U.S. Energy's Global Impacts

Mark Green
Posted October 3, 2013

More from this week’s North American Gas Forum conference in Washington – this one a discussion of the U.S. opportunity capitalize on global demand for natural gas and the potential geopolitical impacts of an energy-resurgent U.S.

Majed Limam of Poten & Partners said natural gas demand from the Asia Pacific market (see chart) and other markets are key to would-be suppliers. 

Yet global demand for liquefied natural gas (LNG) isn’t infinite, Limam said. Those who move quickly to secure market share will be rewarded:

“The U.S. is not the only LNG play in the world. There are opportunities out there, but you have to move quickly – including developers, the regulatory – in order to grab market share. It’s not just sitting there waiting for U.S. LNG. There are many, many other parts of the world that will compete for that premium demand.”

Of course, market demand determines the need for LNG supply – and the need for LNG export facilities. The United States is the world’s leading producer of natural gas, but it is not a leading natural gas exporter. If that situation continues, the U.S. could squander the opportunity to see its natural gas wealth generate significant economic and trade benefits through LNG exports, as projected in studies by ICF and NERA.

Although the Energy Department has approved four applications to export LNG to non-free trade agreement nations over the past two and a half years, the list of pending applications numbers 21, covering 18 discrete facilities. The point Limam and other experts make is that the competition to meet global LNG demand is under way – and that those who hesitate may be lost. Limam:

“There are medium-term opportunities for sellers. … You can bank on the demand being there, but not an infinite number. … The U.S. has maybe a cost-competitive advantage. A lot of the Asian buyers are interested in the U.S. because it diversifies their supply sources, there’s access in some cases to upstream shale gas, technology …  and the U.S. and Canada are suppliers they feel comfortable with, particularly Canada with its export history. … So all good news at that end, but the demand is finite.”

Jason Bordoff, director of Columbia University’s Center on Global Energy Policy, said increased U.S. natural gas production could reduce Russian leverage in the global gas market, increase access to supply for energy-poor allies like Japan, facilitate a coal-to-gas switch in Chinese power generation and continue to help reduce greenhouse gas emissions:

“The kind of quantities of LNG that we’re talking about … can have a transformational impact on the global gas market. It can change the way gas is priced. … The impact of U.S. exports will be significant in a huge number of ways.”

The surge in U.S. energy production – much of it from unconventional sources through the use of hydraulic fracturing and horizontal drilling – already is having geopolitical effect. Bordoff:

“The impact of a sharp reduction in U.S. oil imports and a sharp increase in U.S. production is really quite significant from a geostrategic standpoint. We’re not going to suddenly stop caring about the Middle East … but to think about we have two and a half million barrels a day of global supply right now that is disrupted from Libya to Iran to Nigeria. We have a very historically low level of spare capacity right now in terms of what Saudi Arabia and a few others can bring to the market quickly. Think about what the global market would look like without the extra two and a half million barrels a day that the U.S. alone brought onto the global market in just the last three years.”

The U.S. energy renaissance presents unique opportunities for economic growth, job creation, trade, energy security and more. With increased access to U.S. reserves, a common-sense regulatory approach and policies that encourage energy investment, America’s oil and natural gas industry can develop more energy here at home and help make our country stronger.