Short-term supplies of natural gas
Posted by Heading Out on April 2, 2008 - 10:00am
I had thought that the short thread that has run through my last few posts – relating to the imminence of a fuels crisis, and the lack of political perception of the problem, had run out. And then I read the piece from Salon that threadbot had as the top story on Drumbeat on Sunday. Taken with a conversation that I had with the Nurse (who lives in Ottawa) today, it led me to this additional comment. And to put that in context, for those who live further South, while Ottawa might get about 100 inches (250 cm) of snow in a normal winter, this year it has had more than 166 inches (421 cm) and the snows are not over. Part of the reason that I bring this up, in context of the Salon article, was the line in that article that said (and I recognize that I am taking it a little out of context)
And for that only one alternative fuel is even remotely plausible -- carbon-free electricity. And my tiny mind asks, where, with a 20-inch (50 cm) snowstorm does one find this source to supply a city of 1,148,800 inhabitants in the short term.
I had thought that the short thread that has run through my last few posts – relating to the imminence of a fuels crisis, and the lack of political perception of the problem, had run out. And then I read the piece from Salon that threadbot had as the top story on Drumbeat on Sunday. Taken with a conversation that I had with the Nurse (who lives in Ottawa) today, it led me to this additional comment. And to put that in context, for those who live further South, while Ottawa might get about 100 inches (250 cm) of snow in a normal winter, this year it has had more than 166 inches (421 cm) and the snows are not over. Part of the reason that I bring this up, in context of the Salon article, was the line in that article that said (and I recognize that I am taking it a little out of context)
And for that only one alternative fuel is even remotely plausible -- carbon-free electricity. And my tiny mind asks, where, with a 20-inch (50 cm) snowstorm does one find this source to supply a city of 1,148,800 inhabitants in the short term.
My worry is that there seems to be a lack of understanding about what we are really talking about when we talk about post-peak oil. I started this thread back with an article on Botswana that began
The habit of bargaining has become so engrained that statements of shortage are quite commonly read as bargaining positions leading to a price hike, rather than that you literally can’t have any. But we are now in a time when the reality of growing shortages, and in more than just crude oil, is going to start imposing such a disconcerting awareness.
The pre-supposition that underlies many of the articles, we see about the need to change the sources for our fuel supply, such as that in Salon, is that we have plenty of time in which to make those decisions. The reality is that we do not.
When I quoted from “Cape Wind” I mentioned that one way that New England coped with the natural gas shortage of 2004 was to close the schools. This was also one of the ways of coping back when we had the energy shortages of the 1970’s. But it is not a permanent solution to anything, The hope is that we might have learned some of the lessons from those experiences. However, the problem is that we may not have learned enough, and there is enough supply, in the short term to slip discussion just long enough that other remedial measures won’t be taken.
Natural gas usage in the United States went up 6.2% in 2007, with residential consumption going up 8% and electrical power use rising 9.9%. ( Natural Gas –Year in Review 2007 (pdf) ). At the same time the production of natural gas from the Gulf dropped 4.5%, while the increase in supply came from the Barnett Shale and the Rocky Mountain region. However it has been noted that the life of wells in the former is likely to be less than four years, with production per well halving after the first. In the very short term the relief in supply will come from the natural gas surplus from the West will make its way through the Rockies Express pipeline to needy customers in the East, even though it is currently held up by bats. The pipeline should reach full delivery capacity as far East as Missouri this year, and then, shortly thereafter be able to deliver some 1.6 Bcf/day out to Clarington, Ohio freeing up supplies to go all the way up into New England. In the process it is driving up the prices of natural gas in the West, which until now did not have sufficient market for the gas they were producing.
A survey by The Associated Press found that households across the Rocky Mountains buying natural gas from major utilities pay as little as $6.36 a decatherm, a heat value roughly equal to 1,000 cubic feet of gas, depending on the quality.
In other parts of the continent, notably Georgia and South Carolina, natural gas can top $25 a decatherm. Hawaii has the country's highest average prices at more than $34, according to the U.S. Energy Information Administration.
As those fields are now able to more easily supply the nation one wonders how long the available supply will last. Current estimates of sufficient supply to meet national needs for ten years may shorten as demand continues to increase, and questions of storage have not completely gone away.
Increasingly the Western supply will look to the development of unconventional gas supplies, such as coal bed methane. And it must be remembered that as the fields decline so the number of wells that must be drilled each year must go up. Over a period of ten years, for example, the number of wells required to sustain production from Canadian fields increased threefold. And now there are increasing concerns with the supply from Canada, because of increased costs and continued lower well productivity.
