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The Quiet Triumph Of Oil And Gas In Obama’s Policies
Wolf Richter www.testosteronepit.com www.amazon.com/author/wolfrichter
It was announced Friday afternoon, when no one was supposed to pay attention: after years of controversy, heated rhetoric, intense lobbying, and stiff opposition from some unlikely bedfellows, with multinational industrial and chemical companies weighing down one side of the bed, and environmentalists tossing and turning on the other, the Obama Administration decided in favor of the US oil and gas industry. With geopolitical ramifications.
The Department of Energy “conditionally authorized” Freeport LNG Expansion LP and FLNG Liquefaction LCC (Freeport) to export domestically produced liquefied natural gas to countries with which the US does not have Free Trade Agreements (PDF, 132 pages). Already allowed are exports to the 20 countries with FTAs – most of them in the Americas, but also Australia, Korea, Singapore, Israel, Jordan, Bahrain, Oman, and Morocco. But exports to the remaining 180 or so countries have to jump through some hoops.
So Freeport’s LNG Terminal on Quintana Island, Texas, is now authorized to export 1.4 billion cubic feet per day (Bcf/d) of LNG for 20 years to those non-FTA countries. Freeport joins Cheniere Energy Inc.’s Sabine Pass terminal in Cameron Parish, Louisiana, with an export capacity of 2.2 Bcf/d. Freeport’s and Cheniere’s combined capacity would amount to 5.2% of US production (estimated at 69.3 Bcf/d in 2013). Other companies are cooling their heels in line at the DOE, which would, as it said, “process the applications currently pending on a case-by-case basis.” At snail’s pace. The administrations sole concession to environmentalists.
“DOE has had the remaining applications on its desk for months and should ensure that these applications are approved without any further delay,” groused Erik Milito, of the American Petroleum Institute, a trade association representing over 500 oil and gas companies.
Hurdles remain. DOE approval is just another step. The plants will have to get a permit from the Federal Energy Regulatory Commission (FERC) and must pass an environmental review, which could be a nail-biter. And none of the plants are up and running yet.
Then there is an unknown: how will world markets react to this additional supply that competes with at least 63 LNG export terminals currently planned or under construction worldwide? US production can rise to meet that new demand, as the gas glut in recent years has demonstrated in its bloody manner. But for production to rise significantly, the price – which is still below the cost of production for most “dry” gas wells – must rise as well.
Industrial and chemical companies that use natural gas for energy or as feedstock are deeply worried. Would they end up having to pay European prices? Or catastrophically, Japanese prices? The gas industry and its pundits have feverishly assured them that LNG exports would have “only minimal impacts” on gas prices in the US. Yet, the moment DOE announced its decision Friday afternoon, natural gas spiked about 3%, before retracing some of it.
The largest potential customers for LNG are Europe and Japan – staunch allies of the US. Europe is furiously trying to break the stranglehold that Russia’s Gazprom has on its gas supplies. Norway has morphed into a large producer, but it isn’t nearly enough. With prices two to three times higher than in the US, cheaper US gas hitting these markets would wreak havoc in Russia and its political clout in Europe. It would be a game changer in the EU economy, which is bogged down in high energy prices. And it would bring the European allies closer to the US.
But it might not happen, at least not initially: because there is Japan, the world’s largest most desperate importer of LNG since the shutdown of its 50 surviving nuclear reactors following the Fukushima meltdowns. The country is doing some serious soul-searching about nuclear power, and whether or not to bring reactors back on line. Meanwhile, its utilities are getting ripped off by distant natural gas suppliers that charge over four times the current price in the US.
Freeport already inked contracts with BP for half of its capacity and with the Japanese utilities Osaka Gas and Chubu Electric for the other half. So at least half, but probably much more of its shipments would be destined for Japan, still the most lucrative market in the world. Those contracts are already being leveraged by the Japanese government in its negotiations with Gazprom on a number of deals, including Japanese participation in an undersea pipeline from Russia’s Far East – which is far only from Moscow – to its neighbor, Hokkaido, the largest island of Japan.
