223
takes, and replacing a small portion of their contract supplies with lower cost shortrun, spot LNG imports from regional suppliers such as Qatar and Australia (www.
cfr.org 2020a, b, c). At this juncture, it is possible that US producers have lost their
opportunity to dominate global natural gas exports. It would take considerable effort
to lock insecure renewed foreign equity investment for US LNG export terminals
with guaranteed offtake agreements to keep US gas flowing. Deals such as this will
be hard to secure as the commercial outlook is less attractive and investment in US
facilities is not geopolitically appealing at this time. Only time will tell if this missed
opportunity has any impact on the geopolitics of natural gas in the years to come but
for the time being, the US LNG renaissance is dwindling (www.cfr.org 2020a, b, c).
US LNG has never been considered as a major option in Europe. Russian gas is the
cheapest option when it comes to pipeline and Qatari gas can outcompete it most of
the time. Hence, there has been generally the expectations that US LNG in Europe
will mostly sell on the spot market with some longer term contracts. Important to note
is that those contracts are highly flexible and most of them are FOB which means as
soon as the buyer picks up they can sell it to other buyers and not necessarily haul to
Europe. Also, cancelation terms are very generous when compared to other contracts.
In general however it is Asia where most sellers want to be. That is where growth in
demand will be. In Europe, US LNG has more strategic meaning as it can provide a
great alternative and influence other gas sellers, including Russia. We have already
seen contracts with Russia becoming more flexible and tied to hub pricing rather than
to oil. That is because more and more European countries are able to access LNG,
including US LNG. In this sense, LNG increases energy security in Europe by making the market more diverse and by providing a “credible threat” to other supplies
creates a price ceiling on any other gas. So even if it does not flow to Europe, the
possibility of it flowing is beneficial (Author’s interview with Anna Mikulksa).
Oil Diplomacy and the US Presidential Election
US policies and diplomacies regarding sanctions and the domestic shale revolution
have been inseparable and mutually impacting each other. The shale revolution
enabled US policymakers to decrease their dependence on crude imports, to advance
in global production, and to reduce the anticipated risk of rapid increases in prices.
This, in turn, made them more courageous to enforce stricter sanctions on both
Venezuela and Iran (www.reuters.com 2020a, b, c, d, e, f, g, h, i).
Abundance in shale production has reduced economic risks, whereas in the past
when the production of shale was limited when compared to consumption, sanctions
led to high economic costs with respect to rapid increases in prices. In addition to the
increase in shale production and the elimination of rival Iranian and Venezuelan
crudes from the market, the US sanctions policies provided more space to boost shale
production while restricting the impact on other producers (gulfif.org 2020). The
shale revolution would possibly have reached a peak much sooner if sanctions were
not in place. If the US could not rely on their shale, policymakers would probably not
be as courageous in cutting oil exports from Venezuela, Iran, and to some degree
Oil Diplomacy and the US Presidential Election
takes, and replacing a small portion of their contract supplies with lower cost shortrun, spot LNG imports from regional suppliers such as Qatar and Australia (www.
cfr.org 2020a, b, c). At this juncture, it is possible that US producers have lost their
opportunity to dominate global natural gas exports. It would take considerable effort
to lock insecure renewed foreign equity investment for US LNG export terminals
with guaranteed offtake agreements to keep US gas flowing. Deals such as this will
be hard to secure as the commercial outlook is less attractive and investment in US
facilities is not geopolitically appealing at this time. Only time will tell if this missed
opportunity has any impact on the geopolitics of natural gas in the years to come but
for the time being, the US LNG renaissance is dwindling (www.cfr.org 2020a, b, c).
US LNG has never been considered as a major option in Europe. Russian gas is the
cheapest option when it comes to pipeline and Qatari gas can outcompete it most of
the time. Hence, there has been generally the expectations that US LNG in Europe
will mostly sell on the spot market with some longer term contracts. Important to note
is that those contracts are highly flexible and most of them are FOB which means as
soon as the buyer picks up they can sell it to other buyers and not necessarily haul to
Europe. Also, cancelation terms are very generous when compared to other contracts.
In general however it is Asia where most sellers want to be. That is where growth in
demand will be. In Europe, US LNG has more strategic meaning as it can provide a
great alternative and influence other gas sellers, including Russia. We have already
seen contracts with Russia becoming more flexible and tied to hub pricing rather than
to oil. That is because more and more European countries are able to access LNG,
including US LNG. In this sense, LNG increases energy security in Europe by making the market more diverse and by providing a “credible threat” to other supplies
creates a price ceiling on any other gas. So even if it does not flow to Europe, the
possibility of it flowing is beneficial (Author’s interview with Anna Mikulksa).
Oil Diplomacy and the US Presidential Election
US policies and diplomacies regarding sanctions and the domestic shale revolution
have been inseparable and mutually impacting each other. The shale revolution
enabled US policymakers to decrease their dependence on crude imports, to advance
in global production, and to reduce the anticipated risk of rapid increases in prices.
This, in turn, made them more courageous to enforce stricter sanctions on both
Venezuela and Iran (www.reuters.com 2020a, b, c, d, e, f, g, h, i).
Abundance in shale production has reduced economic risks, whereas in the past
when the production of shale was limited when compared to consumption, sanctions
led to high economic costs with respect to rapid increases in prices. In addition to the
increase in shale production and the elimination of rival Iranian and Venezuelan
crudes from the market, the US sanctions policies provided more space to boost shale
production while restricting the impact on other producers (gulfif.org 2020). The
shale revolution would possibly have reached a peak much sooner if sanctions were
not in place. If the US could not rely on their shale, policymakers would probably not
be as courageous in cutting oil exports from Venezuela, Iran, and to some degree
Oil Diplomacy and the US Presidential Election