Gas supplies continue to be negotiated

With a couple of stories in the news this week, one's first inclination might be to think that we should stop worrying so much about immediate fuel supply problems.  Consider the report that natural gas supplies are at the highest level since 1984.  At a level of some 197 tcf, set against an annual production of around 18.3 tcf, this would appear to give us a reasonably good supply for over ten years.  Unfortunately life is not that simple.  As Dave pointed out our reserves are increasingly coming from unconventional sources.  And as the OGJ article points out
Production growth hasn't followed the increase in reserves, noted Chris McGill, AGA's managing director of policy analysis.

 "In 2005, over 27,000 gas wells were completed in the United States, which is the highest level of completions on record," he said. "However, most of these wells were drilled onshore in shale, tight sands, and coal seams, which are low-yield and slow-yield resources."

To a degree this is good news, since if the supply is, for geological reasons, produced over a longer time interval, it means that it will be around longer.  On the other hand it does mean that if demand is sustained, then other means of supply will be needed.  Which is, in part,  why there is sustained pressure on Congress to open up more drilling access to the outer continental Shelf.  Though the claims are a little hyped.
"Despite record-level demand and prices, federal policies continue to drastically restrict exploration and development, drastically limit supply of domestic natural gas," said NAM President John Engler in a speech last week to the Economic Club of Pittsburgh. "And remember, natural gas is by and large a regional market -- unlike oil, we cannot ship in additional supplies from the Middle East or Russia to meet growing demand."

He appears not to have heard of  LNG, a world resource that seems to be growing.  While given that we don't have the resources yet to fill all the anticipated gap, BG has shipped 40 cargoes this year of which a third went to the US, and Europe and Japan were also strong customers.  Increased profit came, however, as the Guardian reports, more from increased prices than from increased sales volumes.

Analysts at Citigroup said the first-quarter performance of the LNG business was roughly double consensus expectations.
The question remains as to whether the production rates will be able to meet market demands, given that the Asian-Pacific demand continues to rise. Schlumberger reports
About one quarter of Russia's gas exports will go to the Asia-Pacific region as of 2020, compared with about 5% now, and the proportion of Russian oil exports to the region will increase tenfold to 30% from 3%, Industry and Energy Minister Viktor Khristenko said Monday.

Russian gas supplies to China may reach 68 billion cubic meters by that year, being pumped through two pipelines beginning in 2011, Viktor Khristenko said.

And Gazprom continues to expand its activities, with discussions now going on with Bolivia and Tajikistan.  Perhaps this is not surprising given that
Gazprom is the largest gas company in the world with an approximately 20% share of global gas production, controling almost 60% of Russia's gas reserves and producing about 90% of Russian gas, according to the company website.
(Actually that's a bit out of date the website now says 25% of world gas production.) Meanwhile possible partners for development of the Shtokman field are being interviewed prior to a decision within the next two weeks.

However, while supplies from Russia may still be questionable, the supply from Qatar appears to be becoming a little more assured. Qatargas 3 and 4 are now being developed to produce about 1.4 bcf per day of LNG equivalent, that will be supplied mainly to the US, with delivery from Q3 coming in 2009, and that from Q4 in 2010.  However it should be remembered that the US need, by that time, will likely exceed 5 bcf per day, though this should supply more than 50% of that need. Incidentally the vessel cost alone for the project will be $2.5 billion.

Meanwhile, after getting a natural gas pipeline promised by Russia, and having got a pipeline for oil from Kazakhstan, China has now signed an agreement with Turkmenistan for a natural gas pipeline.  Which is probably something that the government of Ukraine might worry about (if they didn't have enough domestic problems) given that the reduced price that they are supposed to get for Russian natural gas is predicated on blending cheaper Turkmen gas with the more expensive Russian gas.  But if the Turkmen are now going to be selling their gas to China at perhaps world market prices  . . . . .

But don't forget that Russian gas lines to Europe still pass through Ukraine, and that if current political problems go away, the alternative Baltic Sea pipeline still won't be flowing gas into Germany until the next decade, leaving Western Europe, to a degree, still at the hands of the Ukrainians. Which may be bad news for the Italians and those in the UK.

"Slow yield" is, IMO, a good thing.  (the opposite of recent deep water find which peak quickly and deplete almost as quickly).

