In the End, This is Why the Keystone XL Will Be Built

The map (and all of the power that goes with it) is being recast right before our eyes.

Not long ago, powerful armies decided who held the upper hand in global politics. Today, the shape of the world is dominated by energy.

In fact, over the last 24 hours, two events, thousands of miles apart, have once again demonstrated how central energy has become in the world of geopolitics.

Both have the potential to change the energy landscape, while fundamentally altering the leverage associated with it… and each involves a contentious cross-border pipeline.

One would combine a country in shambles with another under duress.

The other is closer to home and would strengthen a superpower making a big comeback in oil…

The Keystone XL: A Matter of American Energy Security

The superpower, of course, is the United States, and the pipeline is the ever-controversial Keystone XL.

Yesterday, the Senate passed a bill to force the approval of the Keystone XL, the last of a five-stage pipeline system built to move crude from Canada to the U.S. and on to Cushing, OK, the primary pipeline interconnector to the Gulf Coast refineries.

But since the project crosses an international border, the Senate doesn’t have the final say. The Keystone XL requires an appraisal by the U.S. Department of State (DOS) and approval by both Congress and the President.

So far, the biggest hurdle has been the environmental concerns.

Most of them have been dealt with in a preliminary DOS finding (the full report has yet to be released) and with the recent verdict by Nebraska that the pipeline poses no environmental threat.

Nonetheless, the Keystone XL has become the quintessential political hot potato.

As it stands, the House of Representatives has already approved the pipeline, although its version differs a bit from the Senate’s. That will require a conference committee to iron out a common version that will then be voted up or down, with no amendments allowed in either chamber. That much seems assured.

However, President Obama has indicated he will veto the measure. And neither the initial House nor Senate approval vote amounted to the two-thirds needed to override a presidential veto. Unless more Democrats decide to defect, the threatened veto will be sustained.

Yet, even with all of this political wrangling, it’s now certain the pipeline will be built. After all, the serious objections have never materialized into substantive roadblocks, and the weightiest complaint was removed when the intended route was altered to keep it from crossing a major aquifer in Nebraska.

So, it’s no longer a matter of if it will be built, but when.

Here’s why. The Keystone XL has become a basic element in America’s new energy security.

Of course, when we started talking about energy independence a few years ago, it seemed like a pipe dream (no pun intended). But now it’s rapidly becoming a reality.

In just 10 years or perhaps even sooner, America won’t need to import any large quantities of oil, and no natural gas whatsoever. Thanks to immense domestic reserves of unconventional (shale and tight) oil, the U.S. will only need to import about 30% of its daily requirements. And virtually all of that will be coming from Canada.

To put this in perspective, U.S. imports approached 70% only a few years ago. Needless to say, this massive shift carries with it certain geopolitical considerations.

In this case, the Keystone XL will be approved because it is in the U.S.’s national energy security interests to do so.

A Turn of the Tables in Greece

The second proposed pipeline with major geopolitical repercussions is found in Greece, where recent elections have suddenly propelled a leftist party into power.

Well, almost.

New Greek Prime Minister Alexis Tsipras and his Syriza Party clearly won the election on an anti-austerity platform. It was a frontal attack on the policies required by the European Union (EU) to keep Greece on financial life support.

However, those policies also created severe hardships in Greece, which many believe led to an unemployment rate of nearly 26%.

Yet despite the resounding victory, the Syriza Party didn’t win enough seats in the Parliament to form a government, so it has entered into a coalition with the Independent Greeks. This is a far right party, proving politics really does make for strange bedfellows.

The only issue they agree on is opposition to the EU austerity dictates, which will make for a volatile alliance at best. It is the Greek version of the Tea Party and Nancy Pelosi joining forces to govern San Francisco.

As unlikely as it may seem, the big beneficiary of this move is likely Moscow, since Russia has long been pushing for a natural gas terminal hub on the Greek border and has encouraged southeastern European markets to build the necessary pipeline spurs to it.

Of course, Russia had been planning a massive “South Stream” pipeline to move its gas into Europe, paralleling the “Nord Stream” pipeline already doing the same thing across the Baltic seabed to Germany.

The combination of the two would have effectively ended Russia’s need to move any volume of gas across Ukraine.

Unfortunately for the Kremlin, Bulgaria decided – after heavy EU and American pressure – to reject the $32 billion project. Since Kiev was not about to grant offshore permission in its sector of the Black Sea, that left Turkey, where all of the pieces come into place.

You see, there’s already the dual-piped “Blue Stream” pipeline moving gas from southern Russia to Samsun on the northern Turkish coast, and the countries have entered into an agreement to build a pipeline system into Europe. But to do that they need a hub somewhere on the mainland.

And, you guessed it, Greece would work just fine. Now there is a receptive left-wing administration in Athens to make it all happen. That most Greeks are angry with Brussels hardly hurts either.

Right on cue, the Russian government said yesterday they would be receptive should Athens request foreign aid in order to circumvent additional austerity measures from Brussels.

And while Greece has agreed to extend the current EU sanctions against Moscow, they may well block any additional punishments. For that matter, the new government would have popular support to pull out of the EU entirely.

Greece would also welcome the connection to Russian gas, which would allow them to receive some nice revenues from the resale to Europe. In turn, Russian President Vladimir Putin would be able to offset some of the financial penalties from the current sanctions, while socking it to the EU with gas sales into Europe against their wishes.

The next conflict between Moscow and Brussels may well take shape over a pipeline thorough Greece.

Energy… it’s what makes the world go round.

The post In the End, This is Why the Keystone XL Will Be Built appeared first on Oil & Energy Investor | Dr. Kent Moors.

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