American liquefied natural gas is reshaping the world energy market.


The last decade has seen an unprecedented boom in shale gas drilling in the United States. This has increasingly helped transition the country from being an energy importer to a major energy exporter. That transition, which presidents from both sides of the aisle have touted as being a positive step in making the country energy independent for half a century, has shaken up the world energy market.

The domestic energy sector in the U.S. is being reshaped by an increasingly global gas market. The United States set out to be a liquefied natural gas (L.N.G.) importer but the frenzy of drilling in shale gas fields over the last decade has changed that. An influx of L.N.G. from Texas and Louisiana is permeating through the global market creating a broader glut and ever lower energy prices.

This glut quickly exceeded domestic demand and import platforms which companies spent billions on had to be converted in order to accommodate exports. Energy experts have predicted that this shift will weaken Russian dominance over European power markets and help clean the smog across China and India as these cheap imports will eliminate the need for the burning of coal.

Over the next four to five years this shift is expected to become increasingly severe, making it difficult for its impact on the environment and climate change difficult to predict. As more and more multibillion-dollar export terminals are coming online in America, few are doubting the influence will be felt by poor and powerful countries alike.

Many experts are looking at Mexico as an example of the impact gas can have in a few short years. As American shale production boomed, Mexico began to replace its dirtier, coal burning products with the cheap imported gas. Now more than a quarter of the country’s electricity comes from imported American gas.

Mexico’s shared border with Texas oil and gas fields has also eased this transformation with pipelines cross between the two. Four additional cross-border pipelines are scheduled to be completed over the next two years, with many more in the planning phase.

Amy Myers Jaffe, an energy security expert at the Council on Foreign Relations said, “The bulge of L.N.G. is going to completely upset the apple cart of world energy politics and the global competition of fuels that is still hard for people to comprehend” later adding, “Russia will be the loser. We can already see their leverage on the gas market in Europe and the leverage they are trying to create over China dissipating.”

Nearly 60 percent of all new L.N.G. export capacity that is being constructed, is being constructed in the United States- which only began exporting in large quantities last year. This has given Washington a new tool in its foreign policy toolbox and propelled it to the top tier of global exporters.

The effect on Mexico has been stark. Gas imports from the US have vastly improved air quality, allowed Mexico reduce its carbon footprint, and freed up capital to invest in more exploration and production of oil. Meanwhile the increase in demand for L.N.G. is expected to be driven by China and India as their middle class grows, demanding more power and industry infrastructure.

Article written by HEI contributor Kevin Abbott.

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