Kenneth Rapoza , Contributor
I cover business and investing in emerging markets. Opinions expressed by Forbes Contributors are their own.
OPEC is no longer in control of oil prices. Russia is. And Russia no longer is the dominant force of natural gas. The United States is. The battle for markets of cleaner and apparently abundant natural gas isn’t Iran versus Saudi Arabia; it’s the United States versus Russia.
According to the International Energy Agency, the top 10 natural gas producers are dominated by the us and…them — the hacking, colluding, democracy manipulating, evil doers known as the Russians. The U.S. has about 20% of the world’s production of natural gas, and Russia has about 19.5%. In a distant third sits Iran at 5.7%. Iran around 60% less than the Russians and American shale gas producers. Qatar is in fourth place with 4.6% of the market.
But check this out…
The Saudi’s and Americans are now angry with the Qataris. The Qataris support a group of Muslim jihadis that the Saudis do not. Their jihadis are better than Qatari jihadis. Qatari jihadis are basically Iranian jihadis. They are aligned. The Saudis and Americans have splintered from the Qataris, opening the door for the Russians.
Russian gas producer Novatek, owned by FORBES billionaire and Russia’s richest man Leonid Mikhelson, is gunning for Qatar. Mikhelson said a recent London energy conference that their liquefied natural gas projects in Russia will put them over the edge to surpass Qatar as the world’s biggest exporter of LNG.
Novatek is expected to start exporting LNG from its Yamal project in the Arctic circle later, the company’s chief financial officer, Mark Gyetvay, told Reuters. This will be Russia’s third large-scale LNG project, led by Novatek’s Arctic LNG 2, that would transform the company, and turn Russia into the world’s leader in LNG exports to Europe. This is a market the U.S. is banking on. Companies have spent hundreds of millions on new LNG export terminals in the Gulf of Mexico and off the coast of Maryland. Europe is prime real estate for American gas. Washington allowed for exporting of natural gas about two years ago. And the U.S. Senate wants to up the ante now on the Russia sanctions regime by making the sanctions extra-territorial. That means companies doing business with Russian gas pipelines and shale gas producers anywhere in the world face the threat of sanctions if a single dollar bill flows through the American banking system.
Russia and the U.S. are not just in a cyber war, or a war of words…they are in an energy battle that has OPEC on the sidelines, longing for the days when it controlled the price and flow of the world’s hydrocarbons.
“We have huge ambitions to be just as large as Qatar is as one country, but as one company,” Gyetvay said in London on the sidelines of an energy forum.
Qatar is the largest exporter of LNG today, selling 77.2 million tons annually and accounting for just under 30% of market share in 2016, according to energy research group IHS and the International Gas Union. Russia was seventh with exports of 10.8 million tons and a 4% market share of LNG exports. The Yamal project will export an additional 16.5 million tons, which would put Russia in third place just below Australia.
LNG is the only way the U.S. can compete with Russia abroad in the energy space. Russia already is the dominant foreign power in the European Union’s natural gas market because of Gazprom’s extensive pipeline system. The U.S. can’t build pipelines to Europe. It has to rely on countries having LNG terminals.
For now, the U.S. has about 70 million tons of annual LNG capacity, according to Meg Gentle, CEO of LNG exporter Tellurian. Australia has around 85 million and Qatar has 82 million tons of LNG capacity. The world will need another 20 million tons of new LNG installed capacity over the next five years. And the U.S. thinks it can nudge Russia on this one. That’s their competitor here. Much more so than the Australians and even the Qataris, a country Washington seems willing to kick to the curb in favor of the Saudis.
“The U.S. will be the cheapest source of new LNG, so we believe a lot of that (capacity) will come from the U.S.,” Gentle told Bloomberg in March. If so, she thinks the U.S. beats the Russians in Europe.