The increasing demand for natural gas offset by the short-term increase in availability is going to lead to more comments that we cry “Wolf” when we look at the energy supply situation. After all we are increasingly able to get LNG from different sources. In the past year we have increased supply and drawn it from a wider resource base, with supplies now coming from Trinidad and Tobago, Egypt, Nigeria, Algeria, Qatar and Equatorial Guinea.
But this abundance is very transient and will unfortunately in that short period sap the strength from the message of concern over longer-term supply. And, it occurs as other nations in need are also competing to purchase supply not only for the short-term, but with longer-term contracts. If, in the short-term we do not need that much, by the time the longer term rolls around the option to purchase may have gone away. We also tend to neglect the growing needs of the economies of the producing nations. There is already evidence that the Export Land Model will apply to natural gas supplies from the Middle East, with Leanan drawing our attention to the developing shortages of natural gas supply among the nations of the Middle East.
Unable to gain access to gas from Qatar or Iran, the northern emirates of Ras al Khaymah and Al Fujayrah have been obliged to import diesel and coal to meet their power generation needs, said Simon Williams, a senior economist with HSBC in Dubai.
"Demand has accelerated more quickly than anticipated and additions to supply have fallen behind," he said. "They've had little option but to look to alternative sources of energy supply. The irony of the Gulf importing hydrocarbon energy is not lost on anyone."
There is also the continuing lack of success in finding natural gas in Saudi Arabia again, from Monday's Drumbeat.
New discoveries have fallen far short of expectations.
Meanwhile, Saudi Arabia is seeing a huge increase in domestic demand for the fuel as a feedstock for everything from desalination plants to heavy industry and power generation.
With the interesting comment from Sadad al-Husseini, former head of exploration and production:
“It is just unfortunate that so much money has been spent to confirm what we knew already,”
The Hirsch report noted that it would take around 20-years to find and develop new technologies and supplies and to put them into place. We do not have the sense of urgency to impel us to do so. The message of “Sorry, there is none,” when it comes will mean that the years of grace are over. And as the scale of the problem then becomes evident we will probably, again, blame the fuel companies, rather than those politicians who fail to recognize and address the underlying problems.
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Bussing children to institutions that must be heated, maintained, staffed and outfitted, for the purposes of inculcation of a mindset that serves the status quo, is crazy. The older of my two sons got expelled from high school for hacking into the school's website and posting derogatory misinfo about teachers. So he sat home and got a far better education from the internet than he ever would have gotten from school. My hope is that inflating energy costs will lead to the closing of the schools. The internet provides a much more efficient educational medium than same-age segregated classrooms in institutions dedicated to imposing conformity. Never make the mistake of assuming that schooling is about education. If American citizens ever became well educated and capable of independent thot, the status quo would unravel. School exists to ensure that this never happens.
It's unfortunate that you feel your criminal son, benefited from being expelled from school....should have gone to jail and would probably have learned a great deal about the real world.
The almost complete Parental failure, in this country has led to this almost complete social breakdown, and is in large part, the reason we are where we are at today. Home school is the best in most situations, unfortunately, only about 5 % of the people who have children, should.
You write as if you almost regard "complete social breakdown" as being a bad thing.
Yeah, yeah, this country's going to hell in a handbasket. It's that rock & roll music, ya know... If only we'd get back to Jesus... blah blah ...
In the post-collapse milieu a whiner like you will simply be shot. :)
It all began when the kid started using words like "swell" and "so's your old man." THAT'S why we got trouble....
Children ARE, a reflection of their Parents. The old adage of "no bad kids, just bad parents" is very true. They learn from a VERY early age, how to behave from those around them....we all pay the price for a Parental failure to teach a child to live in the world as a decent human being, and let the TV/internet/street do it for them, or rely on others, because the fact is, most humans who have children, do not have the ability to raise them. An ability is not a right, even when it comes to breeding humans.
This might very well be true, but it is also true, that by using the internet as education medium people would have to sift through enormous amounts of information to find out, what is actually important and what is not, what is true and what is not. In the end, this might produce much more educated people, but it would be a lot more time consuming.
The purpose of schools and, to a lesser degree, universities is to provide pupils and students with a massive block of information that covers a broad spectrum of fields, where everything that seems unimportant is left out. This form of education saves a lot of time, at the risk of distorting or leaving out critical facts.
