The U.S. shale oil and gas production surge and the resulting shift of the United States from a major importer to an exporter of oil and natural gas are well known, but there is disagreement about what this means for U.S. and global energy security.
Much of the current energy security focus is on Europe, because the recent Russian-Ukrainian disputes could disrupt natural gas flow to Europe this winter.
In June Russia halted gas deliveries to Ukraine while promising to continue to supply gas passing through Ukraine to Europe – but many European countries are concerned that disputes between Russia and Ukraine could lead to disruptions of Russian gas deliveries like those that happened in January 2009.
According to the U.S. Energy Information Administration (EIA), Europe, including all EU members plus Turkey, Norway, Switzerland and the non-EU Balkan states, consumed 18.7 trillion cubic feet (Tcf) of natural gas in 2013. (For comparison, the United States consumed 26 Tcf in 2013.)
Russia supplied 30 percent (5.7 Tcf) of this European et al volume, and 16 percent (3 Tcf) of the total natural gas consumed in Europe passed through Ukraine’s pipeline network.
In Washington, D.C., some legislators are advocating for accelerated government approvals of natural gas exports, while enthusiastically proclaiming a new global energy balance where the United States can assure that Europe will have adequate gas supplies to weather any natural gas curtailment by Russia.
Others oppose increased energy exports because they may increase prices for domestic consumers, degrade water quality or increase greenhouse gas emissions.
These disagreements mean that legislation to accelerate the federal permitting processes probably will not become law.
In addition, given the time required to build already-approved export facilities, liquefied natural gas (LNG) exports cannot get to Europe before this coming winter.
Some exemplary congressional positions include:
- House Energy and Commerce Committee Chairman Fred Upton (R-Mich.) has proposed an American energy policy that reflects the U.S. energy abundance, and would use energy as a diplomatic tool to provide energy to our allies to protect them from dependence on energy from Russia or the Middle East.
- Representative Cory Gardner (R-Colo.) is the author of H.R. 6, the Domestic Prosperity and Global Freedom Act. The bill, which passed the House but is unlikely to pass the Senate, would accelerate government approval of LNG export applications.
- Representatives Ed Markey (D-Maine) and Henry Waxman (D-Calif.) are among those opposing U.S. energy exports on the basis that they would raise prices for industrial and residential consumers.
A July 8 hearing of the Senate Committee on Foreign Relations, Subcommittee on European Affairs on European Energy Security, chaired by Sen. Chris Murphy (D-Conn.), provided testimony suggesting the topic is more complex.
♦ Edward Chow, of the Center for Strategic and International Studies, a Washington, D.C.-based bipartisan think tank, noted in his testimony that the post-2010 decrease in U.S. imports of LNG freed global supplies for Europe.
In response, Gasprom lowered natural gas prices to Europe, eventually contributing to western Europe purchasing more Russian natural gas and LNG import facilities operating at 25 percent of capacity.
Chow also noted that European gas supply and distribution sectors have little competition, which has discouraged a diverse and interconnected European energy sector that could better weather disruptions in Russian gas deliveries. He described the years of failure of Ukrainian government(s) to reform the country’s energy sector as contributing to the current natural gas crisis.
Neither Chow nor the other witnesses provide any quick solutions to a situation in which Ukrainians might go without needed natural gas this winter or use natural gas destined for eastern and central European customers.
♦ Andras Simonyi, at Johns Hopkins University Center for Transatlantic Relations, testified that for many years the European energy strategy has focused on increasing renewable energy production and reducing greenhouse gas emissions, but not on reducing consumption. Breakthrough technologies have not appeared to deliver the needed growth in renewable energy production; instead, reliance on Russian natural gas has grown.
Simonyi observes that it is clearly in the interests of the United States to work to make Europe less energy dependent on Russia, and recommends facilitating increased LNG exports to Europe.
♦ Brenda Shaffer of Georgetown University pointed out that the European Council recently released its draft Energy Security Strategy, which proposes cooperative efforts to correct the European energy imbalances: Some nations in eastern and southern Europe rely on Russia as their sole supplier, have limited natural gas storage capability or few pipeline interconnections with their neighbors.
Another source of future diversification could be from the eastern Mediterranean – if additional volumes of oil and natural gas are discovered in Israel, Cyprus and their neighbors.
♦ Amos Hochstein, of the State Department Bureau of Energy Resources European, testified that energy security is an integral part of U.S. national security and that the State Department has been actively engaged in advocating for diversification of European energy supplies, including the natural gas pipeline from Azerbaijan to southern Europe, which could begin delivery in 2019.
The current Washington, D.C. focus is on natural gas, but also worrying is the global oil balance.
EIA statistics show that global energy supply is adequately meeting current demand, despite supply disruptions in Iran, Nigeria, Iraq and Libya that are keeping about three million barrels of oil per day (bopd) off the market.
The huge growth in U.S. oil production – three million bopd since 2008 – and slow economic growth in many parts of the world have balanced current supply and demand.
However, unrest in the Middle East or Africa could easily reduce supplies below global demand.
In fact, the volume of oil that could quickly come on line in the event of a major energy emergency is quite small. The Oil and Gas Journal reports that Saudi Arabia is believed to have about 2.6 million barrels of oil per day (bopd) of surplus capacity – equivalent to about 3 percent of global demand.
(Surplus capacity in other OPEC countries and natural gas liquids, although not counted in these statistics can provide modest additional volumes.)