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The U.S. becomes the world leader in energy exports
Material posted: Publication date: 19-07-2013

United States of America is preparing to become a world exporter of gas, to get rid of energy dependence and strengthen its geopolitical leadership.

America and Russia began an "arms race" — this time in the market of energy trade. While the Kremlin, in addition to "Gazprom" creates sermonaudio under the brand of "Rosneft", which is actively buying producing assets, the US has been doing everything to weaken exporters of energy and, above all, the creation of excess offers in the gas market. To do this, the White house has already begun to grant permission to export liquefied natural gas that will be possible from 2015, when it will be put into operation the first LNG plant, writes Investgazeta.

And the specifics of the gas market encourages the country to unlock the exports, which are currently allowed only in the direction of States with which the U.S. has signed a free trade agreement. Those only fourteen, but among them only two are large consumers of gas — Korea and Singapore.

 

How to break plateau

Excess gas in the US is primarily due to the development of its extraction from unconventional sources, particularly shale gas. And, after three years of rapid growth in 2012, its production has stabilized at 250 billion cubic meters a year. At this rate of production at the closed North American market in April 2012, the U.S. gas price fell to $68 per thousand cubic meters, and now is about $92 for 1 thousand in cubic m. Such price barely kept the "shale" companies on the verge of profitability, because the cost of production of unconventional gas is higher than traditional, and some deposits can be up to $150 per thousand cubic meters.

The achievement of such a "plateau" of gas production is very pleased "Gazprom", which even began to say that the "shale bubble burst". However, this allegation is refuted even by the fact that the American mining companies continue to invest heavily in drilling new wells. Not the last role in this process is played by the prospects of exporting natural gas from North America.

Licenses for the export of natural gas gives the U.S. Department of energy. At the moment were only issued two such licences — company Cheniere Energy for Sabine Pass terminal with a capacity of 18 million tons of liquefied natural gas (almost 25 billion cubic meters) per year, and the Freeport LNG terminal the company is around 10 billion cubic meters per year. All in all, the United States Department of energy, submitted 18 bids for the construction of such facilities, the total work which can afford to export about 300 billion cubic meters of gas per year. In particular, it's a big terminal project Golden Pass from ExxonMobil and Qatar Petroleum — 21.5 billion cubic meters per year.

Therefore, in the period of 2015-2017 export volumes can be about 60 billion cubic meters per year with the further intensification increase, says Roman Roamed, expert on energy issues. This will provide an incentive for drilling new wells, because overseas gas is much more expensive than in the US. "In the next three years will retain the ability to increase production of shale gas to 60-80 billion cubic meters of gas per year. Unlocking will increase its export production by 10-20% at the initial stage with the possibility of more significant increase in the case of timely construction of necessary export capacity," says the analyst.

 

Include liberalizaton

In 2011, the natural gas markets rose on its head after the U.S. stopped buying liquefied natural gas. And although they were delivered from the sea only 2 billion cubic meters, however, this excess is twice pushed down the spot price of methane. Now we are talking about the appearance of an additional 60 billion cubic meters. That is, changes in the market will be even greater. Estimated Rukomet of the Novel, when the initial volume of gas exports to 60 billion cubic meters per year (about 20% of global annual LNG) supplies from the USA will reduce gas prices in Europe and Asia by 10-15%, and further — more, if exports would grow.

However, all the experts unanimously assert that after the removal of the legislative barrier to the export of gas, the U.S. government will not be able to specify where and at what price we have to export oil or gas. The possibility of geopolitical influence could be a key argument in this issue for Barack Obama, who has publicly supported the release.

Cheaper gas in key markets, combined with a possible start of export of shale oil in the longer term will help to support the economy friendly to U.S. European and Asian countries, mostly importers of fuel, and also to weaken Russia, middle East and Latin American countries-producers of energy resources. At the same time, however, benefit from lower prices will get economy of China, but it's additionally a strike on Iran, for which China still was one of the few unpretentious buyers of fuel.

In this case, America will have a much stronger influence on fluctuations in world energy prices. The U.S. will no longer depend on exports from countries in Latin America or the Middle East. And now Washington may be even favorable instability and civil war in these regions.

In General directions to American gas export two: the European and Asia Pacific markets. The most attractive rates in Asia, however, deliver the goods because most of the projects of LNG terminals are located in the Gulf of Mexico. "I think, the main focus will be Asia, but so far contracts have been signed with European firms. The direction of exports will depend not only on regional prices, but also on the cost of freight of tankers, for example, tariffs of the Panama canal", — commented the "invest Gazeta" Mikhail Korchemkin, CEO of American consulting company East European Gas Analysis.

But according to energy expert Alexander Narbut, to facilitate the entry of the US to Asia can swap schemes — that is, agreements about the exchange of gas. For example, the American gas will physically be shipped to Europe, but to sell his company from Qatar, New Zealand or Australia who may be interested in diversifying their consumers. And the U.S. will be selling their gas in the Pacific region.

So far, the largest contract Cheniere — 5.5 million tons per year — was signed with British Gas, the remaining volumes by 3.5 million tons per year — leaving the Spanish Gas Natural, India's Gail and South Korea's Kogas. Freeport has signed 20-year contracts for LNG production for two major customers Japan: Osaka Gas Co. and Chubu Electric Power Co. And each of these areas weakens the competitors of the United States. "Britain is not only one of the most liquid markets, it is also a place for struggle, in particular, with "Gazprom", — commented Oleksandr Narbut.

Export gas from the US is actively interested in Poland, building its LNG terminal, not to depend on Gazprom. Gas can be delivered even in Ukraine, says Roman Recomed. In particular, through the reverse from the territory of the EU if domestic LNG-terminal by that time and won't work. "Us LNG could be adopted at European LNG terminals, and then through a single European natural gas delivered to Ukraine", — said the expert.

 

The dollar will get support

Main opponents to unlock the export gas steel industrial company in the United States, in particular major gas consumers like Dow Chemical, Huntsman and Alcoa. Recently they got access to cheap fuel and because of this, started to return to North America for the production, once exported to third countries ("Investgazeta" №18, 2013). Consumers are afraid that now the domestic price of gas will rise. After all domestic and export contracts tied to the spot price in the main American hub — Henry Hub. As a result the industry again may start stagnating, and the US will turn into a typical extensive exporter of energy resources, dependent on external demand.

Their opponents in the American government claim that significant growth of quotations will not happen because the export capacity is limited and exports will be almost fully attributed to the increase in production volumes. Accordingly, the acceleration of economic growth will be achieved both through industrial production and by increasing production of gas. For example, according to the report, approved by the U.S. Department of energy in December 2012, the upper limit of the price growth after five years of continuous export growth of $40 per thousand cubic meters, which will increase the total price of 1 thousand cubic meters of gas to $150-160. "At the price the American chemical and other industrial corporations would continue to maintain a significant competitive advantage in world markets", — says Roman Recomed.

Accordingly, this trend will also affect the dollar. "In 2012 the share of oil imports in the overall trade deficit amounted to 57%. By 2020, the deficit could be reduced by half, which should lead to the strengthening of the US dollar in the range of 3-6%. Role of the U.S. dollar in world trade in this case will only increase", — says Igor Putilin, head of the analytical Department of the IG "ART Capital".

In other words, the unblocking of exports to the U.S. is virtually uncontested. Just as Gazprom and other countries-getters of energy should prepare to confront a new competitor, and not to appease the public statements about the shale bubble.

 

Source: Economic News

Tags: assessment , USA , resources , oil , gaz


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