{"id":69517,"date":"2021-12-21T14:30:05","date_gmt":"2021-12-21T03:30:05","guid":{"rendered":"https:\/\/www.aspistrategist.ru\/?p=69517"},"modified":"2021-12-21T13:13:20","modified_gmt":"2021-12-21T02:13:20","slug":"australia-could-lose-out-from-geopolitical-machinations-over-global-gas-supplies","status":"publish","type":"post","link":"https:\/\/www.aspistrategist.ru\/australia-could-lose-out-from-geopolitical-machinations-over-global-gas-supplies\/","title":{"rendered":"Australia could lose out from geopolitical machinations over global gas supplies"},"content":{"rendered":"
<\/figure>\n

In August last year, Olaf Scholz\u2014then Germany\u2019s finance minister and now its chancellor\u2014attempted to persuade the Trump administration to drop its proposed sanctions on the companies building the Nord Stream 2 gas pipeline from Russia to Germany beneath the Baltic Sea.<\/p>\n

Betting on the transactional nature of Donald Trump\u2019s regime, Scholz wrote to Treasury Secretary Steven Mnuchin promising that Germany would spend \u20ac1 billion on facilities for importing liquefied natural gas from the US if the construction of the pipeline were able to proceed unhindered.<\/p>\n

Because it was transactional, the Trump administration calculated that Germany would be more likely to boost its LNG purchases from the US if sanctions were enforced. The mere threat of them halted the pipeline\u2019s construction.<\/p>\n

It took the Biden administration to withdraw the shadow of sanctions, allowing the pipeline to be completed with an understanding that Germany wouldn\u2019t allow Russia to use its gas supplies to Europe as a weapon against Ukraine.<\/p>\n

The detail of that understanding wasn\u2019t disclosed, but with the US warning that Russia could be planning a major attack on Ukraine, the security of gas supplies to Germany and the rest of Western Europe hangs in the balance.<\/p>\n

It\u2019s assumed that Germany has promised the US that it won\u2019t import gas through the new pipeline if Russia takes military action against Ukraine or turns off gas supplies through the trans-Ukrainian pipeline.<\/p>\n

Russia supplies around half the European Union\u2019s gas imports and couldn\u2019t readily be replaced by other suppliers, such as pipelines from Norway, or by LNG.<\/p>\n

Demand for gas is partly being driven by the phasing out of coal-fired power stations. As a fossil fuel, gas is being targeted for phase-out by climate activists as well as coal, but policymakers see it as a transition fuel because of its lower carbon emissions and its responsiveness at times when renewable power sources aren\u2019t operating.<\/p>\n

The expectation is that as electricity-storage technology develops, the need for gas will diminish, but in the meantime, gas supplies are critical to power generation, industry and domestic and commercial heating.<\/p>\n

Europe has seen Russia use its control over gas supplies for geopolitical ends before. Russia turned off the taps in the thick of winter in January 2009, halting all gas supplies through pipelines that passed through Ukraine to Western Europe, ostensibly in a dispute over transit fees.<\/p>\n

The Nord Stream 2 pipeline, built at a cost of around US$11 billion and designed to carry around 55 billion cubic metres of gas a year (equivalent to around half Australia\u2019s LNG exports), would reduce the strategic importance of Ukraine to Europe while increasing Europe\u2019s direct dependence on Russia.<\/p>\n

The pipeline has been completed but is not yet operational because regulatory approvals haven\u2019t been granted. Russia has cut back its supplies to Europe through Ukraine, with speculation that it\u2019s engineering a price spike to force regulators\u2019 hands.<\/p>\n

It has been almost 50 years since the OPEC nations pushed the security of energy supplies to the forefront of global geopolitics. Then it was oil; today, it\u2019s gas.<\/p>\n

Russia is using its vast reserves to leverage its return to superpower status. The US sees its own gas reserves from fracking as an alternative to Russian supplies.<\/p>\n

