President Trump has promised to roll back federal regulations to help U.S. oil and natural gas and to open up new areas for development. The administration’s energy priority is to “unleash America’s $50 trillion in untapped shale, oil, and natural gas reserves.”
Note: given our low prices, drilling in new areas might not seem so critical today but will becoming increasingly so because oil and gas aren’t yet replaceable at scale, and demand will continue to mount “as far as the eye can see.”
Overall, to say that we will now be implementing more pro-oil and pro-natural gas policies might be the biggest understatement you will hear this year. Think about it: former Texas governor Rick Perry is head of the U.S. Department of Energy and former ExxonMobil CEO is head of the U.S. Department of State.
Thus, the U.S. could rival Russia as the world’s largest oil and gas exporting machine.
Russia accounts for over 20% of the world’s exported natural gas, and gas is easily the world’s most important fuel going forward given climate commitments: gas emits 50% less CO2 than coal and 30% less CO2 than oil. In 2016, “Russia tops Saudi Arabia as the world’s largest oil exporter,” and oil is the world’s most important fuel, with no significant substitute whatsoever.
With flexible liquefied natural gas (LNG) export contracts, a stable democracy and legal system, and transparent and technically advanced companies that countries desperately seek to do business with, U.S. oil and gas is highly desirable.
The U.S. is now slated to have the capacity to export 10-12 Bcf/day of LNG to the world by 2020, this is 1/3 of the current global market and a boom from virtually nothing a year ago.
At about 2 Bcf/day, we are now exporting LNG to some 20 nations, with U.S. supplies steadily moving across the spectrum in a single year: first to Latin America, then to Asia, and now over to Europe, Russia’s most vital energy client. In fact, U.S. LNG is so desired in Europe that some nations have offered to accept higher prices for it, willing to lose money to lower the reliance on Russia.
U.S. oil and gas exports are crucial to the domestic and global security benefits of lowering Russia’s influence around the world, clearly explaining why they have bi-partisan support.
Given the problems that our main LNG competitors face, we could easily become the go-to source of LNG around the world: Australia confronts huge cost overruns, and Qatar has placed a moratorium on new capacity projects.
Exports are expected to be streamlined under the Trump administration, especially since Perry and Tillerson, two oil and gas supporters from Texas, know how crucial exports are to U.S. producers. Our natural gas prices, for instance, would be about 50% lower if not for the Mexican export valve. Mexico is now taking in about 4.1 Bcf/day of U.S. piped gas, with the capacity to import 15 Bcf/day by 2020, double the capacity today.
Moreover, in the past two weeks or so, the U.S. had been exporting 1 million b/d of crude oil, up from basically nothing (or at least only to Canada) 14 months ago. “US May Export More Oil in 2017 Than Four OPEC Nations Produce.”
U.S. oil and gas exports can also help alleviate energy deprivation around the world: 6 in every 7 humans live in undeveloped nations and require access to modern fuels like oil and gas to up human development. Again Mr. Gore, exporting modern energy to a sadly and unacceptably mostly undeveloped world is the real “moral imperative of our time.”
The Trump administration is expected to pull back many of the oil and regulations that were installed under President Obama, such as the Clean Power Plan. The environmental groups, therefore, are surely gearing up for a fight, so the U.S. oil and gas business will need all the help it can get – and so will the energy deprived and poor nations that could greatly use our energy to develop.
Overall, the oil and gas industry must be feeling good about a more supportive executive branch and federal government, and Putin’s energy machine is surely feeling the heat.