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Atlantic Council


A Natural Gas
Diplomacy Strategy
for the New US
Agnia Grigas
A Natural Gas
Diplomacy Strategy
for the New US
Agnia Grigas

Energy Diplomacy Initiative

The Energy Diplomacy Initiative (EDI), as part of the Atlantic Councils Global Energy Center,
aims to drive a global conversation on critical climate and energy security challenges, with the
objective to prevent conflict and build bridges through energy ties, provide everyone with access
to reliable, affordable, sustainable, and modern energy, and galvanize communities for climate
action around a more stable, secure, and prosperous world.

Cover photo credit: REUTERS/George Frey. A natural gas drilling rig operates as natural gas piping rises
from underground outside Rifle, Colorado, June 6, 2012.

ISBN: 978-1-61977-456-8

This report is written and published in accordance with the Atlantic Council Policy on Intellectual
Independence. The author is solely responsible for its analysis and recommendations. The Atlantic Council
and its donors do not determine, nor do they necessarily endorse or advocate for, any of this reports

January 2017
Table of Contents

Executive Summary..................................................................................................................... 9

Introduction..................................................................................................................................... 10

Natural Gas Markets in Transition........................................................................................... 12

The United States in the Geopolitics of Natural Gas ...................................................... 14

Policy Recommendations ......................................................................................................... 18

Conclusion....................................................................................................................................... 20

About the Author.......................................................................................................................... 20

A Natural Gas Diplomacy Strategy for the New US Administration

Executive Summary
The new US presidential administration of Donald J. As an emerging energy superpower, the United States
Trump and the newly elected Congress will have an should take on a leadership role in the global natural
opportunity to reassess the countrys domestic natural gas markets to support its allies in Europe, contain its
gas policies and its natural gas diplomacy strategy in adversaries, and reshape relations with rising Asian
the face of transformed global natural gas markets. powers. Already, Russias energy influence is waning in
Natural gas is on the verge of becoming a global its historic markets in Europe, its old backyards of the
commodity, a development that has been spearheaded Caucasus and Central Asia, and Asia where it hopes to
by a boom in US shale gas production, the growth of gain new markets. By leveraging its energy influence
the global liquefied natural gas (LNG) trade, and a and formulating a gas diplomacy strategy, Washington
buildup of gas transport infrastructure worldwide. can favorably realign strategic relations between the
world powers.
As a result of the shale boom, the United States has
emerged as the worlds greatest producer of natural Continued political support for easing regulations
gas and is rising to become a leading exporter of LNG. on LNG exports, improved pipeline infrastructure in
In 2016, the first US LNG deliveries made their way to the United States, and new trade agreements would
Latin America, Europe, Asia, and the Gulf. The United support the United States breakout position in the
States has also been instrumental in changing the global gas markets. By strengthening its cooperation
conventional practices of the international gas trade: with NATO countries and other allies over energy
away from a reliance on long-term contracts to the securityincluding by exporting technology and
introduction of spot trading, and away from gas prices expertise and providing investment or funding on shale
that are linked to oil to those that are linked to Henry development and LNG tradethe United States would
Hub, the foremost US natural gas trading hub. These cement its leadership position in the new geopolitics
practices are gaining wider acceptance. of gas.

A Natural Gas Diplomacy Strategy for the New US Administration

As Donald J. Trump takes office as the forty-fifth half-century-long status quo of global gas relations.
president of the United States on January 20, 2017, his Traditional gas suppliers like Russia are seeing their
administration will have an opportunity to reassess US influence wane, while gas-importing states have more
energy policy, specifically, its natural gas policy. This flexibility and optionality in their import sources. US
reassessment will not only be a by-product of a change LNG exports add greater liquidity to the global natural
in leadership in Washington, but is necessitated by the gas markets and thus can help secure and diversify
fundamental transformation of the worlds natural gas Europes supplies. Direct deliveries are also possible as
markets since President Barack Obama took office per US early exports to Spain and Portugal. Moreover,
eight years ago. In 2011, the International Energy US LNG can contain the influence of Russian gas
Agency proclaimed that the world energy markets behemoth Gazprom and Moscows use of gas supplies
were entering the golden age of gas.1 Since then, as a foreign policy tool. It can also court energy-hungry
the natural gas markets have seen an influx of new Asian powers like China, which has been trying to
gas sources, greater liquidity, a growing liquefied secure its natural gas imports and has looked to Russia
natural gas (LNG) trade, a buildup of gas transport as a potential supplier. If properly leveraged, Americas
infrastructure, and an increased appetite for natural gas newfound energy prowess can be an invaluable tool of
as a cleaner fossil fuel alternative diplomacy and help ensure that US
to oil or coal. The boom in US and allied leadership continues to
shale gas development, which
also irreversibly altered Americas
The budding US guide the twenty-first century.

