Friday, December 24, 2010

Terra to Humans: Merry Christmas w/ Gas, Use It Wisely

Arguably the biggest story in the United States energy scene, and de facto for the rest of the world, has been the development of shale gas. Natural gas production in the United States was flat from about 1995 to 2005, standing at about 2 Tcf per month. But over the last five years, production started going up (see graph) moving to around 2.3 Tcf per month. The entire increase is because of shale gas, contributing at least 17 percent of domestic production. This is remarkable, considering that shale gas accounted for an estimated 2 percent just a few years ago. _EnergyTribune

The shale gas revolution has hit US and world energy markets like a massive sledge hammer. But the impact of abundant unconventional hydrocarbons has barely registered on the "energy seismic detectors" up until now. Despite the best efforts of carbon hysterics, energy starvationists, and faux environmentalists to put the djinn back in the bottle, Terra's huge and expanding reserves of natural gas can no longer be denied -- and will not be refused.

Geoffrey Styles looks at some interesting aspects of shale gas economics, and explains why airheaded proponents of unreliable wind power are so resentful of shale gas:
Perhaps one reason the impact of cheap natural gas hasn't sunk in yet is that the main market price for gas, the futures price at the Henry Hub in Louisiana, doesn't have much relevance for the average consumer. Residential gas customers don't buy their gas in the million-BTU (MMBTU) lots in which the futures contract is denominated; we buy gas in therms--one tenth of an MMBTU--and by the time we see it on our bills all sorts of handling and distribution fees and mark-ups have been added on. But when you compare the price of traded gas in barrels of oil equivalent (BOE) to the price of West Texas Intermediate crude, the remarkable divergence of the last two years becomes obvious, as shown in the chart above. Between 2000 and 2006 gas and oil tracked each other closely, allowing for the greater seasonal volatility of the former. There were even periods when a barrel-equivalent of gas was worth more than a barrel of oil. Yet while oil and gas prices fell precipitously when the recession and financial crisis burst the various asset bubbles, they have diverged sharply since then, with oil advancing back up to today's $91/bbl and gas settling in to the $20-25/bbl range in which we were accustomed to see oil prices a decade ago. Adjust that for inflation and you're looking at an average natural gas price for 2010 equivalent to $20/bbl in 2000. _GeoffreyStyles


In early December, Argentina’s president Cristina Fernandez de Kirchner announced a huge shale gas find that could supply the country’s gas needs for 50 years. A Moroccan delegation has already called upon U.S. shale expertise to help develop its resources. And, speaking at the World Shale Gas Conference in Dallas-Fort Worth in November 2010, Ukraine Government ministers proudly proclaimed their country had “the biggest shale gas deposits in the world”.

Meanwhile, China and India have been quick to spot the game-changing qualities of domestic shale gas development. China’s deposits could exceed 1000 Tcf (Wang and Economides, Paper SPE 133458, 2010.) Last year, China signed the U.S.-China Shale Gas Resource Initiative, the latter already perceiving the U.S. as the world leader in shale gas technology.

That the global energy landscape is switching in favour of gas is also confirmed by developments at the energy majors. In an interview with Fortune magazine, asked about the future strategy of Big Oil, Shell President Marvin Odum stated that by 2012 Shell would be producing more gas than oil. _EnergyTribune
Shale gas has just begun to touch the world's energy balance -- and shale gas is just the beginning of unconventional hydrocarbons.

Carbon hysterics, energy starvationists, and faux environmentalists hate shale oil and other unconventionals for what such reliable energy sources will mean for the Green crusade of lefty-Luddite dieoff.orgiasm. Even T. Boone Pickens has abandoned loony wind power in favour of unconventional gas.

Cross posted to Al Fin



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