Meeting today’s energy and security challenges

David Goldwyn, a non-resident senior fellow with the Energy Security Initiative at the Brookings Institute, delivered testimony on the US security implications of international energy and climate policies at a hearing before the US Senate Committee on Foreign Relations’ Subcommittee on International Development and Foreign Assistance. The hearing took place on 22^nd July 2014.

In this testimony, Goldwyn emphasises his view that the US needs to use all of the tools in its tool kit in order to meet the energy and security challenges that it faces.

Ukraine

According to Goldwyn, the most obvious national security challenge where energy security issues are explicitly at play is Russia’s continued aggression in Ukraine. Russia continues to lend material support to seperatists operating in Eastern Ukraine and last month stopped supplying natural gas to Kiev.

The US needs to use diplomacy, technical assistance and support exports to help not only the efforts of Ukraine, but also other countries proximate to Russia, including those in Western Europe, to diversify their sources of supply. The diplomatic agenda is pressing for a divided Europe to finish the work of integrating its gas market, promoting internal market reform in member countries, developing further infrastructure to support alternative gas supplies and interconnections among member countries and encouraging indigenous gas development.

Goldwyn explained that export policy can also help. A clear signal from the US that LNG exports will be available to European allies for future purchase would immediately put pressure on Russia’s market share and export revenues, and would also provide a market signal to help accelerate investment in and construction of gas transportation infrastructure in Europe.

Although many sceptics question whether Europe would receive US LNG due to the expected higher prices in Asian markets, the fact remains that European prices could easily approach Asian levels in the event of a Russian supply cutoff. Additionally, purchasers consider not only price, but also the diversity of supply source and the likelihood of timely project completion, which may leave at least some European purchasers predisposed to paying a premium price for US gas that rivals the market price Asian purchasers are willing to pay.

Iraq

Goldwyn highlighted that geopolitical tensions in Iraq may also have implications for the US. The 20 July ISIS takeover of gas fields in Syria and its efforts to gain control of the Baiji refinery signal its intent to disrupt energy infrastructure. Additionally, violence in the south could induce international companies to pull out larger shares of their foreign personnel, which would have negative implications for Iraqi production.

Goldwyn holds that the US approach in Iraq should primarily comprise of efforts to foster reconciliation among Iraqi stakeholders. Yet the US should also be prepared to continue supporting the stability of the global oil market should supply disruption occur. US domestic production growth has helped to keep the global market well supplies and prices stable even as unplanned supply disruptions, including in place such as Libya, South Sudan, and Yemen, have emerged. However, the US could do more, including taking steps to authorise the export of light sweet crude grades that it has in excess, in order to keep the market stable.

Central America and the Caribbean

The Caribbean region is currently largely dependent on Petrocaribe, a Venezuelan backed program that allows Caribbean and Central American countries to purchase Venezuelan crude oil and petroleum products on generous financing terms. While this program once provided these countries with immediate budget support, it has left them increasingly indebted to Venezuela, and reliant on high carbon, expensive fuel oil and diesel for electricity generation.

A recent IDB Pre-Feasibility Study found that replacing liquid fuels with natural gas, in combination with energy efficiency and renewable energy measures, produced net benefits for every surveyed Caribbean country, lowering the cost of fuel and power as well as substantially reducing carbon emissions.

The US could facilitate a natural gas bridge in the Caribbean by providing credit enhancements and declaring LNG exports to all Caribbean nations currently reliant on Petrocaribe, with the exception of Cuba, to be in the national interest. Promoting the adoption of natural gas in the Caribbean and Central American energy mix would bring about several benefits for US interests. The risk of harm to the region’s economies from a Venezuelan interruption in credit support would decrease. Electricity costs for industrial and residential consumers would decline as cheaper natural gas replaces more expensive fuels. Finally, cleaner burning natural gas would reduce the region’s carbon footprint.

Adapted from testimony by Emma McAleavey.

Read the article online at: https://www.oilfieldtechnology.com/exploration/29072014/us-energy-and-climate-security-1027/