natural gas industry, spearheaded role as an energy While over the past few years, US
energy policy has seen divisive
many of these worldwide changes. superpower partisan debate over energy
The United States emerged as the
worlds leading gas producer in offers a number production, exports, and how
2011 and as an LNG exporter in of opportunities to address climate change, the
benefits of the United States
2016, with US inaugural deliveries
to Brazil, India, United Arab
for the new natural gas boom offer room
Emirates, Argentina, Portugal, administration for bipartisan agreement. The
economic, climatic, security, and
Kuwait, Chile, Spain, China, Jordan,
the Dominican Republic, and
and the American geopolitical gains awarded by
Mexico. In the coming years, the natural gas the rise of US domestic energy
United States stands to become industry. production offer many benefits
for the next US administration.
one of the worlds leading LNG
exporters. While some would prefer to see
more environmental regulation
The budding US role as an energy superpower offers in domestic gas production, especially in regards to
a number of opportunities for the new administration fracking, and others would prefer to boost production
and the American natural gas industry. At the same to maximize economic and energy security benefits, at
time, the United States faces a number of challenges: this point neither the Democrats nor the Republicans
a resurgent Russia, a vulnerable and potentially would seek to block US LNG exports or hinder the
fracturing Europe, and an unstable Middle East. How American natural gas industry. Moreover, in light of
can Washington leverage its natural gas endowment climate change concerns, many regard gas as a cleaner
for diplomatic aims under these circumstances? How fossil fuel that can serve as a bridge to renewables,
should the United States lead in the international gas potentially reducing carbon dioxide emissions.
markets given the new geopolitics of natural gas?
Nonetheless, President Trumps administration will
The geopolitics of natural gas is already undergoing a undoubtedly face unexpected developments and
significant shift. The emergence of new gas resources potentially new challenges in the energy markets.
and the growth of LNG trade are challenging the Markets are fickle and cyclical. It is uncertain how long
the current cycle of low oil and gas prices and tempered
energy demand will last. In contrast, if low gas prices
1 International Energy Agency, Are We Entering a Golden Age
of Gas? World Energy Outlook 2011, Special Report 2011,

A Natural Gas Diplomacy Strategy for the New US Administration

LNG terminal at Sabine Pass, Texas, USA. Photo credit: Think Defense/Flickr.

persist, will worldwide investment in LNG import and constraints for the next administrations domestic and
export infrastructure continue? For now, the US gas international natural gas policies. In many instances,
industry has demonstrated an incredible aptitude for these realities present opportunities for US leadership
raising efficiency and reducing costs in the low-price in the newly emergent global gas markets and the
environment. New technological breakthroughsfor new geopolitics of natural gas. These developments
instance, in renewable energy resourcescan also offer will be outlined region by region with a focus on
game-changing opportunities and alter the status quo. the geopolitical gas triangle between Washington,
The gas market previously experienced a turnabout Brussels, and Moscow. Additionally, the report presents
when the US shale boom effectively terminated earlier a number of strategies and policy recommendations to
plans for US LNG import projects and instead launched leverage US leadership and make the most of the new
US LNG exports. opportunities in an increasingly interconnected global
energy market.
This report sets out the realities of the transforming
global gas sector, which will shape the prospects and

