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Millions tons of coal for Ukraine: How Trump wants to achieve US energy dominance

Author : Georgiy Kuhaleyshvili

20:42, 6 July 2017
Millions tons of coal for Ukraine: How Trump wants to achieve US energy dominance

Author : Georgiy Kuhaleyshvili

US President Donald Trump said that the time has come for a policy of US energy domination. He intends to help increasing the export of US energy carriers around the world. Ukraine will not be deprived in this policy - Trump is ready to supply us with coal. According to him, Ukraine needs "millions and millions tons of coal"

20:42, 6 July 2017

Read original article at 112.ua

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Economy is first thing to manage

The US began exporting natural gas and oil during the presidency of Barack Obama. In December 2015, Obama lifted some of the oil export restrictions that operated in the United States since the oil crisis of the 1970s. During his presidency, gas pipelines and LNG terminals were built in the states of Louisiana and Maryland for the export of natural gas abroad. Under Obama, the technology of extraction of shale gas and oil by fracturing method was widely used in the USA.

Donald Trump decided to develop Obama's achievements in the framework of his "Make America great again" program, which aims to strengthen the American economy. The cornerstone of US energy domination policy is the abolition of legislative restrictions on the extraction of oil, natural gas and coal domestically and the increase in energy exports to international markets. At the moment, the US supplies natural gas to Mexico, Chile, China, India, Argentina. As for exports to Europe, this direction is not yet developed. In 2016-17 years, the United States delivered natural gas in tankers to Portugal, Spain, Italy, Holland, Poland. The US plans to increase coal exports to India, Brazil, Holland and other European countries.

With the help of increasing natural gas exports, the White House expects to reduce the US trade deficit. Last year, the US budget deficit reached $ 502.3 billion, the highest range since 2012. The problem is that Americans began to buy more goods abroad than to sell to foreign markets. Especially it concerns the consumer goods and cars. According to Donald Trump, if the US will produce oil and gas without restrictions, then US GDP will grow by $ 127 billion. According to the American Action Forum, the export of natural gas to 2040 will increase the volume of US trade by 1.6 trillion dollars. Donald Trump withdrew from the Paris Agreement, canceled the alternative energy development plan of the previous administration to stimulate the development of the coal and oil and gas industries. Within 10 years, the US plans to invest 1 trillion dollars in the development of infrastructure projects related to energy.

Republicans want to create new jobs for industrialists. To date, the drivers of the US economy are services and high technology, but not heavy industry. A significant number of American welders, engineers and machine builders are idle due to the decreasing of unprofitable industries in the cities of the so-called "Rusty Belt" (Pennsylvania, Ohio, Indiana, Michigan, Illinois) and the entry of cheaper industrial products from Asia to the US market. The crisis is experienced by the US coal industry due to the fact that power plants began to switch to natural gas. Trump is convinced that 500 thousand jobs will be created thanks to an increase in the extraction of natural resources. Currently, 6.4 million Americans work in the US energy sector. The average salary is 90 thousand dollars a year. If Trump's initiative is implemented, then within seven years the annual amount of funds for the wages of employed in the energy sector will increase by $ 30 billion. The development of oil and gas fields will require the services of a large number of engineers, geologists, drivers, welders and other professionals in the industrial sector. Related fields will also receive orders: repair companies, manufacturers of drilling equipment, vehicles, metal structures. Near the new deposits the hotel business, public catering companies will be developed.

In the United States, there is a great potential for implementing the policy of energy dominance. About 60% of US oil fields are not developed due to legislative restrictions. Confirmed oil reserves in the US are estimated at 35 billion barrels (10th place in the world), natural gas reserves amount to 9.86 trillion cubic meters (5th place in the world). During 2018-2020 years it is planned to build 4 new LNG terminals. This will allow the US to become the third largest exporter of liquefied natural gas after Australia and Qatar.

