Loosening Russia's stranglehold on European natural gas [GGP]
The Senate is considering a bipartisan bill intended to hamper Russia’s stranglehold on the European natural gas market, but the Senate is going about this in all the wrong ways.
The legislation would sanction companies that participate in the construction of a new natural gas pipeline, for fear that further supply of fuel from Russia to Europe will give Russia too much influence over our NATO allies. This is the wrong approach, because it will have minimal impact on Russia while negatively impacting American companies doing business abroad. Instead, the United States should unleash our own immense natural gas capabilities to defeat Russian supplies in the free market.
Nord Stream II is an expansion of an existing pipeline that will bring natural gas from northwestern Russia, through the Baltic Sea, to northern Germany. This expansion will create a parallel pipeline that will increase Russia’s natural gas exports to Germany by about 1.9 trillion cubic feet per year. American politicians are correct to be wary of Russia increasing its power over Central Europe’s energy supply, and Nord Stream II appears to be a major victory for Russia.
However, U.S. sanctions are unnecessary and unwise. At this point, the pipeline is already 60 percent complete, so sanctions on the companies building the pipeline are unlikely to halt its eventual completion. It would be a waste to use American economic power to stop companies from working on the pipeline. Instead, we simply need to show Germany and its neighbors that there is a better, alternative supply of natural gas from the United States. To do this, the U.S. government must allow and help American gas exporters to grow, and it must advocate the benefits of using American natural gas to European customers.
Natural gas is shipped overseas in the form of liquified natural gas (LNG). Now that the process has been mastered and is safe, it presents tremendous export opportunities for U.S. fuel. Most of the natural gas produced in America is used domestically, but we are producing much more natural gas than we need. As a result, natural gas prices in the U.S. are low compared to the rest of the global market. U.S. liquefaction capacity is growing rapidly and is expected to reach 8.9 billion cubic feet per day by the end of the year, with facilities in Louisiana, Texas, Maryland and Georgia.
However, to truly compete with Russia, America’s liquefaction capacity must grow further, and the government can facilitate this by expediting the permitting and construction of liquefaction facilities and export terminals.
In addition, the U.S. must ensure the necessary pipelines to move natural gas, especially the natural gas produced in the northern United States. The natural gas must make its way from the fields to facilities in ports along the east coast and Gulf coast.
While activists sometimes oppose pipeline construction, natural gas pipelines are a safe way to transport one of the cleanest and most efficient fuels we have. And as we now see with Europe, natural gas pipelines in the U.S. are a geopolitical necessity, because they can help us combat Russia’s control of Europe’s energy security.
The U.S. government also has a role in facilitating relationships with European utility companies. In order to construct new LNG plants, owners need to have long-term contracts with customers in place. According to Reuters, there are over two-dozen LNG plants that are ready to start construction or expansion in the U.S. but are waiting for customers to sign deals. Many of these plants are hoping to secure customers in China, but have been derailed by the trade friction between the U.S. and China.
No one knows when the trade issues with China may be resolved, but, in the interim, the Department of Energy could help these companies secure commitments from customers in Europe. The Department of Energy should facilitate new contracts, especially in Europe, both for the economic gains and for the geopolitical benefits of limiting Russian influence.
In fact, the Department of Energy recently assisted in the coordination of an agreement for the American firm, Venture Global LNG, to supply 1.5 million metric tons of LNG to Polish Oil and Gas Company. At the signing earlier this month, Energy Secretary Rick Perry spoke about the strategic alliance between the two countries and about energy security. The deal was clearly presented as a counteraction against Russian influence. This model can and should be replicated.
Congress should be very concerned about the political impact of European dependence on Russian energy. But imposing sanctions on companies already building the Nord Stream II pipeline isn’t a worthwhile or effective solution. Lawmakers should abandon punitive measures that could incite retaliation against American companies operating abroad. Instead, they should focus on helping American natural gas compete with Russian natural gas in Europe. America’s LNG industry is ready. The government can help.
Ellen R. Wald
Ellen R. Wald, Ph.D., is a senior fellow at the Atlantic Council's Global Energy Center as well as the president of Transversal Consulting, a global energy and geopolitics consultancy. She is the author of “Saudi, Inc.,” a history of Aramco and how the Saudi royal family controls this multitrillion-dollar enterprise.
Originally published in The Hill
The statements, opinions and data contained in the content published in Global Gas Perspectives are solely those of the individual authors and contributors and not of the publisher and the editor(s) of Natural Gas World.