A slight feeling of disquiet

It may seem strange, in a week where traders were actually paying folk to buy their natural gas, but I am still a little disquieted about our medium term natural gas situation. (I was going to say long-term but 2010 isn't that far away any longer).

The feeling was regenerated when a reader directed us to Robert Amsterdam's site. Currently he is posting about the story in today's NYT dealing with the construction of the new LNG port at Sabine Pass, LA.. The port is one of several that is being built to bring foreign natural gas to help with the coming shortage in the US. To quote CERA, as the article does:

Liquefied natural gas represents only a 3 percent share of total American natural gas consumption, which is mostly used for industrial purposes and home heating. Cambridge Energy Research Associates estimates that imported liquefied natural gas will account for 10 percent of American use by 2010, and potentially as much as 25 percent by 2020.
Bob Amsterdam believes that by 2010 this 10% will largely come from Russia in general, and our friends in Gazprom in particular, with the projected source of supply likely being Shtokman.
However, as I recently noted there is a Shtokman delivery problem. Firstly the project hasn't been awarded yet, and secondly it appears as though the US is now being cut out of the distribution. At the present companies with major ties to the US don't appear to be faring too well in Russia. Shell continues to be harassed over Sakhalin Island, and the Russian government position seems to justify concern.
President Vladimir Putin has signaled his intention to reassert state control over the energy sector, calling the industry the "holy of holies," as high oil prices have driven the country's economic growth in the last few years.
It was only this week that the Eni Vice President was writing a story in Newsweek stating that the world would soon be awash in energy. Russia, as you may remember, recently passed KSA in terms of the production of oil, and so some of the prediction may well have been based on the anticipation that Eni was going to get a slice of that bonanza.

Well it turns out that it may not be quite that easy. There is some concern arising in Italy about the deal,

The accord on oil, gas, power and liquefied natural gas was to be signed after months of talks. It was expected to give Eni access to Russian oil and gas fields and let Gazprom sell gas directly in Italy.

A source in one of the companies said Tuesday that Eni was not ready to let newcomers into its market, and that Gazprom did not want to see new companies in Russia's oil and gas fields.

Now, as it happens Eni has other interests in that part of the world, that are also of interest to Gazprom. Just yesterday Russia and Kazakhstan signed an agreement to produce gas from the Karachaganak field.
Russia will be represented by gas monopoly Gazprom, while Kazakhstan's KazMunaiGas state energy firm will own the other half.

Gazprom is keen to contract incremental supplies of gas from Central Asia to cover Russia's domestic needs, freeing up its own production to supply to lucrative European export markets.

Karachaganak is co-led by Italy's ENI and Britain's BG, which both hold 32.5 percent stakes, while U.S. Chevron owns 20 percent and Russia's LUKOIL has a 15 percent interest.

Truly it is a small world.

But this all gets us back to the LNG problem, since getting gas from Kazakhstan, and Turkmenistan may help Russia send LNG our way, if they decide they want to.

Which brings up a slightly different problem, that was recently raised in the OGJ. It relates back to the problem the UK traders had with gas this week. Namely that natural gas is a product that, as a general rule, flows fairly swiftly from the well to the user. There is not a huge amount of storage that is built into the system. This can be a problem when, for example, winter (whether in Moscow or Denver) decided to be a bit harsher than normal for a while. Or when suddenly there is too much coming through a line. Problems with the supply line can lead to disruptions. This may well become more of an issue, as the gas starts to come in chunks from tankers, rather than flowing, controllably, from wells.

As the article points out there is a considerable variation between summer and winter use

The total swing from summer to winter can be 60 bcfd or more. These seasonal swings are likely to become greater as residential and commercial heating loads continue to grow and more gas-fired power generation is added.

This current summer-winter gap is served by gas storage. Roughly 3.3 tcf of working gas underground storage capacity are throughout the US and Canada. These 385 or so facilities can deliver up to 50 bcfd of withdrawals and inject up to 35 bcfd. Current gas storage can barely handle current seasonal swings and more is needed to serve the growing gap between supply and demand. The market has evolved to the point where gas storage is not only needed to meet winter demand, but also to meet gas-fired electric generation summer load requirements as well.

Two problems are now anticipated as more of the countries supply comes in tankers. Firstly the shipper wants to unload the tanker and turn it around to go get some more, as soon as possible, whether there is an immediate need for the gas or not. (Recognizing that it may not be possible to meet the winter demand with immediate supply). And so there needs to be an increased storage capacity within the system especially since
This LNG corridor (around Sabine Pass) will be home to an estimated six LNG terminals between now and 2013, adding potential sendout volumes of 13 bcfd. These LNG terminals include CMS Trunkline (existing, at Lake Charles, La), Freeport LNG and Freeport LNG expansion (2008 and 2010, respectively), Cheniere Sabine Pass (2009), ExxonMobil Golden Pass (2010), Sempra Cameron (2011), and Cheniere Creole Trial (2012-13).

