US urged to expand LNG exports soon to diversify overseas gas markets

The US should move more quickly to expand its liquefied natural gas exports not only to reap significant domestic energy and economic benefits, but also to improve its geopolitical influence overseas by helping countries diversify their gas supply sources, speakers recommended in two separate Washington forums.

“If ever there was a time for robust American leadership in Europe, and to increase our own ties that bind us closer to allies and partner countries, this is it. The problem is that, for now, Russia is ahead of us,” warned Center for European Policy Analysis Pres. Peter B. Doran.

Significantly greater US capacity to bring not just gas but also crude oil to global markets is exceptionally beneficial to US allies not just in Europe but also Asia and elsewhere, he told a Feb. 27 House Energy and Natural Resources Committee hearing.

“Together with supplies from the Middle East and other regions, Americans can take pride in the fact that we are helping to protect vulnerable consumers beyond our shores; and to increase their leverage in energy negotiations with Moscow,” Doran said.

The European Union mounted a groundbreaking response to construct a new network of regulatory and legal fortifications against monopolistic energy suppliers after Gazprom, Russia’s state-owned gas company, abruptly suspended shipments to Ukraine in 2008, he continued.

Russia’s response was to propose the Nord Stream 2 pipeline project across the Baltic Sea directly to Germany, Doran said in his written testimony to the committee’s Energy and Mineral Resources Subcommittee. “NS2 has a larger strategic purpose: to undercut the EU’s energy supply security, to close large parts of Europe to gas-on-gas competition, and to isolate and damage America’s strategic partner: Ukraine,” he declared.

Likely to intensify

While these outcomes present a mid- to long-term danger to American interests, they also are “a far more existential challenge to the immediate national interests of our allies and partner countries in Europe. We should take this challenge very seriously,” said Doran. “The contest over the future of NS2 is likely to intensify in 2018; and its consequences could reverberate for many years to come.”

A second witness noted that increased LNG exports could help narrow the US current account deficit; expand economic activity and employment in the gas extraction, processing, and related industries; and aid broader American foreign policy goals insofar as they contribute to a diverse, sustainable, and affordable energy mix in recipient markets.

“As such, increased LNG exports would indeed appear to strengthen the US position in global geopolitics,” David Livingston, Deputy Director for Climate & Advanced Energy at the Atlantic Council’s Global Energy Center, said in his written testimony.

“While the growth of US gas exports is poised to be a positive development for energy, economic, and climate security, this should be complemented by the strategies, investments, and policies necessary to ensure that gas maintains its relevance and value in the shift to more advanced and decarbonized energy systems in the US and elsewhere,” he added.

Tellurian Inc. Pres. Meg Gentile agreed that more LNG exports would advance US geopolitical interests and leadership by strengthening the energy security of its allies and improving their air quality. “The US is positioned to lead a global energy transformation as countries around the globe grapple with an array of energy modernization and climate challenges,” she told the subcommittee in her written testimony.

“These benefits can only be achieved through a continued partnership of all public and private constituents that support US LNG’s cost-competitiveness,” Gentile went on. “Other nations such as Russia and Qatar continue to grow their LNG export capacity, expanding their financial, geopolitical, and industrial influence. Timely infrastructure investment for pipelines and export facilities will be essential to support continued US leadership in the global LNG market.”

Building domestic infrastructure

A fourth witness – Cheniere Energy Inc. Senior Vice-Pres Christopher Smith – said that the LNG export company expects to invest approximately $30 billion in US energy infrastructure. “When all of our production capacity currently under construction is online, which is expected to be by 2020, we are projected to be a top-5 global LNG supplier alongside longtime industry participants such as Shell and Qatar Petroleum,” he said in his written testimony.

Smith said that Cheniere sells into a global market, and every one of its customers resides in a country that has committed to reducing emissions under the Paris climate agreement. “LNG is contributing to a global shift toward a lower-carbon energy mix that favors gas over coal and liquid fuels - reducing air pollution and carbon emissions,” he indicated. “Many countries – developed and developing, traditional LNG importers and emerging markets – are choosing gas as a lower-carbon, affordable and reliable option for their energy portfolios.”

As they testified, however, speakers at another event across town at the Center for Strategic and International Studies warned that inadequate pipeline transportation from the Permian and Bakken shales could restrict growth in tight oil production and create air emissions management problems from the associated gas (OGJ Online, Mar. 1, 2018).

The issue resurfaced a day later during a discussion about US LNG export potential where analysts from both the International Energy Agency and the US Energy Information Administration spoke. Katie Dyl, EIA’s top natural gas infrastructure analyst, said that growing demand for gas for manufacturing and power generation along the Gulf Coast is an ideal destination for that Permian Basin associated gas. While 2-4 pipelines have been proposed, none has moved very far, she added.

After becoming a net gas exporter in 2017, volumes could climb to 61% of total US energy output by 2050 under the reference case in EIA’s 2018 Annual Energy Outlook, Peter Gross, who leads EIA’s gas markets team, said at the Feb. 28 event hosted by Energy Allies and Our Energy Moment. It forecast more exports to Mexico through pipelines as demand grows, although Mexico’s own gas production is expected to grow and begin to displace imports from the US by the mid-2020s, he indicated.

Gross said that the number of exporting LNG facilities would double soon. A transport ship carrying the first cargo from Dominion Energy’s Cove Point liquefaction and tanker-loading installation near Lusby, Md., on the Chesapeake Bay departed on Mar. 2. Another five LNG export facilities could start operating before US shipments eventually plateau as they become less competitive by 2025-30, Gross said. “Economics will determine continued growth after 2021,” he suggested.

Contact Nick Snow at[email protected].