A Natural Gas Diplomacy Strategy for the New US Administration

Natural Gas Markets in Transition

Over the last decade, the global gas sector has percent of total LNG volumes traded globally in 2014
witnessed changes that have no real precedent into the international gas market.5
in recent history. The shale gas revolution in the
United States, the growing global LNG trade, and a Growing LNG trade has also facilitated the
buildup of pipeline interconnectors and gas transport development of a new and increasingly global gas
infrastructure are making gas a global commodity. market. It has turned gasa previously localized and
Recent technological achievements and various difficult-to-transport resourceinto an increasingly
market factors have made this transformation of the liquid global commodity. The history of LNG trade
natural gas industry possible. Most evidently, in the US goes all the way back to the late 1950s and 1960s when
shale boom, long-term policy planning and changing it became a commercial endeavor in the United States,
political and economic considerations have played an North Africa, and the Middle East. However, the last
important role. The shale gas revolution originated decade has seen a surge in LNG trade. For example,
from government-led research programs of the 1970s by the end of 2015, global LNG trade surpassed the
to 1990s, which paved the way for shale formations former all-time high of 241.5 million tons (mt) of 2011
mapping, hydraulic fracturing, and horizontal drilling and grew to a record 244.8 mt. This growth was driven
technologies. In later years, bold entrepreneurship by a steady increase in LNG-exporting states, which
and market forces ensured success. Geopolitical currently number at least seventeen. The leading LNG
considerations also played a part. For example, the exporters include Qatar, Australia, Malaysia, Nigeria,
United States acute dependency on energy resources and Indonesia. At the same time, there is a constant
from the Middle East, and the ensuing oil shocks of the growth in demand. There are at least thirty-three LNG
1970s, taught Washington the important lesson that it importing countries, with two newcomers, Colombia
cannot fully rely on anyone but itself. and Ghana, entering the market in late 2016 and 2017
These newly improved technologies that have allowed
the United States to fully harness its unconventional Today, the demand for American LNG abroad chiefly
gas reserves have fundamentally altered the countrys depends on commercial considerations like pricing
gas production capabilities. They nearly doubled the and shipping costs as well as seasonal fluctuations
former total proven reserves of natural gas from 5.8 of demand; factors like financing opportunities and
trillion cubic meters (tm3) at the end of 2005 to 10.4 infrastructure availability also come into play. LNG
tm3 in 2015. Simultaneously, gas production rates were demand may also be driven by political considerations,
boosted 50 percent, from 511.1 billion cubic meters particularly in states and regions where gas import
(bm3) in 2005 to 767.3 bm3 in 2015.2 As a result, after diversification is important for energy security. As
a hard fought competition that lasted for over thirty a matter of fact, politics played a profound role in
years, in 2011 the United States managed to surpass the early years of the LNG industry. In 1959, the first
Russia as the worlds largest producer of natural gas.3 American LNG exports went to the United States
Most of this breakthrough came from shale gas, which closest ally, the United Kingdom, and in the 1970s
quickly increased its share in US gas production: from and 1980s, the United States exported to Japanalso
barely 1 percent in 2000 to more than 20 percent in a close ally. More recently, commercial and political
2010, and then to over 50 percent in 2016.4 Looking considerations prompted Northern and Eastern
forward, the future is even brighter for the American European countries like Lithuania and Poland to
gas industry. The United States is poised to become a
sizable exporter, because according to estimates, by
2020, it will add the equivalent of approximately 20
5 International Energy Statistics, EIA; Shale in the United
States, EIA, October 22, 2015,
in_brief/article/shale_in_the_united_states.cfm; World LNG
Report2015 Edition, International Gas Union, June 2015, 6, 30,
2 BP, BP Statistical Review of World Energy June 2016, Pureprint
Group, 2016, 20, 22. IGU-World%20LNG%20Report-2015%20Edition.pdf.
3 How Much Shale Gas Is Produced in the United States? 6 World LNG Report2015 Edition, 611; 2016 World LNG Report,
Frequently Asked Questions, US Energy Information 4, 6-9, 45; Lynn Doan, Mitsui to Supply Colombia Its First
Administration (EIA), June 14, 2016, Liquefied Natural Gas Cargo, Bloomberg, May 27, 2016, www.
4 EIA, Annual Energy Outlook 2016 with projections to colombia-its-first-liquefied-natural-gas-cargo; Ghana sees
2040, August 2016, first LNG imports landing in early 2017, Reuters, June 6, 2016,