Politics - continuation of the economy

According to US Energy Secretary Rick Perry, the US will be able to find many "friends" among the countries that buy American energy resources. The Energy Minister is convinced that America's energy dominance means its self-sufficiency and security from those countries that use energy as an economic tool, including Russia. The US can use increased natural gas exports as a political tool. Cooperation in the energy sphere strengthens interdependence between countries, and so there are grounds for rapprochement in the political sphere.

In relations with the European Union, the Republican administration can use the supply of liquefied gas to reduce the dependence of European consumers on the Russian company Gazprom. This approach is in line with EU priorities to reduce dependence on individual suppliers. Republicans can strengthen the confidence of Europeans who are not satisfied with the US withdrawal from the Paris agreement, unwillingness to conclude an agreement on the Transatlantic trade and investment partnership.

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The US can strengthen its influence among the countries of Central and Eastern Europe. Poland opposed the implementation of the Nord Stream-2 gas pipeline project and is interested in reducing dependence on Russian natural gas. Before the G-20 summit, Trump intends to meet with the leaders of the countries of Central and Eastern Europe in Warsaw to discuss the prospects for cooperation in the energy sector. The US expects to agree on the supply of liquefied natural gas and other energy resources to them.

However, the US will not be able to oust Russian gas from the EU market in the near future. The share of natural gas from the Russian Federation in the EU gas market is 33%. In 2016, Russia exported 118 billion cubic meters of gas to the EU, increasing supplies by 15%. Existing US facilities produce 18.6 billion cubic meters of liquefied gas per year. Under favorable circumstances, the States can increase the volume of exports to 96 billion cubic meters to 2020. According to Forbes, Russia can specifically reduce the price of its natural gas in order to make US gas uncompetitive. So the export potential of the US and Russia in the gas market is not comparable.

Prospects for Ukraine

During the meeting of President Petro Poroshenko with his American counterpart Donald Trump and US Secretary of Energy Rick Perry, the prospects of supplying liquefied gas to Ukraine from Louisiana and coal from Pennsylvania were discussed. Trump during the substantiation of the policy of energy domination said that Ukraine needs "millions and millions of tons of coal."

Expansion of coal import directions is an urgent issue for Ukraine. The loss of control over the ORDLO deprived Ukraine of access to the lion's share of Donbas coal. Because of the blockade of Donbas, Ukraine this year experienced interruptions in the supply of coal from the occupied territories. Coal is one of the main types of fuel on which Ukrainian thermal power plants operate. Interruptions with supplies threaten outages of electricity for Ukrainian consumers. In 2016, Ukraine purchased 15.6 million tons of predominantly coking coal for $ 1.4 billion. The most volume of coal is still purchased in Russia (61.78%). For the US, the increase in coal exports to Ukraine is interesting in order to compensate its losses in other markets. Last year, Canada, the Netherlands, India, South Korea reduced imports of American coal. Then Ukraine bought coal in the US for $ 212 million. The US share in coal imports is 14.46%. The problem is only in price. American coal in 2016 cost Ukraine more ($ 112 per tonne) than Russian ($ 85 per tonne). An increase in the volume of imports of American coal will be beneficial for Kyiv, if Washington makes a good discount.

 It is currently impossible to import liquefied gas from the US, since there are no LNG terminals for receiving it in Ukrainian ports. The question of the construction of such objects has been exaggerated in government circles for a long time. The cost of an LNG terminal with a capacity of 10 billion cubic meters of gas per year was estimated at $ 2.5 billion in 2010. In 2012, the possibility of building an LNG terminal near the port of Pivdenny in Odesa region was being explored. The project was to be led by the Spanish Gas Natural company. The solving of this issue was halted in connection with the events of EuroMaidan and the change of power in Ukraine. In 2014, the project was recalled by former Prime Minister Arseniy Yatsenyuk, who said that Ukraine keeps plans for the construction of an LNG terminal. In July 2015, Naftogaz Ukraine signed a memorandum with the US Frontera Resources company on the import of liquefied gas.

The supply of energy from the US is beneficial for Ukraine in the conditions of searching ways to reduce energy dependence on Russia. The only question is the price of American gas and coal for Ukrainian consumers, on which the benefits of cooperation will depend.

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