No Hot Air

IEA on gas again:

Two countries, two views:

Apart from the FT, we couldn't find much in the UK press where the International Energy Agency talks about the gas glut, so we have to find out their views from the German press:

Unconventional gas is unquestionably a game-changer in North America with potentially significant implications for the rest of the world,” said Mr. Tanaka. The share of unconventional gas in total US gas output jumped from 44% in 2005 to around 50% in 2008 and, in the Reference Scenario, is projected to rise to almost 60% in 2030. The boom in North American unconventional gas production, together with the recession’s impact on demand, is expected to prolong the glut of gas supply for the next few years. The analysis of WEO-2009 shows that the annual under-utilisation of inter-regional pipeline and LNG capacity could rise from around 60 billion cubic metres in 2007 to 200 bcm by 2015. This glut could have far-reaching consequences for the structure of gas markets, with suppliers to Europe and Asia-Pacific coming under pressure to modify pricing terms under long-term contracts, to de-link gas prices from oil prices, sell more gas on a spot basis and to cut prices to stimulate demand.

But The Times doesn't want to hear from someone like the head of the IEA, when they can give a forum to the cheerleader in chief for nuclear, CCS, gas storage and everything with a government subsidy attached, Dieter Helm.  Mr Helm is an Oxford man, but he hasn't heard of gas:

How did we get to this state? Partly because energy policy has never been taken seriously. Without a crisis, it is always someone else’s problem — and one for the future. Most solutions require customers (and voters) to pay more now — and that is something politicians are loath to admit. But bad news on bills — and an energy crisis — is coming unless radical action is taken soon.

But what about un-radical action, like gas for example?  It's a strange world where the right is seeking radical action and old lefties like myself are promoting free market solutions.

Gas is barely mentioned on Planet Dieter and it's the same old story.

North Sea gas reserves have been running out

So?  Big deal in a gas glut.

He said something that since we know that Ireland generated just under 40% of it's power from wind recently, we got a bit suspicious about:

We not only pay among the highest bills for wind, but in Europe only Cyprus and Malta generate a lower proportion of their electricity from it

What is he trying to say?  That we generate too much wind or not enough?  Is he saying that our pitiful contribution to wind power is among the best in Europe?  If that is the case we didn't have to look far. Same newspaper, same day:

High winds across Spain on Sunday meant that for over five hours, over 53 per cent of the country’s power came from wind energy. The towering white wind turbines which loom over Castilla-La Mancha — home to Cervantes’s hero Don Quixote — and which dominate other parts of Spain, set a new record in wind energy production.

Red Electrica said this year wind power is expected to produce 13 per cent of all electricity, hydroelectric power 10 per cent and solar power 2.5 per cent. Spain’s solar industry is one of the fastest growing in the world.

CCS at coal-fired plants to almost double cost of power production

Based in Canberra, the Global Carbon Capture and Storage Institute is a cross government organisation that is tasked with promoting CCS.  But if this is promotion,  we'd hate to hear anything negative:

The use of carbon capture and storage (CCS) technology at coal-burning power plants would add 78 per cent to the price of producing electricity, according to a new report released yesterday.

"A viable business case for commercial-scale, integrated projects has not been established at this time for coal-fired power generation and other large CO2-emitting industries," said the report, titled Strategic Analysis of the Global Status of Carbon Capture and Storage.

Their solution of course is for governments to dip into our pockets and support coal CCS.  Whereas last time we looked, all gas is asking for is a level playing field and a carbon price. Which won't cost most people anything at all, and certainly far less than the untried CCS technology which appears to be up to 20 years away anyway. We're trying to find out about CCS at gas plants, but can't find much that makes sense. The GCCSI report states that gas carbon capture is twice as expensive as coal.  Any hints out there as to why?

The smart ones walk away.

Most oil companies have never made themselves any friends in the past through a desire to "drill, baby, drill" just about anywhere, polar bears, dolphins, indigenous tribes and every other sentient being be damned.

Aubrey McLendon, head of Chesapeake Energy is disrupting, along with most things, that part of the hydrocarbon matrix that  has never found a potential source they didn't like.  

Gas drillers have been exploring  the giant Marcellus Shale coming up from West Virginia and Pennsylvania for most of the past year, and were waiting for go ahead on drilling in upstate New York to unleash yet another gas land-rush. 

Although the southern section in the Catskills,is especially attractive for being in the New York City exurbs, this portion of the Marcellus was also close to the watershed for the NYC drinking water supply. There was the potential for a big battle between classic Manhattan limousine liberals and upstaters who wanted to take the money and move to Miami, an attractive prospect in a depressed area.  In short the old nimby v economy story, which usually ends up eating column inches and grand debate for years.