By 2010, an additional 4.4 bcfd of gas will be flowing, on average, through this region heading east toward Florida, mid-Atlantic, and Northeast markets. At maximum sendout, this figure doubles to 8.8 bcfd. When Texas exports and Louisiana offshore gas production destined for these same eastern markets are added in, the total flow from this specific region will increase to 12 bcfd (on average) and 16 bcfd during peak sendout.

The second problem is that gas-fired electric generation facilities do not use a steady stream of gas all day, but as electric demand fluctuates, so their use of gas follows the same curve. Which means that there needs to be some capacity for storage in the system to cope with that shorter term fluctuation also. The question that the article raises is as to where all this storage should be built.

(Grin - do I hear a bid from Nantucket ?) I guess that Dave and I will puzzle out where we are going to get all this gas on another day.

Does anybody know if any new generators or cement plants are being built that will depend on LNG? Looking at the gas generation outlook for my old home town I see that they have just completed one backup pipeline to augment the fast depleting main gas field. They are lobbying for another from a neighbouring country with a possible spur line to coalbed methane in another state. Finally there is the LNG option with extra storage tanks.

No link because their vulnerability is embarassing.

$59 headed towards $53 like a Rocket

Crude Oil Rises From 7-Month Low on Report OPEC May Cut Output

By Trisha Huang and Angela Macdonald-Smith

Oct. 5 (Bloomberg) -- Crude oil rose from a seven-month low after a report that the Organization of Petroleum Exporting Countries may reduce output to halt a decline in prices.

OPEC members including Kuwait, Iran, Venezuela and Nigeria have informally agreed to voluntary cuts that may trim production by at least 1 million barrels a day, the Financial Times said.

``OPEC is getting more serious,'' said Steve Rowles, a Hong Kong-based analyst at CFC Seymour Ltd. ``A 4 percent cut will have a dramatic impact on supply, reigniting supply concerns.''

Crude oil for November delivery rose as much as 79 cents, or 1.3 percent, to $60.20 a barrel in after-hours electronic trading on the New York Mercantile Exchange. It traded at $60.18 at 11:57 a.m. Singapore time.

Brent crude oil rose as much as 63 cents, or 1.1 percent, to $59.85 a barrel on London's ICE Futures exchange. It traded at $59.75 at 11:47 a.m. Singapore time.

The voluntary reductions will probably be formalized at OPEC's December meeting in Abuja, Nigeria, the Financial Times said today, citing people within OPEC it didn't identify.

Saudi Arabia is unhappy with the move toward voluntary cuts, the newspaper reported. Even so, OPEC's biggest producer has reduced output by 200,000 barrels a day over the past two months, it said.

Kuwait's Oil Minister Sheikh Ali-Jarrah al-Sabah said yesterday his country will support a cut in production ``if it's for the benefit of the market.''

Nigeria and Venezuela said last week they will cut production by a combined 170,000 barrels a day in response to the slide in oil prices since mid-July.

Valero Energy

Oil yesterday closed at $59.41 after touching $57.75 a barrel, the lowest since Feb. 16. Futures have declined 23 percent from the record $78.40 a barrel on July 14 as tensions in the Middle East eased and fuel stockpiles increased.

Prices rose yesterday after a shutdown at Valero Energy Corp.'s refinery in Houston and a government report showed that U.S. refining operating rates were at the lowest since May.

Valero Energy's refinery in Houston had a chemical spill yesterday and the 130,000 barrel-a-day plant is to shut for 40 days starting this month for maintenance, the company said.

U.S. refineries operated at 89.9 percent of capacity last week, the lowest since May, according to the Energy Department. Analysts had expected refineries to operate at 91.6 percent.

``We've got the prospect I believe toward the end of the year of further OPEC production cuts,'' Gavin Wendt, Sydney-based senior resources analyst at Fat Prophets Funds Management said. ``Typically they've been proactive in managing oil prices.''

To contact the reporters on this story...

I can give you what you want.

I can make your heart beat short.

Fireangel has tipped me off to the Raymond James natural gas analysis. I like that, it works pretty good.

Somebody should do a graph plotting Oil and NG together as Dollars per BTU. Barrels. Try to convert NG to Oil Barrels.

Leanan will probably delete this last sentence.

And an article from http://www.bloomberg.com/apps/news?pid=20601072&sid=arzFS2l43sSc&refer=energy
suggests that oil prices (not refined products prices) are heading up because the amount of crude oil which can refined has been reduced after a refinery accident. And since U.S. refinery utilization was lower than expected, this also contributed to a rise in crude prices.

Am I missing something here - because the market now has more crude oil, the price went up? That is, higher supply leads to higher prices?

Again, I am only talking in reference to this article, not to OPEC's various moves.

Somehow, the information flow too is becoming very strange. This may also be a symptom of system oscillations, which is something to be expected around peak. Or peak plateau, for those who like to wear another chapeau

Well, this is the sort of bull that you hear all the time in the financial press.  It makes no sense at all, but some trader somewhere will make some assinine statement (or some financial reporter will claim that one did).  Whenever there are things like refinery problems it is cited as a reason for oil to go up in price.  

