US Energy Boom Better Than Sanctions Against Russia

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Competition in the form of increased US energy exports is the last thing Russian President Vladimir Putin wants to see, so that's exactly what we should do.

This opinion piece presents the opinions of the author.
It does not necessarily reflect the views of Rigzone.

U.S. oil production is surging, and it's helping to cripple the Russian economy. It’s a win-win situation

With 40 percent of the Russian economy hinging on oil and gas sales, America's oil and gas boom is doing more to bring President Vladimir Putin to his knees than any of the sanctions being imposed by the U.S. and Europe.

Competition in the form of increased U.S. energy exports is the last thing Putin wants to see, so that's exactly what we should do. Russia is currently the third-largest oil producer and the top exporter of natural gas, and you better believe that Putin uses these advantages to push his agenda regionally and globally.

Russia needs oil prices to stay above $110 per barrel to keep its budget balanced, but on August 20 Reuters reported that Russian oil is below $100 per barrel.

The U.S. has added roughly 3 million barrels per day to its oil production in the last five years and is on track to surpass Saudi Arabian oil output by 2017. If the U.S. government can get out of the way of progress, the U.S. can increase the downward pressure on Russian and global markets. The U.S. isn’t likely to be able to export much crude, but any amount of exports can help create greater investment certainty that could ultimately escalate U.S. production.

The U.S. also recently surpassed Russia as the world’s top natural gas producer. If ExxonMobil is correct in its projection that natural gas will become the second most common energy source by 2025, the American shale boom could inflict even greater pain on Russia by causing oil exports to plummet by 25 percent after 2015.

Given Putin’s recent aggressions, the U.S. should do everything it can to keep oil and gas production booming.

Forget sanctions: the U.S. can do a lot more to put pressure on Russia by speeding approvals of liquefied natural gas (LNG) export terminals and lifting the ban on crude oil exports.

Approving the Keystone XL pipeline will be key, as it will pump 830,000 barrels of crude oil every day from the Canadian oil sands to Gulf Coast refineries, reducing U.S. dependence on imports of oil from more volatile regions and freeing up more US oil and gas for export.

The U.S. must also cut through the red tape currently limiting natural gas exports. Due to the unpredictably lengthy permitting process, we won’t be seeing natgas exports until at least 2015.

Exports offer the U.S. government a politically expedient tool to help reduce Russia’s leverage on Europe and Ukraine without overt or aggressive action that could further entangle America in a nasty foreign dispute.

Europe is also looking at a golden opportunity: while low oil prices and economic sanctions are slowing new Russian oil projects, Europe can free itself of its dependence on Russian oil and gas by exploiting its own shale resources and increasing imports from other, friendlier, nations.

The Congressional Research Service expects Europe’s natural gas consumption to grow as its domestic production declines. This has created a heavy reliance on Russian energy, especially in Eastern Europe. About 70 percent of all the gas Ukraine uses comes from Russia and 34 percent of Europe’s natural gas came from Russia in 2012.

Russia has not been shy about using the power of its exports. In 2009, 2008 and 2006 Russia restricted the energy flowing through Ukrainian pipelines for political gain. Between 60 and 80 percent of Russian gas bound for Europe goes through Ukraine—an unsettling fact in light of Putin’s aggressive incursions into Ukrainian territory.

Russia will be the biggest loser in the new global energy map being re-charted by America's shale gas explosion and development now underway in other countries all over the globe.

Author of The Fracking Truth and producer of Breaking Free, Chris Faulkner is CEO of Dallas-based Breitling Energy Corporation (OTC: BECC), an oil and natural gas exploration and production company.  Faulkner's diverse and extensive background in the oil and gas industry in North America, Europe and the Middle East covers all aspects of oil and gas operations, including project management, production, facilities, drilling and business development. Faulkner serves as an advisor to the ECF Asia Shale Committee and sits on the Board of Directors for the North Texas Commission.



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