The United States is beginning to realize the strategic benefits of the fracking revolution. And they just keep growing.
This week at the IHS CERAWeek energy summit in Texas, Secretary of Energy Ernest Moniz said that the United States anticipated "becoming big players" in the global liquefied natural gas market and that "there's a good chance that we will be LNG exporters on the scale of Qatar," which he noted was the world's largest LNG exporter.
Technological leaps in fracking and more efficient drills have dramatically altered the energy landscape. Data from the U.S. Energy Information Administration illustrates how swiftly the revolution in LNG has come. In 2005, the U.S. imported a net 4 trillion cubic feet of LNG; by2025 the U.S. will be a net exporter of that amount. Another report shows current U.S. monthly dry shale gas production at almost 40 billion cubic feet per day, up from about 2.5 billion cubic feet in 2000. One field, the Marcellus basin under West Virginia, Pennsylvania and New York, is responsible for over a third of the increased output. Marcellus was producing only fractional amounts five years ago.
The surge in LNG production is part of a general good news story when it comes to energy. Overall American oil and natural gas production is soaring. In 2012, the U.S. surpassed Russia as the leading energy producer, measured by combined oil and gas energy production, and in 2014 U.S. oil production alone surpassed the energy output of Saudi Arabia's oil and natural gas combined.
The United States, which until recently had been predicting a future of energy scarcity, now has to consider the emerging possibilities of energy as an element of national power. The energy surge is redrawing the world's strategic landscape. The locus of global energy is shifting more rapidly out of the Middle East, which has the dual benefits of making that region and its myriad conflicts less important, and decreasing the flow of Western wealth into countries that convert it into destabilizing influences such as Islamic terrorism and Iran's nuclear program.
OPEC has attempted to push back against the U.S. energy surge. Saudi Arabia's oil minister, Ali al-Naimi, views the recent production-induced decline in oil prices as a means of heading off the U.S. energy surge. Crude oil prices bottomed out last month just over $42 per barrel and have risen to over $56 since, down from over $107 last June. Fracking is supposedly unsustainable when oil prices go below $50 or $60 per barrel, though overall American production is not slowing yet. But the Saudi plan is short-term at best. The break-even points for most OPEC countries to sustain their energy-based economies are much higher, in the range of $100 to $130 per barrel. And even if OPEC can maintain this strategy long enough to affect U.S. energy output, when prices rise again, the fracking boom will continue.
The surge inLNG in particular has the potential to break Moscow's grip on European countries that rely on Russian natural gas. At the 2013 Gas Exporting Countries Forum summit in Moscow, Russian President Vladimir Putin decried the "shale revolution" that had the potential to undermine Russia's continental energy dominance. The output from U.S. Marcellus region alone is, according to one report, "roughly equivalent to Russia's exports to Europe through the Nord Stream, Yamal, and Brotherhood pipelines." In 2014, G-7 energy ministers developed a core set of principles for a coordinated energy security strategy. According to Moniz, "these principles emphasized a broad and collective approach to energy security." The Energy Department and interagency and international partners "have supported the Government of Ukraine in the development of their own winter contingency plan." Other countries such as Lithuania and Poland that pipe in natural gas from Russia are building port facilities to import LNG from other sources, particularly the U.S.
The time has passed when the United States could view global energy strategy in mostly defensive terms, based on false notions of future scarcity and diminishing choices. The fracking revolution is creating a new world in which American energy can reshape old strategic paradigms and undercut adversary states whose center of gravity is oil and natural gas. When it comes to energy, the United States has the power.