Sep 07

Tom Ridge: Shale Gas Makes America Safer

By Curve shale gas No Comments »

 

The former head of Homeland Security is an advocate for shale gas, having been a lobbyist for the Marcellus Shale coalition.  In a speech today, he cuts to the chase and gives many reasons why shale is a cleaner and safer alternative to what we already use:

Former Homeland Security Director Tom Ridge kicked off the Marcellus Shale Coalition’s “Shale Gas Insight” conference with a blunt message: the more natural gas the United States extracts from shale rock, the safer the country will be.

How’s that work? The Republican began his morning speech with the well-worn argument that the U.S.  imports way too much oil from foreign countries. He called federal energy independence plans “a mirage,” adding, “In 2010, our bill for foreign oil was a quarter trillion dollars….we still have no national energy policy

“We now import 3.5 billion barrels [of oil] annually,” he said, “compared with roughly a third of that in 1973.  …It’s one thing to get oil from counties like Canada…. But we also import from counties who aren’t such good friends. Nations such as Algeria and Iraq and Saudi Arabia and Syria and Nigeria and Venezuela and Chad. All of those countries are on the State Department’s travel warning list. Now think about this picture and ask yourself what’s wrong…we travel, in this country, on their oil. But it’s not safe for us to travel in their country.” Ridge went on to call the United States’ relationship with these countries “toxic, both literally and figuratively.”

“We need a national all-in energy policy that’s realistic and practical, not rhetorical and illusory.” And predictably, given the fact we’re here at a conference about natural gas drilling, Ridge said hydraulic fracturing and shale gas should be the cornerstone of that new policy. “We are truly an energy-rich country,” he said. “And natural gas should be at the forefront of the energy revolution.”  The more energy the United States extracts from within its borders, Ridge argued, the less it will need from the Middle East. “Made in America, when it comes to energy, is in my mind just a synonym for national security.”

Ridge spent about a year lobbying for the Marcellus Shale Coalition, and clearly believes in the industry group’s product. “When gas is taken from the ground by hydraulic fracturing, it provides the least environmental distribution of any current base load fuel,” he said. “And when it is used, it has only half the carbon emissions of coal, and virtually zero particulate emissions.” A substantial number of people – many of whom are protesting outside the convention center – are concerned about hydraulic fracturing’s safety. They’re worried the chemicals used in the process will contaminate drinking water. Ridge dismissed the worry as “phony hysteria.”

Ridge promised gas extraction will improve the economy, too. “Jobs that arise from clean energy are not just for those in the energy industry, but for those in virtually every industrial activity,” he argued. “Transportation, manufacturing, construction, power generation, and even more benefactors. And they flow to schools, community development, recreation and culture activities.”

Ridge dinged the federal government for not investing more money in “there’s not much discussion within the political class about natural gas. It seems at times to be about everything but natural gas.” He called subsidies for renewable energy efforts “baffling,” adding, “most renewables are very costly, and will take awhile to become reliable, sustainable regional and economic sources of energy. I’m not saying we should stop pursuing them…but clean energies still cost vastly more than fossil fuels.”

Toward the end of his speech, the former governor tried to tie natural gas to the country’s long history of energy extraction. “We must decide whether we will lead the transformation, or be led by others. I prefer the former.” He tied natural gas into the country’s long history of extraction. “Coal powered America into the industrial age in the 19th Century. Oil propelled American citizens into the transportation age of the 20thCentury. Natural gas should lead the energy revolution, and be the foundation fuel, of the 21st Century.” Of course, both the oil and coal boom devastated Pennsylvania’s natural resources. Ridge said gas drillers have learned the lessons from those extraction cycles.

Source: State Impact

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Sep 02

Shale Gas “Important to France”

By Curve France No Comments »

 

In the wake of the French ban on hydraulic fracturing, Jacques Sallibartant, President of the Drillers Union and Gerard Medaisko, a Geology Consultant, are adamant that shale gas and shale oil are important to France.

They opine that there is not one simple answer, but that gas and oil are part of a reasonable and realistic energy mix.

There follows an English translation of their Op-Ed submission in today’s Le Monde newspaper:

 

Shale gas is indispensable

The debate should remain open

The 26, 27 and 28 of August, opponents of shale gas and oil (also called tight oil) will gather in Lézan (Cévennes). But why? To congratulate themselves on having deprived France of a new energy source or to propose solutions for the country’s energy problems?