A Natural Gas Diplomacy Strategy for the New US Administration

acquire LNG-importing capabilities to diversify away Asia, which became possible after new pipelines were
from Russian gas. built in the late 2000s. These infrastructural projects
also weakened Moscows influence in the region and
The current surge of new gas pipelines and other gas brought countries like Turkmenistan and China closer
transport and interconnecting infrastructures both together. However, the pace of gas infrastructure
in Europe and in Asia serves as yet another example development in places like China, India, and Southeast
of the significant political and market forces at play. Asia is nowhere near that of Europe or North America.
The construction of the Nord Stream pipeline and the
controversial plans for Nord Stream II were by and Another feature of the rapid transformation of the
large initiated by Russia due to its political interest in global gas market is that factors like shale, LNG,
removing Ukraine from its gas transit role in Europe, and the development of new infrastructure have
and its commercial interest of satisfying Western started to alter how gas is priced and contracts are
Europes gas demand. The Turk Stream pipeline and made. US energy company Chenieres LNG exports
its earlier iterations have been are increasing the prevalence of
shelved and revived numerous linking gas prices to US Henry
times over the years, because
of the tumultuous political
Another feature Hub levelsbased on the United
States best-known natural gas
relationship between Europe, of the rapid trading huband, therefore,
Russia, and Turkey and the latters transformation traditional gas price indexation to
rising gas demand. oil is being challenged. Moreover,
of the global gas the abundance of new oil and gas
At the same time, Russias abuse market is that resources in the markets has driven
of its monopolistic standing in
the European gas markets has factors like shale, down energy prices, creating more
optionality and flexibility for gas
incentivized the European Union LNG, and the importers. Contract destination
(EU) not only to pursue an antitrust
case against Gazprom but also to
development of clauses, which forbid wholesalers
in an import market from reselling
seek alternative gas supply routes. new infrastructure gas outside the countries where
As a result, the EU embarked on a
largely political quest to establish
have started to they are established and which
have been Gazproms favored
the Southern Gas Corridor in alter how gas tools, are not used by US
order to bring Caspian gas from is priced and exporters. In addition, the EU has
Azerbaijan and beyond. Moscows
increasingly aggressive foreign contracts are put regulatory pressure on gas
suppliers, including Gazprom, to
policy in both Ukraine and Syria made. increase gas flow flexibility by
provided additional impetus for annulling such destination clauses.
Brussels to seek alternatives to Likewise spot trading rather than
Russian natural resources. Finally, Moscows politicized solely relying on long-term contracts for gas supplies
use of gas exports in its relationship with Ukraineone is becoming more popular in the global gas markets.
of the main gas transit countries to Europegalvanized These trends challenge traditional relations between
the EUs political ambitions of building a network exporting and importing states, which are bound to
of gas interconnectors that could potentially buffer witness a monumental change. New gas deals are
Europe from unstable Russian gas flows. likely to spur cooperation between new sets of states,
form new alliances, and establish new patterns of trade
Political forces and market dynamics have also been
in regions like Europe, Asia, Latin America, and the
driving gas infrastructure projects in Asia, Central
Middle East.
Asia, and the Caucasus. Chinas growing demand for
energy is increasingly satisfied by gas from Central

A Natural Gas Diplomacy Strategy for the New US Administration

The United States in the Geopolitics

of Natural Gas
What are the immediate implications of the rapidly In earlier times, when there were fewer gas suppliers
changing global gas market for the geopolitics of gas? and less export and import infrastructure available,
For one, it means that the role of politics will diminish liquidity and optionality were almost nonexistent for
and that gas markets will have the upper hand in the many importers. Thus, gas relations were long-term
gas trade. Factors like increased competition and arrangements between two states and often had an
greater market pressure will force new and traditional even more politicized and strategic calculus than
gas suppliers to abandon the old ways of bringing gas that of oil. Nowadays, however, trade dynamics have
to consumers. As a result, it will become increasingly changed so that importers and exporters no longer
difficult for monopolists to maintain captive or near- interact simply on a bilateral basis, but are subject
captive markets. Granted, this does not mean that long- to the forces of the global natural gas markets.
term gas supply relationships will suddenly become This diversification of supply dynamics has brought
irrelevant; rather, the increase of diverse producers unprecedented interconnectedness to regional gas
and gas transport options will markets, which historically were
pave the way for diversification of often stuck in vulnerable and
supplies and growth of short-term Factors like unbalanced dependences vis--vis
relationships and spot trading. the exporting state.
Also, new technology such as
floating LNG, compressed natural competition and Still, regardless of the increasingly
diffused nature of the supply-
gas, and other innovations are
slowly but steadily challenging
greater market demand dynamics, political
the age of costly large-scale gas pressure will force considerations are unlikely to
supply infrastructure. Improved new and traditional disappear in the new geopolitics
of gas. This is largely because
logistical capabilities are another
significant development. The gas suppliers to interconnection and liquidity are
enlargement of the Suez Canal abandon the old likely to tilt the power balance from
the exporters to the importers,
in 2015 and the expansion of the
Panama Canal in 2016, specifically
ways of bringing who will now have much greater
to accommodate gargantuan LNG gas to consumers. diversification capabilities to
tankers like the Q-Max, serve as satisfy their demand. Furthermore,
prime examples. As a result, in the in the years to come, the change in
summer of 2016, China was able to receive its first US the balance of power between gas
LNG shipment from Sabine Pass that sailed through exporters and importers will have other implications.
the Panama Canal. For instance, US partners like the EU will have the
potential to reduce their dependence on Russian
This multitude of changes will allow gas-importing gas and thus be more willing to resort to using
states to select their suppliers and forms of gas energy sanctions vis--vis Moscow in conflicts, such
imports on a much more flexible basis. Imports may as Ukraine. In sum, this dawn of the new geopolitics
include piped gas or LNG, and volumes may be of gas is likely to alter the importers standing from
adjusted according to seasonal swings in demand, a bargaining position of weakness into a position of
economic performance, or political calculations. strength.
Another key feature of this new globalizing gas market
is that it provides greater flexibility for re-exporting Given the vast potential of its LNG exports, the
unwanted gas volumes. Consequently, this allows for United States is on the verge of becoming an energy
a more efficient way of mitigating various crises and superpower. As a result, the question of how the
gas shortages across the globe. United States will shape the new energy order
naturally emerges. The age-old debate in Washington
The growing interconnectedness and trade in the global of whether the country should keep its vast energy
gas markets will enhance stability of gas supplies for resources for domestic consumption and thus ensure
importing countries and will depoliticize such imports. energy independence or be open to exports seems to

