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Economy

Energy crisis is postponed as new gas rescues the world

2009-10-13

America is not going to bleed its wealth importing fuel. Russia's grip on Europe's gas will weaken. Improvident Britain may avoid paralysing blackouts by mid-decade after all.
Not gonna be allowed to happen...
The World Gas Conference in Buenos Aires last week was one of those events that shatter assumptions. Advances in technology for extracting gas from shale and methane beds have quickened dramatically, altering the global balance of energy faster than almost anybody expected.

Energy bills could hit £2,000 Tony Hayward, BP's chief executive, said proven natural gas reserves around the world have risen to 1.2 trillion barrels of oil equivalent, enough for 60 years' supply -- and rising fast.

"There has been a revolution in the gas fields of North America. Reserve estimates are rising sharply as technology unlocks unconventional resources," he said.

This is almost unknown to the public, despite the efforts of Nick Grealy at "No Hot Air" who has been arguing for some time that Britain's shale reserves could replace declining North Sea output.

Rune Bjornson from Norway's StatoilHydro said exploitable reserves are much greater than supposed just three years ago and may meet global gas needs for generations.

"The common wisdom was that unconventional gas was too difficult, too expensive and too demanding," he said, according to Petroleum Economist. "This has changed. If we ever doubted that gas was the fuel of the future -- in many ways there's the answer."

The breakthrough has been to combine 3-D seismic imaging with new technologies to free "tight gas" by smashing rocks, known as hydro-fracturing or "fracking" in the trade.

The US is leading the charge. Operations in Pennsylvania and Texas have already been sufficient to cut US imports of liquefied natural gas (LGN) from Trinidad and Qatar to almost nil, with knock-on effects for the global gas market -- and crude oil. It is one reason why spot prices for some LNG deliveries have dropped to 50pc of pipeline contracts.

Energy bulls gambling that the world economy will soon resume its bubble trajectory need to remember two facts: industrial production over the last year is still down 19pc in Japan, 18pc in Italy, 17pc in Germany, 15pc in Canada, 13pc in France and Russia. 11pc in the US and the UK and 10pc in Brazil. A 12pc rise in China does not offset this.

OPEC states are cheating on quota cuts. Non-compliance has fallen to 62pc from 82pc in March. Iran, Nigeria, Venezuela et al face a budget crunch. Why comply when non-OPEC Russia is pumping at breakneck speed?

The US Energy Department expects shale to meet half of US gas demand within 20 years, if not earlier. Projects are cranking up in eastern France and Poland. Exploration is under way in Australia, India and China.

Texas A&M University said US methods could increase global gas reserves by nine times to 16,000 TCF (trillion cubic feet). Almost a quarter is in China but it may lack the water resources to harness the technology given the depletion of the North China water basin.

Needless to say, the Kremlin is irked. "There's a lot of myths about shale production," said Gazprom's Alexander Medvedev.

If the new forecasts are accurate, Gazprom is not going to be the perennial cash cow funding Russia's great power resurgence. Russia's budget may be in structural deficit.

Posted by:Fred

#16 Petrol/diesel car engines are in the range of 25% to 40% fuel efficient

That's if you use the company ad mileage per gallon numbers---don't know about your car, but mine doesn't even come close.

Posted by: g(r)omgoru 2009-10-13 23:13

#15 Coal is also $9/ton (Powder River) while oil is $75/barrel. That's $0.51/Million Btus vs $12.9/Million Btus.

Posted by: ed 2009-10-13 21:18

#14 Petrol/diesel car engines are in the range of 25% to 40% fuel efficient. At source electricity generation from coal is 30% to 35% efficient.

Posted by: phil_b 2009-10-13 20:47

#13 Electric vehicles require substantially more energy to power them than petrol/diesel/NG powered vehicles because of the inherent inefficiences electricity production, distribution and storage.

Definitely not true about production. What's the efficiency of internal combustion---8% to 10%?Distribution is matter of engineering.
Storage we haven't solved yet.
On the plus side
(a) Think relative mechanical simplicity (and hence price: both initial & upkeep; to the castumer).
(b) No partial combustion products (real pollutants unlike CO2), just a bit of O3---which is actually refreshing.
(c) No noise pollution.

Posted by: g(r)omgoru 2009-10-13 15:03

#12 At what pricepoints, Redneck Jim?

Posted by: trailing wife 2009-10-13 13:47

#11 I once owned a heavy truck (3 ton van 302 ford engine) cross fitted for either gasoline or propane, I did a cost-per-mile analysis and it was dead even. no gain either fuel.