In light of current energy issues, there cannot be a single, hasty and simple answer. An energy mix, uniting and optimizing different energy sources – from wind to nuclear and gas and oil – is the only realistic and reasonable option. It is also absurd to affirm that the national production of fossil fuels would halt the development of renewable energy.

In fact, the eventual production of shale gas and oil on the French territory, would not aim to substitute the development of renewable energy sources but rather to replace extremely costly energy imports (for example, metropolitan France currently imports 99% of its oil consumption). It would be, at the very least, paradoxical to, in a few years’ time, import shale oil from Poland while the resource lies beneath our feet.

While the Jacob law to ban hydraulic fracturing was voted on in Parliament early this summer and promulgated on July 14, only the implementation of experimentation provided by by the law would provide a clear answer to a presently confusing situation.

The implementation of hydraulic fracturing tests would fully meet the requirements of the principle of precaution; namely a scientific assessment of potential risks. In the case of shale gas [production] the risks have been well known and manageable for years.

The Mining Code should also evolve not only to respond to new technological challenges posed by tight oil and gas, but also to provide maximum security and respond to the understandable concerns of the public.

Another route

Several lines of thought should be developed: better regulation on drilling and stricter control on behalf of authorities in order to guarantee the compatibility of research and production operations and respect of the environment and quality of life; better distribution of production revenues for departments, municipalities and communities; and finally the possibility for landowners to benefit from a percentage of revenues earned on production from their soil.

In the United States, a new report mandated by the Obama Administration highlights that, in order to guarantee clean production of shale gas, it is necessary to promote and encourage best practices among oil companies, to exercise tighter drilling controls and publish fracturing fluid ingredients (which are already disclosed by most operators). This report is a reminder French ideologists that there is a route other than total refusal of scientific and technical progress (shale gas, GMOs, nanotechnology): the route of regulation.

Source: Natural Gas for Europe

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Aug 31

The Energy Collective: 3 Studies Confirm Shale Gas Is Not Worse Than Coal

By Curve shale gas No Comments »

 

Geoffrey Styles, Managing Director of GSW Strategy Group, LLC, an energy and environmental strategy consulting firm, has posted on The Energy Collective, the combined findings of different studies into the environmental impact of shale exploration and extraction:

For most of this year the enormous potential of shale gas has been clouded by controversy over its alleged climate impact. This began with the draft and later the leaked pre-publication version of a paper from a Cornell professor suggesting that the greenhouse gas emissions from gas were no better than those from coal and might even be worse. When I examined Dr. Howarth’s analysis in two postings last December and this April I found that his methodology and assumptions were sufficiently flawed to undermine his conclusions. However, I also recognized the informal nature of my assessment and suggested the need for further scrutiny of this issue by organizations with more resources. That has now taken place, though I claim no credit for it. Within the last month three separate teams have issued reports bearing on this question, and not one of them validates Dr. Howarth’s findings against shale gas.
The first of these studies comes from IHS Cambridge Energy Research Associates, addressing not just Dr. Howarth’s paper, but also the EPA’s estimates of methane leakage that were a key input for its calculations of greenhouse gas (GHG) emissions from shale gas. Although a skeptic might find reasons to dismiss a study from a consultancy with a large energy industry clientele, the other two studies have connections to groups with unimpeachable environmental/sustainability credentials.

One is a collaboration between Worldwatch Institute and Deutsche Bank, while the other paper, published in Environmental Research Letters, is from a team at Carnegie Mellon University with financial support from the Sierra Club. I encourage you to read them, but here are the highlights:

The Carnegie Mellon team focused on shale gas from the vast Marcellus formation underlying several eastern states.  They found that while the current techniques for developing and completing a Marcellus shale gas well do result in higher methane emissions than from conventional gas wells, the extra methane only increases lifecycle GHG emissions from well to burner tip by 3% on average. This is the case because, “The life cycle emissions are dominated by combustion that accounts for 74% of the total emissions.” As a result, when burned in a combined cycle power plant to generate electricity, shale gas results in emissions per kilowatt-hour (kWh) that are 20-50% lower than those from coal, depending on equipment and sources.

This is the crucial comparison that Howarth’s paper gave short shrift. They also compared shale gas emissions to those from LNG, which we’d now be importing in large quantities had shale gas development not ramped up as it did a few years ago. The Mellon team found shale gas and LNG roughly comparable, with both emitting around a quarter less CO2 equivalent per BTU than diesel fuel. That suggests that shale gas isn’t just a lower-emitting fuel for power generation, but also for transportation.