A Natural Gas Diplomacy Strategy for the New US Administration

Donald Trump speaking at the 2013 Conservative Political Action Conference (CPAC) in National Harbor, Maryland.
Photo credit: David Stanley/Flickr.

be withering away. However, the debate is far from over. strategic use of these newfound energy resourcesin
For instance, the White House, Senate, Department the form of denied or enabled access to themcould
of Energy, and the State Department, among other become an effective instrument in the foreign policy
government agencies, have differed in opinion about toolkit that Washington employs. Potential uses of this
the ideal approach. There is some likelihood that the resource policy could vary from coordinated efforts
change in administration and a rise in energy prices with allies to enact sanctions against energy exports of
might reignite the debate. If, however, the current hostile powers to creating energy blockades vis--vis
policy line is not abandoned, and the United States targeted states or relieving allies, who are cut-off from
remains firmly rooted in its support for open markets, energy supplies by rival states.
it will be well-placed to emerge as a dominant LNG,
and perhaps even oil, exporter. Overall, the recent shale revolution has provided the
United States with the power to take a leadership
Even though the State Department has noted it will not position in the global gas sector and the geopolitics
use American energy exports for coercive purposes, of gas. Given the countrys long-standing history
this does not mean that the United States should not in support of open markets, Washington is well
pursue gas diplomacy to gain influence globally.7 As positioned to stand tall as the champion of global gas
the worlds last superpower, the United States has trade and the de-politicization of gas.
interests well beyond its borders and, therefore, it
has not shied away from demonstrating leadership in EUROPE
even the most remote corners of the planet. Hence, The emergence of a new order of gas will possibly
the United States should use its newfound energy have the greatest impact on the European continent
prominence to support allies, contain foes, and reign and the post-Soviet region. The developments in
in rivals. From Cuba to Iran to the Soviet Union, and the European gas markets will be favorable for US
most recently to Russia, the United States has a long interests, because Russia will slowly but steadily
and successful history of using sanctions against lose its strategic chokehold as the dominant natural
revisionist powers. Thus, it is more likely than not that gas supplier. This will become particularly evident
if the EU manages to accomplish all of its planned
7 John Kerry, Remarks at the US-EU Energy Council Meeting, interconnective gas infrastructure and succeeds
Brussels, Belgium, April 2, 2014,
in diversifying its natural gas supply routes. The

