“The Oil and Gas Weapon Won’t Work”: Davis & Leggett on Ukraine.

Lt. Col. Daniel Davis & Jeremy Leggett in The National Interest: “After many weeks of political chaos and bloodshed in Kiev, Moscow sent soldiers across the frontier into the Crimea on February 27, claiming it aimed to protect the Russian-speaking population.” “Writing in theWashington Post on March 7, former US Secretary of State Condoleezza Rice captured the essence of many in the US who advocate using oil as a weapon against Russia. She wrote that “soon, North America’s bounty of oil and gas will swamp Moscow’s capacity. Authorizing the Keystone XL pipeline and championing natural gas exports would signal that we intend to do precisely that.” Secretary Rice’s assumptions regarding the state of US tight oil and gas as “bountiful” are common among many opinion leaders in the West. They also happen to be wrong.
Before contemplating the use of US oil and gas as a strategic weapon, it might be useful to review a few key fundamentals. First, consider the following oil production, consumption and import/export numbers reported by British Petroleum for 2012. Russia produced 10.6 million barrels per day (mbd), consumed 3.2 mbd, leaving 7.4 mbd available for export. The United States produced 8.9 mbd, consumed 18.5 mbd, and imported 10.5 mbd.
All the talk of America “soon overtaking Russia” as the world’s largest oil producer comes with a rather sizeable asterisk: even if that eventually occurs, the US will still be required to import an additional five to six million barrels of oil per day, while Russia would have an additional 7 to 8 mbd to export. This fact places the Russian Federation in a considerably stronger energy-security position than the United States.
Second, such action would likely penalize US citizens. Chris Nelder, an independent energy analyst and journalist hits the nail on the head: “I don’t think U.S. consumers are willing to pay higher prices for natural gas, grid power, and gasoline to enable the uncertain possibility that doing so would ‘stick it to Putin’ some years down the line.”
Petroleum geologist and energy analyst Arthur Berman also warns there would be unintended consequences to exporting American natural gas. “The U.S. imports nearly 4 billion cubic feet of gas per day. It seems a bit premature to be discussing natural gas export when you are a net importer and are likely to remain one until at least 2018 according to the EIA.” Least we forget, conventional gas in the US accounts for almost 60 percent of the total produced and is declining at about 20 percent per year. Unconventional gas, meanwhile, is declining at more than 30 percent each year. “Taken together,” Berman calculates, “the US needs to replace 19 billion cubic feet per day each year to maintain production at flat levels. That’s almost four Barnett shale plays at full production each year.”
It is clear the United States is going to have an increasingly difficult time in the coming years meeting its own gas needs. How it is in America’s energy-security interest to export domestic supplies when the US is already a net-gas importer, however, is not clear.
Part of the problem seems to be a broadly held, though empirically unsupportable position that the US tight oil and gas boom of the past several years is a sustainable and expandable phenomenon. Yet geoscientist David Hughes—a thirty-year veteran of the Canadian Geological Survey whose data derives from over sixty-five thousand oil and gas wells shows what is commonly referred to as the “tight oil boom” is more likely to be a temporary bump.
“The ‘shale revolution’ behind the export enthusiasm lacks staying power,” he concludes, “given the very high well- and field-declines that demand high rates of drilling to sustain. Even the EIA reference case 2014 forecast, which is optimistic compared to actual shale oil production, projects a peak in 2021. Most shale gas plays in the US except for the Marcellus and associated gas from the Bakken and Eagle Ford tight oil plays are flat or in decline, which is likely to mean higher and more volatile prices, such as those seen in the last quarter, strongly contradicting the meme of low gas prices for the foreseeable future.”
Exporting oil and gas now would undoubtedly give oil companies a huge spike in profits, but then in just a few years when the US need for imports will grow, the cost per barrel will likely be much higher than it is now, and that cost will be borne not by the richer oil companies but primarily by middle- and lower-class Americans. The situation in the Crimea is serious and deserves to be dealt with in a responsible manner. But in the emotion of the moment we must avoid making decisions that may not accomplish our international objectives while perversely causing harm to the citizens of the United States.”

Daniel L. Davis, a Lieutenant Colonel in the US Army, is a widely published researcher on national security including energy policy. Dr. Jeremy Leggett is author of the critically acclaimed book The Energy of Nations—Risk Blindness and the Road to Renaissance. The opinions expressed in this article are those of the authors alone and do not represent the views of the Department of Defense or the Department of the Army.