I guess maybe you could argue that futures might go up due to anticipated increased demand later to make up for a shortfall.  That is the only explanation I can think of, and I am not entirely sure it is a valid one.  Another possibility is a lot of people trading oil don't really have much grasp of how the system actually operates.  Or they understand it, but they're trying to anticipate what others will think, regardless of whether it makes sense or not.  

I realize that the financial tends to be worthless, unless you are interested in bread and circuses of that type.

What I find interesting is how the information flows themselvers are starting to get unhinged - that is, in a number of areas, all reasons are considered valid explanations for what is happening. Oil prices are up because production is down, or oil prices are down because production is down.

At some point, the noise completely covers the signal. Whether we have reached this point (GAY REPUBLICAN CONSPIRACY!!! - see, noise) is harder to judge, considering how much of the American MSM has been full of little but noise for years. (ANOTHER MISSING BLONDE!!!) (BRITNEY, JESSICA, LINDS - is that with an 'e' or an 'a'? - inquiring minds don't care.)

A really excellent article in the Asia Times about Russia and China's long-term plan to cut the U.S. out of the energy loop -- forcing Americans to be part of the 21st Century world rather than the master of it.


They seem to know what they're doing.

They do indeed know what they are doing.

The Asian Times remains one of my favorite information sources.

Hello Dave Cohen,

I agree, thus the sooner we abandon the '3 Days of the Condor' scenario, the better off we will be as a country.  IMO, the govt. should be rapidly moving ahead to shift most of the labor force to relocalized living and permaculture.

Bob Shaw in Phx,Az  Are Humans Smarter than Yeast?

Dave and Toneila,

Agree and I am pushing for more manufacturing base in the midwest.  Historically manufacturing followed available energy.  New England water begot mills.  Pennsylvania coal begot foundries.  Texas oil begot refineries.  Each step led to manufacturing of goods based on what raw materials were produced.  Mills = food, cloth, lumber.  Foundries = metals, tools, building components.  Refineries = carbon compounds, plastics, portable energy.  All of these industries are now offshore with labor following them.

We need a new energy base of biofuels, wind and solar which will lead to ---- what?  Whatever it is will require labor and new plant construction.  The point is not to grow the economy so much, as to employ people to make things locally.  Lots of multiplication of the money when there is a good manufacturing base locally.  And I am convinced we need to be producing the energy locally to get that base back.

It doesn't matter if this isn't as much as currently provided by fossil fuels.  New England had a thriving economy based on water power 250 years ago using a fraction of the energy they use now.  It's the difference between making and buying that leads to a viable economy.  We only buy now and that has to change.

Relocalizing is great, but the people who have the guns (U.S., Britain, Israel) have already committed to the opposite view. There'll be a great war lasting for generations, and when it's over, they'll somehow end up on top.

I watch the western banking system (the real power), and so far they're staying with imperial plan. I suppose they realize if global capitalism dies, they die, too.

So the wealth needed to rebuild and relocalize our towns, cities and countryside is instead going into the vast military machine.

I feel like such a meaningless bystander in all this ...


If you hit the eject button on your DVD player you can remove your 2 days of the Condor DVD and put in some other movie.  


Hello Oilrig Medic,

Thxs for responding.  I think that scenario best expresses worldwide detritovore desire, therefore I encourage all to post it as often as possible until we see a worldwide shift to a more appropriate direction.  I often wonder what degree of future horror will be ignored by the average American.  The population declines in Iraq, Darfur, and other places don't seem to concern most Americans now.  If 2/3 of Mexico dies due to energy shortages: will Americans be shocked, or just accept that as normal routine?  If 1/3 of Americans are in hard labor camps under a harsh Govt. boot: will the other 2/3 still applaud these actions as long as they have food and water?  I think they will.  Consider this link on Dieoff:

Bob Shaw in Phx,Az  Are Humans Smarter than Yeast?

Eject the DVD !
I tend to be skeptical of the Asia Times. They often have a superficial knowledge of the energy sector, but weave partial facts into apparently convincing big theories.
What about this particular article, Jerome?

Does the world submit to becoming resource colonies of the West? Or does Asia/Middle East have its own plans for the future?

As I wrote recently over at eurotrib, Europe's current energy policy seems to be "you arrogant Russians had better give us your gas cheaply, or else we'll call you a nasty imperialist dictatorship", so it's no surprise that Russia is (i) reacting somewhat incredulously, and (ii) hinting at other plans.

But the fact is that all Russian pipelines (both for oil and gas) go West for now, and those that will eventually go East (i) are far from being built, (ii) will use other reserve areas than the Western ones to be filled, (iii) bump against China's unwillingness to pay more for natgas than prices used to be in the good ol' days ($2-3/MBTU), and (iv) are still subject ot Russia's games viz. Japan and China.

So sure, Russia and China talks. I'm not convinced it means much in practice, in the short term anyway.

Sorry, Jerome, but this strikes me as a bit naive. Russia & China are in this for the long haul -- many years. It's just commonsense to believe that American "hegemony" is part of the target. North American natural gas production is declining. One needn't be Sir Isaac Newton to figure this out. Russia and China are clearly making separate plans together. It's all about political leverage. Pipelines can be built. It takes a while to turn an elephant around. Russia's got the gas, China's got the T-bills, what's the problem?