There are other important players in global gas markets. Australia is the largest exporter of LNG, with output now marginally higher than the long-time dominant supplier, Qatar. Taken together, however, Russia\u2019s supplies of pipeline gas and LNG are more than double the size of Australia\u2019s shipments.<\/p>\n

The US is the most potent counter to Russia because its exports are growing so rapidly. International Energy Agency data<\/a> shows US gas exports rising from less than 20 billion cubic metres in 2017 to 85 billion cubic metres this year and a forecast 125 billion cubic metres by 2025. It will overtake both Australia and Qatar, which both export of a little over 100 billion cubic metres.<\/p>\n

Russia\u2019s LNG exports are also growing rapidly, but 85% of its exports are through pipelines. Gas is generally cheaper through pipelines. Pipelines lock customers and suppliers together, with neither able to switch readily.<\/p>\n

The US has been vocal in its opposition to the Nord Stream 2 pipeline since the Obama administration, but its principled support for Ukrainian economic independence has always been backed by self-interest. As a rapidly growing exporter, the US is keen to gain market share from whomever it can and it has always seen Europe\u2019s need for imported gas as a valuable prize.<\/p>\n

While seeking to increase Western Europe\u2019s dependence on its gas, Russia has also been trying to reduce its dependence on Europe. The EU imposed sanctions on Russia in the wake of its seizure of Crimea in 2014, and Russia doesn\u2019t want to be locked into a single export market. It completed a major pipeline from Siberia to China in 2019, which is building up to an annual capacity of around 38 billion cubic metres and is lifting its LNG export capacity.<\/p>\n

While Europe is the current focus of gas geopolitics, Asia, and China in particular, is delivering global growth in gas markets, with its manufacturing sector driving demand.<\/p>\n

Australia pioneered the Chinese LNG market with a deal for it to buy supplies from Woodside brokered by Prime Minister John Howard in 2002. Australia is by far the largest supplier to China, accounting for 43% of its market in 2020.<\/p>\n

A report by Bloomberg<\/a> earlier this year indicated that two smaller Chinese LNG importers had received orders from government officials to avoid further purchases of Australian LNG, in line with the broad Chinese campaign of economic coercion of Australia. However, this hasn\u2019t extended to the major state companies that are the principal buyers of Australian LNG.<\/p>\n

The Department of Industry, Science, Energy and Resources says these \u2018alleged directives\u2019 haven\u2019t materially affected Australian LNG sales to China, though it\u2019s likely the US will seize most of the future growth in Chinese demand.<\/p>\n

The Trump administration\u2019s trade deal with Beijing struck early last year required China to increase its purchases of US energy (principally gas, but also coal and oil) from the 2017 level of US$7 billion to US$41 billion in 2021.<\/p>\n

Tracking by the Peterson Institute for International Economics shows that from January to October this year, US energy exports to China<\/a> have fallen far short of the target and were worth only 37% of the requirement for the year to date. Both Beijing\u2019s attempts at coercion and the Trump-era deal, which the Biden administration has said it will enforce, will result in the US gaining LNG market share in China at Australia\u2019s expense.<\/p>\n","protected":false},"excerpt":{"rendered":"