We have a crunch in production, prices force adjustment, and we end up with roughly the same production in a few years.

Growing reserves, declining production (if true) is a good step towards an easier transition.  A gentle downslope.

IMO, nonconventional US natural gas production is to conventional US natural gas production as nonconventional oil production worldwide is to conventional oil production worldwide.    

In both cases, nonconventional production will primarily serve to slow the rate of decline of total production.

Thanks for the post, HO.

Given that you've got basically only two alternatives, pipelines or LNG for transport and also that both involve long-term contracts in most cases, the scramble is on now to secure supplies up to 5 years out and beyond. I'm not saying there isn't a spot market. But the major positioning (eg. the US with Qatar, the Russians with the Chinese) is going on in the present. I wonder if people appreciate the importance of the current geopolitical positioning over securing future natural gas supplies.

Also, aside from our (US) current importers, does the US have any deals going (outside Qatar, 2009) with any other major new LNG suppliers? I'm only aware of Shtokman (Russia) being a new US supplier but that's years away as well. Also, the Alaska pipeline is 7 or 8 years away. The next 3 years look shaky for US supply and it's still tight after that if everything goes as planned--which never happens.

According to the BG Webpage the US has commitments as follows
During the fourth quarter, Lake Charles received its first LNG cargoes from Egyptian LNG Train 2. From 2006, contracted supply will rise to 10 mtpa, with new long-term supply contracts from Trinidad and Tobago (Atlantic LNG Train 4) and Nigeria, and increase further from 2007 with supply from Equatorial Guinea. In addition, in February 2006, BG Group signed a Memorandum of Understanding (MOU) with Nigeria's Brass LNG for the acquisition of 2.0 mtpa of LNG for 20 years, with initial deliveries expected to start during 2010. It is planned that cargoes will be delivered on an ex-ship basis to Lake Charles and Elba Island but BG Group will retain destination flexibility. During 2005, BG Group continued to source cargoes on the short-term market.
Note that this is only for Lake Charles and Elba Island. I think the Nigerian Train 6 is aimed at a different destination. Chevron lists several potential sources for Point Pelican and the Baja California terminals. Poten lists several new sources including Oman and Australia that have just come on line. Though the comment in that report that "From a performance perspective the industry is showing strain across the board," isn't particularly encouraging, but could be just due to the shake-down of a lot of these newer operations.
Further to Dave's comment on the need to establish long-term contracts for supply, the case of Korea might be considered.  Korea has according to Poten currently got a short-term contract with Indonesia for about a quarter of its energy supply, but Indonesia is now expected to significantly drop production by the end of this year.  This will also impact China and Japan, but the latter have been aggressively chasing new contracts.  Korea has apparently not, and is thus thrown onto the spot market where prices have been much higher, and where, as the UK recently found out, supplies are not necessarily always available.
Hello TODers,

Sorry, I am not a chemist or refinery engineer, but I recall calcium carbide lamps where pellets and water generated a flammable gas.  Couple of links for youngsters:

Instead of turning natgas into LNG, would it be safer & cheaper, and have a higher ERoEI to turn the gas into a dry chemical similar to calcium carbide?

To heat your house: pour a bag into a tank and add water?
To power your car: pour a bag into a tank and add water?

Forgive me if this topic has been thrashed before.

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

Like hydrogen, acetylene would have safety considerations for home use.  As far as a solid compound that would easily produce methane, nothing comes to mind.  You could make methane from liquids like methanol or formaldehyde, though.
One more question.  If the oil sands are in limestone, and water is becoming short in Canada, could they just convert the oil sands to 'power pellets' where we add water when we want to use the power inside?  We would have a problem with our cars spewing leftover sand all over the place, but that might work great in snow country.  =)

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

Wekll, if the U.S. had actually developed the external combustion vehicles proposed in the seventies and started manufacturing them we'd have a lot fewer problems now.  A little late, now.

 Most of the process water is recovered and recycled. Pelletizing the oil sands and using the pellets as a fuel source is an interesting idea that I have not heard before.

 One problem may arise from the fact that at the microscopic level each sand grain is "coated" with water with the oil on the outside of that coating. Trying to burn this as raw fuel might be like trying to burn green wood.

