Coal Part of U.S. Future as Net Energy Exporter (Platts)
North America to be energy independent by 2020, but remain world player: WoodMac
The UK-based energy consultants, in a report, “Global Geopolitics Reshaped by North American Energy Independence,” said the reversal of North America’s net trade as an importer will have “complex impacts” on global energy flows.
And some of those “are already becoming apparent,” Paul McConnell, senior analyst for WoodMac’s Global Trends Service, said in the report.
“Qatari LNG has been competing with Russian piped gas in Europe, North American coal is finding its way east across the Atlantic and North American imports of light sweet crudes have plummeted,” McConnell said.
Over the next few years, North America’s energy independence will reshape, but not redefine, global geopolitics, according to the report.
“The Middle East is the most sensitive to changes in oil flows,” said McConnell. “Under pressure to maintain oil revenues, and with Asia importing ever-greater volumes, the relationship between China and the key players of OPEC will become increasingly bilateral.”
As a result, China’s and the US’ strategic interests in the Persian Gulf will become more aligned, he said. Unconventional oil production, which the US is ramping up rapidly, “will not divorce US foreign policy from the Middle East,” he added.
Prompted by North American shale gas, Russia’s gas export position has undergone a “dramatic” change, and that has led to a re-evaluation of a strategic need to open Pacific Basin markets to gas exports, said WoodMac. Russia is already leaning toward China, a development that reverses the traditional limited engagement between the pair. Underpinning this strategic shift has been pipeline exports to China, with projects proposed in western and eastern Russia for which momentum has built this year.
North America’s energy independence will also forge a new dynamic to coal, oil and gas prices, according to WoodMac. Coal and gas exports will establish a price cap on their respective markets during high-demand periods, while weak oil demand growth will cause US unconventional oil to build a price floor under crude markets.
North American gas exports will act similarly, and the possibility of more LNG coming from that region will cap gas prices throughout the world. But, WoodMac said, the impacts of an energy-independent North America cannot be fully grasped without mentioning the rise of Chinese energy demand. Imports into China will expand as those into North America decline and eventually reverse.
“While North American exports will provide boundaries for coal, oil and gas prices, it will be the trajectory of China’s import demand that determines when these barriers are tested,” said McConnell. “China will assume greater responsibility in the Middle East, but it will be in partnership with the United States, rather than instead of it.”
Consequently, energy independence does not suggest a North America entirely detached from global markets, said WoodMac. On the contrary, the region will depend on others to clear its excess production, making the US an oil importer for the foreseeable future. This alone will moderate the geopolitical impact of North America’s changing trade position, ensuring the continent is not an energy isolationist but rather energy independent.
See article here.