But there's more. Qatari gas is not secure. They are just a few miles away from Iran across the Persian Gulf. Iran is aligned politically with Russia and China. Again, I say, you don't have to be genius to figure this out. The world's changing but you dismiss it.

I can't read where you are coming from on this stuff. Why do you downplay these obvious reports?

What's the link on your Eurotrib article?

Jeez, I hope Europe doesn't dismiss Cheney, Putin, China, etc., as baffoons unworthy of serious consideration.

I think this is the great game, the resource war, and I think it's all extremely dangerous.

I like France; I like how it's prepared (somewhat) for peak oil. I like its preservation of local agriculture. I love Paris.

But France will not be immune if this all goes badly.

Don't mistake me, I am not dismissing any of them. Just saying that their public pronouncements, their desires and the reality can be 3 different things. And as I am in the business of actually putting up the money (someone else's, but still) to pay for that reality, i think I have a decdent grasp of what's feasible and what's less so - and thus what's bluster, what's bluff, what's grandstanding, what's wishful thinking and what's ignorance.
I did note that this was not significant in the short term. I am also skeptical in the medium term. In the long term, the intense rivalry between China and Russia might reasssert itself, so it's hard t osay what would happen. I'd be Russian, I'd be wary to commit myself to a pipeline with a single (Chinese) client.

Thus the attractiveness of LNG, more easily tradeable. The trouble is that the LNG chain is surprisingly hard to master. Iran has proved totally incapable of it, and Russia is discovering that it is harder than pipelines.

We'll see, but i am not convinced that Russia's long term strategic interests are aligned with China's. Taking advantage jointly of the absolute stupidity of the current White House host is one thing, committing to the allies of the moment for much longer is another.

First let's all say together, we all blew it.  Well, most of us anyway.  I will speak for myself first:

There is no way I could have predicted the direction and range over only the last year, if I had been sinking real money in based on my own estimates, I would have been wiped out.  There, how many will be that honest.  I can go further....If I had been betting with CERA at the front end, I would be wiped out and if I had been betting with Matt Simmons and T. Boone Pickens at the tail end, I would have been wiped out....if i could have timed by milisecond, there's a chance I would have broken even.  So, all in all, I would have done about as well as the "big boy" derivative funds, and their managers make millions!
So, bravely on into the future!  Let's kick around some thoughts
(1)  The American prospects for LNG importation.  Leaving aside the political/nationalistic issues mentioned above, the American LNG industry faces a challenge never before seen in the LNG market to this point:  Never in history has an LNG industry had to compete with a still vibrant, although maturing domestic land pipeline natural gas industry.  In Japan and South Korea, the two largest and most mature of the LNG markets, LNG functions as the only major supply of natural gas.

In the U.S., however, the risks of a glut of pipeline gas from the mainland domestic industry makes the risks to LNG very great.  If pipeline gas prices tumble as has just recently happened, LNG is not competitive.  But it has to go somewhere, and fast, because LNG shipping is very tightly scheduled.  

The way that Japan/Korea have overcome this is through very tight schedules, long term contracts, and owning the "LNG train" from one end to the other, supplier terminal/ships/recieving terminals.  Due to lack of competition from domestic mainland gas, this makes sense in those countries.

But the North American market is different.  Would I sign a long term $8.00 per mm/BTU contract for billions of feet of LNG, knowing that a mild winter, a bit of outsoursing of industrial use, and a bit conservation could drive prices for domestic pipeline gas down to $4.00?  It could be a catastrophic financial failure for me if I did.

So, to protect myself, I would ask for more flexible terms, something closer to spot market prices and more flexible acceptance terms on delivery schedules.  This of course would create a very risky and volatile market.

The call for storage is a good one, but does not cure the problem.  Even with storage, I can only afford to sit on millions or billions of dollars worth of natural gas for so long.  Then, as the British example shows, I would have to get rid of some at whatever price to release the money, which could be earning interest/investment income somewhere else.

Some commodities, as much as we hate to admit it, do NOT lend themselves well to globalization, despite what Daniel Yergin may believe.  It is why we do not import milk from China.  Natural gas may turn out surprisingly hard to globalize, especially for an "Island market" like North America, where the big reserves are far across the sea from where we are.

But the best minds in the world still see, over the longer view, a decided shortfall of natural gas compared to demand in the U.S and North America.  Both Matthew Simmons and Daniel Yergin served on the famous NPC (National Petroleum Council Report) requested by Spencer Abreham in 2003, a fascinating free small book that can be downloaded from their website at
http://www.npc.org  (go to reports by year, and at 2003 download
"Balancing Natural Gas Policy -
Fueling the Demands of a Growing Economy (2003).  Next to Matt Simmons "Twilight In The Desert" this is the other "great" energy document of the new century.

So what are the prospects for "cheap" natural gas over the longer view (2010 and beyond)?  It is hard to find a reason to believe at this moment that "cheap" natural gas will be plentiful, but technology and radical developments are now moving very fast.  Given the demands for a ecologically clean fuel, the "low carbon fuels natural gas and propane should be in huge demand.

