Posts tagged “natural gas”
I have seen a number of commentators over the last few days say that the American shale gas revolution means that the U.S. could simply announce new LNG exports and that would undercut Russian gas. House Energy and Commerce Committee Chairman Upton, for instance, said in a statement: “Expanding U.S. LNG exports is an opportunity to combat Russian influence and power, and we have an energy diplomacy responsibility to act quickly.”
Statements like this overstate the influence that U.S. energy can have on this crisis Ukraine. While it is true that a viable, functioning LNG export capacity would provide geopolitical benefits, we do not have it today and we should not think that the U.S. energy boom will help in this crisis.
The U.S. energy boom has already helped reduce Russia’s influence and increased European energy security, without a singe molecule of US Natural Gas landing on the continent. This is because, even if the United States does not directly supply Europe with oil or natural gas, because the U.S. no longer is demanding imports of liquefied natural gas (LNG) has freed up major suppliers like Qatar or Norway to send supplies to Europe.
Andrew Holland writes about how Europe can change Russia’s behavior by embargoing imports of Russian natural gas.
This winter has been one of the coldest on record. It’s been the coldest winter in at least 30 years, and I saw a report today that there is a chance that this will be Chicago’s coldest winter on record. Presently it is the 3rd coldest on record for Chicago, but another blast of cold air is just moving into the Midwest and East Coast.
Natural gas is a major energy source for heating homes, and prices have been spiking periodically in recent weeks as the weekly draws on natural gas inventories are higher than normal. Natural gas consumption in the US is highly seasonal, so producers use a system of underground pressurized storage that builds inventories until mid-fall, which are then depleted through the winter. Natural gas can be stored in depleted oil or gas reservoirs, in natural aquifers, or in salt caverns.
The US has nearly 9 trillion cubic feet (tcf) of natural gas storage capacity, but only a fraction of that has ever been used. According to the Energy Information Administration (EIA), the actual amount in storage has never exceeded 4 tcf. Inventories will usually build to between 3 and 4 tcf by ~ November 1st each year, before being pulled down to under 2 tcf by the end of winter. So a typical winter season will see just over 2 tcf pulled out of storage — an amount equivalent to about 10 percent of annual US natural gas production. CONTINUE»
Solar Is Growing, But Hydro Remains Much Bigger
A tweet this morning sent me on a fact-checking expedition into state-level electricity statistics. The subject was a San Jose Mercury article with the unwieldy title, “Drought threatens California’s hydroelectricity supply, but solar makes up the gap.” The article’s quote from the head of the California Energy Commission implied that solar power additions were sufficient to make up for any shortfall in hydro, historically one of the state’s biggest energy sources.
My gut reaction was to be skeptical: Solar has been growing rapidly, especially in California, but even with nearly 3,000 MW of photovoltaic (PV) and solar thermal generation in place, it’s still well short of the scale of California’s 10,000 MW of hydropower dams, especially when you consider that the latter aren’t constrained to operate only in daylight hours. However, I also know better than to respond to a claim like this without checking the data on how much energy these installations actually deliver.
The Comparison Has Shifted In the Last Year
My first look at the Energy Information Administration’s annual generation data seemed to confirm my suspicions. In 2012 California’s hydropower facilities produced 26.8 million megawatt-hours (MWh), while grid-connected solar generated just 1.4 million MWh. However, when I looked at more recent monthly data, the mismatch was much smaller, due to solar’s strong growth in the Golden State. For example, in October 2013 California solar power generated 435 MWh, or nearly 24% of hydro’s 1.8 million MWh.
Energy’s Brief Appearance in the State of the Union Address
Energy issues received scant mention in Tuesday’s State of the Union speech, consisting mainly of a victory lap for the President’s “all of the above” formulation and a somewhat contradictory promise to place even more federal lands off-limits to drilling. While browsing through reactions from various energy leaders and environmental groups I was intrigued by one critique of Mr. Obama’s approach from an environmental NGO, arguing that he should instead be placing the country’s bets on “best of the above” energy. They weren’t the only ones to object to the current approach.
It’s clear from their statement that Earthjustice has definite ideas about what’s best and what isn’t, but their comment merits further discussion. After all, who could argue against supporting the best energy sources? And isn’t all of the above just a sop to the status quo, in which a diverse array of energy sources dominated by fossil fuels provides the energy for the rest of the economy?
Obama and “All of the Above”
As President Obama noted Tuesday, his reference to an “‘all of the above’ energy strategy”–a debatable characterization in itself–referred to a key phrase in his 2012 address to Congress. It’s worth recalling the context, in an election year in which the Republican nominee was certain to focus on conventional energy when it was delivering US production growth in both oil and natural gas that couldn’t have been imagined just a few years earlier.
A couple of weeks ago I had the opportunity to tour the Liquefied Natural Gas (LNG) facility at Cove Point, Maryland. Owned by Dominion, the Cove Point facility is currently an LNG import and storage facility.
As readers will know, there has not been that much demand for LNG imports to the U.S. over the last few years – the shale gas revolution has turned the U.S. from an economy looking to import increasing quantities of costly gas to one where a surplus of low-cost gas is looking to global exports. As such, Dominion has applied for the permits to expand the facility for LNG export. It has received approval from the Department of Energy for exports, but it is awaiting state, local, and final FERC approval before construction can begin. They expect to break ground on the new facility in the spring of 2014, with completion sometime in 2017.