So our educational system is far from being perfect and neglects many basics, yes, it might even be used to misinform the masses and to prevent them from thinking, but it is also a sad fact, that many people have either not the time, the brain or the will to educate themselves beyond the absolute necessary; although an educated people would be vital for a working democracy.
One has to sift thru enormous amounts of information in order to find out what is true and what's not regardless of the information source. Doing so online is much faster than doing it in a hardcopy library.
That "seems" I emphasized in the quote from your post is the big qualifier. What seems unimportant to one person may be vitally important to someone else.
Agreed. The thing is, tho, that these people aren't going to become educated no matter how well schooled they become. Good comments. Thanks.
A wise man, I think it was Woody Allen, said 90% of everything is crud. 99% of everything on the Internet is crud because it lacks the educated filtering of professional peer groups and publishing house editors. Even lunatics like me can create blogs that pontificate on even the most absurd concepts. Just look at how this site is used to spread anti-climate change nonsense. Ideally our schools would teach every child how to discern the wheat from the chaff even though 99% of our teachers have never seen real wheat or chaff.
If you've ever been involved in the peer review process you probably don't have much confidence in the process. The way that personalities, academic rivalries, turf battles, good ole boy networks, tit for tat recommendations or rejections, etc., impact the process makes it just as suspect as anything else you read.
I believe you're thinking of "Sturgeon's Law", after sci-fi author Theodore Sturgeon.
Though, libraries may still exist, when the infrastructure to uphold the internet is long gone.
Anyway, that is not the point I wanted to make. What I wanted to say is that the teachers and lecturers in schools and universities have done the sifting already and so present to you what they have found to be important. And no matter how wrong they might be, on what is important, the fundamentals they have to teach you. That way you can get a faster overview of many scientific fields than by carving out the basics of them all by yourself, and I see it as highly important to have a basic understanding of many fields, to get a grip of the big picture.
It is a problem that many people are dwelling solely in their special field of expertise and that they cannot see beyond their own nose. That's why economists see every aspect from an economic point of view. It's what they know, what they have learned.
But to understand what's going on on this planet, to get the full picture and to make wise decisions for the future, you have to have knowledge of many different realms.
We have divided science in many areas, but in real life this division often doesn't exist and so a problem can touch aspects of many scientific fields. So if you watch a problem from your specialized point of view it is likely that you are missing something crucial, which could have dire consequences.
So, school is a way, to get in touch with those many fields, in a fairly compact span of time. For more in-depth knowledge you might fare better to do your own research, but for some basics, school is good enough. At least, where I live.
What I'd like to see in school though is the teaching of critical thinking from first grade on. That way pupils would learn to scrutinize what they were taught and it would get more difficult to distort the truth. So far the establishing of a critical mind is not only neglected, it is even discouraged. And that is, maybe, the point, where the school system really fails. It creates zombies that are willingly believing everything that a so-called authority, be it a scientific, political or clerical, spews around.
You're right, of course, but what educators have found to be important has been sifted thru the filters of their own bias, and that of their instructors in turn. I suppose this is just human nature and is to be expected. The internet exposes learners to every sort of bias and thereby forces them to construct their own filters, if they're capable of doing so.
I know this guy who does research on growing hybrid poplars for celluosic biofuel conversion in a semiarid region where the soil pH is 8.2 and the mean annual precip is 8.2". He utilizes computer controlled solenoid valve irrigation and knows precisely what micronutrient supplementation the trees require. I would imagine that he's the world's foremost expert on growing poplars under conditions they aren't adapted to. Yet there is no market for his trees, which I call his "bananas in Alaska." Has he ever asked himself WHY he thinks he needs to grow these trees that nobody wants where they don't belong? The reason he does it is that there's grant $$$ available for cellulosic biofuels research. To him, this is more than sufficient justification for this waste of the taxpayers' $$$.
In the first place, few students possess the intellect to support critical thinking. For the few capable of developing critical thinking skills, the schools are designed to ensure that they never do. If large numbers of citizens ever developed critical thinking skills, the status quo would collapse. Everything from politics & religion to organized sports would be seen for the scams they are. The powers that be can't allow that. And for the very few who are capable of developing critical thinking skills in spite of the organized childhood long attempt to prevent them from doing so... well, here we are. :)
I think the main purpose of school is to contain children so that adults can go to work. Why else do we send them at 4/5 yrs old??
