No Hot Air

Water everywhere

Or at least in the news today:

Here is an inconvenient truth about renewable energy: It can sometimes demand a huge amount of water. Many of the proposed solutions to the nation’s energy problems, from certain types of solar farms to biofuel refineries to cleaner coal plants, could consume billions of gallons of water every year.

“When push comes to shove, water could become the real throttle on renewable energy,” said Michael E. Webber, an assistant professor at the University of Texas in Austin who studies the relationship between energy and water.

Don't even ask about water and nuclear by the way:  Every summer we see stories about French and German nukes unable to produce power due to low river levels.  Energy and water seem to go together, as do some objections about shale gas.

On water, as in carbon, with friends like the Robert F. Kennedy's Waterkeeper Alliance and the Sierra Club on shale's side, at least some people realise that there is never a perfect solution. And we can't afford to wait for one.

Converting rapidly from coal-generated energy to gas is President Barack Obama’s most obvious first step towards saving our planet and jump-starting our economy. A revolution in natural gas production over the past two years has left America awash with natural gas and has made it possible to eliminate most of our dependence on deadly, destructive coal practically overnight – and without the expense of building new power plants.

America’s cornucopia of renewables and the recent maturation of solar, geothermal and wind technologies will allow us to meet most of our energy needs with clean, cheap, green power. In the short term, natural gas is an obvious bridge fuel to the “new” energy economy.

Since 2007, the discovery of vast supplies of deep shale gas in the US, along with advanced extraction methods, have created stable supply and predictably low prices for most of the next century. Of the 1,000 gigawatts of generating capacity currently needed to meet national energy demand, 336 are coal-fired. Surprisingly, America has more gas generation capacity – 450 gigawatts – than it does for coal.

However, public regulators generally require utilities to dispatch coal-generated power in preference to gas. For that reason, high-efficiency gas plants are in operation only 36 per cent of the time. By changing the dispatch rule nationally to require that whenever coal and gas plants are competing head-to-head, gas generation must be utilised first, we could quickly reduce coal generation and achieve massive emissions reductions.

In an instant, this simple change could eliminate three-quarters of America’s coal-burning generators and save a fortune in energy costs. Around 920 US coal plants – 78 per cent of the total – are small (generating less than half a gigawatt), antiquated and horrendously inefficient. Their average age is 45 years, with many over 75. They tend to be located amidst dense populations and in poor neighbourhoods to lethal effect.

When will gas run out?

A question that Aubrey McLendon of Chesapeake can answer, and does in the WSJ

Asked recently when output from North America's prolific shale-gas resources would peak, Chesapeake Energy's chief executive, Aubrey McClendon, quipped: "With all due respect to you and to me, we'll both be dead."

Barring sudden discovery of the elixir of life, he is surely correct: Navigant Consulting puts recoverable resources at 118 years of supply.

Don't depend on generation or electric vehicles to have a long term impact either:

But U.S. energy officials expect electricity-demand growth to average 0.8% a year to 2020, down from 1.3% over the past decade. Crowding into this is an expected 267 gigawatts of renewable capacity like windmills, which, Barclays Capital points out, might obviate the need for any growth in gas-fired electricity output. Energy-efficiency initiatives, which McKinsey reckons could cut projected 2020 electricity consumption by about a quarter, represent another game-changing threat.

In reality, intermittent renewable-electricity generation requires backup fossil-fuel capacity, for which flexible gas-fired plants are well-suited. Vehicles represent another opportunity, although more likely via causing more demand for electricity rather than a mass conversion to natural-gas-powered cars. Still, energy consultancy GSW Strategy Group estimates even if a fifth of vehicles were plug-ins by 2020, this would add only a few percentage points of demand to the grid.....The risk is that a combination of huge shale-gas resources and low demand growth weighs on prices for years to come.

October...

October, start of the heating season, the gas year and the traditional time for energy traders to talk up any risk at all. And the traditional start of the time for energy users to act like suckers and buy into energy risk catastrophic scenarios.