In August last year, Olaf Scholz\u2014then Germany\u2019s finance minister and now its chancellor\u2014attempted to persuade the Trump administration to drop its proposed sanctions on the companies building the Nord Stream 2 gas pipeline from Russia …<\/p>\n","protected":false},"author":955,"featured_media":69539,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"_mi_skip_tracking":false,"footnotes":""},"categories":[1],"tags":[325,1153,1935,163,714],"class_list":["post-69517","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-general","tag-europe","tag-gas","tag-lng","tag-russia","tag-ukraine"],"acf":[],"yoast_head":"\nAustralia could lose out from geopolitical machinations over global gas supplies | The Strategist<\/title>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" href=\"https:\/\/www.aspistrategist.ru\/australia-could-lose-out-from-geopolitical-machinations-over-global-gas-supplies\/\" \/>\n<meta property=\"og:locale\" content=\"en_US\" \/>\n<meta property=\"og:type\" content=\"article\" \/>\n<meta property=\"og:title\" content=\"Australia could lose out from geopolitical machinations over global gas supplies | The Strategist\" \/>\n<meta property=\"og:description\" content=\"In August last year, Olaf Scholz\u2014then Germany\u2019s finance minister and now its chancellor\u2014attempted to persuade the Trump administration to drop its proposed sanctions on the companies building the Nord Stream 2 gas pipeline from Russia ...\" \/>\n<meta property=\"og:url\" content=\"https:\/\/www.aspistrategist.ru\/australia-could-lose-out-from-geopolitical-machinations-over-global-gas-supplies\/\" \/>\n<meta property=\"og:site_name\" content=\"The Strategist\" \/>\n<meta property=\"article:publisher\" content=\"https:\/\/www.facebook.com\/ASPI.org\" \/>\n<meta property=\"article:published_time\" content=\"2021-12-21T03:30:05+00:00\" \/>\n<meta property=\"article:modified_time\" content=\"2021-12-21T02:13:20+00:00\" \/>\n<meta property=\"og:image\" content=\"https:\/\/www.aspistrategist.ru\/wp-content\/uploads\/2021\/12\/GettyImages-1234444989.jpg\" \/>\n\t<meta property=\"og:image:width\" content=\"1024\" \/>\n\t<meta property=\"og:image:height\" content=\"661\" \/>\n\t<meta property=\"og:image:type\" content=\"image\/jpeg\" \/>\n<meta name=\"author\" content=\"David Uren\" \/>\n<meta name=\"twitter:card\" content=\"summary_large_image\" \/>\n<meta name=\"twitter:creator\" content=\"@ASPI_org\" \/>\n<meta name=\"twitter:site\" content=\"@ASPI_org\" \/>\n<meta name=\"twitter:label1\" content=\"Written by\" \/>\n\t<meta name=\"twitter:data1\" content=\"David Uren\" \/>\n\t<meta name=\"twitter:label2\" content=\"Est. reading time\" \/>\n\t<meta name=\"twitter:data2\" content=\"6 minutes\" \/>\n<script type=\"application\/ld+json\" class=\"yoast-schema-graph\">{\"@context\":\"https:\/\/schema.org\",\"@graph\":[{\"@type\":\"WebSite\",\"@id\":\"https:\/\/www.aspistrategist.ru\/#website\",\"url\":\"https:\/\/www.aspistrategist.ru\/\",\"name\":\"The Strategist\",\"description\":\"ASPI's analysis and commentary site\",\"potentialAction\":[{\"@type\":\"SearchAction\",\"target\":{\"@type\":\"EntryPoint\",\"urlTemplate\":\"https:\/\/www.aspistrategist.ru\/?s={search_term_string}\"},\"query-input\":\"required name=search_term_string\"}],\"inLanguage\":\"en-AU\"},{\"@type\":\"ImageObject\",\"inLanguage\":\"en-AU\",\"@id\":\"https:\/\/www.aspistrategist.ru\/australia-could-lose-out-from-geopolitical-machinations-over-global-gas-supplies\/#primaryimage\",\"url\":\"https:\/\/www.aspistrategist.ru\/wp-content\/uploads\/2021\/12\/GettyImages-1234444989.jpg\",\"contentUrl\":\"https:\/\/www.aspistrategist.ru\/wp-content\/uploads\/2021\/12\/GettyImages-1234444989.jpg\",\"width\":1024,\"height\":661,\"caption\":\"LENINGRAD REGION, RUSSIA JULY 27, 2021: A gas measuring unit at the Slavyanskaya compressor station (operated by Gazprom), the starting point of the Nord Stream 2 offshore natural gas pipeline. 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