My daughter, a 13 year old PETA influenced vegetarian, will be speaking to the school principal with objection to science class dissections of frogs, mice, etc. I would venture that maybe 1-2 of the class will become surgeons. What do the rest learn from that that can't be seen in 3d modeling, textbooks? Dunno, it's what we always do in 7th grade science..
I think that dissecting animals is one of the more valuable things that kids do in school. For really learning how animals function there's no better way to teach it. A computer simulation doesn't give you the same feel or the same experience of discovery as actually dissecting an animal. This isn't only knowledge that is valuable to kids destined to become surgeons, doctors, nurses and veterinarians. Dissecting animals also provides experience with the scientific method. These are things that are much harder to teach solely from books and simulations.
Sorry, but most people will never have any advantages in their life, because they have performed a dissection on an animal, and to see how the body works an anatomy book would suffice for most of us.
And if dissection has to be teached, why not letting them watch an autopsy? That way they would actually learn something about their own bodies, which is more likely of any value, than to know the inside of a frog or mouse.
As far as I can see those school dissections create just more dead animals and not indispensable knowledge.
And you can very well learn how to work in a scientifical way without cutting a single being into pieces.
Winston Churchill said "the primary use of a liberal education is to know when someone is talking rot."
And speaking of "talking rot," what has any of this to do with the topic of rapidly depleting natural gas supplies?
On the surface, the idea that a better education can be achieved at home I agree with. However, we then get into the realm of motivation and discipline. Most people and especially children lack the ability to self motivate in a disciplined manner. Think about the people you work with - they need prodding, right? So what's going to be the process, the protocol of establishing the necessary pressure to achieve academically? Any test taken via the internet can be cheated on by simply searching out the answers via the internet, so how are periodic tests conducted that measure actual results?
True enuf, yet on average, homeschooled children consistently outperform public schooled kids on standardized achievement tests. I met this girl online who was being homeschooled. She was supposed to be looking up info on the internet yet there she was, day after day, in the chatroom. I would have her do things like look up articles on the West Antarctic Ice Sheet, then tell me if or when she thot it would collapse. She played along for awhile 'til she got bored with it. She was actually one of the most astute people I've ever met online, despite her almost total lack of academic motivation and discipline. I have no misgivings over that young woman's educational attainments. She was learning more, even in mindless chatrooms, than she would've been sitting in class tuning out the teacher while obsessing over her current status with her peer clique.
Except that dealing with your peer clique is a lot of what most jobs are about.
It would appear likely that many homeschooled people may be seriously lacking in this respect.
Well that sounds like a good start! Maybe homeschooling will save the world from the emptiness of 'networking' and being a 'team player'?
Well, at least you didn't rendezvous at a shopping mall to discuss peak oil & natural gas, did you?
Are we discussing post peak oil, or post peak gas? Are we confusing the two and merging them together? Are we confusing between electricity and carbon-free electricity? Why is the only considered possible response the latter rather than a combination of the former?
It seems to me that a world where peak gas and peak coal come after peak oil, that peak oil will be a red-herring and eye-opener to the energy problem we face. Also I do not agree with the 20 year figure. People do not plan 20 year ahead, so that figure by itself is very disingenious, but I am no expert nor did I make an extensive paper on it, so it's just my two cents.
And in the long term, if we really have a bad energy situation, then people that live in such dire conditions should think better if that's really a good choice. Economics will teach them otherwise.
It seems to me Non-Renewables are setup like a series of dominoes. Roughly:
Oil -> NGas -> LNG -> Nuclear / Coal
As the 1st domino to fall the first major impact will be transportation that depends on ICE. A general transition to Electric will be started against a backdrop of conversion to liquid fuels of some of the other non-renewables (already coal and natural gas/LNG are being touted as Oil/Petroluem ICE replacements as well as the Biofuel bogeyman)...
I do not think that the public will allow governments to simply lurch from one energy driven crisis to another energy driven crisis and expect it to rapidly bubble to the top of the political agenda in the same way that other important things have when causality is affirmed.
Therefore it seems inconceivable to me that the pain caused by this decades long transition will not result in a fundamental rethink of where we are going as a global civilisation wrt. our overal energy policies / usage and the price we are prepared to pay for it all as individuals and societies.
Regards, Nick.
Part of the concern is that when a power plant moves to a dual fuel supply option it may not recognize that both fuels may be in short supply, before long.
Although global peak NG may come later than global peak oil, here in North America it is likely that we'll have NG shortages before oil shortages. That's because NA NG has peaked already (?) and available LNG is not enough to make NG globally fungible.