 Natural gas is being and is intended to grow as a major supplier of source fuel to (a)electric power generation (b)home and industrial heat source (c) tar sand industry and (d) ehtanol industry.  If there were a shortfall in transportation, it would be expected to fill in there too.

But recall we are talking potentially 2010 or later.  Alternative developments are moving very, very fast.  Extremely advanced solar electric cells, once such hugh makers as Honda join the competion, could fall rapidly in price and rise rapidly in efficiency.  Ths would supplant the some fo the need for new consumption of natural gas for electric power generation.  Advanced batteries and designs of motors, controllers and drivetrains are making it possible that people will begin to look at the Plug hybrid car on the basis of performance and convenience as well as efficiency.  And of course, if the price rebounds, the North American gas drillers will bring the best technology to bear on lands they have for decades been forbidden to drill in.

So, natural gas prices could go (a)through the roof or (b) into the dumper, depending on the speed of technical development, the pace of investment in both gas and alternatives, and the weather.  And this is not just short term, but long term as well.

O.K., time to bet your money!  Which way you going on natural gas and propane (astoundingly cheap!)...long or short?

Remember, it's your prosperity at stake, but what the helll, it's only money!

Roger Conner  known to you as ThatsItImout

Good analysis of how uncertainty causes problems for the North American LNG industry.

A utility company executive view is that they will competing in the spot market for tanker loads from Trinidad and the Middle East, against European and Japanese buyers.  Deloitte & Touche published a review of energy executive views recently, I think.

I think also the Artic Gas phenomenon becomes important: Canadian Arctic and Alaska gas pipeline.  These lines will eventually be built.

I don't think, unless there is a big move towards pricing carbon emissions or emission rights trading, that gas is going to increase market share.

Nor do I think that new energy technologies will displace core carbon fuel demand.

It's all very bullish for coal in North America, really.

I second your praise of Roger's remarks. Nice analysis -- I'll "steal" some of it later.

Re: the Alaskan pipeline

That will be online in 2015 at the earliest. No immediate or mid-term help.

Not so fast on that pipeline

Will LNG jeopardize pipelines?

Countries in the Middle East have embarked on an aggressive, multi-billion-dollar strategy to liquefy their shut-in natural gas resources.

The notion of building two Arctic natural gas pipelines -- Alaska and the Northwest Territories -- has been bandied about for decades.

A combination of politics, environmentalist opposition and red tape has prevented these projects from getting off the ground.

Now there's another obstacle to these megaprojects: LNG, or liquefied natural gas.

"Alaska's competition is Qatar,'' said Washington's top energy czar, Jim Kelliher, at a recent conference in Banff. He is chair of FERC, the Federal Energy Regulatory Commission which grants easements and licences for energy production and transportation across borders. He was referring to the Middle Eastern country, and its neighbours, who have embarked on an aggressive strategy to liquefy their shut-in natural gas resources because they have no nearby markets for their gas.

They have sunk billions into building facilities to super-cool, liquefy, refrigerate and transport LNG around the world.

A combination of politics, environmentalist opposition and red tape has prevented these projects from getting off the ground.

that's not entirely true.

Those lines were never going to be built without government aid-- the industry always said that.  The economics have never looked that good, when there was enough gas in Canada and Lower48.

LNG is not a big part of the North American fuel portfolio, so logically the only 'competition' for those lines was domestic production.

Now that prices have moved up and there is the demand from the Tar Sands, and mainland supplies are running low the Mackenzie Delta line, at least, will get built.

Figures it was Diane Francis who wrote the piece.

What she ignores is that gas prices have been too low to justify the pipeline.  The Energy Crisis of the early 80s ended, and gas prices fell.

Actually the Berger Report was in the 70s, I believe-- I am old enough to remember reading it.


1977.  She could have checked on Google (as I just did).  To be fair, she is right that Berger nixed the Mackenzie Valley line, but that line would not have been built without government subsidy in any case, as far as I can recall.

On the LNG point, what has changed is the open water issue.  The sailing days in the Arctic have increased massively since the 70s, (when there was a global cold snap), as the ice pack has receded.

It looks, very soon, like the Northwest Passage will be open all year round.  What the explorers sought, has finally happened.

Just to confuse the pipeline issue, the surface issues have gotten a lot more complicated: the permafrost appears to be melting.

PS I don't see Honda as a PV player.  PV is a chemical and electronic technology and is more the preserve of electronics companies, not auto companies.

"PS I don't see Honda as a PV player.  PV is a chemical and electronic technology and is more the preserve of electronics companies, not auto companies."

Better tell, Honda, because they are coming big, they say as early 2007.  That's a done deal:



"In December, Honda Motor said it will enter the thin-film business and mass-produce cells by 2007."


Roger Conner  known to you as ThatsItImout

you are way ahead of me on this.

Thanks for the heads up!

Just one disagreement.  Alternative sources of energy are not moving quickly; there are no large-scale solar cell factories being built, ditto for wind turbine factories, electric cars,  and practically everything else.  These things have time delays even longer than regasification terminals.  
Hmmm... both wind and PV are growing 20% + per annum.

