The Geopolitics of Shale from Stratfor

The Geopolitics of  Shale is republished with permission of Stratfor.”

By Robert D. Kaplan Chief  Geopolitical Analyst

According to the elite newspapers and journals of opinion, the future of  foreign affairs mainly rests on ideas: the moral impetus for humanitarian  intervention, the various theories governing exchange rates and debt rebalancing  necessary to fix Europe, the rise of cosmopolitanism alongside the stubborn  vibrancy of nationalism in  East Asia and so on. In other words, the world of the future can be  engineered and defined based on doctoral theses. And to a certain extent this  may be true. As the 20th century showed us, ideologies — whether communism,  fascism or humanism — matter and matter greatly.

But there is another truth: The reality of large, impersonal forces like  geography and the environment that also help to determine the future of human  events. Africa has historically been poor largely because of few  good natural harbors and few navigable rivers from the interior to the  coast. Russia is paranoid because its  land mass is exposed to invasion with few natural barriers. The Persian Gulf  sheikhdoms are fabulously wealthy not because of ideas but because of large  energy deposits underground. You get the point. Intellectuals concentrate on  what they can change, but we are helpless to change much of what happens.

Enter shale, a sedimentary rock within which natural gas can be trapped.  Shale gas constitutes a new source of extractable energy for the post-industrial  world. Countries that have considerable shale deposits will be better placed in  the 21st century competition between states, and those without such deposits  will be worse off. Ideas will matter little in this regard.

Stratfor, as it happens, has studied the issue in depth. Herein is my own  analysis, influenced in part by Stratfor’s research.

So let’s look at who has shale and how that may change geopolitics. For the  future will be heavily influenced by what lies underground.

The United States, it turns out, has vast deposits of shale gas: in Texas,  Louisiana, North Dakota, Pennsylvania, Ohio, New York and elsewhere. America,  regardless of many of the political choices it makes, is poised to be an energy  giant of the 21st century. In particular, the Gulf Coast, centered on Texas and  Louisiana, has embarked upon a shale gas and tight oil boom. That development  will make the Caribbean an economic focal point of the Western Hemisphere,  encouraged further by the 2014 widening of the Panama Canal. At the same time,  cooperation between Texas and adjacent Mexico will intensify, as Mexico  increasingly becomes a market for shale gas, with its own exploited shale basins  near its northern border.

This is, in part, troubling news for Russia. Russia  is currently the energy giant of Europe, exporting natural gas westward in  great quantities, providing Moscow with political leverage all over Central and  particularly Eastern Europe. However, Russia’s reserves are often in parts of  Siberia that are hard and expensive to exploit — though Russia’s extraction  technology, once old, has been considerably modernized. And Russia for the  moment may face relatively little competition in Europe. But what if in the  future the United States were able to export shale gas to Europe at a  competitive price?

The United States still has few capabilities to export shale gas to Europe.  It would have to build new liquefaction facilities to do that; in other words,  it would have to erect plants on the Gulf of Mexico that convert the gas into  liquid so that it could be transported by ship across the Atlantic, where  regasification facilities there would reconvert it back into gas. This is doable  with capital investment, expertise and favorable legislation. Countries that  build such facilities will have more energy options, to export or import,  whatever the case may be. So imagine a future in which the United States exports  liquefied shale gas to Europe, reducing the dependence that European countries  have on Russian energy. The geopolitics of Europe could shift somewhat. Natural  gas might become less of a political tool for Russia and more of a purely  economic one (though even such a not-so-subtle shift would require significant  exports of shale gas from North America to Europe).

Less dependence on Russia would allow the vision of a truly independent,  culturally vibrant Central and Eastern Europe to fully prosper — an ideal of  the region’s intellectuals for centuries, even as ideas in this case would have  little to do with it.

This might especially be relevant to Poland. For Poland may have significant  deposits of shale gas. Were Polish shale deposits to prove the largest in Europe  (a very big “if”), Poland  could become more of an energy producer in its own right, turning this flat  country with no natural defenses to the east and west — annihilated by both  Germany and the Soviet Union in the 20th century — into a pivot state or  midlevel power in the 21st. The United States, in turn, somewhat liberated from  Middle East oil because of its own energy sources (including natural gas finds),  could focus on building up Poland as a friendly power, even as it loses  substantial interest in Saudi Arabia. To be sure, the immense deposits of oil  and natural gas in the Arabian Peninsula, Iraq and Iran will keep the Middle  East a major energy exporter for decades. But the shale gas revolution will  complicate the world’s hydrocarbon supply and allocation, so that the Middle  East may lose some of its primacy.

It turns out that Australia also has  large new natural gas deposits that, with liquefaction facilities, could  turn it into a principal energy exporter to East Asia, assuming Australia  significantly lowers its cost of production (which may prove very hard to do).  Because Australia is already starting to emerge as the most dependable military  ally of the United States in the Anglosphere, the alliance of these two  great energy producers of the future could further cement Western influence in  Asia. The United States and Australia would divide up the world: after a  fashion, of course. Indeed, if unconventional natural gas exploitation has  anything to do with it, the so-called post-American world would be anything  but.

The geopolitical emergence of Canada — again, the result of natural gas and  oil — could amplify this trend. Canada has immense natural gas deposits in  Alberta, which could possibly be transported by future pipelines to British  Columbia, where, with liquefaction facilities, it could then be exported to East  Asia. Meanwhile, eastern Canada could be the beneficiary of new shale gas  deposits that reach across the border into the northeastern United States. Thus,  new energy discoveries would bind the two North American countries closer, even  as North America and Australia become more powerful on the world scene.

China also has  significant deposits of shale gas in its interior provinces. Because Beijing  is burdened by relatively few regulations, the regime could acquire the land and  build the infrastructure necessary for its exploitation. This would ease  somewhat China’s energy crunch and aid Beijing’s strategy to compensate for the  decline of its coastal-oriented economic model by spurring development  inland.

The countries that might conceivably suffer on account of a shale gas  revolution would be landlocked, politically unstable oil producers such as Chad,  Sudan and South Sudan, whose hydrocarbons could become relatively less valuable  as these other energy sources come online. China, especially, might in the  future lose interest in the energy deposits in such low-end, high-risk countries  if shale gas became plentiful in its own interior.

In general, the coming of shale gas will magnify the importance of geography.  Which countries have shale underground and which don’t will help determine power  relationships. And because shale gas can be transported across oceans in liquid  form, states with coastlines will have the advantage. The world will be smaller because of unconventional gas  extraction technology, but that only increases the preciousness of  geography, rather than decreases it.

Editor’s Note: Stratfor offers a combination of  geopolitical insight, source-driven intelligence and objective analysis to  produce customized reliable information and forecasting for businesses,  organizations and government agencies. For more information about Stratfor’s  client solutions offerings, click here: http://info.stratfor.com/solutions/

Read more:  The Geopolitics of Shale | Stratfor

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