The natural gas boom in the U.S. has weakened Russia’s influence on European energy supplies and could keep Iran’s influence in check for years to come, according to a new study from the Baker Institute for Public Policy at Rice University.
The study, “Shale Gas and U.S. National Security,” says the surge of drilling in shale formations will have an impact on global supply for years to come and limit the need for the U.S. to import liquefied natural gas, or LNG, for at least 20 to 30 years.
That means more LNG shipments from the Middle East will be available for Europe, which has been beholden to Russia for a large portion of its gas, supplied by pipelines.
The study, funded by the U.S. Department of Energy, predicts that Russia’s share of the natural-gas market in Western Europe will drop to as little as 13 percent by 2040, down from 27 percent in 2009.
“By increasing alternative supplies to Europe in the form of liquefied natural gas (LNG) displaced from the U.S. market, the petro-power of Russia, Venezuela and Iran is faltering on the back of plentiful American natural gas supply,” writes Amy Myers Jaffe, a fellow at the Baker Institute and one of the authors of the study.
The study challenges the notion that the U.S. natural gas shale is a short-lived phenomenon. It concludes domestic production will more than quadruple by 2040, from 2010 levels, and account for more than half of all U.S. gas production by the 2030s.
“The idea that shale gas is a flash-in-the-pan is simply incorrect,” writes Kenneth Medlock III, another Baker Institute fellow and study co-author. “The geologic data on the shale resource is hard science and the innovations that have occurred in the field to make this resource accessible are nothing short of game changing.”
A decade ago, U.S. companies were making massive investments to build LNG-import terminals based on the assumption that domestic natural-gas production would continue to decline and the country would need to draw on supplies from Africa, Russia, the Middle East and Australia.
But U.S. supplies did a U-turn over the past five years as companies perfected the combination of horizontal drilling and hydraulic fracturing — a process of injection millions of gallons of water, sand and chemicals into the ground to crack open shale formations – to economically access more gas reserves.
U.S. gas production from shale has risen from virtually nothing in 2000 to more than 20 percent of domestic production today. That’s left the handful of new LNG import terminals – such as the Freeport LNG terminal southwest of Houston and Cheniere Energy’s Sabine Pass terminal in Louisiana – seeking permits and funding to build the capacity to export U.S. natural gas.
Help for Europe
By freeing up LNG shipments that might otherwise have been destined for U.S. consumption, Europe will be able to draw more heavily on Middle Eastern and other future LNG sources, cutting its dependence on Russian gas.
“A more diverse energy supply for Europe enhances U.S. interests by buttressing Europe’s abilities to resist Russian interference in European affairs and help border states in the Balkans and Eastern Europe assert greater foreign policy independence from Moscow,” Medlock writes.
Trouble for Iran
Cutting U.S. dependence on LNG imports would also delay for another 20 years the need for other countries to import LNG from Iran, the study says. That would diminish Iran’s economic influence and increase make it easier for the other countries to support U.S.-led sanctions against Iran for its nuclear weapons development.
“In addition, the long delay in the commerciality of Iranian gas means that Tehran will have trouble moving forward with the development of pipelines to India or Pakistan until at least the mid-2020s,” Medlock writes.
Shale gas production could also lower natural gas costs globally, making it less costly for the U.S. and other countries to meet long-term goals of reducing greenhouse gas emissions, the study says