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Natural Gas: A Geo-Political Tool Or Modern Weapon?
The 2003 invasion of Iraq was a formidable maneuver that launched a 10+ year conflict. Today, President Obama is on the verge of another conflict in the Ukraine that involves Russia’s occupation of Crimea. Unlike Bush, however, Obama and Congress are eyeing natural gas exports as their weapon of choice to rein in Vladimir Putin from reclaiming territories along the perimeter of Russia. A geo-political tool to enable a global energy transformation or a modern weapon to settle disputes, natural gas has truly evolved.
Cleaner to burn but messy to legislate, natural gas from shale holds great promise for the US and the world. This relatively clean energy source has miraculously become the ideal bridge-fuel that society desperately needs to wean itself off its addiction to dirtier coal and oil. The rapid expansion of wells drilled since 2006 has given engineers plenty of valuable field data to improve upon yields and safety standards. From these field trials, amazing, breakthrough technologies have emerged.
Now into its eighth year, the US natural gas bonanza is no longer a nascent business for wild cat investors, its unprecedented success placing it front and center on the global stage. Presently at the helm, is the US who practically overnight, has gone from being a net importer that was often subjected to the whims of OPEC, to a net exporter. For a long time, Americans have always been taught to loathe their dependence on oil-rich countries. They often accused these oligarchs of using US oil payments to wage war against the same US freedom-fighting armies that protect their regions. With this recent change of the guards, however, Americans and their leaders are finding themselves in uncharted territory. The improved situation favors the US significantly but also leaves its leaders facing a tough dilemma.
To Prohibit or To Allow Exports
While the US can boast having the cheapest natural gas on the planet and the best technology to extract it, elected leaders in Congress must deal with two opposing issues: either to prohibit the export of US natural gas so manufacturers can create more American jobs or to allow exports to threatened US allies whose economies are constantly challenged by volatile energy prices. Already, the US’s offer to export natural gas to the Ukraine in response to Putin’s invasion of Crimea has prompted a strong reaction between both sides. Seen in this manner, one might contemplate the following question:
Could natural gas become the US enabler for global sustainable economic growth and world peace? …and if so, should it be implemented as a tool or a weapon?
There are three key benefits the US could gain from exporting its natural gas.
- First, the US could stabilize energy prices globally for a long time. Stable energy prices would help remove a fundamental uncertainty that concerns investors. Keeping investors happy is important since they are instrumental in relieving government coffers of additional financial burdens.
- A second benefit focuses on building global awareness on climate change. Just as the US has done to limit the use of their coal-fired power plants, other countries could be further encouraged to adopt similar environmentally friendly laws and best practices.
- Finally, for countries seeking a free trade agreement with the US, natural gas exports could earn valuable trade concessions that could lead to integrated capacity-building among government institutions, a critical component toward establishing sustainable democracies worldwide.
These lofty expectations may be too high for even the US, considering that every new encounter will introduce more complexities and unknowns. We can only hope that US elected officials will recognize this once in a millennium opportunity and use natural gas as a tool rather than a weapon to steer the world toward a sustainable energy transformation strategy that follows a common set of internationally vetted guidelines and best practices.
13 Comments on "Natural Gas: A Geo-Political Tool Or Modern Weapon?"
Joe Clarkson on Sat, 15th Mar 2014 12:09 am
“These lofty expectations” are at such an altitude that they exist in the realm of angels and heavenly miracles, far loftier even than pie in the sky. In other words, “Neva gonna happen”.
rockman on Sat, 15th Mar 2014 1:00 am
So much bullish*t IMHO I had to put on hip boots before responding. LOL.
First: “…the US who practically overnight, has gone from being a net importer…to a net exporter”. The US has been exporting a very small volume of our NG production for many decades. We continue to do almost exclusively via pipelines to Canada and México.
Next: “the US’s offer to export natural gas to the Ukraine in response to Putin’s invasion of Crimea has prompted a strong reaction between both sides”. There has been no “strong reaction” by anyone and for good reason: every $ of US LNG that can be shipped overseas for at least the next two years is already under contract to other buyers (mostly in Asia). New LNG trains and export terminals would have to be built to send any LNG to the Ukraine or anyone else. And that would require many tens of #billions and years.
“…the US could stabilize energy prices globally for a long time”. Laughable IMHO. Just pull up US NG prices for just the last ten years: prices up 400%+…down 70%…back up…back down…etc. The country that produces 1/5 of all the NG on the planet can’t stabilize prices within it’s own border.
“Just as the US has done to limit the use of their coal-fired power plants other countries could be further encouraged to adopt similar environmentally friendly laws and best practices.” US laws have done little to nothing to decrease coal burning in the country. Lower NG prices are the primary cause. OTOH the US has increased coal exports to those countries we will be encouraging less coal consumption? Like China to whom the US has increased coal exports over 500% in recent years? And much of this coal is being dug from US gov’t leases.
It’s so easy to build fantasy solutions when one isn’t encumbered by the facts. LOL.