Granted from low bases.  PV is stymied by a worlwide shortage of silicon (we have just passed the point where more silicon is used in PV, than in electronic devices such as computers and phones).

But wind is getting serious-- something like 40GW capacity worldwide, growing 20%+ pa.  PV I think has just crossed 1GW (for power generation purposes).

That is a doubling every 3.5 years.  Now it will slow down-- indeed there is a global shortage of wind turbines.  Also the US wind subsidy has yet to be renewed, and there is always an order drought until it is.

On the production facilities, I am not sure where we are on silicon fabs.  Wind I believe new turbine factories are getting built.

I agree there are time lags, but I also think the pace of growth is impressive.

Wind is growing quickly.  But this is in a world where one coal power plant is 2GW.
If wind keeps growing geometrically, it will catch up-- that's the mathematics of doubling every 4 years.

It took 14 years to build the first GW of UK wind power, and 14 months to build the second.

I don't think it will (growth doesn't usually sustain that fast, and the US subsidy timing factor is big), but it is a measure of how fast an industry can move if we want it to.

Whereas a new coal plant can take 5-7 years (and even the Chinese, with no significant planning consultation, probably take 3), an individual wind turbine can be built and deployed in 3 months.

I think you and are actually agreeing.  Renewable energy is small potatoes compared to fossil fueled energy.

If (enormous if) the world moves to a realistic level of carbon charging/ carbon permit trading, then I could see RE surprise all of us.

Global wind was 60GW at the end of 2005.

In the US wind is exploding: 9GW total installed at the end of 05, 12GW at the end of 06, and 12GW of installations planned for 07! The US's growth is the reason for the short supply of turbines. Now, not all of that will be built, but it's the single biggest form of electrical generation being planned for 07 in the US (43%, adjusted for capacity).

see http://www.nei.org/documents/Energy%20Markets%20Report.pdf

Solar is growing at 40%+ per year, and the single biggest fab is being built in California, at 430MW per year.

As Rummy would put it:  Could renewables be growing faster, with an Apollo type project? Golly, yes.  Would that be a good idea?  Gee, whiz, sure.  Is it growing pretty darn fast, anyway?  Absolutely!

remember the tax position is a distorter.

The current power subsidy will expire in 2007.  Historically what has happened is there is then a gap of some months before Congress renews it, leading to a 'rush' of turbine developments just before it expires, and then a 'drought'.

They are trying to get Congress to give wind more legislative stability, but at the moment that is the situation.

So 2007 will be nuts, and 2008 will be a pretty quiet year.

Also of course Capacity is not Kilowatt Hours.  Since your capacity factor in US wind is, I would guess, 30-35%, 1GW of gas turbine is c. 3.5GW of wind capacity.

Coal is going to be the big US power source for new capacity unless some form of carbon restriction/ taxation is introduced.  Not by this President!

"The current power subsidy will expire in 2007...  
So 2007 will be nuts, and 2008 will be a pretty quiet year."

No question.  OTOH, I think the climate has changed, and that there's very little question that the credit will be extended. see page 8 http://www.nei.org/documents/Energy%20Markets%20Report.pdf

You'll see that planned wind in 2008 is higher than installations in 2006, even though 2008 is at the edge of the planning horizon for wind.

"Also of course Capacity is not Kilowatt Hours.  Since your capacity factor in US wind is, I would guess, 30-35%, 1GW of gas turbine is c. 3.5GW of wind capacity."

Capacity factor for gas is less than 40%, even for combined cycle. See http://www.nei.org/documents/U.S._Capacity_Factors_by_Fuel_Type.pdf and note that their wind factor is a bit low - these are 2005 actual numbers, and the 36% growth in 2005 distorts the comparison of average production to year-end capacity.

"Coal is going to be the big US power source for new capacity unless some form of carbon restriction/ taxation is introduced."

See the same source: wind is bigger than coal for 2007 and 2008, and 2009 is well outside the planning horizon for wind.  After that, either wind or coal could dominate: it's a choice we as a country will have to make: clean or not?

Nick - you keep pushing these numbers, but I'm having a real hard time seeing the significance. Do you have a sense of how this planned installation relates to total electric demand in the U.S.? Is wind growing fast enought to even supply the demand for growth year over year? Much less actually begin to replace other existing generation?

I tried to do the figures myself, but the contributions of wind to total were coming in some tiny that I must have been doing something wrong. In short, before I can be impressed I need to know if this is a significant contribution to electrical generation or is this a matter of wind being a big portion of a very small increment.

Thanks in advance for clarifying this.

Take GW times 365 times 24 times capacity factor = GWhrs pa

Compare to US total GWhr (1 Terawatt Hr is 1000 GWhr)

http://www.eia.doe.gov/fuelelectric.html data is on rhs of page


Capacity is 978GW (978k Megawatts)
Production is 4054 GWhrs about a 47% capacity factor

It's easy to see how 100GW of wind could fit into that picture.  Or 200GW in fact.

US electricity generation is about 2.5GT of CO2, or about 34% of US estimated CO2 emissions.
I think it's most useful to think in terms of GW's of average production.