But not this time:

Bowing to intense public pressure, the Chesapeake Energy Corporation says it will not drill for natural gas within the upstate New York watershed, an environmentally sensitive region that supplies unfiltered water to nine million people.

The reversal seems to signal a more conciliatory tone from the gas industry, which is facing mounting opposition in New York to its drilling practices.

But before the New York Green Party uncorks the organic Champagne,  this isn't a victory for them, it's a victory for rational common sense:

“We are not going to develop those leases, and we are not taking any more leases, and I don’t think anybody else in the industry would dare to acquire leases in the New York City watershed,” Aubrey K. McLendon, the chief executive officer at Chesapeake Energy, said in an interview on Monday in Fort Worth. “Why go through the brain damage of that, when we have so many other opportunities?”

Over all, Mr. McClendon said, the company’s holdings in the watershed are “a drop in the bucket” compared with the Marcellus field’s potential. He suggested that Chesapeake had more to lose by drilling there than by forgoing it, even though he contended such drilling would do no harm.

“How could any one well be so profitable that it would be worth damaging the New York City water system?” he said.

The simple fact is that there is so much gas that contrary to reputation, drillers can be choosy.  Bad luck if you own land in the Catskills.  And Dorset.  There often will be  those among the  legions of UK nimbyists who secretly want to sell out and move to Marbella.  The lesson from New York is possibly don't protest too much. 

Why electric cars will impact your natural gas bill

We always have thought that a key paradigm shift in energy is how we are using less of it.  But what would be the impact of electric vehicles on gas and power use?

The answer is that we don't yet know, but we should at least start asking the question. One more transformation over the next few years looks like being EVs.

After years of hope and hype, electron-powered driving finally appears to be on the verge of reality.

In the next three years, at least a dozen pure electric or plug-in hybrid cars are slated to hit the market in the U.S. Electricity-driven vehicles from giants such as General Motors Co. and Nissan Motor Co., as well as start-ups like Fisker Automotive Inc. in Irvine, will provide consumers with a wide variety of choices. ..

Battery makers and automakers alike are tooling up factories to produce big volumes of electric vehicles. Meanwhile, power utilities and regulators are scrambling to figure out just how big the market will be...

"This is happening and it's happening soon," said Mark Duvall, director of electric transportation at the Electric Power Research Institute, an independent, nonprofit research group. "By the end of 2011, consumers will have more choices in vehicles they can plug in than they currently do for hybrids."...

But in the last couple of years, huge improvements and new battery chemistries "opened the opportunity" for ambitious product plans, she said. Gioia predicts that as many as a quarter of new vehicles sold by 2020 will be electrics, plug-in hybrids or traditional hybrids.

It's too early to say at this point how much electricity, and gas to generate that, will be needed to power EVs.  But it's not too early to say that abundant natural gas and distributed generation is the way to supply those needs whatever they end up being.

Talking about my (electricity) generation

In the UK, we're roughly equal at 40% each between coal and gas in fuel sources for generation. Coal, in it's present form has got to go. It's many years past it's sell-by date and we can't afford for it to poison us for much longer. But what to do about about replacing coal?

Let's pretend that we are UK policy makers, who have either never heard of shale gas, confuse it with shale oil or pretend that it's many years away.  Let's also assume they also don't believe in negawatts, the electricity replaced with no power at all via efficiency. Smart metering, smart grids and LED lighting can knock 15 to 30% off total consumption. 

Without gas on the energy menu, the replacement for coal would be either nuclear or CCS. Ignore for the moment that nuclear waste storage has been great-grandfathered to the 21st century equivalent of Ofgem:  It's their baby, we just paid for building the power station, which the nuclear industry say is a snip at 4 billion euro each.

But as a University of Greenwich study says, nuclear isn't an economical option either:

Oct. 19 (Bloomberg) -- A group of U.K. academics advised the government against subsidizing development of nuclear power because of the "huge" costs to consumers and taxpayers.

Professors from Imperial College, Sussex University and University of Greenwich will advise against subsidies at meeting of lawmakers, policy advisers and industry executives today at Westminster in London, according to a statement. The group said subsidies such as loan guarantees, fixed carbon prices and consumer taxes to support prices will be needed to develop new U.K. nuclear power.

"If the government caves in to nuclear industry demands for subsidies and guarantees, it will be electricity consumers and taxpayers that will pay huge additional costs," Steve Thomas, a professor at the University of Greenwich, said in the statement. Subsidies may also be challenged under European Union competition law, the group said. 

