Commentary: Step on the gas, Europeans plead
To hear Brenda Shaffer, a peripatetic academic specializing in European and Eurasian energy issues who is currently on a research fellowship at Georgetown University, natural gas is the predominant fuel of the 21st century, and it will be used copiously as time goes on. It will become the fuel of transportation as well as heating, manufacturing and electric generation.
But, at this point in time, moving natural gas from supplier to user presents special problems. It is not as easily transported as oil, and it is not as fungible.
Ideally, natural gas is transported by pipeline. Less desirably, it is converted into a liquid at -260 F and shipped around the world, where it has to be regassified. The freezing and the regassification processes for liquefied natural gas (LNG) require hugely expensive plants: over $5 billion at the originating end, and half that at the receiving end. This makes the gas expensive and its shipment inflexible.
Oil is put on tankers and unloaded wherever it is needed. LNG is shipped in special cryogenic tankers to dedicated terminals on long-term, take-or-pay contracts.
The United States is in the middle of a natural gas boom of unprecedented proportions, the result of extraordinary reserves in shale and the development of sophisticated hydraulic fracturing (fracking) technology linked to horizontal drilling. The pressure to export is on, balanced by environmental concerns and the fear of manufacturers that the price will rise.
In the current crisis over Ukraine, a question has arisen as to whether we can help our European allies by shipping them LNG. The answer is “yes and no.”
We do not have any terminals ready to begin exports; the first LNG exports will be loaded from the Sabine Pass terminal in Louisiana late next year and will be shipped to Asia. Nor does Europe have enough receiving terminals.
But the Europeans argue strongly that the mere presence of the United States as a player in the natural gas export business will have a huge impact on the world market, signaling that we are on the way and, hopefully, warning Russia that its captive gas customers in eastern and central Europe are looking at alternatives, and want to lift the yoke of dependence on Russia.
With the invasion of parts of Ukraine by Russian troops or their surrogates, gas has become a weapon of war. Russia’s giant, state-owned gas monopoly, Gazprom, has been an arbitrary supplier to Europe for years. Most troublesome is that the bulk of Europe’s gas supplies transit Ukraine, and that Gazprom has never behaved like anything but an arm of the Kremlin, dangerous and capricious.
In 2009, Gazprom cut off supplies over alleged contract and payment issues; in the cold of winter, the Russian bear was merciless. Also, it posts a different gas price for each customer, regardless the distance from Russia’s border or cost of delivery.
Desperately, Europe is looking for a defense against Russia freezing supply to Ukraine this winter and cutting off some countries, particularly those wholly dependent on Russian gas, like the Baltic states and Slovakia.
That is why the Visegrad Group, consisting of Poland, the Czech Republic and Slovakia, under the chairmanship of Hungary, has been intensively lobbying Congress to pass a bill that would simplify and speed up the licensing of export terminals in the United States. At present, seven terminals have provisional licenses from the Department of Energy, and Sabine Pass is fully licensed.
Visegrad members swarmed Capitol Hill this week, lobbying for the legislation. They were accompanied by officials from Bulgaria, Croatia, Latvia, Romania and Ukraine.
Their message was simple: the legislation would convince the Russians that they had to play by market rules because the entry of the United States as a player in the world of LNG — even if the gas cannot be offloaded in Europe in the near future — will send a strong market-stabilizing message.
Where possible, eastern and central European countries are improving their interconnections and adjusting their systems so they can reverse the flow of gas to help Ukraine in a dire emergency. But no one believes that it will make enough of a difference; besides, as most of that gas will have originated in Russia, some Russian contracts specify the use of the gas.
Almost all of the gas in the region is used for heating rather than electric generation or manufacturing. Central and eastern Europe is dreading winter and imploring the United States to send strong signals, even if it will be a long time before Pennsylvania or Ohio gas warms the people of Ukraine and its neighbors.