So, overall US production is about 440GW.  An increment of 12GW of wind would give you about 3.6GW (30% capacity factor), or about .8%.  
In 2001 the DOE projected 1.8% growth in electricity growth for the next 20 years.  Anybody have better numbers?  

Total new generation planned for 2007 is 8.3GW, ( see page 8 http://www.nei.org/documents/Energy%20Markets%20Report.pdf ), or 1.9%, which matches pretty nicely.  So, wind appears to be supplying 43% of demand growth.

Now, what this suggests is that wind has "arrived" as a major competitor to coal, and that with just a little growth it could replace it for all new generation.

Actually a large scale PV facility is being built in Albuquerque, NM as we speak...


Tell that to Nanosolar who is building a 400+megawatt thin film CIGS facility, as we speak, which represents 27% of last years total solar production. They are just one of at least seven companies expanding thin film this year. With their reduced production costs solar is poised to explode in the next five years. Within the industry there is competitive infighting about who will win in solar, thin film or silicon. Noone is arguing about whether solar will win.
You make a lot of good points, but LNG to Europe has had to compete with piped gas for a long time already. Sure, that piped gas is mostly priced in relation to oil rather than as an independent market, but the point re LNG stands.

And it's all the more relevant that Gazprom has the cheapest marginal cost of delivery of gas to Western Europe around - so potentially they can wipe out any LNG competitor unless specific issues of security of supply and diversification come into play (like they do for GDF, Snam or Ruhrgas).

agree a predatory pricing strategy against LNG would be logical for Gazprom.

More likely, perhaps is they just won't let it get too big, by signing long term contracts with the key consumers at prices just about the LNG entry price.  Sets a ceiling (and a floor) on European gas prices.

Yep, that's how it's been played so far, and it's likely to continue.
There is an unmeet need for a larger spot market in LNG, and I suspect that a faction of Shtokmann (say 10 or 15 million m3 of 70 million m3) will be devoted to that.  A "base load" via pipeline to Germany & France and the rest to LNG train in Murmansk.

Summer to Japan & S. Korea via Bering Straits, most of the winter to Eastern Canada, New England, Spain (Italy ?) if prices are right.  If not, shut down for a month (mid-winter Murmansk is not a good time to ship).  Pipeline pays for basic  apital costs of development.

Demand is not constant and a larger spot market is needed to balance NG demands (drought in Spain was recent example).

I just bought some Encana (ECA) at 43.02 :-)  There is no risk of new technology (solar) having a significant impact on North American demand for NG in the next 6 years.  Plug-in hybrids will INCREASE NG demand !  Wind will begin to eat into NG's electrical market but conservation, loss of industrial demand will be the responses to high NG prices.   Wind w/o pumped storage will begin to eat into coal demand as well (good for GW), but without a nation wide grid and pumped storage, wind will not cap NG prices in a six year time frame.

I see this as a rare 95% chance of gain in six years and 5% chance of breakeven/small loss.

Best Hopes,


And they've just announced a $15bn tar sands deal with Chevron, to produce 400k bl/day.

They are the biggest natural gas reserve holder in North America, I believe, and the purest play.

It's a pretty safe long term hold, although the share price will yo-yo with the winter gas price (it always does).  I hold Canadian Natural Resources for the same reason.

Actually I think wind will displace gas, not coal fired electricity.  Coal is just too cheap, in the absence of meaningful restrictions on CO2.

Wind will displace gas first, then coal.

Take the electrical island of Texas in a hypothectical.  

3 AM, January 5, 2012 a strong "blue norther" has installed wind generating at 92% of nameplate.  Every gas plant in state is turned off and the coal plants (some new) reduce output to meet demand.

But on 3 PM August 5, 2012, wind is calm as high pressure settles over the state in record heat wave,  Wind at 6% of nameplate as air conditioning demand surges and every gas plant generates at maximum.

At the end of 2012, it is calculated that the 11.5 GW of wind installed in Texas displaces 82% gas, 18% coal and 0% nuke. 38% of Texas NG use for electricity was displaced by wind

Best Hopes,


One tends to use coal for mid merit power, and gas for peak power-- partly because coal stations can't be 'spun up' in minutes, whereas a gas turbine can.

the only caveat is if we go to CO2 permissioning/ taxation.

Europe a CO2 permit costs 18 euros (and it was 30 euros).  that makes coal expensive.

But I don't see it, politically, soon enough.

My point is that, in a region without much storage hydro or pumped storage OR transmission grid to other regions, wind will displace gas first and then coal (absent CO2 taxes).  

But a large installed wind base will displace coal (after displacing 100% of NG) at times of near peak wind output and less than peak demand.

At other times, of peak demand and low wind generation, large amounts of NG will be used in electrical generation.

Best Hopes,


I heard on the radio that GM have terminated talks with Renault/Nissan.

Signed their own death warrant.

Have heard "financial analysts" say that there was nothing in it for GM : they know how to build cars Americans want, they just need to make their structural changes (reduce wages and benefits) so they can make them profitably again. Rental market, blah blah. Implied : They don't need help from Franco-Japs who only know how to build silly little cars that Americans don't want.

