Editorial: Biden: his time? [NGW Magazine]
Next month’s US presidential elections could usher in a more co-operative era, if the Democrats’ lead in the polls translates into a big majority in government.
Already some 50mn voters have delivered their verdicts. This is reportedly a record number for this date and it testifies to the strength of feelings.
A Biden victory could bring the US back into a more active overseas role and undo the early fulfilment of some of the election promises that brought in Donald Trump. One such is the plan to withdraw from the Paris Agreement on climate. But in or out, this will have little bearing on how the individual US states pursue their own energy policies, many of the governors seeing generous windfarm permitting as a vote-winner.
Another agreement negotiated with the participation of the Barack Obama administration – Biden was vice-president then – was the treaty intended to contain Iran’s nuclear programme. This too got short shrift: an early casualty of the Trump presidency’s sanctions was French major Total’s agreement to develop part of the South Pars gas project. Reimposing sanctions on investment and cutting the country’s oil exports also made more room in the market for US oil.
Biden has said that if Iran were to return to strict compliance with the framework agreement that the US and European countries struck with Tehran, then Washington would rejoin the agreement as a starting point for follow-on negotiations. But he will not become president in fact until January 20.
But little diplomatic progress might be made in that direction as Iran itself is facing new elections next year. Conservatives in the Revolutionary Guard oppose any engagement with the US. China on the other hand is a different proposition and at time of press, Iran and China were working on long-term strategic alliance.
The only unambiguous diplomatic success the Trump administration has had overseas was in brokering peace deals between Israel and the UAE and Bahrain in September. But more significant than US intervention, Israeli-Arab relations have been improving because of growing regional concerns about Iran and its efforts to expand Shia influence and its backing of Houthi rebels in Yemen.
Warmer ties between Israel and its neighbours could have implications for the energy sector. Israel has started negotiating an end to a long-running maritime border dispute with Lebanon in the gas-rich east Mediterranean. It is also working with the UAE to build a pipeline to transport crude from the Red Sea to the Mediterranean.
More generally, US relations with Europe and with other Nato members would doubtless improve after their low point during Trump’s provocative presidency. Already aggressive, Washington’s hostility to Russia is also likely to intensify, given Biden’s remarks on the annexation of Crimea in 2014 and other, later events. It would be a real test of Biden’s diplomatic skills if he can keep Germany on side while making business even harder for Nord Stream 2 AG and its financing companies. But it is doubtful that sanctions and other US measures will derail it now.
At home, Biden’s hostile stance on hydraulic fracturing will not extend beyond federal land, owing to the risk of reducing the strategic and economic importance of oil and gas production and export. Not to mention the legal implications of such a ban. The shale revolution came from advances in fracking that is underpinning the current boom in petrochemicals and gas liquefaction along the Gulf coast and nearly all of it is on private land. Too many jobs and taxes depend on it continuing and even growing for years to come, if the trade deficit is to fall and his $2 trillion green plan is to get off the drawing board.
And while it would have no doubt proved a rallying-cry among a certain demographic, as recent events in California have shown, banning fracking more widely before there is a reliable and lower-carbon replacement for gas could have adverse consequences at home. Renewable energy is not an unmixed blessing for consumers.
But his ability to tighten the federal environmental regulations on oil and gas production, which have been loosened by Trump, and to enforce fines more effectively, will if anything improve the carbon footprint of US gas in fact, even if not sufficiently to satisfy the environmental lobby groups.
Besides, there are already signs that the gas industry is following developments abroad – such as the European Methane Strategy –quite closely and pre-emptively cleaning up its act.
Project developer NextDecade for example is planning to make its own LNG exports at Rio Grande with zero carbon emissions, eventually after a 90% initial cut. The announcement came around the time that Paris was reportedly using its shareholding in Engie to try to stop the signature of a provisional agreement to buy LNG from the project.
As fracking is banned in France, importing fracked gas would imply double standards – although the UK, which did not technically ban fracking at home but made it next to impossible with tight regulations, seems happy enough to waive that objection.
Trump’s famous ‘Make America Great Again’ slogan implies a white-hot industrial boom. It would theoretically help revive the rustbelt but also force home-made LNG – among other energy products – on unwilling customers. A case in point is China, running a large trade surplus and committing to buy US LNG for years in order to work it off.
But even US presidents cannot really influence global markets – in peace-time at least. Today’s low gas prices mean that NextDecade’s plant, and many others in that part of the world, are still a long way from becoming a reality.