Prof. ST Hsieh
Director, US-China Energy Industry Forum
February 28, 2023
The successful US shale revolution has changed global politics forever, the full impacts will be felt around the world for a long while. One unique feature of the shale revolution in the US is that even the technology is well understood but so far, no nation in the world has duplicated the US success!
The immediate impact of the US shale revolution was that the US realized full energy independence. More so the US became a net energy exporter for the first time. LNG export industry in the US has flourished well and it is still expanding.
Clearly the US is now the most dominating global power. It is easy to understand that, if the US did not have the potential capacity of exporting LNG to Europe thus replacing Russian oil and gas, the Ukraine war would not have started. Furthermore, the US now can challenge Russia for global energy market share.
However, only a steady growing global economy will ensure a profitable energy industry. Peace on earth!
How U.S. Shale Changed The Face Of Global Politics
Tue, February 28, 2023 at 11:00 AM PST
In the early 2000s, a revolution was unfolding in the energy industry. Technological advancements in horizontal drilling and hydraulic fracturing had unlocked vast reserves of oil and natural gas trapped in shale rock formations deep beneath the earth’s surface.
The U.S. was sitting on top of one of the largest shale deposits in the world, known as the Permian Basin, which spans parts of Texas and New Mexico. As companies began to explore and drill in this region, they discovered that there were immense amounts of oil and gas waiting to be extracted.
This discovery sparked what would become known as the historic U.S. shale boom – a period of rapid growth in domestic oil and gas production that would have significant geopolitical implications for years to come.
How did it happen?
The shale boom didn’t happen overnight. It was the result of decades of research and development by geologists, engineers, and scientists who were looking for new ways to extract oil and gas from unconventional sources.
Horizontal drilling was one key breakthrough that made shale production possible. This technique involves drilling down vertically into the earth until reaching a layer of shale rock, then turning the drill bit horizontally to follow along with the layer.
Once horizontal drilling had been perfected, hydraulic fracturing (or “fracking”) became another essential tool for extracting oil and gas from shale formations. This process involves pumping a mixture of water, sand, and chemicals into wells at high pressure to fracture the rock and release trapped hydrocarbons.
The U.S. shale boom had far-reaching geopolitical implications that continue to shape global politics today. Here are just a few examples:
Reduced Dependence on Foreign Oil
The most immediate impact of the shale boom was that it dramatically reduced America’s dependence on foreign sources of oil.
This shift towards domestic energy production has given American policymakers greater flexibility when it comes to foreign policy decisions related to energy security. For example, sanctions against major oil-producing countries like Iran or Venezuela are less likely to have severe economic consequences for Americans since they can rely on their own domestic supply instead.
Increased Energy Security
In addition to reducing dependence on foreign sources of oil, increased domestic production has also improved energy security within the United States itself.
A New Balance Of Power
The rise in American energy production has also shifted global power dynamics significantly – particularly between Russia and Europe.
Before the shale boom took off, Russia held significant leverage over European countries due to its position as a major supplier of natural gas – which many European nations depend on heavily for heating homes and powering industries.
However, as American exports have flooded international markets (particularly those previously dominated by Russian producers), Europe now has more options when it comes to sourcing its energy needs – giving them greater independence from Russia’s influence.
Changing Global Energy Markets
Finally – perhaps most significantly -the emergence of new players in global energy markets is fundamentally altering how we think about geopolitics itself.
With new technologies making it simpler than ever before for companies around the world to extract previously inaccessible reserves from unconventional sources (like tar sands or deepwater offshore fields), traditional power structures based around resource-rich states are being challenged like never before.
As emerging economies like China continue to drive demand for oil , these shifts will only become more pronounced – making it all but impossible for any single country or group of countries to completely control global energy markets moving forward.
Today – several decades later- we see some geopolitical ramifications from this momentous change still unfolding.
As we look ahead towards an uncertain future marked by climate change concerns amidst continued population growth worldwide- it is clear that innovations like those behind America’s original Shale Boom will play an increasingly important role in shaping our world moving forward.
EU Energy Crisis May Lead To $100 Billion In New U.S. LNG Projects
Tue, February 28, 2023 at 3:00 PM PST
Developers of U.S. LNG export facilities could launch $100 billion worth of new plants over the next five years as high prices and the need for energy security create strong momentum for long-term LNG demand and contracts.
The United States is set to overtake Qatar and Australia as the world’s top LNG exporter this year after Freeport LNG resumes operations in the spring, energy consultancy Wood Mackenzie said in a recent report.
U.S. LNG exports could reach 89 million metric tons per annum (mmtpa) in 2023, according to WoodMac.
“However, it won’t stop there,” the consultancy said, noting that U.S. capacity could jump by the end of this decade, potentially doubling American LNG exports.
The energy crisis and the need for energy security—especially among European buyers after the Russian invasion of Ukraine—afford U.S. LNG developers the perfect opportunity to sign long-term contracts for planned facilities that would underpin final investment decisions (FIDs) of the projects.
Europe’s LNG Demand Soars
Europe, previously reluctant to commit to long-term gas deals due to climate goals and emissions considerations, is now installing floating storage regasification units (FSRUs) to welcome LNG cargoes that are replacing Russian pipeline gas supply.
For example, German utilities are signing long-term deals with LNG exporters, including with major American developers. A year after Russia invaded Ukraine and showed Europe how unreliable a supplier it is, Germany already has two floating import terminals up and running, in Wilhelmshaven and Lubmin, while a third LNG terminal, at Brunsbüttel, is in the commissioning phase.
“Energy supply will no longer be taken for granted,” Simon Flowers, Chairman and Chief Analyst at WoodMac, wrote last week.
“No country can ever again allow itself to become reliant on imported energy from a single supplier. In future, energy security will be about the diversity of fuels and sources, and the primacy of domestic resources,” Flowers added.
The U.S. LNG industry has fared well as countries race to ensure diversified gas supply, WoodMac notes.
“There’s growing confidence that Europe can muddle through the next three years, albeit with relatively high and volatile prices. New supply volumes, mainly US and Qatari LNG, arrive from 2025, helping prices to ease back to ‘normal’,” Flowers said.
The surge in LNG demand in Europe is set to intensify competition with Asia in the short term and dominate LNG trade in the longer term, Shell, the world’s largest LNG trader, said in its annual LNG outlook earlier this month.
LNG could become a core energy supply for Europe to meet energy security needs, while China could increasingly provide more flexibility to the global LNG market, the supermajor said. However, Shell warned that another supply-demand gap could be looming in the late 2020s without new investment in additional supply.
Forever-Changed Markets Set To Encourage New U.S. LNG Projects
Concerns about energy security are laying the foundations for more LNG projects to be planned, announced, and potentially developed over the next five years, WoodMac said.
Based on the combination of projects already under construction and the momentum of potential projects, U.S. LNG capacity could grow between 70 mmtpa and 190 mmtpa before the end of the decade, potentially more than doubling current exports, it added. The increase in capacity will need a number of new projects, which could lead to as much as $100 billion in new projects in the next five years.
“This activity has pushed a host of pre-final investment decision (FID) US projects forward and we could see a wave of FIDs this year and next,” Farrer noted.
U.S. LNG liquefaction capacity could vastly exceed that of its competitors Qatar and Australia by 2030, but not all possible projects in America would proceed—some are likely to be delayed or canceled, WoodMac says.