Last year some energy buyers who congratulated themselves by not being suckered into £1 a therm fixed price, bought at 65. That ended up being a dumb move. Come January, Russia and Ukraine kicked in and the coldest winter in almost twenty years started. And worst that day ahead index could come up with was 48 pence per therm in January. 

This winter, the same old stuff.  Buy now and pay the fear premium. Pay on the day, and pay for reality.

Gas traders here and in North America are praying for a cold winter. It still wont' help. 100% storage capacity has never been reached this early in the year.  Bulls are also depending on a recovering economy. But a jobless recovery won't be an energy using recovery. Gas use won't' rise if someone buys a derivative of whatever, or sells someone a PowerPoint presentation. Gas use needs car factories and steel mills and paper mills and chemical plants and all the associated suppliers. We don't see the demand destruction of last winter being reversed anytime soon, and the refusal of UK domestic suppliers to pass on price drops is short-sighted. The domestic market fell last winter, the first time this previously inelastic sector dropped use. Ripping users off is a great way to push up the next quarter, but not as long term business strategy.  Unless of course they are confident that the regulator and whichever government comes in next year, will leave them alone. People are more aware of alternatives, number one being: turn down the thermostat or switch off the light. High price provide incentives for even lower actual use even when prices do come down.

But the surge in US production, coming to a continent near you sooner than anyone knows, is going to continue. What will happen next spring when storage is still full and even more shale gas hits the market? US production will come across the ocean, along with everyone's spare gas. A mild winter in the Northern Hemisphere could see single figures sometime in Q1 2010. And that's before a single kWh of European shale gas gets produced. Prices may correct themselves, and it would be healthier if they do.

Our guess for average day ahead October 1 to March 31:  19 pence per therm. Almost 50% down on today's fixed price.  We'll do another story on April 1. It won't be foolish.

A lot of bread. And toast

For landowners in Pennsylvania, the amount of cash falling from the sky is like manna from heaven

Hundreds of people from far-flung farms and rural communities across a large swath of northern Pennsylvania trekked to an American Legion post this weekend to have checks -- often for large, life-changing amounts of money -- pressed into their hands.
It went on throughout the day yesterday and continued this morning. Some people cried with happiness.

The land owners formed a group to negotiate leases of their land with Chesapeake, a major gas industry player, and they reached a collective deal that fetched $5,750 per acre for drilling rights on their total of 37,000 acres, with more money to follow in the future in the form of royalties.
"God has put the Marcellus Shale underneath our property," said Lines-Burgess, a spokeswoman for the group. "We are about the luckiest people in the whole world right now."

One of our theories about the lack of news over European shale is discretion on the part of gas drillers.  Take heed:

Jim Grimsley had lived in New York City. He had fixed machinery in an industrial- sized bakery for 27 years. He and his wife picked a rural corner of Pennsylvania for retirement. They bought a house and 30 acres on a hilltop in Susquehanna County.
The visitor who came in 2006 represented a gas company. Grimsley and his wife agreed to lease their land for $25 an acre. They got a check for $750 and life went on. A year or so later, they learned neighbors were getting $2,000 an acre.
In the past few weeks, they heard of group lease negotiations, like the one culminating with the Black Walnut signings this weekend, that ended at $5,000 to $6,000 an acre.
"We didn't know,: Grimsley said.

And no one's saying in Europe for sure!

Alberta is Canada's oil and gas producer, but as it's conventional gas and they're far away from markets, the cost of conventional is now more expensive than "unconventional", which has suddenly become the new normal.

Conventional natural gas, the kind that roars from the Earth when its reservoirs are pricked by wells, has for decades been the bedrock of the province's economy. Until this year, when a nosedive in prices helped sink the province into a $7-billion deficit, natural gas brought in fully a quarter of Alberta's annual budget. Last year, Alberta collected $6-billion in natural gas royalties, fully 50 per cent of its revenue from non-renewable sources. The vast majority of that came from conventional gas.

