Global governments ‘still coming to terms’ with America’s energy abundance
The U.S. has undergone an “unprecedented energy transformation” and is changing international energy market dynamics to such an extent that other countries are only just accepting it, according to Frank Fannon, the U.S. assistant secretary of state for energy resources.
Speaking to an audience at the Abu Dhabi International Petroleum Exhibition and Conference (ADIPEC) Tuesday, Fannon said that the U.S.′ evolution into a global leader in energy production offered new opportunities, and challenges, to consumers and producers around the world.
“Governments around the world are still coming to terms with this new reality and reconciling the implications, this is understandable. The U.S. shift from scarcity to abundance occurred with unprecedented speed and scale,” Fannon said.
“For more than 40 years, U.S. law prohibited oil exports but Congress lifted the ban in 2015 and the private sector responded,” Fannon said, “today, the U.S. is the largest producer in the world and on track to produce 13 million barrels (per day) next month.”
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He also noted that the country had gone from being the 15th largest exporter of liquefied natural gas (LNG) in 2016, to the third largest exporter currently and that it was changing energy market dynamics by introducing liquidity and choice into the market. The U.S. is the second largest producer of renewable energy, Fannon also stated.
America has certainly shaken up the norms when it comes to energy production and supply. Aside from its so-called “shale oil revolution” that has made it the largest crude oil producer in the world, closely followed by Russia and Saudi Arabia, it has also (in the space of a few years) become one of the major global players in terms of liquefied natural gas (LNG) exports.
The boom in energy production in the states means that in the fourth quarter of 2020, it is expected to become a net energy exporter, exporting more energy products than it imports.
Achieving that status of “energy independence” is seen as an important milestone for a country looking to reduce its dependence (and all the security implications that entails) on external producers. It also means an economic boost for the U.S., as well as potential political wins. But the country still faces stiff competition from other more established energy producers, like Russia. Europe, for example, has become something of a battleground between Washington and Moscow competing to supply natural gas to the continent.
The Russia question
Another market dynamic that the U.S. is contending with is the established, and apparently strengthening, relationship between OPEC and non-OPEC producer Russia.
Not only does the 14-member oil producing group led by Saudi Arabia have an agreement with Russia (and other producers) to curb oil output, the two countries have also sealed energy investments and partnerships in recent years — most recently when President Vladimir Putin visited Saudi Arabia in October.
Asked by CNBC’s Hadley Gamble if the U.S. had left a vacuum in the Middle East that countries like Russia were seeking to fill, Fannon said: “I don’t see a vacuum at all.”
He said countries like Russia were spurred on to seal investment deals because of competition from the U.S.
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“I’m not surprised that Russia is eager to be in the region, and elsewhere. We might not like it but it’s rational. What they see, whether it’s in this region or around the world, is what’s happening to global energy markets because of U.S. energy and U.S. energy innovation,” he said.
“I see there’s a race going on to get here and create positions because these infrastructure (projects), these energy projects, can have 50-year time horizons. They see what’s happening and so they’re rushing to lock in these positions because they’re fearful,” he said.
Appointed to the role by President Donald Trump in January 2018, Fannon is largely responsible for energy diplomacy at the State Department. He said the U.S.′ energy policy was “a proxy for other foreign policy issues.”
“It can be an area that facilitates cooperation, irrespective of perhaps historical clouds,” he said.