A Natural Gas Diplomacy Strategy for the New US Administration

United States has long advocated for European in the long term it will reduce Moscows influence in
energy diversification and now Europe has become a the region.
viable market for US LNG exports. While it is more
difficult for US LNG to compete with Russian piped RUSSIA
gas in a low-price environment and even if US LNG Of all major energy producers, Russia will likely lose
is not exported in significant volumes to all parts of the most in this new order of natural gas markets.
Europe, the fact that the US can now meet its own gas While this does not necessarily mean it will lose export
demand with domestic production rather than imports markets or be forced to reduce its export volumes,
frees up other sources of gas and puts downward it will, however, experience greater competition both
pressure on gas prices for the benefit of European in Europe and Asia. This trend is already evident in
gas importing states. Indeed, the European market will the post-Soviet region, where, thanks to new pipelines
most likely be a spot market for US LNG, while long- from the Caucasus and Central Asia, countries have
term contracts will likely be signed with customers been gradually liberating themselves from Moscows
in Asia. Nonetheless, in some European markets like monopolistic grip over their gas markets and
Spain or the United Kingdom, which are further away infrastructure. Europes liberalizing efforts have also
from Russian pipelines, US LNG is expected to take a been one of the main impetuses for Russias interest
significant share of the market. The changing rules of in China and other countries in the East as alternative
the gas trade in addition to liquidity and low prices gas consumers. However, given Chinas colossal
may force Gazprom to play by the rules and if they market size, diversification strategy, and geopolitical
do, it will not matter as much for European security weight, Beijingnot Moscowwill dictate the terms
or energy markets even if Europeans continue to buy on which any future gas deals will be made including
significant amounts of gas from the forthcoming Power of Siberia
Russia. pipeline that will bring Russian
The EUs energy security would Of all major energy gas to China. In general, Gazprom
also be strengthened if the bloc producers, Russia will increasingly face
competition from other natural
finally manages to establish an
effective energy union, allowing
will likely lose the gas exporters, most notably the
it to negotiate gas deals with one most in this new United States. As a result, it will be
forced to refrain from insisting on
voice. Simultaneously, its policy order of natural long-term contracts, oil-linked gas
agenda of prioritizing the use of
renewable energy sources and gas markets. pricing, and destination clauses
that for decades have been the
increasing energy efficiency, while
staple of its business approach.
cutting its reliance on fossil fuels,
will likely mitigate the importance of natural gas on the Russias weakening grip on the post-Soviet region in
continent. However, these developments are likely only the natural gas markets has other implications than
if the EU manages to sustain its structural integrity and just reducing the likelihood of Moscow using the so
the UKs Brexit remains an isolated case. Aside from called energy weapon against energy-poor countries.
that, the EU still is facing a myriad of problems: The In particular, corruption, behind-the-scenes political
Syrian refugee crisis, growing populism and far-right scheming, and vicious cycles of rents in both the post-
movements, and the difficulties of maintaining a firm Soviet region and the EU can be expected to decrease
policy line vis--vis Russia are all likely to add pressure when Russian gas (and accompanying Russian gas
on the unity of the bloc. interests) lose market share. Given that half of Russias
state budget income is from energy exports, Gazprom
In Eastern Europe, countries like Ukraine and Belarus
will work hard to maintain its current clients and
are likely to lose some of their significance as transit
attract new ones. These exports, along with the gas
countries for Russian gas in the longer term because
relationships, provide a revanchist Moscow with both
European access to Caspian gas, reverse gas flows,
influence and power. In such circumstances, the United
and LNG imports will reduce their importance to
States should support its allies as they seek to improve
the EU. If Moscow succeeds in building alternative
their energy security and diversify from Russian gas,
pipelines to Europe, the role of Ukraine in particular
while keeping in mind that a dramatic loss of revenues
will also decrease from the vantage point of Russia.
from energy imports would spell instability not only for
For the US, it is important to realize that, although this
the Russian economy but also for its political system.
development will cost the Ukraine revenue and the
country may require additional economic assistance,

A Natural Gas Diplomacy Strategy for the New US Administration

ASIA will be facing considerable competition from countries

In the past, the United States interest in the geopolitics like Australia, Qatar, and Indonesia, as well as Russian
of gas mainly revolved around the relationship piped gas, though Russian LNG export capabilities are
between Russia and Europe, however, the globalizing still lagging.
gas market highlights the growing importance of Asia.
If China succeeds in ramping up its domestic gas
Europes tempered demand for gas, the emergence of
production, including its shale gas reserves, Beijing
the United States as an LNG exporter, and Russias bid
will be an even fiercer negotiator with potential gas
to find new customers makes Asia possibly the most
suppliers. Beijings current policy toward shale gas
important market for gas exports. By 2035, the Asia-
production is linked with its worries of colossal future
Pacific regions share of the worlds energy demand
energy needs, and growing pressures from the public
is expected to rise to 47 percent, making it two times
to tackle chronic pollution that has plagued many
greater than the second-largest energy-consuming
of the countrys cities and regions. To date, Chinas
region, comprising Europe, Russia, and the post-Soviet
efforts of recovering unconventional gas resources in
countries, whose share is expected to be 18 percent of
the Sichuan Basin have been mostly driven by political
global demand.8
considerationsthough tremendous investments
Chinas role is particularly important in this equation have resulted in only meager volumes of output. For
because the countries that supply it with gas will example, by the end of 2014, Beijing had drilled four
doubtlessly gain revenues and influence. For the hundred wells and invested well over US $3 billion,
time being, this opportunity is still largely open. yet this led to the production of a mere 1.25 bm3 of
Central Asian countries, specifically Turkmenistan, natural gas. In 2015, its shale output reached a total of
Kazakhstan, and Uzbekistan have been exporting gas 4.47 bm3, an improvement but still an underwhelming
to China since the 2000s, and in recent years Russia amount.9 In general, Chinas strategy will focus on
has sought to build two gas pipelinesthe Power of domestic production and the diversification of energy
Siberia and the Altaito deliver its resources. Given imports, allowing Beijing to emerge in a position of
the new conditions of the global gas markets and strength rather than weakness in the negotiations to
Beijings preference for diversification of energy come. In the event that China eventually manages to
imports, there will be more than one or two suppliers experience a similar shale gas boom to that of United
to satisfy Chinas vast appetite for gas. As a result, the States, the global natural gas markets would be bound
United States, with its LNG exporting capabilities, is for further change.
particularly suited for this task. However, Washington
9 New Shale Gas Discovery in South-West China Adds to
8 BP Energy Outlook 2035: Country and Regional InsightsAsia Already Prolific Fueling Field, Shale Gas International, July 12,
Pacific, BP, 2015, 2016,
energy-economics/energy-outlook-2015/Regional_insights_ gas-discovery-in-south-west-china-adds-to-already-prolific-
Asia_Pacific.pdf. fuling-field/.