"People don't plan 20 years ahead", I couldn't agree more and that's really the biggest problem right there. Humankind seems to take everything as it happens now, rather than putting any real forethought into what will happen in the future. We might have already passed peak oil in 05 or 06, but no one knows for sure because OPEC's reserves are a secret, and once the slide downward from the current production plateau takes shape people will be so outraged that it came so suddenly as if it was such a huge surprise.
And the idea of conservation, as found in German building codes?
Of course it takes a long lead time, and fairly rational political commitment, to achieve such goals. Which societies like Germany are able to muster.
And the U.S.? People continue to argue which oil company is manipulating the market most, while trading in Corvettes and buying Suburbans, to save money.
Against stupidity, the gods struggle in vain - I think that is a fair translation of a certain expression written in German.
I think you are referring to the "Hirsch" report.
Ottawa is fine and sunny. Who wants to worry about NG! Winter is over!!
Sorry for the mistake, first time I have used it without providing a reference (and hence a memory check). It has been corrected.
HO.
Thank you for expressing the appropriate deep concern that this deserves.
IMO their is much talk and analyses and not enough outrage expressed.
When I approach our local officials with this they just say, “Yes we know that things will keep getting more expensive but the median income for our area is increasing also.”
That is as far as their thinking goes. I can't seem to get the concept of limits through their heads. Simply not possible in their opinion.
Thank you for your good work.
Thanks for the article. From "news stories" that I have read over the last few months, this might be a tough year for Nat Gas prices (high) in the US this year as we try to refill storage. The thought is that LNG imports could be down 1-2 bcf/day this year as other nations outbid the US for their supply. Further, it seems likely that imports from Canada will be down because: (1) they had a colder than normal winter; (2) increasing demands for the tar sands; and (3) reduced drilling due to (a) fewer prospects and (b) less favorable tax treatment.
As we should. While I personally see nothing wrong with some socialism, we live in a capitalistic free market uber alles society. Supposedly that works best, including the planning for the future part. If the energy cos run out, it is going to be their fault, not the pols, who after all, only do what they're paid to do.
TJ,
Thank you for a valuable insight. Until this moment I was derisive of the folks who blame the Big Bad Oil Companies for fuel supply disruptions. But you're right, our representatives mostly do what their campaign contributors and lobbyists "suggest" they should do.
Errol in Miami
I wish we had better information on US natural gas. Clearly, unconventional natural gas production has been rising for many years. This is an EIA graph:
This is a distribution of the types of unconventional gas that are now contributing to production based on data from Advanced Resources International.
There seems to be a huge amount of activity now in shale gas. This is a link to an article hoping for production rivaling Barnett Shale from Haynesville Shale. This is a link a WSJ article hoping for production rivaling Barnett Shale from Marcellus Shale.
If we look at US natural gas reserves reserves, they have actually been increasing recently, based on EIA data.
As you note, US consumption is up in 2007. That increase of course reflects the fact an increase in natural gas production was available in 2007 for this increase in consumption to take place.
It is not clear to me when we hit the wall on all of the unconventional natural gas supply. At some point it becomes non-economic, but that depends on the price of natural gas. Natural gas is now higher priced than it was last year, when the Arthur Berman's analyses were done. It seems like it might be possible that we could still have a moderate amount of unconventional natural gas that might be economic left (at a high enough price). If this is the case, and if there are enough drilling rigs and trained engineers, it might be a few years longer before we hit the downturn on unconventional. Clearly investors are not yet being scared away.
What I am seeing is not too different from what you are talking about. Supply now seems to hinge on the unconventional natural gas production continuing to increase. It remains to be seen whether this will actually happen.
Gail, it might be a lot more than a "moderate amount." Organic rich shales occur over very broad areas, and structural highs have little to do with productivity.
I don't know for certain [and at this stage neither does anyone else] but I suspect that the Barnett Shale situation will be repeated again and again.
This is not a cornucopian position as gas from shales, and coal bed methane wells are neither cheap, nor easy.
BTW, one other reason for some optimism on natural gas is that gas is not limited the same depth window as oil. There are deep prospects, but once again any gas from those prospect will not be cheap.
One other point. The availablity of rigs is limited in the near term, but over time, and with the prospects for long term contracts, the economics of drilling and owning gas wells in shales may turn out to be a lot like buying annuities.