But environmental groups in the US, already fuming at their erstwhile messiah, are getting madder with every fossil-fuel deal the Administration approves. The controversial Keystone Pipeline, which Native American opponents have equated with “environmental genocide,” is waiting in the wings. The Administration simply doesn’t want to get run over by the momentum of the oil and gas industry, and the thousands of high-wage jobs it has created. And it wants to lick its geopolitical chops.
Meanwhile, for the Administration, the plot thickens. Read.... Timothy Geithner Is Key To IRS Scandal
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See, Obama is NOT socialist, communist or a "watermelon." He's a CIA fascist pawn for the fascist elite motherfuckers that produced and now run him.
Trace the strings. hujel
I predict a large number of unexplained explosions along the Keystone pipeline throughout it's lifetime.
Certainly makes it harder for Putin to strong-arm Europe doesn't it?
As a land owner with a gas well I believe that it is my right to sell to whomever I wish. If Dow and other chemical users believe that my gas products sould only be sold to a captive market then surely they believe there products must only be sold where I wish them sold
I think someone needs to investigate the prayers of the American Petroleum Institute.
/sarc
Even third world countries are smart enough to buildtheir own industries and export finished products. Instead of exporting LNG we shoulbe exporting chemical feedstocks, fertilizers, etc. Obama has complete contempt for the U.S. and is doing everything in his power to destroy it.
Agreed but you are missing the point in that this is an attempt to prop up our allies in Western Europe and Japan who desperately needed access to more affordable sources of energy for base power generation. It is to keep them in the US sphere of influence and to keep them from failing off a cliff financially.
You mean the discovery of gas and the innovations required to extract it are some kind of geopolitical scheme? ANY nation would do what we're doing which is why I disagree with the proposed export policy. We should be storing what we have, undertaking a wholesale conversion to natural gas, continue investing in alternatives because this "eternal supply" will go the way of the North Oil. The "200 years" of free energy lasted 38 years until the UK had to start importing again. And did she use those profits to cut debt and get on a sound financial footing? Of course not.
Obama - and the backers who trained him, helped cover his tracks, had him approved at Bilderberg, and still guide his script - etc...
There. FIFY. Stop trying to anthropomorphise a global takeover bid into a single puppet! The same goes for those who focus on Cameron, Draghi, von RumpyPumpy (as if he ever got any!), Harper, Gillard, etc ...
**SLAP** ... Wake the fuck up!!!
Japan and Europe probably will use most of it directly for heating and electricity generation.
Russian plan to dismantle the Dollar System ???
Its more a broad movement on a worldwide scale. Read this
http://www.zerohedge.com/news/2013-04-13/china-takes-another-stab-dollar...
These currency swap agreements (or better Dollar exclusion agreements) include countries, such as, India, Japan, France, Brazil South Africa, Russia, China, Iran. Also Germany and China is doing some business already directly without the Dollar involved.
The volume of the transactions actual performed might be right now small in comparision with the total world trade. But important is the sheer existence of such agreements, because these swap agreements secure that the world wide trade can not be stopped by the US. In case the US Dollar is collapsing there exists now a international back-up system capable to replace the Dollar system within days if necessary - at least as far as intl trade is concerned. To say payments can be executed and goods will continue to flow.
Thus the US has nowadays not anymore the power to control the intl trade at will by using the Dollars system as a threat or weapon. Since a while its only their military what is left to control the economies of this world. This can be observed clearly if one wants to see it. Since WWII there were never more trouble spots in the world then today. The only thing holding the US back from the "huge war" is the existence of nuclear armed Russia and China.
Ah but if it is indeed true that the US has the ability to ramp up energy production and exports then both the dollar and the military benefit greatly. Recall the story of Kissingers grand bargain with the Saudis always had a "US will limit production" component. Pressure from Russia changes the calculus.
This was the retaliation to Rusir arresting our agent, our CIA dude, andselling Syria missles. Watch for more such deals. The U.S. will bury Russia.
The knock on effect is Japan's energy costs will abate, and tey wil keep printing and buuyg U.S. and Euro debt.