A Natural Gas Diplomacy Strategy for the New US Administration

Policy Recommendations
The ability of the United States to fully capitalize on the Regulatory Energy Commission (FERC), the US
globalizing gas market and the shale revolution both Maritime Administration, and the Coast Guard. At
at home and abroad depends on domestic political this point there is little more that Congress and the
currents. President Trump and the new Republican- government can do to improve such regulation. Even
dominated Congress have the capacity to shape the reducing permitting time to thirty days would, in the
energy and foreign policy priorities of the worlds greater scheme of things, have little impact. Thus, the
leading gas producer and consumer. They are likely most important policy recommendation is for the new
to favor increased natural gas and coal production administration to maintain a steady course, which
and reduced environmental and industry regulation. would allow the country to capitalize on its shale gas
Democrats in Congress will likely continue to prioritize revolution and consolidate the countrys standing as
greater regulation of the gas industry, particularly when the leader in global gas markets.
it comes to fracking, as well as to boost the profile
of renewables in the countrys energy market. Given Since free trade agreements (FTAs) like the Trans-
the economic and geopolitical Pacific Partnership (TPP) with
benefits of US LNG exports, the the Pacific Rim countries and the
new administration should not President Trump Transatlantic Trade Investment
Partnership (TTIP) with the
restrict natural gas exports. It
would be wise to leverage the
and the new EU are unlikely to find much
newfound gas resources both for Republican- support within the new Trump
administration, it is worthwhile
the benefit of the United States
and to help shape a new world of
dominated for policy planners to consider
gas diplomacy and trade. Congress have what other agreements or

The United States, together with

the capacity to arrangements could be made to
bolster US energy exports well
its allies, can pursue a number shape the energy beyond the twenty countries that
of both short- and long-term and foreign policy currently have signed FTAs with
strategies to assist the emergence Washington.
of a truly global gas market. Doing priorities of the
so would not only support the worlds leading Another agenda item for the
new administration should be to
creation of a de-politicized gas
industry, but would also directly
gas producer and broaden Washingtons energy
benefit Washington, Brussels, and consumer. cooperation with its allies. In
others. Though US energy matters recent years, Washington and
are chiefly driven by the markets other allied capitals have observed
and private companies, policy makers can also play NATOs increased focus on energy
a role. security. Although NATO has yet to formulate a
coherent strategic-level approach to energy, it already
More attention should be awarded to pipeline projects plays a role on the operational level by analyzing
that would connect gas-producing regionslike the how potential disruption of energy supplies could
Bakken Formation in Montana and North Dakota (as affect both societal functions and NATO missions.
well as parts of Canada)with export infrastructure These tasks are among the primary objectives of the
to market this gas beyond the countrys borders. In NATO Energy Security Centre of Excellence in Vilnius,
addition, the government could focus on placing a lid Lithuania, which opened in 2012. Although the center
on both environmentally and economically harmful needs to broaden the scope of its activities to include
practices, like gas flaring, by providing incentives issues like Europes energy security, it has the potential
for companies to build additional infrastructure that to become a hub where policy makers and technical
would gather, process, and transport excessive gas experts can come up with new and innovative ways
volumes to consumers or export terminals. of tackling cutting-edge energy security issues. Given
that the United States is by far the greatest energy
The success of LNG exports and their terminals producer in NATO, it should be on the vanguard of
also depends on the continued timely permitting formulating the Alliances energy agenda. Also, both
and licensing by the Department of Energy, Federal