Death warrant.

Put a fork in GM. They are done.
Renault would bring little to the table and Nissan is the weak sister of Japanese auto companies.  I doubt that a GM-Nissan-Renault merger would be a success.  Just ask those folks in Stuttgard >;-)

Best Hopes,


yeah what could renault bring to the table...only diesel engines that produce 60 mpg euro cars , like this nissan micra
Even with ultra-low sulfur diesel, US emissions standards will limit diesel penetration.  And GM can buy engines easily enough; they bought Isuzu diesel engines for Chevettes in the 1970/80s.

I think Renault would bring little to the table.  Their lack of quality and mediocre engineering is just what GM does NOT need.

AFAIK, GM sold off their stake in Isuzu.  Too bad.  Importing Isuzu light commercial truck technology could help GM.  GM has the capability (IMHO) to dominate the light commerical market in North America with fuel efficient durable trucks & vans.  And Isuzu built some durable, efficient diesels in the 1980s.

I am a diesel fan, I drive an 1982 M-B 240D (31 mpg city)and bought an 1982 Isuzu I-Mark diesel (39 city, 48 highway) new and drove it for 15 years till I grew bored with it.  But I am pessimistic about % diesel in small US cars.

World refineries could not handle a major switch in both US & EU from gasoline to diesel.  Diesel-gas spread would grow.

Best Hopes,


Unless you've got a ready-to-use hole in the ground liquid storage beats gas storage.  That means the storage is going to be built near the terminals, like it or not.
There are so many things to comment on -- I don't know where to start.

In the Amsterdam article, there is this happy scenario:

What the article does not mention is that there are indications that a Russian state energy firm may be considering acquiring a major participation in the company [Cheniere] (perhaps majority), and gain a critical foothold into U.S. energy infrastructure....

News from Russia via the Houston Chronicle:

Gazprom Deputy Chairman Alexander Medvedev said Tuesday in Houston that, in exchange the Russian company would allow Western energy companies to have a role in developing the Shtokman Field in the Barents Sea.

"Our principle is simple. We want to be involved in all parts of the value chain," Medvedev said in the interview published in Wednesday's editions of the Houston Chronicle. "For access to our strategic reserve base, we want equal access to the downstream and midstream assets."

Upstream also reported on "close talks" between Russia and Cheniere on March 24, 2006...
Oh, no! This gives us the Russian terms & conditions that makes HO's text below make sense:
Truly it is a small world.

But this all gets us back to the LNG problem, since getting gas from Kazakhstan, and Turkmenistan may help Russia send LNG our way, if they decide they want to.

Every day the Russians sit on that geographically convenient Shtokman field, V. Putin's happiness becomes more & more complete. Truly, it is a small world. And, truly, our friend the former KGB officer, indicates to us everyday that he fully grasps the meaning of the word globalization regarding the "holy of holies".

Next up after Nate's post and HO's fine update here is a new examination of the economics of LNG. I should interview Mr. Putin, for he understands what the price will truly be to slake our thirst in North America even if others -- in the U.S. government -- do not, or do not care.

(Grin - do I hear a bid from Nantucket ?) I guess that Dave and I will puzzle out where we are going to get all this gas on another day.

That's easy.  You aren't.

They want to move 13 bcfd of LNG a day through Sabine Pass?
Suddenly I am very glad that I do not live around that area. I think I would be moving.
The US may not necessarily get any natural gas from Shtokman. At a recent meeting with French President and German Chancellor, Vladimir Putin suggested diverting 45 billion cubic meter of NG per year from the US to EU countries in exchange for allowing Gazprom to aquire gas distribution networks in Europe. (See http://www.kommersant.ru/doc.html?DocID=707028&IssueId=30208 , the entire article is in Russian and subscription-only).

I would venture to guess that Russia's gas will go to the highest bidder, and the US may not end up being a winner, especially given EU's geographic proximity to Russia, the new gas pipeline that is being laid across the Baltic between St. Petersburg and Germany, and the geopolitical considerations on Russia's part.

Whenever I get confused about the world situation today, I go to the two axes:

U.S., Britain, Israel versus Russia, China, Iran.

Everybody else has to decide which axis has a future.

My guess is that western Europe sees a rising Asia in its future. The U.S. looks increasingly self-isolated.

Let alone the fact that the U.S. produces very little that Russia might want to trade for the oil.
I agree the gas will go to whom will pay the highest price.

The US has more alternatives than Europe, and is a richer country.

I suspect the Europeans will pony up for the Russian gas, and avoid offending Putin and successors on foreign policy matters.

The Americans will go after Arctic gas, and perhaps African and Qatari resources.

Regarding where gas storage will be built, there will probably be two methods used:

Pumping the gas in existing depleted reservoirs with existing infrastructure in place.

Pumping nat gat into salt domes that that have caverns created by circulating water from bore holes drilled into them.  

If you overlay a map of major pipelines over a geologic map of nearby salt domes, that would be my guess where the storage will be built.

On the LNG market, I can only recommend to sift through the presentations by BG Group, an almost "pure" LNG player, there's lots of valuable information in there.


Thanks, Jerome.