Hello HO,
Thxs for the keypost. Since a timely mitigation seems impossible [hopefully not yet], I would expect rising prices/shortages for electrojuice and heating/AC to directly conflict with our FF-derived food desires. IMO, the best response is human seasonal migration for relative temperature comfort on RR & bicycles with intensive and laborious ag-fieldwork along the migration paths. This is required if sufficient FFs are to be directed for I-NPK & tractors for avoiding Liebig Minimums and optimal harvest yields as ELM hammers home.
As posted before: sitting in the dark with food in your belly is pure luxury compared to starvation.
Bob Shaw in Phx,Az Are Humans Smarter than Yeast?
Are there EROI numbers on unconventional sources? If they are low, then it's okay as long as the "conventional" piece of the pie is high enough so that the average comes out high enough to be profitable.
However, it seems to me that unconventional sources require a larger bit of infrastructure in order to recover. Economics, and not geology, might be the limiting factor here.
When you look at Gail's chart, we're down to only 5-to-6 years worth of supply of the conventional stuff! Hopefully I've made a stupid mathematical error. Someone please tell me I did.
The energy companies cannot have it both ways: they deny peak oil, soon-to-peak gas and yet ask not to be held culpable for rising prices. And I admit, they are not all equally culpable even in this regard.
But the deeper problem is the country is no longer run even by politicians, but by a military-energy-industrial-corporate complex that increasingly controls and manipulates the playing field on which politics is played out. So while the energy companies are not (entirely) guilty of the very specific charge, they are very complicit in the broader problem.
I live in Broome County, upstate NY. 3 weeks ago a nice looking 50ish woman (my age also) came to our front door and wanted to buy drilling rights to some pcs of land my family owns. Her company is paying 50 to 75 dollars acre. Chesapeake is drilling for NG all over Tioga, Broome and Chenango counties. My neighbor and I spoke to another repesentive of a different company that brokers for Chesapeake, we are up to 850 dollars per acre as of this week plus 12 percent of the pay from the gas if the well is productive.
What has struck me is how fast the drillers want to get going. Many rural land owners are hoping for a payday from all this. This drilling has come as a surprise to many. As a long time reader of TOD, this drilling activity is no surprise to me.
See: http://www.wtrg.com/rotaryrigs.html
Ng rig count is up from ca 600 in 2002 to 1430 in late 2007. The steep increase took place from early 2004 at ca 800 rigs to late 2006 at ca 1400 rigs, an increase of 75%. The annual wells drilled more than doubled in that period. Lower 48 production declined during late 2003, '04 and '05. The rise from late '06 through '07 just got us back to the 2003 level, with more than twice as many wells being drilled. Note the rig count flattening in H2 2007. There simply aren't the rigs and crews to continue the increases of recent history, so unconventional supply growth will no longer be able to offset the declines in conventional supply, starting in 2008.
Because H1 '07 was still ramping up, total production in '08 may equal or slightly exceed '07, but a net decline for 2009 seems most probable. Imported LNG and gas from Canada will not offset any domestic decline, and if the winter of 2007/08 is a herald of things to come, demand is most likely to increase. As I said before, crisis possible by March '09, and nearly certain by March 2010. NG will likely be the wake-up call for USA before peak oil. Murray
Yet at the same time, Chesapeake CEO says that unconventional shale plays will make US awash in gas and is suggesting building LNG plants for export (Im trying to find link). That, if it comes to pass, would be about the most bullish thing possible for US nat gas prices (though bearish for society)
This is backhanded way of guaranteeing profits - if they invest billions in Marcellus and Alabama shales and costs increase from $5 per mcf to $8-9 and we have glut like last year they have to shut in production and bleed fixed costs. The international market pays much higher mcf rates than domestic so if that exists its almost like an arbitrage presence for producers - puts a floor on nat gas prices.
So - I think he is crafty for suggesting it, from a purely profit standpoint.
However, no way will our government, once they realize the treadmill nature of this situation, allow us to export LNG, at least in any meaningful way - if they go forward with these plans, I would predict this would be the first shot across the bow of nationalizing our energy companies (which would be painful and take time, but it will likely eventually happen)
I think this is back to the stock and flow issue. There may be considerable stocks in shales and tight sands, but the flows will never be really good, and will be limited by short well lifetimes and drilling capacity. Read Simmons on the knowledge/intelligence of energy industry executives. Murray
Intelligence not correlated with wealth in that business. T Boone has IQ below 100 I would guess but I could retire in style on 1/10 of 1% of his shekels...;-)
Aubrey Mclendon of Chesapeake is another story - smart like a fox with this LNG comment. We'll see.
