US energy chief on Ukraine: Don't count out its resources, US know-how

The Ukraine crisis presents the country with an opportunity to boost its domestic energy production with the help of American expertise, says US Energy Secretary Ernest Moniz, in a Monitor interview. US experts will support Ukraine natural gas production and energy efficiency as part of a crisis support package announced Tuesday. 

The US is expanding its support for Ukraine's beleaguered energy sector, but the emphasis isn't on exporting North America's newfound oil and gas wealth – it's on sharing the technology and expertise behind it.

Energy is an area where Ukraine stands to gain tremendously, and where the US government and private American companies are uniquely qualified to help, says US Energy Secretary Ernest Moniz.

"[Ukrainians] do have a lot of gas potential that they are not developing, both conventional and unconventional," Mr. Moniz said in an interview with The Christian Science Monitor Tuesday. "A lot of American companies – or companies operating in America – are where most of the expertise lies with regards to unconventional in particular." The Department of Energy and the Department of State will be working with private companies to facilitate the development of Ukrainian shale gas, Moniz added without offering specific companies involved. 

"There’s quite a potential there to increase their production," he said.

US officials are already in the region working to broker gas supplies from Ukraine's western neighbors, particularly as mounting debts threaten to crimp flows from Russia, its primary supplier. Next month, experts from the US will visit Ukraine to help increase Ukraine's own domestic production, and improve energy efficiency in the country. That will include working with private companies to boost Ukraine's unconventional, or shale gas, prospects – the same kind of production that has brought a natural gas windfall in the United States. 

It's part of a $50 million aid package the White House announced Tuesday, aiming to promote security, transparency, and prosperity in a country in turmoil.

"With the right investments and the right choices, Ukraine can reduce its energy dependence and increase its energy security," Vice President Joe Biden said during a press conference with Ukrainian officials in Kiev Tuesday. "We will stand with you to help in every way we can for you to accomplish that goal."

The Ukrainian government has long subsidized the consumption of natural gas, a fuel that makes up about 40 percent of the country's primary energy consumption. Many analysts say those subsidies have encouraged inefficiency and corruption, while discouraging the development of Ukraine's own so-called conventional gas resources. Ukraine also holds significant shale gas potential – an estimated 128 trillion cubic feet of technically recoverable resources – but those resources require the advanced and controversial drilling techniques of hydraulic fracturing (fracking) and horizontal drilling.   

Some have called on the Obama administration to leverage North America's own energy boom as a counter to Russia's oil-and-gas geopolitics, but officials have been cautious to lean on oil and gas exports as a solution for Ukraine's challenges. They note that shipping natural gas overseas faces costly and time-consuming logistical, legal, and political obstacles. 

"Our [liquefied natural gas] exports will not start until the end of 2015, and they wont really, frankly, kick into high gear until towards the end of this decade," Moniz said Tuesday. "We have approved or conditionally approved a very significant volume already but you wont see that volume flowing for several years."

In the meantime, the US aims to provide the technical expertise that made shale gas development possible – teaching Ukraine to drill, so to speak, instead of shipping it the oil and gas. US experts will join with the European Bank for Reconstruction and Development and others next month to develop a public-private investment initiative to increase Ukraine's conventional gas production, according to the White House. Another team will work with the Ukrainian government to "ensure swift and environmentally sustainable implementation of contracts signed in 2013 for shale gas development," according to the White House.

Last year, California-based Chevron and Netherlands-based Royal Dutch Shell signed multibillion contracts with Ukraine to develop its shale prospects. The fate of those projects have come into question over the recent turmoil in Ukraine. Neither company was immediately available for comment and the administration did not offer specifics on companies involved in supporting Ukrainian energy security. 

"We have to look at different time scales and implement assistance – technical assistance or other kinds of assistance – with those different time scales in mind," Moniz said. "Something like efficiency, typically you can have a pretty short response time if you push on that."

Ukraine's energy intensity – total energy consumption divided by gross domestic product – is roughly three times higher than the average industrialized nation, according to the Organization for Economic Co-operation and Development. By retrofitting outdated building practices and industrial processes, Ukrainians "would have a big impact on their needs for Russian gas by both producing more and requiring less," Moniz said.

Secretary Moniz, a Brookline, Mass., resident, was in Boston Tuesday to commemorate Earth Day, speaking alongside Environmental Protection Agency Administrator Gina McCarthy at the New England Aquarium. When asked about the threats of climate change, most recently outlined in a pair of reports from the United Nations Intergovernmental Panel on Climate Change, Moniz gave reasons to be optimistic.

"I’m a technologist, and I believe that we will continue to see the cost reduction in the low-carbon technologies that will continue very, very rapidly," Moniz said, noting the dramatic drop in the cost of solar technology and energy efficient light-emitting diode (LED) bulbs. "We are pursuing technology innovation across the entire innovation chain: research, development, demonstration, deployment. The object of that innovation is very simple: cost reduction. Make those technologies continuously drop in cost and we will see the deployment go up and the policy be easier to implement."