.

U.S. LNG exports are not expected to begin in full until at least 2017. In the meantime, supplies from other global exporters, including Australia, Canada, and Qatar, could rush in to help fill European demand.

And new supplies of U.S. light sweet crude may not be an ideal substitute for Russia’s heavy sour oil.

To be sure, there is no expectation that the Obama administration will quickly void the 40-year-old ban on oil exports based on one crisis. Some U.S. lawmakers are concerned that exporting crude oil would translate to higher gasoline prices at home.

Still, U.S. Energy Secretary Ernest Moniz caused a stir in December by saying the ban was outdated at a time the United States has become an energy producing power.

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