Ukraine Turmoil Will Weigh in LNG Export Decisions: MonizJim Snyder and Julianna Goldman
The Obama administration will consider the turmoil in Ukraine as it weighs whether to approve additional exports of natural gas to blunt Russia’s dominance as an energy supplier.
Geopolitics and the effect on global markets are issues the department considers in reviewing applications from companies to build natural gas export terminals, Energy Secretary Ernest Moniz said today.
“Maybe we will give some additional weight to the geopolitical criterion going forward,” Moniz said at a Bloomberg Government breakfast with reporters and editors in Washington. “But we will never eliminate for sure the issue of implications for the domestic market.”
The Energy Department is responsible for evaluating natural gas exports to countries that don’t have free-trade agreements with the U.S., a list that includes the entire 28-member European Union and Japan. Exports to countries with free-trade deals are approved after a nominal evaluation.
European Union nations get about 30 percent of their natural gas from Russia. Moniz said “gas and oil flows have not been interrupted” in the weeks since Russia moved to annex the Ukraine’s Crimea peninsula.
“The whole relationship with Russia is something that we will see evolve over these next weeks and months,” Moniz said. “It’s obvious that the relationship is under strain.”
The Energy Department is the lead U.S. agency responsible for implementing a U.S.-Russia “swords-into-plowshares” program to convert 68 tons of weapons grade plutonium into fuel for power plants.
He said so far security agreements with Russia haven’t been affected by its annexation of Crimea.
“On both energy and our nuclear security, we think it’s very important to maintain the relationship” with Russia, Moniz said. “On the other hand, we will have to see how that evolves.”
Moniz said his department’s review of Keystone is in progress. The $5.4 billion pipeline to connect Alberta’s oil sands with U.S. refiners has become for environmental groups a symbol of the administration’s commitment to reducing the threat of climate change.
While the State Department is leading the review because Keystone would cross an international border, the Energy Department is one of eight agencies that play an advisory role. Its review focuses on whether Keystone will relieve constraints in the U.S. energy distribution network, Moniz said. “We’re actively working on that,” he said.
Approving natural gas exports is among the most sensitive political issues Moniz’s department faces. The drive by energy companies to step up overseas sales is resisted by some lawmakers and manufacturers like Dow Chemical Co. that worry unfettered exports will raise domestic prices.
Moniz said costs remain a key component of the department’s review. He also said U.S. energy security concerns “don’t end at our borders.”
As House Republicans and some Senate Democrats push bills to expedite approval of the export terminals, Moniz said there aren’t many quick fixes.
Cheniere Energy Inc.’s Sabine Pass facility in Louisiana could start exporting gas by the end of next year, Moniz said. Due to the time it takes to construct the facilities, more gas won’t start flowing from other projects until probably 2018 at the earliest, he said.
“Physically there is no way of picking up the pace,” on exporting natural gas, Moniz said.
The department has conditionally approved five other applications from companies including Dominion Resources Inc. to build multibillion dollar terminals to export natural gas cooled to a liquid for shipment on ocean tankers.
The projects, which include Dominion’s Cove Point facility in Maryland, face additional environmental and safety reviews.
If all six facilities become operational, they could export a total of 8.7 billion cubic feet a day. That level would make the U.S. the largest exporter of gas today, Moniz said. The U.S. uses more than 60 billion cubic feet a day, he said.
“It’s not like we’re just nibbling around the edges,” Moniz said.
The situation in Russia so far doesn’t warrant the release of additional oil from the U.S. Strategic Petroleum Reserve.
“I don’t think anyone is saying the oil markets are badly supplied,” Moniz said.
The Energy Department this month sold 5 million barrels from the reserves for $495 million as part of a pre-planned test of its ability to move oil to the market. It was the first release from the reserve since 2012.
“The timing of this was not Ukraine,” he said.