A Brief History
When Cove Point was first built in the late 1970s, there was demand for imported gas from the only major supplier of LNG, Algeria. The 1970s had seen shortages of gas around the country. As it came on line in 1978, Congress passed legislation to deregulate the gas industry. With deregulation, domestic production increased and demand for imported LNG fell and most imports ceased by 1980. In the early 2000s, there was pressure in natural gas markets again, and Cove Point was reactivated as an import terminal in 2003. In ‘04 and ’05, Cove Point hosted almost 80 ships per year bringing in LNG from producers around the world. At that time, U.S. demand looked set to grow inexorably, with domestic supplies unable to meet demand. So, in 2004, Dominion embarked on a large expansion of Cove Point’s capacity, more than doubling its storage capacity. Once completed in 2009, markets had again turned against LNG imports, as the shale revolution pushed down prices and pushed up production. 2011 was the last commercial import of LNG; now two or three ships per year service the facility in order to keep their lights on and fulfil their secondary mission of providing a peak demand service (providing gas to markets in times of high demand).
Geopolitics in Region Could be Impacted
Recent natural gas discoveries off Israel’s eastern Mediterranean Sea are reversing its role of importer to that of exporter. According to the Energy Information Administration (EIA), the larger finds — the Tamar and Leviathan fields — hold estimated reserves of 10 trillion cubic feet (Tcf) and 18 Tcf respectively. These fields are part of the Levant Basin, with probable oil reserves of 1.7 billion barrels and probable natural gas resources of 122 Tcf.
In the past, Israel imported most of its natural gas supply from Egypt. “Until early in 2012, the country received 40% of the gas it needed — 90% for electricity generation — from Egypt via a marine pipeline between El Arish and Ashkelon,” notes Oil & Gas Journal. Egypt, facing gas shortfalls, is planning to import gas via LNG, though pipeline deliveries from Israel are likely cheaper. Spot LNG in the east Mediterranean region is currently priced around $12.00 per million British thermal units.
Favorable Economics, the Permian, and Choices
In July, I wrote about the ramped up activity in the Permian Basin. The point of that story was to merely observe and document that period of time in the Basin. In the data offered over the course of several articles, the conclusion was clear: the U.S. is in the early period of another boom from U.S. production of oil, and Texas is largely the zone for the majority of the production capacity. While the Bakken Shale and the Eagle Ford receive numerous well-deserved headlines, exploration and production (E&P) firms were busy making new history in the Permian Basin.
The largest producer in the Permian Basin is Occidental Petroleum, also known as Oxy. This also makes the firm the largest producer in Texas. Pioneer Natural Resources, Apache and Kinder Morgan Production follow behind Oxy in Permian Basin production for 2012. According to the Energy Information Agency, in 2012 the U.S. imported approximately 10.6 million barrels of crude oil per day. The ratings agency Moody’s recently made an announcement about the impact of the “Permian revival” on exploration and production (E&P) firms. In their communication, they mention producers speculate that the full development of the Wolfcamp Shale could result in 2 million barrels a day — more than the 1970s peak for the entire basin. That is nearly 20% of U.S. daily imports. When might that happen? Hard to say.
Touring a “Fracking” Site in Pennsylvania
It’s easy to talk about the shale gas revolution in the abstract and forget that it is the cumulative result of thousands of operations in locations across the country. It combines the technological marvel of precisely planned and executed drilling more than a mile below ground with the efforts of teams of skilled workers on the surface, and affects the surrounding community in many ways. Last week I had my first opportunity to visit one of these sites, near Williamsport in north-central Pennsylvania. I also saw several nearby sites in different stages of development. Although I was consistently impressed, I also tried to observe with the concerns of shale gas critics in mind.
The Anadarko Petroleum well “pad” I toured is located in Cogan House Township in rural Lycoming County, atop the Marcellus shale formation. This site visit for bloggers and other media was arranged by API, which also paid for accommodations in Williamsport. Anadarko provided experts from its local engineering and public affairs staffs and hosted a dinner with members of the community the evening before the site tour.
Unique Energy Opportunity if Smart Policies Continue
In the early part of 2008, I began delving into the big story of the day in North Texas and Dallas, the prolific activity from the recovery of natural gas in the Barnett Shale. At the time, other shale plays were being explored as well, such as the Fayetteville play that confirmed the Barnett’s results; the Marcellus was just being sized up. I was challenged with attempting to figure out how to communicate what shale could be physically described as — in essence, a dead ocean from a geologic perspective.
Three things came together that gave tailwinds to today’s “shale revolution.” One was that the government stepped out of the way after many decades of nearly regulating natural gas out of existence. It had created artificially low gas prices, which killed production and confidence in the market until the 1980s and ’90s. The second force was the entrepreneurial spirit in oil and gas exploration, which presides in Texas. A powerhouse of expertise exists here, and these newfound unconventional gas production techniques and know-how spread to the rest of the country and the world. For producers, it was their Google moment.
And finally, technological advances in drilling technology —hydraulic fracturing and horizontal drilling— combined in the Barnett with independent producers’ experimentation, the innovators like Trevor Rees-Jones of Chief Oil and Mitchell Energy. Their efforts, and those of other operators in the 1980s and ’90s, paved the way for the U.S. gas revolution and its ripple effects across the globe. It was the right combination of economics, opportunity and efforts coming together.