But you are right - almost everything at this stage is a stocks vs flow issue. Our human straw can only get so big....
A 2004 US Bureau of Labor Statistics study found no correlation between IQ and total wealth for the general population. There was a weak + correlation between IQ and income but IQ and bankruptcy were also weakly + correlated.
I can't say, though, that I am terribly shocked that someone would propose exporting LNG. If I saw the growing reserves and production recently, and heard the various stories about new shale gas, and saw the prices in the last year or two, I can see how someone would be concerned that the price might not support the new production. We talk about the decline in gas as if it is a given, but it is not all that clear to someone working in the industry what is going to be happening.
At the same time, I thought LNG needed to be a long term arrangement to make sense. It is hard to see how a decline in gas prices would last for long.
Murray,
Thanks for this link. Tell me, and any one else for that matter, how good is the research from WTRG? Do you subscribe to their newsletter?
Also see http://query.nytimes.com/gst/fullpage.html?res=9802E5D7133AF931A15754C0A... . Rig availability is more of a barrier than available prospects, especially in the Rockies which are tight sands, with similsr production profiles to Barnett shales. Murray
I heard Andrew Weissman, who calls himself “The Matt Simmons of Natural Gas”, speak in February 2008 at a UCB Boaldt law school energy law class.
Weissman started out by giving a history of how we got ourselves into this situation. In 1999, a group of just 5 people at the National Petroleum Council forecast a 50% supply increase to 33.5 Tcf by 2015. This led to the insane build-up of NG electric power plants – 70 GW of power built since 1999 (check out slide 7 at http://www.mwalliance.org/image/docs/conference/2006_MEEA_conf_doc-113.pdf), and new natural gas plants still going up. The use of NG to generate electricity is up 33.6% in just the last four years, to 7.51 TCF per year now. And electricity consumption continues to grow.
Natural gas is in a steep decline in the gulf region, especially the near shelf region which accounted for over 20% of USA production, and there's no way to replace this. The Jack find in the Gulf will only make matters worse by diverting deepwater rigs to wells that only produce oil for much of the next decade.
The EIA has consistently underestimated demand and overestimated supply. They continue to make bad forecasts. They're basing their long-term natural gas forecasts on events that are risky propositions--the building of the Alaska natural gas pipeline, the importation of LNG, only limited declines in Canadian NG imports, plus more nuclear and renewable power. All of these assumptions are likely to fail, potentially leading to much higher energy prices within 4 years.
No studies were, or are, being done to see what realistic amounts of natural gas likely remain, so utilities are in the dark and continue to build natural gas electric plants.
He emphasized that LNG will not be available when we need it, and we’re counting on LNG to solve our problems. We’re already having problems being outbid by other nations. Weissman emphasized that LNG is a high risk strategy (slide 21 of http://www.electricitydeliveryforum.org/pdfs/Weissman_Feb_21_08.pdf)
– Likelihood of sharp, “feast or famine” swings in supply
- Gas dumped onto U.S. market in times of excess supply, forcing U.S. producers to cut back on drilling
- U.S. gas companies outbid by Asian or European buyers during periods of peak demand
– Much higher price volatility
– Pricing increasingly tied to global oil prices
– Periodic supply shortages – with no ready substitute
– Far greater leverage for Russia, Iran, Nigeria and other major suppliers to global gas market
– Significant increases in U.S. balance of trade deficit
– Increased risks if control threatened over Straits of Hormuz
I thought he said Cheniere might close an existing LNG plant, but I haven’t been able to find any confirming information on this.
Weissman thinks importing LNG is a bad idea because then we’d be dependent on two imported fuels. Nor can he see how we'd be able to afford it with our current balance of payments, competition with the rest of the world for limited supplies, etc.
Weissman said we’re down to pockets of new natural gas that last for 6 months or less, which means we have to replace 32% of natural gas every year. We’re barely holding flat now, and Canadian natural gas imports, 25% of what we use, are about to drop off for reasons that have been discussed on theoildrum before.
Weissman predicts Democrats will shut down old coal plants, putting even more pressure on NG as new and existing plants burn NG to make up for lost coal. Which will bring the natural gas crisis that much sooner.
He believes there are only two actions we can take
1) A much more radical approach to energy efficiency and conservation within the next three years, such as retrofitting every home and store, etc.
2) Coal gasification at a large scale. This can't start that for at least 5-7 years.
