Gulf Today:
No one hates the US shale revolution more than Russian President Vladimir Putin. Surging US oil and gas production is a nightmare he can’t escape. Already, US gas production and the promise of US liquefied natural gas exports have Russia’s European customers demanding cheaper prices for gas, and the Russians are reluctantly agreeing. Nothing is more critical to Putin’s power than Russian energy revenues. Oil and gas exports account for 52 per cent of the Russian state budget. That kind of dependence on one source of revenue can pay the bills when energy demand is high and prices are up, but it can be fiscally disastrous when prices fall.
Putin has long used gas exports, and Russia’s state-run gas company, Gazprom, as a lever of geopolitical influence. To extract concessions from client states, he has on numerous occasions either threatened to cut off the flow of gas, or actually done so. Ukraine knows that all too well. But that kind of ruthless behaviour sends buyers looking for new suppliers. For years, European consumers haven’t had alternatives to Russian gas. In fact, many East European countries rely on imports from Russia to meet 80 per cent or more of their natural gas needs.
As a result of America’s shale-gas boom, that’s on the verge of changing. Already, seven US LNG export terminals have received Department of Energy approval to ship gas to countries with which the United States doesn’t have free trade agreements. That includes all of Europe.