Driving off Russian Aggression with U.S. Natural Gas; Plentiful Exports Could Lessen Eastern Europe's Energy Dependency

Article excerpt


The power struggle between Russia and its Eastern European neighbors is playing out again on the heels of the European Union's Eastern Partnership summit. The United States can change the political dynamic between Russia and its Central and Eastern European neighbors. The possibility of U.S. liquefied natural gas (LNG) coming onto the world market could markedly change the balance of power in European energy markets and have significant strategic consequences.

Currently, Russia holds a tight grasp on Eastern European energy supplies, and it hasn't been shy about using that supply as a way of wielding additional leverage in its relations with its neighbors from the former Soviet Union and Warsaw Pact. An example of this is the deal struck between Russia and Ukraine over $15 billion in loans and natural-gas subsidies this week, which is a tactical victory for Russia just as thousands of Ukrainian protesters are asking their government to move closer to the European Union.

However, U.S. liquefied natural-gas exports to Europe could significantly undermine Russia's regional influence. Several countries neighboring the Baltic Sea, including Finland, Estonia, Latvia and Poland, are considering importing U.S. liquefied natural gas to increase supply and help bring down prices. Lithuania's planned terminal just received the green light from the European Union, with plans for it to be built by 2015. A pipeline will link the terminal to the country's natural-gas grid, and may serve as a conduit to neighboring states.

America's shale-gas revolution has opened up the possibility of large-scale U.S. liquefied natural-gas exports. Abundant U.S. natural-gas resources have put steady downward pressure on natural-gas prices in recent years. Indeed, the United States is poised to become the world's leading oil and natural-gas producer by 2015, according to the International Energy Agency.

While much U.S. liquefied natural gas will ship to Asian markets, several European nations are betting that increased global supply will be available for them, too. The United States could export up to 10 billion to 15 billion cubic meters of liquefied natural gas per year to Europe starting in 2020, according to an analysis by Wood Mackenzie.

Despite recent declarations from Russia's OAO Gazprom that it is unfazed by the prospect of U.S. liquefied natural-gas exports, this global natural-gas producer and major gas exporter is undoubtedly looking at developments in the United States with trepidation.

Russia, clearly threatened by that move, recently announced plans to construct its own LNG terminal in the Kaliningrad region, wedged between Poland and Lithuania, which would serve as a competitor to the Lithuanian import terminal. …