Obama Hops on LNG Train, but Is That Train Even Leaving?

New LNG leeway in the United States could help the cause, though any meaningful relief for Europe may arrive long after the immediate crisis is over.

Mar 27, 2014 at 12:33PM

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U.S. President Barack Obama said a trans-Atlantic trade deal under review could help break Russia's grip on the region's energy sector. New LNG leeway in the United States could help the cause, though any meaningful relief for Europe may arrive long after the immediate crisis is over.

"Once we have a trade agreement in place, export licenses for projects for liquefied natural gas destined to Europe would be much easier, something that is obviously relevant in today's geopolitical environment" the president said.

U.S. policymakers have said more energy exports could help European allies, Ukraine in particular, who are struggling to break Russia's grip on the region's energy sector. Most of Russia's gas bound for Europe runs through the Soviet-era gas transit network in Ukraine and recent turmoil has sparked concerns about the future of the region's energy security.

The United States doesn't have free trade agreements in the European Union, though the trans-Atlantic deal could change that.  EU Trade Commissioner Karel De Gucht said an EU trade deal would open an "ambitious chapter on energy" if embraced by both sides.

Concerns, however, over U.S. National Security Agency spying in Europe, coupled with issues over customs duties, have brought few developments on the trade deal in the past year.

Momentum, however, emerged this week when the U.S. Energy Department awarded an export license for the Jordan Cove energy project in Oregon. That means domestically produced LNG can leave the western port for countries without a free-trade agreement with the United States.

U.S. Sen. Lisa Murkowski, R-Alaska, ranking member of the Senate Energy Committee, said that deal, and the dozens of pending deals just like it, could bring relief to overseas allies.

"Given the situation in Ukraine, this license sends a positive signal to our allies and to energy markets that the United States is ready to join the growing global gas trade," she said.

Obama's comments during talks with European leaders could help allay some of the concerns about regional energy security given the new-found American leverage from shale. The White House said Wednesday that trade barriers could be eliminated for the sake of both sides of the Atlantic. A robust trade relationship would not only promote globally security, but advance energy security bilaterally, the president's office said.

Bipartisan leaders from the House and Senate this week heard testimony on how best to exploit the leverage brought on by the abundance of U.S. energy reserves. At home, policy concerns stem from environmentalists worried about the consequences of more hydraulic fracturing to what impact more exports would have on domestic energy prices. Overseas, meanwhile, it's unclear how ready Europe is to take on more LNG even if the remaining U.S. export licenses are expedited.

Sen. Mary Landrieu, D-La., chairwoman of the Senate Energy Committee, said the United States could position itself as a global energy superpower with more exports. Testifying before the committee, Edward Chow, a senior fellow for energy security at the Center for Strategic and International Studies, said it would be 2015 at the earliest before U.S. natural gas supplies make their way to Europe even under the most optimistic of scenarios

"Export of LNG is not a silver bullet for Europe," he said.

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Written by Daniel J. Graeber at Oilprice.com.

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