Oil sands are about 10% oil, 10% water and 80% sand. A lot of the sand is actually really fine clay like bentonite that is damn hard to separate from the bitumen. No free lunch in the sand I'm afraid.
The usual process of producing  calcium carbide is to 'burn' limestone or chalk (largely calcium carbonate) to produce lime (calcium oxide). This is a heavily endothermic reaction and produces carbon dioxide.

This lime is then heated in an electric arc furnace with coke. The coke is produced from petroleum or coal. Both sources waste energy and usually the release of some carbon dioxide. The electric arc furnace produces calcium carbide and carbon monoxide. Normally excess carbon is required over the stoichiometric ratio. The process is heavily endothermic and I believe not very efficient. I could  not find exact figures but there was one reference to the possibility of increasing the efficiency by 22% which implies a low starting figure. The carbon monoxide is usually burnt to help heat the reaction producing more carbon dioxide.

The acetylene is produced by the action of water on the carbide which gives off the gas and produces calcium hydroxide. This gives off heat but this is usually wasted. The acetylene lamps still sometimes used for caving produce the gas in a box that straps to your waste and gets quite hot.

Finally you get to burn the acetylene to produce carbon dioxide and steam.

Roughly speaking for each ton of calcium carbide 1.8 tons of  carbon dioxide is produced before the acetylene is used and 1.1 tons of carbon dioxide is produced in burning it. Which would mean a maximum of 38% efficiency from this alone and in practice would be well below this.

In principle you could absorb a quarter of the carbon dioxide in the calcium hydroxide turning it back into calcium carbonate and leaving an overall reaction of carbon plus oxygen gives carbon dioxide but I doubt it will be practical.

I think you could get better efficiency by burning the coal directly in a coal fired steam vehicle.

Instead of turning natgas into LNG, would it be safer & cheaper, and have a higher ERoEI to turn the gas into a dry chemical similar to calcium carbide?

No. Huge losses in the conversion process, and harder to transport and distribute if turned to solid.

A much better idea would be to turn the nat.gas to methanol or to use gas to liquids. Both processes are very efficient and not that capital-intensive.

no open thread up so i'm dumping some news here , sorry

United States stopped the supplies of spare parts for the F-16 aircraft to Venezuela


i call them mercs not independant contracors

and for fun
Yesterday, the Center for American Progress held a discussion about how to hasten the arrival of the "After Oil" era

So, say, one side hires Blackwater. Where there's a Hertz, there's an Avis. So the other side hires Avis. How does this play out? Corporations at war -- literally?


 Until it hurts. Literally.

Here is an interesting story:

Look's like doomers aren't getting good rep these days.

Kill yourself in order to save the planet!
I bet the students were asking the Prof to go first!
Just a general comment.

When HO and I post these stories on natural gas supply, people here at TOD do not seem to appreciate the scope of the problem, particularly as gas supplies for North America goes. This is reflected in the pausity of replies to these posts on the subject.

The near term situation could not be more serious and the longer term (involving LNG, drilling for unconventional gas resources, etc.) is not much better.

I would suggest that this is where the action is, even as we consider the apparent current plateau of global oil (all liquids) supplied to the markets. As to how that trend will play out in the next few years, I don't know. But the crisis in the natural gas situation is clear. There are many competitors for the resource, as HO's post makes clear. How this will turn out is anyone's guess but the various stories published here at TOD are alerting us to a very precarious situation.

Just a warning and food for thought.

Oddly, there is a 12 to 24 month response to higher North American natural gas.  It takes as little as 12 months from financial decision to commercial operations when expanding an existing wind farm, and about 24 months for a "green field" wind farm.

In almost all areas of North America (except Quebec & New foundland) NG is burned for peak electricity.  In Texas, OK & LA natural gas is burned 24 hours/day.  New wind will displace some of that.

Also, Canada and US could agree to run the Niagara Falls hydropower plants at full capapcity during the summer.  The equivalent of an extra nuke or two during daylight hours.

Not enough, but a good start.

Consider the report that natural gas supplies are at the highest level since 1984.  At a level of some 197 tcf, set against an annual production of around 18.3 tcf, this would appear to give us a reasonably good supply for over ten years.

SO how do you tell someone there's a problem when they see we still have a ten year supply of NG??  How does this relate to a short term problem??  I don't believe the average joe will look at this figures and believe we have a problem, IMHO.

Well... by most estimates we have in the range of 30 to 50 years oil left world-wide, but still most of us believe we will be having a problem.