Finally, they looked at the possibility of shale gas wells being fractured multiple times, rather than just once during their production life, and found that it would take more than 25 fracturing events to negate gas’s advantage over coal.

The Worldwatch/Deutsche Bank study considered both top-down and bottom-up views of shale gas emissions, including that of Howarth. They looked at the average US natural gas supply including current proportions of shale gas and found that the emissions from gas-fired power plants beat coal-fired plants by an average of 47%, even with the EPA’s higher figures for methane venting during gas production.

They also found that among bottom-up assessments of shale gas emissions, including the one from Carnegie Mellon and another from the DOE’s National Energy Technology Laboratory, Howarth’s results appear to be an outlier, and that shale gas is materially lower than coal in lifecycle emissions for power generation. And while their analysis was performed using the standard 100-year global warming potential for methane of 25 times CO2, they considered sensitivities ranging up to a GWP of 105:1, at which extreme gas still performed better than coal.

It’s probably too much to hope that these independent studies will alleviate all of the concerns that have been raised about the greenhouse gas emissions from shale gas, which will only improve as technology and standards progress. (The studies also highlighted both the need and potential to reduce methane emissions from shale gas development, in order to minimize the extra greenhouse gas contribution, irrespective of any comparison to other fuels.) I also get that with the current mood in much of this country, claims for the game-changing energy potential of shale gas must sound too good to be true, without some fatal flaw.

Yet everything I see indicates that the problems associated with shale gas development are all manageable, and that while it isn’t a panacea, it does represent an extraordinary opportunity for the US from an economic, energy security and environmental perspective. It’s time to recognize this as the tremendous gift that it is.

Source: The Energy Collective

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Aug 26

Halliburton: 11,000 New Jobs in Shale Exploration

By Curve Halliburton No Comments »

 

Evidence was provided on the popular CNBC show Mad Money this week, that shale fields are generating big business and huge job opportunities.  Host Jim Cramer was told that Halliburton plans to hire thousands of people – mostly to work on shale extraction in North Dakota:

 

Energy company Halliburton plans to hire 11,000 workers in North America in 2011, a top executive told Cramer Wednesday.

Jim Brown, president of Western Hemisphere, said many of the new hires will be sent to North Dakota’s oil-rich Bakken shale, which is one of the largest oil finds in U.S. history and where Cramer broadcast a special episode of “Mad Money” on Wednesday. Brown said Halliburton is currently hiring across the board–from MBAs to unskilled workers.

“If you have a willingness to work and an aptitude to learn with a high school education, within a year-and-a-half to two years, you can become a front-line supervisor. That job will pay $125,000 to $130,000 a year,” Brown said. “It’s a tremendous opportunity. You gotta come to North Dakota, but what we’re doing here, we’re replicating across the nation.”

Source: CNBC’s Mad Money

 

 

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Aug 19

Shale Gas Emerges As New Energy Target

By Curve shale gas No Comments »

 

 

The Calgary Herald’s take on recent developments in north America regarding shale gas extraction:

It’s almost as if the sins of the oilsands are now being visited upon shale gas producers.

Clearly the energy sector can’t catch a break.

The report released last week by the U.S. Shale Gas Subcommittee of the Secretary of Energy advisory board is an excellent example of a discussion that is being driven by public perception rather than fact.

Most companies – like Encana, which produces 1.8 billion cubic feet per day from its U.S. gas plays – are already following the recommendations in the report.

“There was nothing that was surprising to us in terms of operational best practices,” said Doug Hock, spokesman for Encana’s U.S. division in Denver.

Response to the report has ranged from recommendations not backed by sufficient industry input to environmentalists saying it did not go far enough.

Perhaps even more telling is that the report makes a point of saying that not enough analysis has been done on shale gas extraction for concrete conclusions to be drawn.

Does the United States need more regulation on the whole for its energy sector?

If Canada is held as a standard for regulation, yes. But does it need to put the shale gas business in a headlock? No.

The SGS was charged with looking into what measures should be implemented to reduce the environmental impact of shale gas production. Fair enough. As anyone watching the natural gas business is only too aware, the unlocking of shale gas reserves has taken the United States from being dependent upon imports to effectively being selfsufficient. Given that these types of plays are relatively new, as manufacturing-types of operations that require plenty of wells – and water – to extract the natural gas, it stands to reason regulation has to evolve, but it shouldn’t stymie.

