UPDATE 3-U.S. mulls how to use natgas resources in Ukraine crisis -top official

Thu Mar 6, 2014 5:13pm EST

Related Topics

* U.S. LNG exports not expected until 2016

* Washington looking at ways to overhaul approval process

* Long term, U.S. could become world's top emergency supplier (Adds analyst on what U.S. can do to expedite exports, paragraphs 5-9)

By Patricia Zengerle and Timothy Gardner

WASHINGTON, March 6 (Reuters) - There are discussions going on at high levels within the U.S. government on how to use U.S. natural gas resources as the country addresses the crisis in Ukraine, U.S. Deputy Secretary of State William Burns said on Thursday.

U.S. Senator Bob Corker, a Tennessee Republican, asked Burns if "it would be fair to say" there are active discussions at such levels about how to use natural gas to ease European reluctance to enact sanctions over the Ukraine crisis, and to help Ukraine.

"There certainly is," Burns responded during a Senate Foreign Relations Committee hearing.

It is not clear what exactly the U.S. government could do in the short-term to help, since new projects to export liquefied natural gas (LNG) from the country's vast new shale fields are still years away. Lawmakers have urged President Barack Obama to speed up the process of approving new projects to export LNG.

A natural gas analyst said U.S. LNG would not be an alternative to Russian supply during the Ukraine crisis because the first shipments will not enter European markets until 2016.

In the longer term, the United States could become the world's primary emergency supplier, particularly for European buyers, said Leslie Palti-Guzman, of the Eurasia Group political risk consultancy.

Washington is in the process of assessing whether the approval process at the Department of Energy and the Federal Energy Regulatory Commission needs to be overhauled, she said.

"With those potential changes, the U.S. government can send a powerful market and psychological signal that the U.S. is open for business and LNG exports get full political support," Palti-Guzman said. "But it is important to keep in mind that not all projects approved by the DOE and the FERC will be built." As more projects are approved, some of the later ones may find it harder to obtain financing.

The DOE has approved six rounds of LNG exports since 2011, and more than 20 are still waiting. The FERC has only approved 1 project to be built.

U.S. House Speaker John Boehner and other supporters of increased U.S. energy exports have pounced on the crisis in Ukraine to pressure the Obama administration to speed approval of liquid natural gas exports, saying doing so could help keep Russia in check.

As Russian President Vladimir Putin's forces tightened their grip on the Crimea peninsula in the Ukraine, concern heightened that the crisis could worsen and Russia could slash its shipments of natural gas to Europe and Ukraine by pipeline.

Speaking with reporters on Thursday, a senior official said the administration was "certainly aware" of the importance of energy to Russia's economy but declined to discuss specific steps the United States might be taken.

The official said that over time, "if Russia continues to perpetuate this crisis, this violation of Ukraine's sovereignty and territorial integrity, it is going to bring greater isolation to their economy."

Russia is the world's top gas exporter. But the United States has become the world's top natural gas producer in recent years, due to hydraulic fracturing, known as fracking, and horizontal drilling. (additional reporting by Mark Felsenthal; Editing by Bill Trott, Andrew Hay and David Gregorio)

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