IMO the NG issue requires more investigation.

You are correct about the apparent lack of focus on natural gas. I would have thought that if nothing else, the issues in Europe this winter would have brought the situation to everyone's attention ... but maybe not.

The situation in the UK was particularly troubling as it illustrated what narrow balance, a cold snap and a fairly minor supply issue could do.

I am a little bit confused how the storage numbers look as good as they do in the U.S. given the hurricane shut in situation in the GOM. Chalk it up to the warm weather, but that does not intuitively seem to be an adequate explanation.

Back to your comment: Maybe oil has more sex appeal?

We need an easy to understand "Peak Natural Gas" chart. :-)


I suspect it's just that U.S. peak oilers have very little interest in what goes on overseas.  The tags to this story suggested it was about natural gas supplies in Eurasia.  That was a crisis last winter, but there was very little interest in it among Americans.  "A hundred people freeze to death in Europe" gets few clicks.  "Rolling blackouts in Denver" gets a lot.  
Hear, hear!

I continue to maintain that the typical household in the US will find it easier to reduce their gasoline consumption by 10% than to reduce their natural gas by a similar fraction.  With no disrespect to Stuart's thoughts on vehicle miles, the household can accomplish the reduction by changing behaviors: some car-pooling, some errand-combining, giving the teenager the car less often, etc.  I believe that the same household will find it much more difficult to make the natural gas reduction by behavioral changes -- they're going to have to make capital improvements.  Lots of people can reduce their miles driven next week; far fewer of them can have their furnace replaced or new windows installed in the same timeframe.

However, I'm even more concerned about the impact of natural gas shortages or steep price hikes on affordable electricity supplies.  As this graphic shows, while GDP growth has become less dependent on total energy use, the disconnect from electricity use is much less pronounced.

I suspect we can lower natural gas consumption more than you think.  Anecdotally, I'd say people are already cutting back, due to high prices.  Lowering the thermostat, increasing insulation, power compact flourescents, etc.  

We have already had a lot of demand destruction, as industrial users shut down or moved overseas where natural gas was cheaper, and we can still cut back more. Plus, we are sort of prepared for shortages with natural gas (and electricity).  Customers who are willing to be cut off when supplies are tight get lower rates.  (I get sent home from work during power emergencies for that reason.)  I don't think we have any similar mechanism with oil or gasoline.    

Just a "non-industry" comment.

From the US, when I see a title "Gas supplies continue to be negotiated", I think gasoline for cars, not natural gas.

I realize that most other parts of the world do not think like that.

But, I only think Natural Gas when I see Natural Gas.

Of course, once I read the discussion, I figure it out...and yes, I am attempting to change.


I don't recall the source of the idea but I like the idea of manufacturing methane hydrates at offshore wells and transporting these using common refrigerated cargo ships instead of cryogenic LNG.
I'm confused by the AGA report that 197tcf is in storage. This amount exceeds the US natural gas reserves reported by Julian Darley in "High Noon for NG". (at p207 he says reserves are 183tcf.)  How can these companies have such large stockpiles of gas?
Not storage - "reserves" refers to the amount of gas estimated to remain in gas fields under production.  This is likely parallel to the case for oil, in which case reserve increases come via:

(1a) reassesing existing firlds using the latest data
(1b) reassesing existing fields based on better producability (more wells, enhanced recovery treatment)
(1c) reassesing existing fields using a higher assumed price (can invest more in fields)
(2) new discoveries of gas (mostly in non-conventional fields these days)

The amount of gas which can be stored in the USA appears to be somewhere near 3.5 TCF - storage generally peaks around there and is now at about 1.7 TCF.  See USA natural gas news and analysis at Natural Gas Weekly Update.

Also, US drilling for natural gas is now at record levels, likely due to the high prices recently.  The key is production rate - there's a worrying precident that in the early 1970s, record oil drilling rates in Texas couldn't stop oil production there from slipping.  Most new gas supplies are unconventional, thus harder to produce...
The comments dealing with rate of production of gas from unconventional deposits ("slow") are too broad for my tastes. "Unconventional" includes tight formations (slow) and deep water deposits (fast). But, I would sure like to know if the info is available as to where coalbed methane fits in (fast or slow or in between?)--possibly this will be as variable as tight formations and likely is related to coal rank?