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Irina Slav

Irina Slav

Irina is a writer for the U.S.-based Divergente LLC consulting firm with over a decade of experience writing on the oil and gas industry.

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Is The Kremlin Funding A Campaign That Undermines U.S. Fracking?

Fracking image

The recent National Intelligence Council report assessing the involvement of Russia in last year’s U.S. presidential elections spurred a flurry of media reports suggesting that Russia is heavily involved in anti-fracking campaigning. Some authors interpreted this involvement as a “propaganda effort”, while others claimed the Kremlin was financially backing anti-fracking groups in the U.S., without, however, providing any evidence for this claim.

The basis for all these reports is part of the report, in which the authors discuss the agenda of RT, a state-funded TV channel and website that is widely seen as the Kremlin’s chief megaphone abroad. They quote shows and reports that led them to conclude that RT aimed at fueling discontent in the U.S. and influence interior politics.

Anti-fracking rhetoric was identified in the report as a major element of RT’s agenda and interpreted by the report’s authors as reflecting Russia’s concern about the growing influence of shale oil and gas on international markets and “the potential challenges to Gazprom’s profitability.”

One media report author, Drew Johnson, went further, seeing this rhetoric as indicative of Putin’s direct financial involvement in anti-fracking campaigns in an effort to undermine America’s energy independence.

It only takes a bit of common sense to see why Russia would not be too happy with the shale revolution – it brought prices down, shaving billions off Russia’s state revenues from oil. So, the suggestion that the Kremlin has a material interest in undermining the popularity of fracking in the U.S. by fueling opposition to it is a logical one. Yet, besides this logical suggestion, there are several questions that might raise some doubts as to the actual “Russian threat” to fracking. Related: Trump’s Trade War With Mexico Could Crash Natural Gas Prices

First of all, how is Russia directly harmed by the growing shale oil and gas production in the U.S.? Unlike Saudi Arabia, whose oil minister has been making condescending remarks about the future of shale oil, Russia does not export its own fossil fuels to America, so that can’t be a reason for the campaigns.

Second, was Russia the worst hit by the oil price crash? Certainly not; that was Venezuela. But what’s more, Russia’s energy industry has proved to be very resilient—more than a lot of small U.S. shale players—simply because of size and government support. One could argue that the U.S. energy industry actually suffered a bigger blow from the price crash than the Russian industry. So, Russia has no reason to hold a grudge against the shale boomers, especially since they weren’t the only ones to raise production to record levels, bringing the prices down.

Third, the threat that American gas could pose to Gazprom’s profitability is a very remote one: gas is exported either via pipelines or as LNG. Gazprom’s pipeline network around Russia and in Europe ensures its stable position on regional markets – a position that it will take U.S. exporters a lot of time and investment to challenge by offering competitive prices and easy deliveries of their gas. Related: Is Deepwater Drilling About To Make A Comeback?

Fourth, why would Russia want to undermine America’s energy independence? This independence may actually be good news for Moscow: the more U.S. oil and gas is consumed locally, the less it has for exports. In 2015, imports accounted for 24 percent of oil and oil product consumption, which was the lowest since 1970, according to the EIA, but still quite high. As energy independence is a priority for the Trump administration, satisfying domestic consumption with local output will likely be more important than expanding globally through exports, possibly threatening Russian markets.

Last, the rise of anti-fracking sentiments hardly has anything to do with Russian propaganda, no matter how passionately the latter supports it. Anti-fracking sentiment has a lot to do with growing environmental concerns in the U.S. that seek to reduce all fossil fuel extraction, as well as with the huge increase in seismic activity in some parts of the U.S., such as Oklahoma, after the start of the shale revolution.

By Irina Slav for Oilprice.com

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  • Coffeeguyzz on February 01 2017 said:
    Russia, KSA, and other major oil supplying countries have been funding protests, couched in environmental guise, for years now.

    Several lawsuits targeting anti frac/anti pipeline groups have tried, unsuccessfully, to identify sources of funding.
  • Dan on February 02 2017 said:
    Google funds anti Microsoft , Ford funds anti FCA, Dole funds anti competition. Lamestream media fund anti web media. Surprised?
  • Lee James on February 03 2017 said:
    RT may well undermine unconventional "fracing" extraction in the U.S.

    In addition to what RT does, some Americans like to believe fracing offers more promise than it actually does. Fracing is in the "tough oil" category, if you take a world-wide perspective about oil production. With fracing, a barrel of oil costs much more than a Mid-East barrel. And we do not quite account for all the leaked and spilled resource that is a part of bringing in and transporting the tougher crudes that we increasingly rely on here in the states.

    I don't just look to denigrate American crude extraction. It all suggests that if we want to be independent from foreign oil, do it by displacing oil-burning machines. I hope the electric car, for example, will become part of the solution.
  • Michael Berndtson on February 03 2017 said:
    Well said. Much of the push back on gogo oil and gas development started truly at the grassroots. These would be folks in Pennsylvania who owned land above Marcellus shale and wondered why US EPA and Pennsylvania DEC weren't addressing their concerns. Many of the large environmental NGOs initially supported loosely regulated fracking as part of the natural gas bridge, starting with Bush's 2005 energy policy and extending through Obama's "all the above" energy suggestion. This so called "anti fracking" movement was very much late to the game. All the sweet spots in Bakken, Marcellus, Texas fields, etc already were in production by the time the average Fox News watcher heard about Josh Fox and his movie.

    Russia has so much more natural gas than US in reserves - along with customers it can pipe its gas to - that it really doesn't care about US fracking or LNG exports. China won't buy US LNG at two to three times the price of Russia's piped gas. Unless there's something to the new-new economy I don't understand. I get a kick out of recent reports comparing US technical reserves to other countries proved reserves. It's like comparing Michael Jordan to me, assuming I was good at basketball and played in the NBA. More to the point, Russia shale and tight rock fields are being developed with US horizontal drilling and fracking technology. It's a matter of whether or not they're paying for the intellectual property that should be the focus going forward.

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