But analyst Brent Watson has blunt words for the province: even after this downturn, it's not coming back. "Conventional is kind of toast, really," the Cormark Securities analyst said.

Mad Money on Natural Gas

The inimitable, if certifiable, Jim Cramer of CNBC on US Natural Gas.  Worth a watch.

And if China gets shale?

Speak to some UK energy buyers and they often parrot a line that energy consultants, who have a vested interest in stoking up fear instead of revealing facts, have also succeeded in pushing on to the UK press.

Xenophobia makes the narrative simple and besides Russophobia and the UK rampant EU phobia, energy consultants can always add the story of the UK facing gas shortages and  price squeezes because China will compete for LNG supplies with the rest of the world.

The China story is getting frayed quickly, but some energy buyers who haven't read a paper since the Beijing Olympics in smog stories of two years ago still think that China is a problem.  We've said several times that China has no interest in replicating the "developed" world's mistakes.  Core future energy tech like  solar, wind, electric vehicles, Super Critical Coal, LED lighting and energy efficiency will help China surge forward and leave some countries in the dust fretting about nuclear and lights out.

China is using much more natural gas in common with other energy resources of course. But since far more gas is available in the Pacific Basin thanks to Australian, Indonesian, Papua New Guinea and Russian Sakhalin LNG either present today or available in the near term, any idea that Asia sucks up world gas and pushes up UK prices is based more on energy policy as anecdote than on boring old facts.

But the real impact on world prices would be if China was able to repeat the US experience on shale gas.  China has all the indicators of shale starting with it's own massive coal reserves.  Robert Holditch assesses China shale potential as north of 3,000 TCF.  But this ConocoPhillips story buried elsewhere shows that if is looking more like when.

U.S. oil major ConocoPhillips (COP.N) on Sunday signed an memorandum of understanding with top Chinese oil firm CNPC to develop shale gas in Sichuan province.

Specific plans still need to be worked out, Yan Cunzhang, a senior CNPC official, told Reuters.

Yan also said substantial progress in joint gas exploration and production by Royal Dutch Shell (RDSa.L) and CNPC in Sichuan would be seen in the near future.

ConocoPhillips are the same US major who we've previously noted are enthused about the potential for Polish shale gas.  Also of interest is the main part of the story, that China is thinking twice about nuclear.

China may have to put the brakes on the construction of nuclear power plants to ensure the plants are safe, the country's top energy planning official told reporters on Sunday.

Zhang Guobao, head of the National Energy Administration, warned of signs of "improper" and "too fast" development of nuclear power in some regions.

Is there a connection?  And should the UK learn from China?

It will happen here....

Another week, another slew of shale stories from North America, another week of silence from the UK energy experts.  The Telegraph still trots out lights out stories, latest today with the usual outdated solutions:  CCS, Storage, Nuclear and not one single word about gas. The UK gave up on gas years ago.  No matter. The Telegraph can write stories like that till the end of time, and probably will. But whatever we do, or to be exact don't do in the UK, won't change a thing.  We'll be up to our ears in gas, it will just be that we'll be paying other European countries for it. We point out that in a globalised market we won't be paying much for it, but shouldn't we be maximising  British jobs and taxes out of our energy?

Out in the rest of the world, shale marches on.  It's getting closer....  Remember all those Polish plumbers that disappeared once the going got tough in the UK?  At least they'll find some jobs once they go home:

ConocoPhillips (COP), one of the largest natural gas producers in North America, sees a future in Europe's gas deposits. And it isn't the only U.S. major to think so.

Through a recent foray in Poland, the Houston-based company has become the latest U.S. oil giant to explore European unconventional gas resources as a potential source of growth. Exxon Mobil Corp. (XOM), the world's largest publicly traded oil company, already has significant acreage in Germany and a venture in Hungary.

