Trump unsheathes his energy batt

The White House has stated that Donald Trump’s plan to enlarge oil, gas and coal production and exports will result in the United States’ energy dominance in the world. According to the source, the United States has 20% more oil than Saudi Arabia has and can export as much as 1,000,000 barrels a day. The country has enough gas for a century and its coal reserves are the biggest in the world.

TASS quotes U.S. Secretary of Energy Rick Perry as saying that Trump wants the United States to be energy dominant due to its vast natural resources.

Growing oil production in the United States is already having an effect on oil prices but Nigeria and Libya are also enlarging their outputs. Bloomberg quotes Pioneer CEO Scott Sheffield as saying that the companies developing the Permian Basin will be profitable even if oil prices drop to $25 per barrel.

According to Rosneft CEO Igor Sechin, this is true only for some U.S. projects. In its article in Izvestia newspaper, he says that half of the global oil production will be unprofitable if oil prices stay at $40 per barrel for a long time. “The oil projects in Brazil and Canada will no longer be profitable. Shale oil producers, except those developing the Permian Basin, will also face problems. Only producers in Russia, Saudi Arabia and in some projects in the United States and Iran will survive the low price. The others will have to quit,” Sechin says.

Gas is a different story. Last year, the Americans started exporting LNG from their only terminal on the Mexican Gulf shore and has so far exported 5bn c m. They are planning to enlarge the exports to 83bn c m till 2020. But their first year was not a success: the Europeans bought just 10% of their LNG (just 500mn c m), while from Gazprom they bought as much as 179bn c m. According to EIA, the key buyers of American LNG last year were South America (1.5bn c m) and Asia (1.55bn c m). The 150m c m exported to Poland and Lithuania were a symbolic supply. So, Russian pipeline gas remains the most competitive fuel in Europe.

“With current prices in Europe and the United States, U.S. LNG supplies will be unprofitable,” Deputy Director of the National Energy Security Fund Alexey Grivach says in an interview to EADaily.

According to Gazprom Export’s representative Mikhail Malgin, in 2017, LNG has had no significant effect on the European market.

Experts doubt that the Americans will be able to enlarge their LNG exports as liquefaction and transportation costs make them non-competitive as compared with Russian pipeline gas and LNG from other states.

Under such circumstances, the Americans’ only option is to use political pressure. While in China and India, they are promising bonuses for local infrastructure, in Europe, they are blocking any Russian pipeline projects. Their new warning that those will be join Gazprom’s Nord Stream 2 project will be punished has already caused contradictions with the Europeans. German Foreign Minister Sigmar Gabriel and Austrian Prime Minister Christian Kern have said that the Americans confuse sanctions with own economic interests. Their new sanctions are aimed at forcing Russian out of the European energy market and at enlarging the export of U.S. LNG to Europe. Angela Merkel is also concerned. Her Spokesman Steffen Seibert has said that anti-Russian sanctions must not affect the European economy.

According to Grivach, the United States is like a wolf who has thrown off its lamb’s skin and is now going to eat the 28 European pigs that have so far believed its tales about energy security, diversification and competition in Europe. “The Nord Stream 2 project will show if the Europeans are ready to protect their economic interests, their companies and their consumers or if they will throw them on the Americans’ mercy,” Grivach says.

Now the Americans are trying to convince the world that they are not going to use energy as an economic weapon. "An energy dominant America means self-reliant. It means a secure nation, free from the geopolitical turmoil of other nations who seek to use energy as an economic weapon," Rick Perry said a few days ago.

According to Senior analyst at the National Energy Security Fund Igor Yushkov, this may be true as the Americans’ goal is to gain dominance and profit.

“The Ukrainians’ hopes that the Americans will help them to stop Nord Stream 2 are groundless. The goal of the Americans is not to stop this very project but to force the Russians out of Europe and to cause gas shortages there. If this happens, prices will grow and they will be able to sell their LNG at profit. China and Japan are not as compliant as Europe is. So, there the Americans are using other mechanisms. They have no influence on Australia, who is also beginning to produce more LNG, but against Russia and Qatar, they have certain weapons. Recently, they imposed sanctions against the Yuzhno-Kirisnky field, the key source for the Sakhalin 3 project, and they have used the Saudis for pressuring Qatar. The next potential target is Algeria, who is a big gas exporter to Europe. In other words, the Americans will try to protect their sales markets from other suppliers, otherwise, they will not be able to ensu8re their energy dominance. The White House expects that by 2040, dominance on the gas market will produce a profit of $1.6tn but this profit will go to the U.S. economy only,” says Yushkov.