Posted by: Redneck Jim 2009-10-13 13:22

#10 Fred's correct while gas is at $2.50 per gallon. At a sustained level of $5.00 per gallon, something I fully expect once the recession is over (say 3-5 years) there will be tremendous pressure to ignore the greens. Not just because of Joe Six Pack's pressure, but because we will relapse into recession. This will costs the states a pretty penny, especially with the pension crisis hitting them. They will be broke. And extraction fees will be their only new source of revenue. Pennsylvania will lead this charge and New York will join.

Or Iran will use its bomb first.

Posted by: Nimble Spemble 2009-10-13 11:43

#9 Followup on Fred's "not gonna be allowed to happen" -- won't be allowed to happen because, according to the greenies, extracting oil from shale takes too much water. That's bad, ya know, especially when you return the water to the environment, even if you treat and clean it. Can't be clean enough for them, so you're not allowed to extract oil and gas from shale.

That's it. Settled. Accept your lower economic status, chumbalones, and let the elites do your thinking for you.

Posted by: Steve White 2009-10-13 11:05

#8 There's no single answer. More CNG is cool, but we still need nuclear, coal and petroleum -- in that order :-)

Posted by: Iblis 2009-10-13 10:36

#7 I say it's not gonna be allowed to happen because without a never-ending energy crisis the bottom drops out of the Green movement. With the bottom goes the justification for vast government spending and great gobs of power accruing to the dictatorial class.

Posted by: Fred 2009-10-13 08:29

#6 You can also make synthetic diesel from natural gas - some is being made to blend with conventional diesel in order to meet some stringent emissions rules, especially in Europe. It is still quite costly - 2-3 times more than conventional - and I don't know how energy-inefficient the processing is, but it is easier to handle than CNG or LNG and you can go farther on a fill-up. I figure if you can make synthetic diesel from natural gas you can probably also make jet fuel.
New US natural gas supplies (mostly shale and tight sand gas) do seem to be large, and have shut down LNG importation projects and most high-cost offshore conventional gas drilling; these new gas wells are not 'great' - but there are thousands of them, and we can drill many more, with (seemingly) predictable results, which sets a ceiling on gas prices (absent any demand increase). And there's lots more gas elsewhere, available to us through LNG imports, if it is cheaper than our own new gas (so far it mostly is not.) So far though, Britain does not seem to have big new domestic supplies, so they are still dependent on Russia - and on LNG imports from West Africa or the Persian Gulf or Trinidad; unfortunately for the Brits, LNG re-gassification plants are NIMBY projects, so they'll mostly stay beholden to Moscow.

Posted by: Glenmore 2009-10-13 08:14

#5 CNG in the US is the answer for cars. Honda makes the only pure CNG vehicle that I know of for the US market but I would not get one just yet. The tank is too small and there are not enough refuel stations. What we are doing is working the conversion of our car. It can run on either gas or CNG at the turn or a switch. This way if the CNG runs low, its back to gas until we get home. You can buy a CNG compressor to fill your cars at home. The compressor is a bit slow, takes the night to fill a car, but you plug it when you get home at night and by morning your good to go. The compressor costs about 2,500 dollars. The conversion for the car is also about 2,500 depending on the size tank you buy.

Posted by: 49 Pan 2009-10-13 07:45

#4 Que?

Electric vehicles require substantially more energy to power them than petrol/diesel/NG powered vehicles because of the inherent inefficiences electricity production, distribution and storage.

Electric vehicles would be OK despite their energy inefficency if ample surplus electricity were available from nuclear and coal power stations.

Ironically, for many people the cheapest source of electricity is from in home generation using Natural gas.

Posted by: phil_b 2009-10-13 07:18

#3 the idiocy of electric vehicles.

Que?

Posted by: g(r)omgoru 2009-10-13 05:26

#2 As I regularly tell you. Natural gas powered vehicles are the solution to US energy imports and energy independence.

Here in Perth, every bus, taxi, delivery vehicle, and most high mileage private cars are natural gas powered.

NG is also safer than petrol.

The problem is car manufacturers have only just started making NG powered vehicles. So for years here, brand new vehicles would go into the shop for an NG conversion before being driven.

I'll self snip my normal rant about the idiocy of electric vehicles.

Posted by: phil_b 2009-10-13 03:44

#1 "Not gonna be allowed to happen"? Pls explain, Fred. Isn't most of the work going to happen in the more pro-gas states like TX and OK (rather than CO or CA)?

Posted by: lex 2009-10-13 02:10

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