Makati1 on Sat, 15th Mar 2014 1:45 am
Article’s author:
Tom Kadala is an internationally recognized writer, speaker, and facilitator well-versed in economics, engineering, technology, finance, and marketing. His views are regularly published by prominent industry publications and also distributed to an exclusive list of contacts, some of whom he has met personally during his 20+ year tenure as the founder & CEO of Alternative Technology Corporation (ATC, Inc.).
Another techie website with articles such as:
“U.S. Gas Boom As A Tool Against Russia Coercion”
LMAO at these techies in their dream world.
MSN fanboy on Sat, 15th Mar 2014 8:11 am
This article is bullshit…
I find it hard to believe humans such as Tom Kadala believe this.
His views are merely a extension of confirmation bias. He advertise concepts without understanding what he is advertising.
Davy, Hermann, MO on Sat, 15th Mar 2014 11:10 am
Well, his talk doesn’t matter because we have no capabilities to export gas now beyond one almost finished terminal which will not have enough capacity to matter. The other export terminals in the pipeline will quickly be shelved when the dynamics of the business become a reality to the “lobby of plenty” There is the above ground reality of a financial correction and the below ground reality of supply constraints already visible this winter. I will say these ideas are a very dangerous. They create market and policy distortions that could leave us with an unstable grid. On the other hand it may extend status quo BAU a little longer by maintaining confidence in our economic system.
rockman on Sat, 15th Mar 2014 12:31 pm
Davy – And to emphasize the earlier point: LNG facilities and export terminals are very big capex projects. As a rule they are not built “on spec”. Meaning that the investment isn’t made not only with GUARETEED buyers locked in at a fixed price and volume but also locking down the source and price of the NG source. For instance the contract between Chenier and the Brit utility receiving the LNG from Texas required the Brits to bond the future purchases which will be priced at Henry Hub prices + a built in operations cost + profit margin. Chenier also had to sign GUARENTEED future NG purchases from producers to satisfy their contract with the Brits.
Given the instability in the region it’s difficult to imagine US LNG being exported to the Ukraine even in several years. Other than the US gov’t who would GUARENTEE the profits to the investors needed to supply those many tens of $billions needed to expand the system to deliver a meaningful volume to anyone across the Big Pound?
IMHO All talk with virtually no possibility of significant action. I’m also sure that TPTB on all sides of the situation understand these simple facts. The chatter is just propaganda for the masses IMHO.
Davy, Hermann, MO on Sat, 15th Mar 2014 12:45 pm
Rock, as always, appreciate the deeper explanations.
Arthur on Sat, 15th Mar 2014 1:09 pm
Title says: Natural Gas: A Geo-Political Tool Or Modern Weapon?
Answer: it’s both and is going to be applied first and foremost against Europe, if Europe continues to let it’s interest be defined by the US in it’s struggle for expansion of it’s global supremacy. Russia and the Gulf states like Iran and Qatar are the only ones able to seriously use the gas weapon for political purposes.
Boat on Sat, 15th Mar 2014 2:19 pm
Funny why we would want to export to a country that doesn’t pay it’s Nat Gas bill.
Arthur on Sat, 15th Mar 2014 2:32 pm
To draw it into your solar system as yet another satellite.
Makati1 on Sun, 16th Mar 2014 8:32 am
True, Arthur, when you have spent $5B to overthrow the elected government, what is a few billion in free NG?
Davy, Hermann, MO on Sun, 16th Mar 2014 12:13 pm
ARTHUR SAID – it’s both and is going to be applied first and foremost against Europe, if Europe continues to let it’s interest be defined by the US in it’s struggle for expansion of it’s global supremacy.
Arthur it is plenty apparent that the new normal now is a multi-polar world. The US no longer has a dominant grip on the world. This is apparent in Syria, Libya, and across the globe. Yet, US influence is still very strong and will continue to be. It does not have an empire in a traditional physical sense but it does have an empire in an abstract sense. This empire is no longer what it used to be and is diminishing fast as the world has hyper-globalized. It is the nature of globalism to maximize comparative advantage and cross collateralization so to speak. Risk has been shifted around by the markets attempt at arbitrage of global markets. The big hedge is now global and it has created huge systematic risk instead of resilience. The whole system is wound tight ready to be sprung. Since this is global and all inclusive it is hard to see the forest for the trees. This is why confidence remains. If and when panic occurs all the pseudo wealth and connections will evaporate and there will be a run for security. The problem now is where is security? What has value and what doesn’t? There is not enough of a planet earth for all the pseudo wealth and money to find a physical home. Debt by nature is a current liability of a future return. So, it is nothing more than confidence in the future. Anyone that thinks the future growth will continue to fulfill these obligations is grossly deceived. So the US has an abstract empire that will evaporate just like the global system.
Arthur on Sun, 16th Mar 2014 5:18 pm
Agree, Davy. But certain circles in Washington are not yet entirely convinced that their time of global hegemony is over. They soon will be.