 

 

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Scenes from The Winning of the Carbon War

Park Lane Intercontinental, London, October 29th, 2014

Tony Hayward & Bob Dudley: similar pasts to me, somewhat different views of the future
Tony Hayward & Bob Dudley: similar pasts to me, somewhat different views of the future

“BP’s retreat from renewables has been so dismal to watch. After the high hopes of the Browne years came a shameless retrenchment to carbon under Tony Hayward’s leadership, notwithstanding hardening scientific evidence on climate change. Now, under Bob Dudley – who once headed BP’s solar unit – BP is on a dedicated mission to emulate ExxonMobil’s worst.”


Parliament Square, London, October 24th and 25th, 2014

Young people anguished about the future can protest. So long as they keep off the grass.
Young people anguished about the future can protest. So long as they keep off the grass.

“Modern capitalism is broken. I say this as a nominally successful capitalist. My experience has shown me that the system is suicidally dysfuntional. It is on course to destroy both itself, and more importantly the viable civilisation people of my generation have a moral duty to handover to our children and grandchildren. ….But it can be changed. It can be fixed.”


Moscow, October 14th, 2014

A gas pipeline carries Russian gas through Ukraine - for the time being
A gas pipeline carries Russian gas through Ukraine - for the time being

“’Let us be frank, in a comradely and hopefully constructive way’, I say with a smile. ‘Most of Europe is desperate to escape having to pay so much for Russian oil and gas exports, or even having to buy any Russian oil and gas’.”


New York, 21-26 September 21st – 26th, 2014

The NYPD find a novel way to deflate the carbon bubble on Wall Street
The NYPD find a novel way to deflate the carbon bubble on Wall Street

“I am often tempted to write ‘life, stranger than art’, in the pages of this chronicle. I can only get away with that cliché maybe once. Let it be here. The NYPD has found a way to deflate the carbon bubble. I mean the one twenty feet across, carried by protestors above their heads as they poured into Wall Street. The police popped it on one of the horns of the Merrill Lynch bull.”


Riyadh, Saudi Arabia, September 18th, 2014

Riyadh at night. By day, no solar panel-plus-storage to be seen. Yet.
Riyadh at night. By day, no solar panel-plus-storage to be seen. Yet.

“I arrive at night, and am driven from the airport into a city lit up like a fireworks display. Six million people live here. They are burning oil in power plants to provide electricity with few constraints on waste. It is akin to shovelling their national income into a furnace, at an accelerating rate every day.”


Somewhere in London, September 15th, 2014

An EV charged by leftover solar from a fully solar-powered home in cloudy Britain
An EV charged by leftover solar from a fully solar-powered home in cloudy Britain

“The world’s largest private bank predicts that by 2020 it will be possible to have a solar roof, an electric vehicle and a domestic battery bank, powering everything you need in a home, with mouth-watering economics. That energy-trio purchase will be able to pay for itself within six to eight years, while giving a 7% pre-tax annual return on investment. Such household economics, UBS concludes, will change the face of the energy industry.”


Online somewhere, July 10th, 2014

Some of the most strident warnings have been in the Conservative party's favourite paper
Some of the most strident warnings have been in the Conservative party's favourite paper

“A momentous article has appeared in the Telegraph. It argues that fossil fuels are the new subprime threat to the global economy ….(and that) a solar revolution is rushing up on society under the radar, the standard bearer of a transformative green industrial revolution that can no longer be avoided.” Some wag, unknown to me, has written on Twitter: “What world are we living in when the Telegraph starts sounding like Jeremy Leggett?”


No 10 Downing Street, London, July 7th, 2014

Delivering a letter from 150 companies to the UK PM
Delivering a letter from 150 companies to the UK PM

“Obama took personal charge of the pushback. ‘Science is science’, he said in an interview with the New York Times. ‘And there is no doubt that if we burned all the fossil fuel that’s in the ground right now that the planet’s going to get too hot and the consequences could be dire’.”


The Houses of Parliament, London, July 2nd, 2014

Juliet Davenport, Good Energy CEO: "solar is a fantastic technology"
Juliet Davenport, Good Energy CEO: "solar is a fantastic technology"

“A journalist from the Wall Street Journal seems impatient with all the British reserve on offer, and the morass of technical detail on subsidies that masks what is clearly the most fundamental of disputes. What is it, exactly, that you are worried about, she asks me. A repeat of 2011, I tell her. The government launched an ambush on the solar industry back then: a savage subsidy cut with only 6 weeks notice, aiming to decimate us. The gas industry was behind it.”


Mayfair, London, June 12th, 2014

Shell strands an asset on rocks en route to explore for Arctic oil
Shell strands an asset on rocks en route to explore for Arctic oil

“The whole concept (of the carbon bubble and stranded assets) is ‘fundamentally flawed’, Shell concludes. And worse, ‘there is a danger that some interest groups use it to trivialize the important societal issue of rising levels of C02 in the atmosphere’. …. I have been accused of many things by the incumbency over the years. Trivializing global warming is a first.”