Framed in the context of energy security, anything that decreases the need to import from less stable parts of the world, which would have been the case prior to the shale gas explosion, has to be seen as a positive.

The only place from which imports are expected to continue is Canada.

From an environmental perspective, the proliferation of natural gas should also be seen as positive.

According to basic economics, more natural gas means lower prices and thus casts the fuel in the realm of possibility as a viable substitute for coal in the production of electricity, increased industrial and transportation use. But that’s not what’s happening.

Instead, environmental groups are raising concerns primarily about the safety of the hydraulic fracturing process in the context of impact on groundwater but also regarding the emissions of methane and greenhouse gases through the process.

The reason for the focus on methane, according to the SGS report, is its warming potential is 25 higher than carbon dioxide over a 100-year time frame and 72 times greater over a 20-year period. But in the same paragraph, the report states there is “. . . great uncertainty about the scale of methane emissions.”

Clearly it’s tough to regulate something that can’t be effectively measured.

Indeed, when talking to those in the energy business, methane emissions are not top of the agenda of concerns when it comes to shale gas production.

If anything, industry is more focused on decreasing the impact of drilling operations through the use of multi-well drilling pads and looking for ways to use water more effectively.

“Water use is a bigger challenge because it varies with geology, hydrology and climate,” said Hock.

“When it comes to dealing with methane emissions, the infrared technology that we use can be applied anywhere we operate.”

From this perspective one might argue the opposition to shale gas development has exceeded what is reasonable. It’s banned in Quebec and France and is under siege south of the border. The one place this is not happening is in Western Canada. And why is that?

Because regulation in the West has, with few exceptions, kept up with the pace of technological development. It’s also better co-ordinated across jurisdictions compared with how things work between state and federal regulatory bodies in the United States.

Here’s what the reports says about the state of U.S. regulation:

“The nation has important work to do in strengthening the design of a regulatory system that sets the policy and technical foundation to provide for continuous improvement in the protection of human health and the environment.

“While many states and several federal agencies regulate aspects of these operations, the efficacy of the regulations is far from clear. Informed conclusions about the state of shale gas operations require analysis of the vast amount of data that is publicly available, but there are surprisingly few published studies of this publicly available data.”

Again, much like the methane issue, the message is clear: more work has to be done before conclusions – or smart regulation – are possible.

The result of this fragmented regulatory system is that there are, as some industry insiders point out, more ‘cowboy’ operators south of the border than in Canada.

As one player pointed out, it’s not the Exxons or the Devons that people should be worried about. It’s the smaller companies. Add to this the fact companies deal individually with landowners and it’s easy to understand there is a difference in stewardship.

“Our system of land tenure and environmental governance does protect landowners,” notes Barry Worbets, the Max Bell Fellow with the Canada West Foundation.

Indeed, some of SGS recommendations might have solicited a big yawn from regulators up here – because of how Canada’s energy sector is governed.

Perhaps one of the key questions arising from the SGS report is the role of the U.S. Environmental Protection Agency fit into what needs to become a comprehensive regulatory framework.

The consensus on the EPA these days is that it seems to be seeing itself with the authority to overstep its regulatory mandate and take action that isn’t possible through traditional channels. It wants to regulate what can’t be legislated. This, if anything, is what has the industry very concerned.

What’s clear from the SGS report is that the United States has a fair distance to travel to get its regulatory house in order. As always, there is a worry that too much regulation could choke off not just development, but also the kind of innovation that has unlocked the shale gas bounty.

Natural gas has to be seen as the fuel for the future – for industrial use, electricity generation and ultimately, transportation.

For this reason, it is incumbent on the regulators not to fall prey to environmentalist fear mongering over the dangers of shale gas development and production.

A track record of 60 years of fracking where groundwater has not been contaminated should more than speak for itself.
Source: The Calgary Herald

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Aug 12

Preliminary Subcommittee Report on Shale Gas

By Curve shale gas No Comments »

 

To view the full preliminary 90 day report released by the Shale Gas Subcommittee of the Secretary of Energy Advisory Board on August 11th, please click here: 90 day report.

 

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Aug 11

A Measured Response to Prelim Subcommittee Report

By Curve Environment, shale gas No Comments »

 

The Natural Gas Subcommittee set up by President Obama back in May, to report on the safety and environmental impact of shale gas fra’king is set to release its initial report on August 18th and the final report on November 18, 2011.

The draft 90 day report is now available  and has been receiving widespread coverage.  Among the recommended blogs offering insight and balance, is one by Michael A. Levi, the David M. Rubenstein Senior Fellow for Energy and the Environment.