A Natural Gas Diplomacy Strategy for the New US Administration

the United States and Norway are the linchpins of Klaipda. Furthermore, relevant government agencies
NATOs energy security as they have the capacity to and the gas industry could support allies keen on
provide alternative supplies in case hostile powers cut- developing their own domestic natural gas resources
off gas deliveries to Alliance members. by either sharing experiences, selling technologies, or,
in the case of private companies, providing investment.
US leadership and greater NATO cooperation are
also needed because Moscow employs an active Still, it is important to note that Washington is not
divide and rule stratagem when planning its new omnipotent and there are clear limits to the tools at its
pipelines. NATO member Turkey, for example, despite disposal. Unlike the EU, which has the capacity to fund
the diplomatic spat that followed the downing of the hard assets and has great sway over energy companies
Russian fighter jet in 2015, has been the prime target. within its borders, the United States government lacks
Turkey will play an increasingly significant role in these structural instruments. As a result, both Brussels
Europes energy security and stability in the Middle and Washington could achieve the greatest results by
East, as a result, no matter how its energy deals with strengthening transatlantic cooperation. Thanks to
Russia turn out, cooperation between Washington and its Third Energy Directive, the EU has the capacity to
Ankara will remain of the utmost importance. Although provide funding not only for electricity distribution
Turkey does not currently permit the shipment of LNG networks and pipeline interconnectors, but also for
through the Bosphorus strait, due to concerns over LNG import facilities. Although the EU has already
safety and shipping lane congestion, this remains the made considerable progress in this direction, it still
only way American and other LNG shipments could has a lot more to accomplish. However, given the
potentially reach the shores of Ukraine and other fragmented nature of the decision-making apparatus in
countries in the Black Sea region. Brussels, which prevents it from speaking with a single
voice, the United States has to pick up the mantle of
Another way the United States could support energy- leadership. It is up to Washington to forge a long-
vulnerable states in Europe, Asia, and beyond is by term strategic vision, capitalize on the opportunities
sharing its know-how or financing feasibility studies for afforded by its new position in the natural gas markets,
pipeline infrastructure, gas storage caverns, and LNG and reduce the risks for itself and its allies in this new
terminals. For example, Washington funded the initial era of geopolitics of gas.
feasibility study for Lithuanias new LNG terminal in

A Natural Gas Diplomacy Strategy for the New US Administration

The recent transformative developments in the United markets and promote open, secure, and de-politicized
States gas sector and the global gas markets warrant flows of natural gas. The incoming administration
a reassessment of the role natural gas can play in the should also embrace its newfound energy prowess to
Trump administrations energy policy and international forge a distinct gas diplomacy strategy to support its
diplomacy. While the country has emerged as the allies, contain its foes, and engage its potential rivals.
greatest producer of natural gas and is on track to This approach would leverage economic and political
becoming a significant LNG exporter, which has gains for the nation and help mitigate the inevitable
positive implications for the United States and its allies, risks and changes that will emerge in the energy
a number of opportunities and potential risks merit the markets and the international political system during
administrations attention. The United States needs to the term of the new administration and beyond.
cement its position as a leading player in the global gas

About the Author

Dr. Agnia Grigas is a Nonresident Senior Fellow with the Atlantic Councils Dinu Patriciu Eurasia
Center. She speaks and publishes on energy; security; and foreign policy regarding the United
States, Europe, the post-Soviet space, Russia, and the Baltic states.

She is the author of three books: The New Geopolitics of Natural Gas (Harvard UP, forthcoming
2017), Beyond Crimea: The New Russian Empire (Yale UP, 2016) and The Politics of Energy and
Memory Between the Baltic States and Russia (Ashgate, 2013).

In the private sector, Dr. Grigas has more than a decade of experience as an adviser to
corporations and government institutions. Her clients have included the likes of Barclays Bank, where she led its
international growth initiatives including opening a global strategic engineering center in Lithuania. Previously,
she worked as an Associate with leading global consultancy Eurasia Group, where she advised on emerging
markets for its multinational clients. She began her career as a Financial Analyst at JP Morgan, where she
worked on Eurobond issuance for corporations and governments.

Dr. Grigas also served as adviser on energy security and the economy for the Lithuanian Minister of Foreign
Affairs (2008-2009), focusing on regional gas diversification solutions and foreign direct investment.

She has held various fellowships including the Truman National Security Fellowship (2015-2016), and since 2014
she has been a Nonresident Senior Fellow at the McKinnon Center for Global Affairs at Occidental College. She
collaborates with prominent American and European research institutions and has published studies for the
Oxford Institute for Energy Studies, The Royal Institute of International Affairs (Chatham House), and Notre
Europe Jacques Delors Institute, among others.

An experienced communicator on screen, in print, and in person, she is an official contributor to The Hill and a
frequent media commentator in outlets including CNN, Forbes, Newsweek, Bloomberg, and Reuters.

Dr. Grigas earned her masters and doctorate in international relations from the University of Oxford and graduated
cum laude with a BA in politics and economics from Columbia University. She resides in Washington, DC.

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