(Oil Price) – Asian nations that are the most exposed to the fallout of the Hormuz crisis have sealed energy deals worth $56 billion with American companies, helping advance President Trump’s energy dominance agenda. Whether this is an actual pivot from the Middle East to the U.S. is yet to be seen.
The news about the financial commitments was announced by Interior Secretary Doug Burgum following the Indo-Pacific Energy Security Forum that took place in Tokyo at the end of last week. The deals involve a 20-year supply contract between Venture Global and South Korean Hanwha Aerospace for 1.5 million tons of liquefied gas and a deal between Terra Energy Center and Hyundai Heavy Industries for the supply of coal power plant equipment for a 1.25-GW power generation project in Alaska.
Also in liquefied gas, the forum yielded an agreement on joint development of the Delfin LNG project, which will be a floating installation off the Louisiana coast with a projected capacity of 13 million tons annually. The project will cost $14 billion and will export the fuel to Japan and South Korea. Among the companies participating in its development, the DoI listed Delfin Midstream, Mitsui O.S.K. Lines, Samsung Heavy Industries, Hanwha Asset Management, and Korea Overseas Infrastructure & Urban Development Corporation.
Asian nations were eager to make energy deals with the United States, the head of the Environmental Protection Agency Lee Zeldin told Bloomberg over the weekend. They were looking to diversify away from the Middle East, Zeldin said, adding they were “far more motivated” to do so.
Asia is the main market for Middle Eastern oil and LNG, and the Hormuz crisis has hit that market hard. Middle Eastern oil grades are currently the most expensive in the world because of the tanker traffic freeze, and producing countries have been forced to slash production due to a lack of storage capacity, which would extend the supply crunch over a longer period of time.
The United States is a suitable alternative, Zeldin told Bloomberg, because of its favorable geography. The EPA head noted that a journey from Alaska to Asia would take eight days, compared with 28 days from the Middle East, without specifying the destination, per the Bloomberg report.
The Trump administration has framed the energy dominance agenda as a win-win, with U.S. geopolitical partners getting energy commodities and the U.S. getting certain markets. It could be argued that Trump’s tariff pressure, however, represented a stick rather than a carrot approach to convincing these partners to buy more U.S. energy commodities. On the other hand, for those concerned only with the end result, the purchasing commitments that so many nations made in response to the tariff threat suggest that the stick works just as well as the carrot, if not better.
“With growing production capacity and a proven record as a dependable energy partner, the United States is delivering the fuels, minerals, and technologies that power resilient economies and secure supply chains for the American people and our allies alike,” Secretary Burgum said at the U.S.-sponsored Indo-Pacific Energy Security Forum, as quoted by Bloomberg.
Some observers would beg to differ on the dependability assertion, just as the oil and gas industry in the U.S. is reluctant to start spending big on production expansion, and for the same reason. In two years, there could be a very different president in the White House, and the energy dominance agenda may give way to another green agenda. For now, however, those Asian countries that depend heavily on energy imports are pledging billions for U.S. energy amid some of the most desperate times in modern history for the region.
By Irina Slav for Oilprice.com