The move comes at a time when demand for gas produced in Europe is expected to grow vigorously as countries intensify their efforts to reduce their dependence on Russia as a supplier. ConocoPhillips and its rivals are hoping that Europe's unique need for new local supplies will help their investment on the continent to hold up better than in the U.S., where heavy development of unconventional gas has contributed to a glut that recently sent prices to a seven-year low.

The UK hangs on to outdated concepts. The Europeans get the jobs and the Americans make money. We get money thrown down various holes called storage, CCS and nuclear.

But U.S. oil majors are directly testing their expertise in Europe as well, where reservoirs could be as promising as those in the U.S., analysts said. The potential resources for unconventional gas in Europe are large but still unproven in most areas. More importantly, the amount that will be converted to commercial reserves and the speed with which it can be extracted remain uncertain.

Companies like BG, Statoil and Eni are a good example of three companies that want to take advantage of the U.S. natural gas space," said Rhodri Thomas, Europe and Sub-Saharan Africa upstream research manager at consultancy Wood Mackenzie. "But clearly there is potential learning they could apply elsewhere."

Actually, we won't get any money thrown away on CCS or storage or nukes. UK policy makers may believe in them, but there isn't a bank on the planet that will finance such outdated schemes, with or without government guarantees.

Carbon Capture

Interesting, balanced article from the NYT earlier this week on  how Carbon Capture in West Virginia may not yet be running, but it is at least up.

A behemoth built in 1980, long before  global warming stirred broad concern, Mountaineer is poised to become the world’s first coal-fired power plant to capture and bury some of the carbon dioxide it churns out. The hope is that the gas will stay deep underground for millennia rather than entering the atmosphere as a heat-trapping pollutant.

The experiment, which the company says could begin in the next few days, is riveting the world’s coal-fired electricity sector, which is under growing pressure to develop technology to capture and store carbon dioxide. Visitors from as far as China and India, which are struggling with their own coal-related pollution, have been trooping through the plant.

Lets make the aside that the UK has it's own vague plans on CCS, which hopefully include this:

Yet the economic viability of the Mountaineer plant’s new technology, known as carbon capture and sequestration, remains uncertain.

The technology is certain to devour a substantial amount of the plant’s energy output — optimists say 15 percent, and skeptics, 30 percent. Some energy experts argue that it could prove even more expensive than solar or nuclear power.

The obvious question must be that if we have now entered the world of abundant natural gas, do those economics stack up anymore?  Whether the technology works is irrelevant. CCS depends on the perception and reality of natural gas being considered as finite, insecurely sourced and too expensive. Do the economics of CCS make the transition to a world of abundant natural gas?  Time for a re-visit a the very least. 

A revisit is happening here in the UK according to the Guardian, but we assume independently of any sudden knowledge of gas in the DECC.  No,  CCS, which is yet another of those things like Wind Energy and Smart Metering where ministers existing and shadow,  trumpet the UK's ambitions while ignoring realities.  The usual British all mouth and no reaching in the trouser pocket.

The government's claim to be a world leader in developing clean coal technology has been dented after officials warned privately that public spending constraints could force them to cut the £10bn programme.

Officials have admitted that securing the necessary investment is "challenging in the current climate".

Bureaucratese for don't hold your breath.

It will also take years for those plants which are promised funding to be built. Ministers will use a "gradualist" approach, staggering the tenders to build the new plants, which will also have the effect of deferring public spending commitments. The current tender, which began in 2007, may not be concluded until 2011.

Translation: Gradualist =  We'll be gone then anyway.

If it's challenging in the current climate, how challenging will it be in the Grand Energy Transition ?

The Grand Energy Transition, The GET, is an ongoing, powerful evolutionary energy transition that is bringing civilization out of a millennia long epoch of limited, unsustainable dirty, solid fuels, into the later stages of what history will record as a relatively short liquid transition to a future epoch of sustainable, virtually limitless, clean gaseous fuels - called by the Author, the Age of Energy Gases.