Levi calls the draft report: “..an exceptional piece of work. Anyone who wants to understand the environmental consequences of shale gas development, and the tools available to manage them, should read it in its entirety.”

Levi’s blog can be read in its entirety here.

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Aug 05

The Future of Natural Gas

By Curve natural gas No Comments »

 

The Economist continues its enthusiastic support of the natural gas industry this week, with another glowing article.  As well as the earlier piece on how safer drilling practises (compared with coal mining) can save lives, this time, the reporter says the whole world can benefit from natural gas extraction.

ALONG the coast of China, six vast liquefied natural gas (LNG) terminals are under construction; by the end of 2015 they should have more than doubled the amount of LNG that the country can import. At the other end of the country, gas is flowing in along a new pipeline from Turkmenistan. In between the two, geologists and engineers are looking at all sorts of new wells that might boost the country’s already fast-growing domestic production. China will consume 260 billion cubic metres (260bcm, which is 9.2 trillion cubic feet) of gas a year by 2015, according to the country’s 12th five-year plan, more than tripling 2008’s 81bcm. The roots of this rapid growth, though, do not lie in China’s centralised planning. They are to be found in a piece of deregulation enacted decades ago on the other side of the world: America’s Natural Gas Policy Act of 1978.

America’s deregulation of its natural-gas market encouraged entrepreneurial energy companies to gamble on new technologies allowing them to extract the gas conventional drilling could not reach. Geologists had long known there was gas trapped in the country’s shale beds. Now the incentives for trying new ways of recovering it were greater, not least because, if it could be recovered, it could be got to market through pipelines newly obliged to offer “open access” to all comers.

Decades of development later, the independent companies which embraced horizontal drilling and the use of high-pressure fluids to crack open the otherwise impermeable shales—a process known as “fracking”—have brought about a revolution. Shale now provides 23% of America’s natural gas, up from 4% in 2005. That upheaval in American gas markets has gone on to change the way gas is traded globally. A lot of LNG export capacity created with American markets in mind—global supply increased 58% over the past five years—is looking for new outlets.

To the extent that the shale-gas success is repeated elsewhere, a vital source of energy will become available from an ever more diverse and numerous set of suppliers in increasingly free markets. This means that, unlike the boom in oil in the decades following the second world war, this growth in gas may not hand a powerful political weapon to those countries with the biggest reserves. Shale gas could significantly diminish the political clout that Russia, Venezuela and Iran once saw as part and parcel of their gas revenues.

“The power of the shale-gas revolution has surprised everyone,” says Christof Rühl, chief economist at BP. In 2003 America’s National Petroleum Council estimated that North America (including Canada and Mexico) might have 1.1 trillion cubic metres (tcm) of recoverable shale gas. This year America’s Advanced Resources International reckoned there might be 50 times as much.

The shale-gas bounty is not confined to America. The country’s Energy Information Administration released a report in April that looked at 48 shale-gas basins in 32 countries (see map). It puts recoverable reserves at 190tcm, and that excludes possible finds in the former Soviet Union and the Middle East, where huge reserves of conventional gas will make investment in shale gas unlikely for years to come. In short order estimates of the Earth’s bounty of recoverable gas have expanded by about 40%. Improving extraction technologies and geological inquisitiveness are sure to raise that figure in the years to come.

Nor is shale gas the only new sort of reserve: “tight gas” in sandstones and coal-bed methane (the sort of gas that used to kill canaries down mines) are also promising. Farther in the future, and more speculatively, there’s the gas frozen into hydrates on the planet’s continental shelves, which might offer more than 1,000tcm if a way can be found to exploit it. The cornucopian belief that human ingenuity will always find ways to increase the availability of resources is not a sure bet. With gas, though, the odds look pretty good for decades to come.

A scenario developed for the International Energy Agency’s forthcoming “World Energy Outlook” offers a sense of what may unfold. Called the “Golden age of gas”, it sees annual world production rising by 1.8tcm between now and 2035, when it reaches 5.1tcm. A fair bit of that is provided by unconventional sources (see chart). The growth is about 50% stronger than in the scenario used as a baseline; trade in gas between the world’s major regions doubles. Coal use declines from the late 2010s onwards, and by 2030 gas has surpassed it, providing a quarter of all the world’s energy.

