On May 21, the United States Senate approved fast-track legislation that has the potential to expedite several international trade negotiations, not least the Transatlantic Trade and Investment Partnership (TTIP), a proposed free-trade deal with Europe. For European nations, hoping that a new accord will also pave the way for greater access to US energy exports, the news should be well received.
The TTIP covers a whole host of trade issues, from regulatory cooperation to labor rights. In terms of energy, the deal could bind the US and the EU closer. Europe sources much of its energy from Russia, an increasingly unreliable and undesirable energy trading partner. That has European officials looking elsewhere.
In a recent interview with the Wall Street Journal, EU Energy Chief Maroš Šef?ovi? argued that the TTIP “could make a quite important contribution to the mutually beneficial trade exchange, but also to the energy security of the EU.” One of the major tenets of energy security is diversity of supply and, as an emerging energy superpower, the United States has a lot to offer. Agreement on TTIP could allow American oil and gas to begin freely flowing to Europe. Related: Oil Markets Can’t Ignore The Fundamentals Forever
However, for the United States, the issue represents yet another pressure point in an already complex national debate over the export of hydrocarbons.
The political context in which TTIP is being negotiated is complex. At the national level, the Obama Administration is already grappling with the controversy over lifting its four decade old ban on the export of crude oil. Exports of liquefied natural gas (LNG), while increasing, are still unnecessarily complicated if the recipient country has not signed a free trade agreement (FTA) with the United States. Obama is also fighting with his Democratic base over the free-trade deal with Pacific countries. Related: M&A To Take Front Seat In Oil Industry
Of course, even if the United States liberalizes energy exports, it would still be competing with other regional natural gas heavyweights. Norway recently outstripped Russia as Europe’s main supplier. According to recent figures, Norway exported around 1 trillion cubic feet (tcf) of gas to Western Europe in the first quarter of 2015 compared to around 700 billion cubic feet (bcf) from Russia. Europe’s energy chiefs are also reportedly talking to suppliers from across the Caspian and North Africa. Still, the economic and political stability of the United States is a major attraction.
For the US, Europe offers a huge market for energy products. Cracks are already appearing in the LNG and crude oil export limitations, but free-trade agreements can further this goal. In a low price environment, US shale oil and gas producers could use the market access. That will provide them with a broader customer base at a time when they need it.
The opportunity to increase cooperation on clean energy technology, research and development, and environmental protection is also significant. Related: OPEC Struggling To Keep Up The Pace In Oil Price War
Furthermore, TTIP may provide a vehicle for energy trade beyond Europe. Not only will the US benefit from trade with Europe, but by opening up the US for energy exports, America takes a step forward on broader a broader free-trade agenda on energy. That could ultimately lead to more US oil and gas exported around the globe.
Not only will the European Union benefit from more energy supplies, but many nations across Asia and the Americas are also hoping that the US lifts restrictions on oil and gas exports , allowing them to diversify their supply base as well.
As TTIP inches closer to reality, it could have a ripple effect across global energy markets.
By Alexis Arthur of Oilprice.com
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