Be sure to read the following for details:
http://www.mwalliance.org/image/docs/conference/2006_MEEA_conf_doc-113.pdf
http://www.energyvg.com/Where_Will_the_Gas_Come_From_ExSum_v01.pdf
Climate Change and Energy Security: http://www.electricitydeliveryforum.org/pdfs/Weissman_Feb_21_08.pdf
http://www.energypulse.net/centers/article/article_display.cfm?a_id=1651
Alice Friedemann
Interestingly, if memory serves, Matt Simmons was one of those 5 people, and he realized shortly after their work was published how wrong they were. Murray
Oops, also see http://online.wsj.com/article/SB120709326316581793.html?mod=googlenews_wsj . Seema Barnett shale production is 1.3 Tcf/yr, or about 7% of lower '48 total production. Up to now it may have been increasing 200 to 300 Bcf/yr, which would only offset ca a 1.1% decline from other sources. Total available gas for the USA from all 2007 sources is likely to be down near 3% prior to new source growth. Hmm.
well said:
..and I am afraid we must add ourselves (we the people) to the list of recognizers, due to the simple assessment that we vote them politicians into their seats. There will be a lot of "arms and legs" WTSHTF though.
("arms and legs", Norwegian slang for "a lot of action but not much really done" ...:-))
We PO-aware must grow until we reach a critical mass, so that one or more political parties start to understand the consequences. PO must become part of their programs, there is no way PO is solved just like “another issue” – that we know here at TOD.
There was a major natural gas discovery in Quebec announced today.
"Forest Oil Corp., Denver, plans to drill three horizontal wells this year in an emerging play for gas in Ordovician Utica shale in Quebec's St. Lawrence Lowlands.
The company assigned a net recoverable resource potential of 4.1 tcf to its 269,000 net acreage position on a gross 339,000-acre spread.
...
Forest anticipates first production in 2009 and the possibility of a full-scale drilling program in 2010 and after.
...
Forest said the Utica shale, which has at least two prospective horizons, averages 500 ft thick at 2,300-6,000 ft. Most of the shale's rock properties are similar to those of the Barnett shale in North Texas."
The discovery (which is conveniently located next to a major pipeline) should provide a welcome supply boost for eastern Canada and the NE U.S.
There has been an active gas exploration program for many years in the lower St. Lawrence valley and the Gaspe peninsula. It will be interesting to see how much more gas there is to be discovered.
Dynegy's Williamson Sees Natural Gas Staying Around $10 Range
April 2 (Bloomberg) -- Dynegy Inc. Chief Executive Officer Bruce Williamson said the U.S. should get used to natural-gas prices around $10 per million British thermal units because a lack of spare production capacity will keep the heating and power-plant fuel from falling out of that range.
http://www.bloomberg.com/apps/news?pid=20602099&sid=and3u93mqvQc&refer=e...
"Ottawa might get about 100 inches (250 cm) of snow in a normal winter, this year it has had more than 166 inches (421 cm) and the snows are not over."
Um, what happened to Global Warming? Did anyone tell Al Gore about this? He is going to be mad...
Global warming is the driving agent. Climate change is the result. In many places the end result is warmer climate or drier climate. In some places the end result is colder and/or wetter.
Of course, anyone who has actually studied the topic would have already known this. I suggest that you actually acquaint yourself with the topic. It might save future embarrassment.
long ago i heard GW would mean short term volatility[more powerful storms, etc.] and long term volatility- a very cold winter when the trend [for a locale] was warmer/hotter seasons.
Correct info?
Hey Creg,
I totally agree with what you have to say, not based on scientific proof but on personal experience. I don't live far from Ottawa and I was wondering when all the snow would stop. Just a week ago it was still snowing here and it's supposed to be spring!
Just a couple of summers ago, it was extremely humid with hardly any rain.
To me global warming means an increase in extreme weather. Winters will be harsher with more snowstorms and summers more humid or an increase in thunderstorms.
I am definitely convinced that we cannot keep ignoring the problem cause by our present consumption habits.
I do have a problem with electric power though, especially with hydropower. I was doing some research on the subject and found that although it is a renewable and clean source of energy, it also can be very damaging to the environment if proper steps are not taken;
indigenous people can be kicked off of ancestral lands also, the diversion of water used for hydroelectricity production can either cause flooding or the very presence of a dam can damage delicate ecosystems.
I just think that any alternatives to fossil fuels should not create more problems than it is trying to solve.