The development of shale-gas reserves beyond North America is still at an early stage. Although widespread pollution of groundwater by fracking seems unlikely (shales that hold gas typically lie far deeper than groundwater supplies), such risks have raised a great deal of environmental concern about the technology. Coupled with a sensitivity to the rural charms of la France profonde, this has led to a moratorium on shale-gas exploration in France. But in Poland, which may have Europe’s largest reserves, companies are busily sinking test wells to see what is there.

In South Africa, which may have the largest shale-gas reserves on the continent, the shales in the Karoo basin have attracted the attention of Shell, which is increasingly billing itself as a gas-focused company. Shell is also one of the companies looking at shale-gas reserves in China, which may be the largest on the planet. Chinese interest in shale gas is strong, with state companies buying up American expertise as they take stakes in established shale-gas producers. The country might be producing its first shale gas at scale before the current five-year plan is over.

Gas is currently bought and sold in three distinct global markets—North America, Europe and Asia—and prices differ widely between the three. In deregulated North America, with a competitive market and plenty of shale gas to augment conventional supplies, prices are low. In Asia, where gas is largely traded using a system of long-term contracts tied to the price of oil, prices are high. Europe sits in between: prices at the moment are around $4 per million btu in America, $8 in continental Europe and $11 in Asia (1m btu is about 300 kilowatt-hours).

The origins of long-term contracts and oil-linked pricing go back a long way. When gas first began to be used a lot in the 1960s it was a substitute for home heating oil, and so it made sense to tie its price to that of oil. Because big exploration, extraction and infrastructure investments required pots of capital, long-term contracts became an industry norm.

Today oil is generally no substitute for gas. Gas is used not to fill up cars and lorries—though there are gas-fired transport enthusiasts who would like to do something about that—but to fuel power stations and heat homes. Still, many gas producers are happy enough with the archaic pricing structure, particularly when oil prices are high. Customers with limited choices have had to put up with it. According to a recent study from the Massachusetts Institute of Technology, pipelines carry 80% of all gas traded between regions. The firms at the upstream end of those pipelines, such as Russia’s Gazprom, which supplies a quarter of all western Europe’s gas, thus have a strong hand in negotiations. Control of the pipelines meant that when Gazprom turned off the gas (as it did in 2009 in a dispute over trans-shipments through Ukraine), buyers had nowhere to turn for alternatives.

In the past couple of years, though, three factors—LNG from Qatar that was no longer needed in shale-gas-rich America, a little energy-market deregulation by the European Union and a drop in overall demand—have helped to loosen the grip of Gazprom. Power-sector reforms allowed smaller European utilities to compete more vigorously, buying LNG on the spot market at a price sometimes as low as half that of long-term contracts from Russia. Bigger utilities that were losing market share approached Gazprom, not known for sympathetic customer relations, for better terms. The normally intractable Russian company renegotiated contracts with European customers for a three-year “crisis period” to allow up to 15% of gas to be priced on cheaper spot terms. (Norway, also a big supplier to EU countries, had begun to sell gas on contracts that tied an even larger fraction to spot prices.)

Since then the European market has recovered. Prices rose after Libyan gas was cut off as a result of the country’s uprising and a lot of Qatari LNG has found a new destination in Japan, deprived of much of its nuclear power since the disaster at its Fukushima plant.

Unsurprisingly, further attempts to pressure Gazprom into revising its terms have faltered. In February it rebuffed appeals by Germany’s e.ON, one of its most important customers, to link its gas to spot prices. Gazprom’s boss, Alexei Miller, told shareholders at the end of June that oil-indexed long-term gas contracts were here to stay. In private the company is still talking to customers about changing the shape of future contracts, and appears more inclined nowadays to regard European utilities as potential partners rather than spineless adversaries.

Looking reasonable, say cynics, is a ruse to discourage investment in shale reserves and alternative pipelines. If an agreeable-seeming Gazprom, along with increased bullishness about LNG and shale gas, were to dampen European enthusiasm for Nabucco, a long-planned pipeline which might bring 30bcm of gas a year to Europe from the Caspian and the Middle East, that would suit Russia pretty well. But Russia’s new attitude could also spring from a realisation that the world really is changing. A study from the James Baker Institute at Rice University, published in July, reckons that, if shale-gas reserves are fully exploited, Gazprom’s share of the west European market might fall from 27% in 2009 to 13% by 2040.

