The New Cold War: The Face-Off between US and Russia over Natural Gas

In the old days it used to be about nuclear weapons and military power. Now in 2013,  it’s about a commodity as precious as gold and oil: natural gas.

From Global Research:

US-Russia “New Cold War”: The Battle for Pipelines and Natural Gas

What the US & Russia are really quarreling over: Pipelines

By Steve Horn

“For both countries, the Snowden affair is just another ho-hum spat in the greater imperial rivalry.

Nearly two months ago, former National Security Agency (NSA) contractor-turned-whistleblower Edward Snowden handed smoking-gun documents on the international surveillance apparatus to The Guardian and The Washington Post in what’s become one of the most captivating stories in recent memory.

Snowden now lives in Russia after a Hollywood-like nearly six-week-long stint in a Moscow airport waiting for a country to grant him asylum.

Journalists and pundits have spent countless articles and news segments conveying the intrigue and intensity of the standoff that eventually resulted in Russia granting Snowden one year of asylum. Attention now has shifted to his father, Lon Snowden, and his announced visit of Edward in Russia.

Lost in the excitement of this “White Bronco Moment,” many have missed the elephant in the room: the “Great Game”-style geopolitical standoff between the U.S. and Russia underlying it all, and which may have served as the impetus for Russia to grant Snowden asylum to begin with. What’s at stake? Natural gas.

Russia, of course, has its own surveillance state and has been described by The Guardian’s Luke Harding as a “Mafia State” due to the deep corruption that reportedly thrives under Putin’s watch.

It all comes as the U.S. competes with Russian gas production thanks in part to the controversial drilling process known as hydraulic fracturing — “fracking” – transforming the United States into what President Barack Obama has hailed as the “Saudi Arabia of gas.”

Russia produced 653 billion cubic meters of gas in 2012, while the U.S. produced 651 billion cubic meters, making them the top two producers in the world.

Creating a “gas OPEC”

Illustrating this elephant in the room is the fact that when, on July 1, Russian President Vladimir Putin first addressed whether he would grant Snowden asylum, he did so at the annual meeting of the Gas Exporting Countries Forum (GECF) in Moscow, which unfolded July 1-2.

“If he wants to stay here, there is one condition: he must stop his work aimed at harming our American partners, as strange as that sounds coming from my lips,” Putin stated at GECF’s annual summit.

Paralleling the Organization of Petroleum Exporting Countries (OPEC) — The New York Times calls it a “gas OPEC” — GECF is a bloc of countries whose mission is to fend off U.S. and Western power dominance of the global gas trade. The 13 member countries include Russia, Iran, Bolivia, Venezuela, Libya, Algeria and several others.

GECF has held informal meetings since 2001, becoming an official chartered organization in 2008 and dominated in the main by Russia. GECF Secretary General Leonid Bokhanovskiy is also the former VP of Stroytransgaz, a subsidiary of Russian oil and gas giant Gazprom.

Depicting the close proximity between Putin’s regime and GECF’s leadership is the fact that Gennady Timchenko – a member of “Putin’s inner circle,” according to The Bureau of Investigative Journalism – owns an 80-percent stake in Stroytransgaz.

A 21st-century “gas Cold War” has arisen between the U.S. and Russia, with Edward Snowden serving as the illustrative protagonist. President Obama, upset over Russia’s asylum offer to Snowden, recently cancelled a summit with President Putin.

With access to the free flow of oil and gas resources a central tenet of U.S. national security policy under the Carter Doctrine, there’s no guarantee this new Cold War will end well.

Fracked gas exports fend off Russia, but for how long?

Fracking is in the process of transforming the U.S. from a net importer of gas to a net exporter, with three liquefied natural gas (LNG) export terminals on the Gulf Coast already rubber-stamped for approval by the U.S. Department of Energy.

Industry cheerleaders as well as President Obama and other like-minded politicians say there are “100 years of natural gas” under the United States, a geopolitical game-changer to say the very least.

But independent petroleum geologists and investors alike see it differently, concluding perhaps 15-20 years of gas exist at current diminishing, “exploration treadmill” rates of return.

“More and more wells must be drilled and operated to maintain production as the average productivity per well is declining,” David Hughes, a Fellow at the Post Carbon Institute explains in his report “Drill Baby, Drill.” “Since 1990, the number of operating gas wells in the United States has increased by 90 percent while the average productivity per well has declined by 38 percent.”

This means there likely won’t be enough gas to fend off GECF and Russian dominance of the global gas market in the long term, particularly because Russia relies on easier-to-obtain conventional gas, as opposed to tough-to-obtain unconventional shale gas.

Despite the reality of the “exploration treadmill,” myriad politicians have backed the notion of the U.S. serving as a global supplier of gas via LNG exports. Congress has already introduced two bills in 2013 – the Expedite our Economy Act of 2013 and the Expedited LNG for American Allies Act of 2013 – calling for expedited approval of the remaining LNG export terminal proposals.

“[T]he timeline for considering these applications may jeopardize our ability to retain a competitive position against other natural gas exporting nations who are also working diligently to export LNG,” a bipartisan cadre of 34 U.S. Senators wrote in a July 9 letter to U.S. Department of Energy head Ernest Moniz urging the DOE for to speedily approve LNG export terminal applications. “There is a global race for market share underway,” the letter continued. “American competitors have been at a disadvantage for the past year and a half because the Department of Energy has delayed action on pending applications.”

Sometimes politicians are vague when it comes to the rationale for expedited LNG exports, using phrases like the ability to maintain a “competitive position” against “other natural gas exporting nations” but not calling out those nations by name.

Others, however, take off the kid gloves and name names. “Our bill will also promote the energy security of key U.S. allies by helping reduce their dependence on oil and gas from countries, such as Russia and Iran,” said Sen. John Barrasso (R-Wyo.), co-sponsor of the Expedited LNG for American Allies Act of 2013, of the rational behind the bill’s January 2013 introduction.

Months later, Rep. Ted Poe (R-Texas) wrote similarly in a June 2013 Houston Chronicle op-ed piece. “Aside from unquestionable economic benefits, there are also geopolitical considerations that make exporting LNG to our friends and allies a no-brainer,” Poe wrote. “The risk of high reliance on Russian gas has been a principal driver of European energy policy in recent decades … From the U.S. perspective, cheap but reliable natural gas would reduce Moscow’s clout while shoring up goodwill amongst our allies.”

Faced with diminishing returns on shale gas basins nationwide, U.S. strategic planners haven’t put all of their eggs in one basket, and have a backup plan in mind to fend off Russia and GECF.”

Read More

(Source: Business Insider)

(Source: Business Insider)

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