European countries to US: Give us your gas

posted at 8:31 pm on March 10, 2014 by Erika Johnsen

In light of the recent crisis instigated by Russia, lawmakers have lately been pushing the Obama administration to expedite the more than twenty outstanding applications from energy companies for permission to export more natural gas into the world market — and a handful of central European countries are decidedly for it. They have recently developed infrastructure advancements that have made it possible for gas that normally flows through Ukraine to the EU to also flow in the other direction, meaning that the EU can and in fact has been shipping gas to the Ukraine, and these ambassadors are hoping that the U.S. will turn up the supply taps and help them expand that capability, via The Hill:

Central European countries are asking U.S. lawmakers to expedite natural gas exports in an effort to curb Russian President Vladimir Putin’s power.

Ambassadors from Hungary, Poland, the Czech Republic and Slovakia wrote to Speaker John Boehner (R-Ohio) and Senate Majority Leader Harry Reid (D-Nev.) urging congressional action to fast-track natural gas exports to allies in Central and Eastern Europe.

“As events in Ukraine bring back the memories of the Cold War, from which all of our countries suffered terribly, we are writing to highlight the overall importance of U.S. engagement in Central and Eastern Europe, and more specifically in the area of energy security and reliable supply of natural gas,” the letter states.

With recent infrastructural investments in Central and Eastern Europe, it became possible to build “reverse gas flows”, which have allowed sending gas from Poland and Hungary to Ukraine at a cheaper price than what Ukrainians had to pay, the letter sent to Boehner and Reid on Friday states.

There are a few pretty important caveats to the overall “export now!” strategy to blunt Russia’s influence: For one thing, even if the Obama administration were to green-light a bunch of export permits today, it would still take energy companies at least a couple of years to get all of the necessary infrastructure and logistics in place and actually get down to the business of exporting (and Europe doesn’t have all of the requisite infrastructure to receive all of that added gas supply yet, either). For another, the potential for higher profits elsewhere in the world mean that the bulk of our natural gas exports might not even make it to central Europe:

White House spokesman Josh Earnest told reporters on Air Force One that policy changes would not have an immediate effect and noted that natural gasstocks in Europe were above normal levels because of a mild winter.

“There is no indication currently that there’s much risk of a natural gas shortage in the region,” he said. …

Once U.S. LNG exports start they likely will first head to Japan, India and other Asian countries that have little access to gas sent via pipeline and are willing to pay more for the fuel than Europe does.

As more U.S. projects are approved and investors spend billions of dollars to build them, U.S. LNG could play a bigger role after 2017 in reducing global prices for the commodity, analysts said.

But that last sentence from Reuters there is the line that I would argue: Even if it won’t be enough to ease the pressure off of Ukraine in short order, that’s no excuse not to keep moving forward on approving more export terminals. The Obama administration has signaled that they’re at least not opposed to doing more on that front, but the current situation is a prime example of just how much freer trade across the globe can help to blunt any one nations’ influence while everyone gets to reap the higher economic benefits — and it’s better to stay ahead of the game then getting caught from behind because of political and bureaucratic holdups. I might add that European countries like Germany that have quixotically tried to ban or ignore hydraulic fracturing are probably rethinking those strategies right about now.


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