 

 

Statoil Hydro opens up even more...

It figures.  Do one Statoil Hydro story and another comes along the next day. 

"Natural gas is an attractive energy source for the future," said Rune Bjørnson, StatoilHydro's executive vice president for natural gas during a press seminar in Oslo on Thursday, 24 September.

StatoilHydro is currently the second largest supplier of gas to Europe, and the group helps secure a stable supply of energy to Europe through export of gas from the Norwegian continental shelf (NCS) , as well as holding significant international gas positions in Algeria, Azerbaijan and in the USA.

"I am convinced that natural gas will be a competitive energy source for many decades to come," said Bjørnson.

He pointed out that natural gas is an important bridge towards a low carbon economy because it is the cleanest burning fossil fuel, with much lower emissions of greenhouse gases than coal and oil. Replacing older coal power plants with new gas power plants can reduce carbon dioxide emissions by as much as 70 per cent. Provided that all of StatoilHydro’s gas export from the NCS in 2008 substituted coal generated power in Europe, the total CO2 emission reduction would have been approximately 220 million tonnes. As a comparison, total Norwegian CO2-emissions were around 44 million tonnes last year.

Europe still uses more coal than gas to produce electricity. Gas from the Norwegian continental shelf is an attractive energy source seen in an overall climate perspective, thanks to low greenhouse gas emissions during production and its proximity to the market .

Statoil Hydro opens up

If one believes the stereotypes,  Norwegians make the English look indiscreet and noisy.  And Statoil Hydro is while in Europe, very, very discreet about shale gas.

But America has a way of making even the most buttoned up voluble.  The best information to be gleaned about shale gas isn't from the NYT or WSJ and certainly not from the UK press which is in willful ignorance mode. No, the top places to learn about Shale Gas lately is one of the many, surprisingly good, local US newspapers, as we see from the Marcellus Shale

A joint investment venture between U.S. natural gas producer Chesapeake Energy Corp. and Europe’s second largest natural gas supplier, StatoilHydro, is coming to fruition in Wayne County.
The companies announced last November that StatoilHydro would invest $3.375 billion into Chesapeake Energy’s Marcellus Shale operations, in exchange for a 32.5 percent ownership interest in some of the leases in that area.
A Wayne Independent review of natural gas leases - a legal document giving a company the right to explore and drill for natural gas on private property - found that the companies are fulfilling that plan here, according to county records. 

Yes, UK press.  One can actually find things out through investigation!  Not as fun as the UK way where one calls up utilities and asks them to brief you! We digress...

More than 1,500 Chesapeake Appalachia, a subsidiary of Chesapeake Energy Corp., natural gas leases in Wayne County have been modified to include StatoilHydro’s 32.5 percent ownership interest, allowing the Norwegian company to recoup its investment when the natural gas wells begin producing a revenue stream that is expected to last at least 10 years.
Under the agreement, Chesapeake Appalachia will remain as the exploration, drill and production operator, said company representatives at the request of an inquiry by The Wayne Independent.
“StatoilHydro is not an operator in any of the leases, and consequently will not seek any (environmental) permits,” said Kjersti H. Torgersen, vice president of communications with StatoilHydro U.S.A.
“We have very good working relations with (Chesapeake Energy), and we are happy to see the operations moving forward in a timely manner,” she added. 

Of course, in Europe, as soon as we ask oil majors about shale, they shut up. Or go off the record, where let us assure you they do not shut up.  On the record nothing.  Off it: "Mammoth", "Tremendous" "Changes everything".

But Americans are so open, that you just have to open up yourself, and maybe they figure in the sticks of PA who ever notices.  But we do:

Under the joint venture, both companies publicly announced that they anticipate developing 13,500 to 17,000 natural gas wells in the next 20 years in an area encompassing four states.

The companies are also engaging in an international alliance to explore for unconventional natural gas.