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Last Updated : Nov 18, 2013 11:20 PM IST | Source: ft.com

US energy boom will not result in isolationism, says Ernest Moniz

US energy boom will not result in isolationism, says Ernest Moniz

The US will not disengage from its role in global oil and gas security, even as its own rising fuel output makes it increasingly independent of foreign producers, the US energy secretary said.

Ernest Moniz said the possibility of the US and Canada together soon producing as much energy as they consume was "a real one".

However, he said the US still had interests in oil-producing regions such as the Middle East, and in the security of global energy flows.

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"This is not like we somehow draw back behind a curtain," he told the Financial Times.

He also offered reassurance to customers planning to buy liquefied natural gas from the US, suggesting it was highly unlikely the government would ever exercise its power to cut off those supplies.

The shale revolution, unlocking oil and gas from reserves that were not previously commercially viable, has transformed US energy production.

The International Energy Agency, the rich countries' watchdog, said last week it expected the US to be the world's largest oil producer by 2015, and to be close to self-sufficiency in energy in the next two decades. It has already fallen behind China in the rankings of the world's largest oil importers.

The energy boom has raised some Americans' hopes that the US could disengage from the Middle East because it is no longer reliant on oil imports from the region. Mr Moniz, however, played down those suggestions.

"We are in a very good energy situation compared to what was expected a decade ago, but we will not be independent of world energy markets," he said.

Mr Moniz, speaking ahead of a visit to Turkey this week to speak at an Atlantic Council energy conference, pointed out that oil was a global market, and that no country could be immune to the effect of oil prices.

For example, he said, British lorry drivers protested over fuel costs in 2000 at a time when the country was still a net oil exporter.

Moreover, the positions of US allies that are still heavily dependent on oil and gas imports "are also an issue for us".

The US is bolstering its military presence in north Asia, which is crucial for protecting the sea lanes through which oil tankers transport oil to its energy-poor allies, Japan and South Korea.

Mr Moniz also said the Middle East retained "enormous geopolitical significance" for energy, and the US had other strategic interests in the region.

Mr Moniz, a former professor at the Massachusetts Institute of Technology who was appointed to lead the energy department in May, highlighted the benefits of US LNG exports.

His department on Friday approved a fifth project for sales of LNG to countries that do not have a trade agreement with the US, greatly increasing its commercial opportunities.

The award of the permit, to a planned expansion of the Freeport LNG project in Texas, is the fourth approval this year as the pace of decision-making by the energy department has accelerated. Freeport received its first worldwide export licence in May. Mr Moniz, who was speaking before the latest decision was announced, implied that the rate of approvals would have been even quicker but for the government shutdown in October.

The pick-up in permit awards has raised fears among some large industrial gas users, who are worried that LNG exports will push up the price of gas and diminish the competitive advantage of cheap supplies for US manufacturers.

Andrew Liveris, the chief executive of Dow Chemical who has been one of the leaders of that campaign, said after the Freeport decision on Friday: "We have approached the right balance for this strategic resource, and must therefore be extremely cautious going forward."

Mr Moniz said the decisions on permits were based on an assessment of the public interest, including not only the effect on US gas prices and the domestic economy, but also "the positive benefits in terms of the position of allies [and] environmental impacts".

US gas exports can reduce consuming countries' reliance on imports from Russia and the Middle East, and help them shift to gas and away from higher-polluting coal for power generation.

The licences granted by the energy department allow the US government to block export sales under "appropriate circumstances" - a provision that has led to some concern among potential customers about the reliability of supplies if North American gas prices rise sharply.

However, Mr Moniz said there would have to be "quite dramatic" circumstances for the administration to exercise that power.

"One would have to think very hard about revoking a permit if billions of dollars had been invested in capital with the expectation of long-term contracts to get the return on that capital," he said.

Decisions on crude oil exports, unlike natural gas, are made by the commerce rather than the energy department, and so are not Mr Moniz's responsibility.

However, he did say that the Energy Information Administration, which is part of his department, had been analysing the issue. It concluded in May that fears that US oil production would be curtailed unless the crude oil export ban was lifted were "likely an overstatement of the actual situation", because changes were possible to pipelines and refineries to make it easier to find customers for domestic production.



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First Published on Nov 18, 2013 11:20 am

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