Russian Pipeline: What no one is talking about
“If the Shale Crescent USA were a country we would be the number 3 natural gas producer in the world.” You have heard this before. It stunned a talk show host in Cincinnati when I said it. It got the attention of the Japanese in January. The large consulting firm Deloitte agrees. Even the White House Staff we talked to didn’t know.
The rest of the story is, the only two places that produce more natural gas than the Shale Crescent USA are the USA without the Shale Crescent included and Russia.
My focus here is not on the politics we have all heard in the past two weeks. My focus will be on energy which the major media is clueless about or chooses to be. For example, a recent Sixty Minutes segment implied that a decommissioned nuclear power plant in California probably producing about 3000 MW 24/7 was being replaced by 62 acres of solar panels on the same site producing 5 MW (when the sun shines). California recently shutdown the San Onofre Nuclear power plant and the Morro Bay natural gas power plant together producing about 6000 MW.
In April of 2018 Californians were paying $0.16 per kwh for electricity compared to $0.11 for West Virginia and $0.12 for Ohio. However, a rate increase approved in May by the California PUC will increase rates for most consumers to about $0.25 per kw. Wow! Who can afford that? Replacing nuclear power and natural gas with renewables is not cheap.
The point is, Russia is our biggest competitor in the natural gas market. They are proposing to build Nord Stream 2, a 48- inch natural gas pipeline that will run from near St. Petersburg in Russia to Greifswald in northeastern Germany. It would run under the Baltic Sea parallel to Nord Stream 1 which was built in 2011. Russia is already supplying most of Germany’s natural gas. This pipeline will double the amount of gas Germany can import from Russia. Germany currently uses more natural gas than any other European country and they expect their natural gas demand to increase. This is a major win for Gazprom, the Russian natural gas company.
Gazprom has been providing natural gas to Europe for over 40 years. They are the largest exporter of natural gas to the European market. The US entered this market last year with natural gas shipments Poland. Natural gas demand in Europe is expected to continue to increase.
European natural gas production is decreasing. Most counties have banned or restricted hydraulic fracturing, which is required on almost every well in order to produce natural gas or oil. These countries are turning to Russia for their natural gas needs. Russia, like all countries, fracks almost every well. Mr. Putin will continue to frack and make billions of dollars from Europe. Gazprom’s contracts with its European customers are long term and tied to oil prices.
What does this mean for the Shale Crescent USA? For the USA’s and our Region’s oil and gas industry Russia will continue to be a major competitor globally.
We can compete in Europe but Russia has an advantage with their pipeline over our LNG. However, our competition will force Russia to stay competitive, like what happened in Poland when the US started shipping them LNG last summer. Gazprom now has some competition from the USA.
We know that the Shale Crescent USA has a huge manufacturing advantage over Europe. Natural gas prices in the USA are not tied to oil prices. The current Dominion South Pointe price for natural gas in the Shale Crescent USA is $2.40 per MM BTU. This is equivalent to oil at $14.40 per barrel. Oil on the world market is selling for $70 per barrel. Shale Crescent’s natural gas is real bargain for industry AND it is literally right under the plants in our region which minimizes transportation costs. This is why industry in Europe and Asia is looking to locate here. Our job as Shale Crescent (the organization) is to let the world know about our energy advantage.
Europe is a great place for us to prospect. We know where they are getting their energy whether it is Russia or from renewables it is very expensive. The other problem Europe has by getting gas from Putin and Gazprom is that Putin can apply political pressure, if he chooses, like he did in Ukraine in 2014 and simply close the valve, shutting off their natural gas. The energy advantage we have in the Shale Crescent USA is long term. We offer the world a unique advantage with low natural gas and natural gas liquids (NGL) prices with an abundant supply. We have competitive electric rates, especially when compared to places like Europe, Japan, California and New England.
Now is our time. It has started. In preparation for my White House trip I contacted a number of companies in the Valley to ask them how important an extended I-68 would be to them. ALL of them said that they have added employees and ALL of them are adding more employees.
These are the high wage permanent jobs we need in this area. The growth has started. We all need to work together to keep it coming.
Thoughts to ponder.
Greg Kozera is the Director of Marketing for Shale Crescent USA www.shalecrescentusa.com . He has over 40 years of experience in the energy industry. Greg is a leadership expert with a Masters in Environmental Engineering and the author of four books and numerous published articles.