Thursday, July 12, 2012

Shale Oil & Gas for the Next US Century

Estimates of how much unconventional gas America has at its disposal vary. The Energy Information Administration (EIA) puts it at around 37tcm of recoverable reserves, two-thirds of which is shale gas and the rest tight gas and coal-bed methane. Others say there is plenty more. Using the EIA numbers, President Barack Obama, in his state-of-the-union speech in January, said that America now has nearly 100 years of gas supplies at current consumption rates.

Earlier this year gas dipped below $2 per million Btu (British thermal units, a measure of heating power), a price not seen since 2001. It now hovers around $2.20 and seems likely to stay low for a while. Lots of gas and falling prices sent many rigs heading to oil-rich shales to take advantage of high prices for crude. Such wells yield plenty of gas as a by-product. Wells producing only “dry” gas have been shut down where contracts allow, but wells that produce NGLs, also pegged to oil prices, are still producing too. Most analysts agree that gas prices will eventually settle around $4-5 mBtu. _Economist

Dow Chemical and others have announced a raft of new investments in America to take advantage of low gas prices. Methanex, the world’s biggest methanol producer, is considering dismantling a huge ethylene cracker in Chile and rebuilding it on America’s Gulf coast. The United States might export fewer cheap raw materials to countries with low labour costs to be made into goods to export back to America. The country could do the job itself, shortening the supply chain and returning manufacturing jobs to America in industries where petrochemicals are a large part of the cost base. PricewaterhouseCoopers, a large accountancy firm, reckons that lower feedstock and energy costs could result in 1m more American factory jobs by 2025.

There are non-industrial benefits too. According to MIT, residential and commercial buildings account for over 40% of America’s total energy consumption, in the form of electricity or gas, making up over half the country’s demand for gas. Low gas prices have meant that the cost of heating schools and other government buildings, often itemised on local tax bills, is falling.

Gas at $2.50 mBtu is the equivalent of a barrel of oil at $15 rather than $100. For the moment cars, buses and lorries are almost entirely dependent on refined crude oil. But gas can be used to propel vehicles in a number of ways: directly either as compressed natural gas (CNG) or LNG, or indirectly by converting gas into liquid fuel or power for electric vehicles. So far only 3% of America’s gas production is finding its way into vehicles.

America’s fleet of natural-gas vehicles (NGV) doubled between 2003 and 2009, though at 110,000 it still makes up only 0.1% of all vehicles on the road. Dallas-Fort Worth airport runs 500 maintenance vehicles on gas (and has allowed fracking beneath one of its runways). AT&T, a telecoms company, is set to buy 8,000 CNG vehicles over five years, giving it the largest commercial NGV fleet in the country. School buses, refuse lorries and other municipal vehicles are switching fast. _Economist

US shale oil production average breakeven price is currently between $45 and $50 a barrel. Anadarko and Utica Shale oil breakeven is higher -- around $65 to $70 a barrel, but as production in those fields begins to scale up, breakeven prices are likely to drop. Regardless, there is little likelihood that the price of oil will fall below those levels anytime soon -- at least not for long.

More at Carpe Diem

And despite current low US natural gas prices and a temporary slowdown in drilling as a result, the longterm prospects for US natural gas production are quite good.

One must almost pity the persons who are so eager to see peak oil doom and peak energy doom, that they are willing to interpret every shifting trend in energy prices or production as confirmation of their doomer cult belief system.

One sees the same unconscious superstitious bias among many believers in climate catastrophe doom -- the carbon hysterics. But as long as national economies do not allow lefty-Luddite green dieoff orgiasts to control their economies and energy policies, the harm that is done by such cultists can be generally limited.

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