21 Jul

Shale gas revolution has been driving US energy market by increasing economic and industrial competitiveness. Today, shale gas has gained acceptance as “bonanza” which triggered slump in gas prices and sparked off widening the energy gap between US and Europe. US gas export is forecasted to bemounted up 6 billion cubic feet per day signifying UK’s daily demand in winter as of 2020. At this stage, a potential oil and gas trade between US and EU will become an inevitable pace for world energy supply-demand balance.

Transatlantic Trade and Investment Partnership (TTIP) will enable to access to US oil and gas markets which will likely to decrease dependency on Russian gas in EU zone. Hence, TTIP may become an epoch-making agreement in terms of US energy export policy and EU gas import dependency . Hence, EU proposes a binding agreement covering crude oil and gas trade licensing procedures which will be ensured by modifying US longstanding energy legislation and provide automatic license approval for energy export to EU.

US Oil & Gas Export Regulatory Framework

Companies shall obtain two types of federal licences: Department of Energy (“DOE”) must grant an export permit and also a facilities permission shall be obtained from Federal Energy Regulation Commission (“FERC”). In case of gas exports to countries which has signed a free trade agreement (“FTA”) accordance with public interest is adequate to attain licenses. Notwithstanding that as to whether export gas to non-FTA countries will be determined by DOE which shall be parallel public interest. As of 2013, 26 projects have received permission for LNG gas exports to FTA countries whereas merely 4 projects have obtained approval for non-FTA countries. As the world’s leader energy producer, US must ease its restrictions on energy trading by reason of having a corner on the global energy trading.

US crude oil exports ban has remained in force since of the mid-1970s in line with the Arab oil embargo. At the president time, US became dominant country in oil market with 50% boost in domestic production. Effacement of trade restrictions on crude oil in US legislation will actualize a genuinely unified front provided that TTIP comes into force.

Expert Opinion: Effects of TTIP to EU and US Markets

Great Exposure on EU Energy Intensive Manufacturing Industries

Although, TTIP may reduce EU dependency to Russian energy, abolishment of all oil and gas trade barriers between US and EU will cause downstream on investments to Europe since companies will intend to benefit from cheaper manufacturing opportunities in US. Particularly, heavy industry in Europe will encounter with market shrinkage. Also, competitiveness of Europe energy markets because of the difference in energy prices will no longer remain which may be result of TTIP agreement.

Oil and Gas Prices Future In US

Energy export limitations in US market is a key component of low energy prices. On condition that licensing procedures are streamlined, oil and gas prices are expected to increase in US market. TTIP agreement will originate an equilibrium price mechanism in US and EU energy markets that is forecasted to be formed above US current oil and gas prices and under EU market prices.


Herdem Law Firm, Istanbul Turkey

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