And Gazprom is finding that China, with which it has been negotiating pipeline deals since 2005, is not interested in the sort of long-term locked contracts that have previously typified Asian markets; indeed it is not even willing to pay European prices. Its immense shale-gas potential might make it even less willing to pay up, inclining it to depend less on pipeline gas and to take the risk that it can smooth out ebbs and flows through spot markets. If the proportion of imported pipeline gas falls, so does the pricing power of conventional suppliers, even if the overall volume they supply goes up.

Increasingly, it looks as if today’s significant regional price differences will be arbitraged away, and that gas could become as fungible and as widely traded as oil. LNG’s growth (23% by volume in 2010) shows no sign of slowing. European LNG import capacity has more than doubled since 2000; the costs of building an import terminal have plunged. So far this year twice as many LNG vessels have been ordered from the world’s shipyards as in the whole of 2010. Qatar, which along with Iran and Russia holds the world’s most impressive conventional gas reserves, is adding new liquefaction plants. Other countries are also busily constructing export terminals; while Australia leads the way, Indonesia, Papua New Guinea and others are all set to bring more LNG to the world markets. There’s even work on liquefaction plants in America.

One consequence of a global gas market supplied from widely distributed conventional and unconventional sources is that this diversity will reduce the power of big suppliers to set prices and bully buyers. There has been occasional talk of a “gas OPEC”, most audibly when, just before the end of 2008, a dozen or so gas producers met in Moscow under the chairmanship of Russia’s prime minister, Vladimir Putin. Despite the rattling of sabres on pipelines, though, something analogous to OPEC looks near impossible under current conditions. For one thing, utilities mostly have spare capacity and can thus adjust their fuel mix in a way that car drivers confronted with an oil shortage cannot. What is more, managing the supply of gas month by month, as the oil cartel seeks to do, would be near impossible when most gas continues to be supplied on long-term contracts that are difficult to break.

And the new technologies are widening the production base all the time, weakening the strategic importance of conventional reserves and the power of those who hold them. Before shale gas, it was thought that Venezuela might soon become an important gas source for America, and that Iran’s vast gas reserves would motivate potential customers to break the sanctions imposed on it as a result of its nuclear programme. Both things are now less likely; the Baker Institute study suggests that while both countries will grow in importance—it foresees 26% of the world’s LNG coming from Venezuela, Iran and Nigeria by 2040—they will do so much more slowly than they would have in a world of constrained supplies.

The growth of the gas market will not be untroubled. Large projects will be delayed sometimes, leading to periods of tight supply; there may also be overcapacity at times, as there has been recently. America’s shale-gas success—a matter not just of helpful geology and Yankee ingenuity, but also of various legal and regulatory positions such as those of the 1978 act—may prove hard to replicate in some other countries. Environmental worries could stop shale gas dead in places. But although the pace may slow and the road may have bumps, for the moment the revolution looks set to roll on.

Source: The Economist

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Aug 04

Economist Claims Shale Gas “So Much Nicer Than Coal”…

By Curve shale gas No Comments »

 

The Economist (out August 6th) has some things to say when it comes to shale gas vs. coal mining – not the usual argument, but the extremely valid point about the safety of the extraction itself…

If the rise of gas means the decline of coal, the environment is one of the winners. Though more research into the damage shale-gas extraction may do to the environment is needed, there is no doubt that the extraction of coal already harms the environment a lot.

It kills a lot of miners, too. In America, a coalminer’s risk of dying on the job is almost twice that of a worker in the oil industry. In China, the world’s largest coal producer, mining fatalities have been dropping quite quickly, especially when calculated per tonne of coal produced, but official figures still put the 2010 number at 2,433.  The toll gets higher after the stuff is burned. In America it is estimated that in 2010, 23,600 premature deaths, and 20 times that many cases of illness, could be put down to soot from coal-fired power stations. Other pollutants, such as sulphur, increase the burden.

A recent analysis by Michael Greenstone and Adam Looney of the Brookings Institution concludes that if the damage to human health and the local environment by such pollution were factored into energy costs, the price of a kilowatt hour from an American coal-fired power station would more than double. For gas such accounting would increase the price by just 4%. In China, where pollution controls (though tightening) are less developed, air pollution may be killing more than 500,000 people a year, and blighting the lives of many millions more: a pressing reason for shifting from coal to gas.

This is all before taking the climate into account. Coal typically produces almost twice as much carbon dioxide per kilowatt-hour as natural gas. Just substituting gas for coal would not solve the world’s climate problems—Europe aspires to emission cuts of 80% or more by 2050, which would require any carbon dioxide from gas plants to be sequestered underground, not emitted to the air. But in terms of long-term climate impact gas is still a much better choice than coal.

