Analyst: LNG 'Most Powerful Weapon' In Addressing Ukraine Crisis

Rigzone: Can LNG exports help Ukraine specifically to meet its energy needs, or is this a part of the idea that an overall increase of LNG and oil in the market will stabilize the global market? How could Ukraine take advantage of foreign LNG if Russia blocks it from receiving LNG exports?

Weissman: There are at least two options. One would be to deliver LNG to a country in close proximity to Ukraine (e.g., Poland or Lithuania, or at some future point possibly Germany) and then make arrangements to ship comparable amounts of natural gas to Ukraine by pipeline. (Germany has shipped gas obtained from elsewhere to Ukraine in the past). There also has been some discussion of building an import terminal near Odessa (the third-largest city in Ukraine). The first option is probably the most realistic, at least for now, but the second option might be possible longer-term.

Rigzone: Do you think realistically that current administration would move ahead with oil exports? Under what circumstances could oil exports be approved? Do you think the Ukrainian situation meets this criteria?

Weissman: Exporting crude oil to markets outside of North America would represent a major change in U.S. policy. I wouldn’t want to hazard a guess as to whether this is possible. Putin’s aggressive action against Ukraine, however, is a game-changer. Over time, it could trigger major shifts in our willingness to use our energy resources to help our allies (and reduce Russia’s leverage in Europe). Further, the U.S. is likely to soon be producing more crude oil than we can use in existing refineries. These two circumstances combined could lead to a major shift in attitudes.

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Andrew Weissman, senior energy advisor with Haynes and Boone LLP.Source: Haynes and Boone LLP

Rigzone: How quickly could the U.S. expand energy exports? What kind of volume could this be expanded to? What kind of products?

Weissman: The answers differ for oil and natural gas. For oil, in principle [the U.S.] could start exporting large volumes of crude oil in a manner of months. There are also are efforts underway to modify existing U.S. refiners in the Gulf so that they can use large amounts of light sweet crude produced in North Dakota, the Mid-Continent and South Texas. These efforts could expand our ability to export finished products, which is currently close to being saturated, by as much as 1 million barrels per day within 12 to 24 months. Diesel fuel would be the most important export, but gasoline, jet fuel, propane and naphtha exports could also be expanded.

On the natural gas side, the U.S. Department of Energy’s (DOE’s) decision regarding whether to authorize LNG exports is based on a “public interest” standard. Recent events in Ukraine, and the leverage Russia currently has over our allies as a result of Russian pipeline exports of natural gas, provide a compelling basis for making a determination that it is in the public interest to export large amounts of LNG to Europe. There are also more than 20 applications for export approval pending before DOE, covering the potential export of more than 20 Bcf/d of natural gas.

If the Administration were to make an all-out effort to expedite authorization of LNG exports to Europe, it could issue preliminary authorization to export 5 Bcf/d or more of LNG in a period of less than 90 days. DOE authorization is not the final step in the project; there still would be a need to complete Federal Energy Regulatory Commission (FERC) review of siting issues. Further, even after all of the regulatory approvals are obtained, construction of the required liquefaction plants could take another 3 to 4 years.


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WHAT DO YOU THINK?


Generated by readers, the comments included herein do not reflect the views and opinions of Rigzone. All comments are subject to editorial review. Off-topic, inappropriate or insulting comments will be removed.

William Cotten  |  March 19, 2014
The US policy should be looking at using US gas exports only as a bridge to aid Europe and the Ukraine. In parallel to gas export sales to Europe, the US government should also be focusing on creating a general consensus in Europe to move forward to develop the large gas reserves that lie under Europe. Developing their own reserves should be of great strategic importance to many European countries. Any immediate exports from the USA should be combined with a general EU commitment for US technology transfer agreements and expertise to develop their own gas reserves based on an agreed to time line.
B. Morsi  |  March 13, 2014
I wonder how these people think of exporting crude oil and this country is still importing about 8-million bbl/day! Is it just to make more money by creating more shortage in this country? If we have oil to export, why we need to import and why the oil price is still hovering around $100/bbl? Do you think exporting one million bbl of petroleum product will make a dent of the world economy? Just be serious!


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