Love us or hate us, pretty shrewd. Chicago politics, worldwide edition.
Ah, the power of wishful thinking...
How long can Russia remain solvent when oil hits and maintains $70/80 dollars, and loses their gas markets to the U.S. and Canada. They are a one trick export pony. No wishful thinking on my part, maybe Moscow's.
How long can Russia remain solvent? WTF? You think it's that simple, do you? Well, as a matter of fact, Russia is practically debt free, and it has THREE TIMES more FOREX + Gold reserves than does the United States. In fact, Russia could PAY OFF ALL of it's external debt tomorrow with the reserves it already owns. Russia is MUCH more than a one trick export pony. Go educate yourself.
https://www.cia.gov/library/publications/the-world-factbook/geos/rs.html
https://www.cia.gov/library/publications/the-world-factbook/geos/us.html
An abundance of natural resources is not a guarantee of anything. If it were, Nigeria, Mongolia and Bolivian would be leading the world and japan, Singapore and Dubai would be wallowing in poverty. It's what one does with resources - debt, oil, gold, gas. Historically Russia has failed repeatedly because the State has (pre and post tsar) fought private innovation and the generation of goods for consumer purposes. She's wasted lives and money on hair-brained social engineering schemes, operated with a strict top down policy and retarded the creativity of her people. Nothing suggests that with a praidly decling population and increasingly authoritarian regime things will turn out differently this time.
You are missing the point. Go look at Russian exports (almost nothing outside of weapons, chemicals, and raw commodities), the Russian budget especially investment in capital infrastructure, trends in demographics, and where or what their more highly-educated young people are doing. Russia is a shrinking country from a demographic standpoint which has been exscaberated by younger people who are fairly educated increasingly settling abroad. Outside of St. Petersburg & Moscow areas is a slowly dying country.
interesting name there "Solarman." here's your solarplay: http://seekingalpha.com/symbol/fslr?source=search_general&s=fslr truly spectacular stock to failure since Obama's re-elect...along with many others. (Tesla certainly stands our as well.) these are companies that have the capacity to wipe out trillions in massively overvalued debt and currency plays..."and suddenly they're being bought hands over fist." profitability is already there for Tesla and soon to be there methinks for First Solar. "gangsternomics" looks set to fail yet again not the least because we still have a two party system in the USA and those parties have trillions "in the bank" (they are the bank are they not?) of their very nature. http://www.youtube.com/watch?v=muMcWMKPEWQ
In the 1970s Britain faced economic ruin until the discovery of oil in the North Sea bailed them out. It was perceived (correctly) as a miracle. North Sea oil also bailed out Norway and Holland. Will the energy boom in th US do the same for us? We should be so lucky.
Of course the rest of the story is that the revenues from the North Sea oil gave these countries nearly a generation to fix their economies. Instread the revenue just went to keeping the socialist bull$shit going for decades.
"The status of the US dollar as the world reserve currency gives the US tremendous advantages. Among them: it allows the Fed to export inflation..."
I see the FED is exporting a lot of inflation into the stock market.
... and that's fine by me, as long as everyone remembers that it's not money until you sell it.
Which is why public interest and investment is nowhere near the go go years of the late 90's. Too many folks got burned then and again in 2007 to ever fully go "all in". Anyone without an exist strategy is doomed to lose yet again.
but but but... hydrofracking is going to kill us all!!
Letting BP essentially off the hook, was the last straw for me.
Who is Obama to say whether a company can sell a product? Oh, he was generous and gas can be sold to countries even though we don't have a free trade agreement with them? Where in the Constitution does it delegate power to the government, let alone the executive branch to say how much and to whom something can be sold? For Pete's sake, do we live in a free country or a fascist dictatorship? Does no one even question this shit anymore?
Asking questions without licensed permission will get your ass examined by the IRS.
Do you have a current permit to make comments, Citizen?
You have 72 hours to report for re-education citizen.
Molon Labe, bitchez!
Rolon Lube, bitchez!
Unscented.
Not for long...