Natural gas export proponents push the Ukraine card

HOUSTON — Natural gas export supporters are calling on Congress to help speed up approvals of new export terminals, arguing that they could send a powerful message to Putin about the U.S. stepping up as Europe’s new energy buddy.

Russia’s invasion of Ukraine and its implications for Europe, which currently receives about half of its natural gas from Russia — much of it via pipelines that run through Ukraine, have opened debate about whether the Department of Energy should expedite approval of several proposed export terminals.

Supporters have argued that U.S. exports of liquefied natural gas would eventually supply Europe with a needed alternative to Russian gas, even though the terminals would not be up and running fast enough to alleviate current dependency.

“It doesn’t immediately alleviate the tensions in the Ukraine but it makes us more prepared for future crisis,” said Bill Cooper, president of the Center for Liquefied Natural Gas, a trade association of LNG producers and shippers, in a Monday morning press call. “We don’t know what the next crisis is going to be, whether it is political or a natural disaster. We need to be able to take advantage and provide needed energy supplies to our allies around the world.”

On Monday, the Energy Department approved a sixth terminal for LNG exports, the Jordan Cove LNG Terminal in Coos Bay, Ore. More than 20 other terminal applications are pending.

Three congressional committees are slated to discuss the proposal to fast track LNG exports this week.

Challenges ahead

Opponents of exports worry about the possible effect on electricity prices and the manufacturing sector, which has financially benefited for increased access to cheap U.S. natural gas.

But LNG exporters will also need to attract financing for the multibillion-dollar projects, which some experts say is proving challenging even for projects that have already received their initial permits.

“Regardless of your licensing arrangements, these are merchant facilities, and they are getting build at the top of the LNG cost curve. Everyone is struggling with this,” said Michelle Michot Foss, chief energy economist at the Bureau of Economic Geology at the University of Texas at Austin.

She noted that Cheniere Energy’s Sabine Pass project, which has been permitted and is currently under construction, has already spent more than $6 billion of its proposed budget.

“We have been talking with bankers, and only one of these facilities in lower 48 is likely to get financed,” said Michelle Foss, “The dilemma is that the LNG value chain is expensive. And you have to have a market in which gas is available for a better price than producers can get at home.”

Price wars

Russia, which relies on Europe as a key customer for its natural gas, could consider a range of options, including price wars, if its access to the market is challenged. Gazprom lost 8 percent of its export market share to Europe in 2012, and further shrinkage is likely on the way, according to Amy Myers Jaffee, Executive Director for Energy and Sustainability at the University of California, Davis.

Russia, in turn, has attempted to keep Ukraine and other European countries dependent on its natural gas resources through other methods, including the purchase of key European infrastructure.

“Russia has made no secret that it is trying to use debt or other means to buy up critical energy infrastructure assets in Eastern Europe, including in the Ukraine,” Myers Jaffee wrote in a recent FuelFix commentary on the Russian and Ukrainian energy. “One Gazprom ploy has been to solicit France’s Total, Norway’s Statoil, Italy’s ENI and Germany’s Wintershall with investment goodies to try to weaken European political resolve on borders, supply contracts, liberalization and overall security relations.”

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