Natural gas is playing a big role in the current standoff between Russia and Ukraine, with the United States and Europe playing major supporting roles. The U.S. Energy Information Administration (EIA) recently reported that 16 percent of the 18.7 trillion cubic feet of natural gas consumed in Europe in 2013 flowed from Russia through two pipelines in Ukraine.

While that amount is not insignificant, it is down by about 50 percent from several years ago. In 2011, the North Stream pipeline, which runs under the Baltic Sea directly from Russia to Germany, came online, resulting in reduced reliance on Ukraine pipelines for transport from the rich Russian gas fields to Western Europe.

In addition, work is progressing on a South Stream pipeline, which will run from Russia under the Black Sea to Bulgaria, again bypassing Ukraine.

Dependence on Russia

The North Stream and South Stream projects will achieve two objectives for Russia: reduce reliance of Russia’s natural gas monopoly on the unstable relationship with Ukraine and ensure Europe’s deepening dependence on gas supplies from Russia. This is where the United States enters the picture. Thanks to its vast reserves and the refinement of such gas production technologies as hydraulic fracturing and horizontal drilling, the United States has edged ahead of Russia as the world’s largest producer of natural gas, with Canada a distant third.

There are now multiple calls for the United States to begin shipping liquefied natural gas (LNG) to Europe to begin loosening Russia’s economic grip on the West. One of those calls was recently made to U.S. House Speaker John Boehner (R-OH) in a letter from the ambassadors of Hungary, Poland, Slovakia, and the Czech Republic, who wrote that the export of U.S. LNG to those nations would be a welcomed development.

Export expected in 2015

Currently, there are no U.S. terminals that export LNG.  Such terminals must be licensed by the Department of Energy (DOE), and that process is proceeding slowly, with about six approved in the last year and many others pending. The DOE is particularly slow in approving export applications that involve nations that are not free-trade partners with the U.S. The first DOE-approved LNG terminal in the United States is expected to begin exporting in late 2015 at the earliest.

In response to the letter, Speaker Boehner said the administration should end its “defector export ban” on U.S. LNG exports both to heed the “call from our allies” and to “keep [Russia’s President Vladimir] Putin in check.” Multiple bills have been introduced in Congress to expedite the federal approval process for export terminals.

Energy costs

But resistance is coming from several directions. Environmentalists are concerned that export will necessitate increased production and growth in the use of hydraulic fracturing, a process they believe presents high risks to underground sources of drinking water. Their unexpected allies are chemical and manufacturing companies who believe that a rush to export LNG will raise natural gas, electricity, and propane prices for Americans.

Their alternative solutions include exporting American hydraulic fracturing technology to Ukraine so it can develop its own domestic shale gas resources, thereby diminishing Russia’s influence. Ukraine has more than 40 trillion cubic feet of technically recoverable natural gas, according to America's Energy Advantage (AEA), a group of businesses that believes the United States should carefully consider the economic consequences before allowing “unfettered natural gas exports.”