However, carbon dioxide is not the only fossil-fuel by-product to affect the climate. Sulphate pollution due to coal cools the planet by shading its surface from sunshine. This effect is taken by climate scientists as explaining a slower rate of global warming over the 20th century than carbon-dioxide levels alone would suggest. The 130% growth in China’s coal use over the past ten years may help explain why temperatures did not rise much over the decade.  The near-term climate benefits of a global dash for sulphur-free gas may thus be smaller than might be expected.  Indeed, it is possible that over the next few decades, the net effect of such a dash could be marginally more warming.
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Jun 29

Energy Information Administration, Industry Heads Fire Back at New York Times

By Curve natural gas, shale gas No Comments »

 

The Energy Information Administration has issued a rare statement in response to a New York Times piece earlier this week on shale gas and its long-term viability as an energy source.  Not only that, the EIA has been joined by many industry heads who point to the fact the Times article does not attribute quotes or anonymous emails to any reliable sources and the research they quoted, flies in the face of the long-term research and exploration by the companies involved in horizontal drilling.

CNN’s Money division details the latest in the – now very public – debate:

NEW YORK (CNNMoney)  – Big energy company executives and government researchers are firing back at a recent New York Times story suggesting the recent boom in natural gas production from shale rock is unsustainable and perhaps fraudulent.

“You really have to wonder why the New York Times is campaigning against cleaner-burning, domestically produced natural gas,” ExxonMobil Vice President Ken Cohen wrote in a blogpost Monday. “If the writer had bothered to call us, we would have told him that ExxonMobil’s investment approach is disciplined and based on a long-term view of global market conditions.”

Exxon through its $41 billion purchase of XTO Energy last year, is now North America’s largest shale gas producer.

A spokeswoman for the Times noted that Exxon was barely mentioned in the story, and that the article contained several quotes from others in the industry defending natural gas production rates.

The multi-part story, run in the Times Sunday and Monday, cited numerous, anonymous emails from government staffers, industry consultants and energy company executives questioning whether natural gas production from shale rock is really living up to the hype or is instead just another bubble.

The emails, which the Times posted online with the names redacted, say the wells may be running dry much faster than anticipated and could actually lose money.

The story suggests that the industry may be aware of this, and could be concealing it to boost their stock price. Emails quoted in the piece refer to the shale gas companies as “Ponzi schemes” and say they are having an “Enron moment.”

The story further accuses the government’s Energy Information Administration of relying too heavily on industry data to make its projections. Many of the emails the paper cites are from EIA staffers.

Monday night EIA struck back, issuing a rare statement, saying the agency’s views on shale gas were “different in significant respects from those outlined in the June 27 article.”

EIA posted the letter it sent to the Times in response to questions from the paper online, noting that shale gas production has risen from 4% of all U.S. gas production to 23% in just 5 years.

“It is clear the data shows that shale gas has become a significant source of domestic natural gas supply,” Michael Schaal, EIA’s director of petroleum, natural gas and biofuels analysis, wrote in the letter.

A letter from the chief executive of Chesapeake Energy, another big shale gas company, took a similar tone.

“It is absurd to conclude that shale gas wells are underperforming while America is awash in natural gas,” said CEO Aubrey McClendon. “The Times story was obviously motivated by an anti-natural gas agenda.”

The letter goes on to say that the company’s production numbers and estimates are verified by various third-party organizations, and any recent production declines are more the result of low natural gas prices.

Shale gas production has taken off in the last few years as new technology has allowed the industry to unlock vast quantities of the domestic fuel. Some say the country now has 100 years worth of natural gas.

When used to generate electricity, natural gas burns about twice as cleanly as coal.

The boom has caused a surge in investment, both in the towns where it’s located and in the stock price of the companies that produce it.

But it’s not without controversy. To produce the gas, the shale rock needs to be cracked by a process called hydraulic fracturing. Known as “fracking” for short, it involves injecting vast amounts of water, sand and some chemicals deep into the ground.

There have been spills of this fracking fluid before it’s injected into wells which have contaminated local streams. There are also concerns about the disposal of the fluid and other tainted water that comes up with the gas, as well as fears that the natural gas itself may be seeping into drinking water wells as a result of the drilling process.

Many are calling for tighter regulations on the industry, and the Environmental Protection Agency is studying the procedure.

 

Source:  CNN Money

 

 

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