Meanwhile the US National Research Council, in a study commissioned by Congress studies the true cost of generation.  It ain't pretty for coal either:

Congress commissioned the report during the preparation of the 2005 Energy Act to get a handle on what energy really costs—not how much we pay for it. That includes the “health, environmental, security, and infrastructural external costs and benefits associated with the production and consumption of energy.”

Coal-fired electricity costs the country $62 billion per year, largely in health impacts from particulate matter. Natural gas for power generation, in contrast, adds about $740 million a year in hidden costs.

Looked at another way, coal’s hidden pricetag adds up to 3.2 cents per kilowatt hour. Compare that to the 2 cents-per-kilowatt hour that wind power gets from the government—that’s less a subsidy than a partial attempt to level the playing field.

OK, what about CCS?  Tony Hayward of BP's opinion:

We also need a more diverse energy mix which will enable energy security and help address the issue of climate change.
Alternative energy - nuclear, wind, solar and biofuels, along with fossil fuels - will all play an important role.
But we need to be realistic - the transition to a lower-carbon economy won't happen overnight.Although Carbon Capture and Storage is often trumpeted as the path to cleaner coal, it still faces a number of challenges which will take time and effort to resolve.
I don't believe we'll see the commercial use of CCS at scale for at least another decade or more and it won't come without a price.

Until renewables gain a sizeable share of the power sector and cleaner coal is available through Carbon Capture and Storage, I can see only one way of doing it - by increasing the use of natural gas.

Gas is the fuel that offers the greatest potential to provide the largest reductions at the lowest cost - and all that by using technology that's available today.

Gas is becoming the new Borg:  Resistance is futile.  It makes such a compelling case that no one can deny it. So why isn't more happening?

World Shale Update

Very thorough update from Seeking Alpha on shale worldwide, far too long for us to quote from.  Nothing terribly new to us, but perhaps to some of our newer readers?  But also much more here on China than we've seen before:

 Both Chinese and American geologists working for E&P companies believe that China’s shale gas potential is massive and that basins which not only rival but greatly exceed the resource and reserve base of the Barnett will be found in China.

China is modeling its nationwide shale research project on basins that have geologic characteristics similar to US hydrocarbon provinces. The Chinese have selected four large provinces for study and development. The South China basin with a maturity similar to the Appalachian ; the Zhungaer and Tuha basins similar to the Rocky Mountains, and the Qadam and East China basins similar to the Michigan basin.

It 's the final paragraph that resonates with us:

If the North American success with shale gas is even partly replicated in Europe, China and later maybe even in India, world energy physical and financial markets will be transformed in remarkable and positive ways. It all began because a few small American E&P independents had the creativity, imagination and will to do what government experts thought was ridiculous and what Big Oil executives thought was an impossibly romantic but implausible treasure hunt

Eon still won't come clean on Kingsnorth clean coal

This is best read with the previous Kingsnorth posts of last week.  Dr Paul Golby of Eon on the Today show a few minutes ago, still saying that Kingsnorth was postponed due to falling demand. But as usual what he didn't say was more important.

Yet High Marnham 1600MW gas CCGT was approved the same week.  What does that say about allegedly falling demand being behind Kingsnorth?  Maybe Kingsnorth just doesn't add up anymore. And he should 'fess up.

China will solve this energy crisis, not cause the next one, part two

The original post of this title from June 10, highlighted how China was moving towards being  more sustainable than the West, and especially the world laggard in efficiency, the UK.

How are they doing a few months later?  The International Energy Agency this week highlighted two trends, falling demand and

China will be able to slow the growth of its emissions much faster than commonly assumed because of its rising investment in wind and nuclear energy and its newfound emphasis on energy efficiency.

Commonly assumed = conventional wisdom.  And readers know where we stand on conventional wisdom.

One of the report’s main findings was that China’s recent energy policies could achieve much bigger cuts than expected.

China overtook the United States as the world’s top emitter of global warming gases in 2007 after more than a decade of rapid industrialization. But China is building more nuclear power plants and increasing the role of renewable energy, raising efficiency standards in new buildings, and gradually moving the economy from its manufacturing base to services, the agency said.

If China manages to achieve the predicted savings, that nation will be “at the forefront of all global efforts to combat climate change,” Fatih Birol, the energy agency’s chief economist, said in an interview.

Continued progress in China could increase the pressure on the United States, which has so far initiated no overall policy to reduce emissions, as well as on other industrialized nations.

If China can get much bigger cuts than expected so can we.  We do have to point out that China has recently slowed down nuclear development, and is on public record of saying that CCS is a waste of money. The leapfrog effect of China putting in energy efficiency, smart metering and renewables from new as opposed to retrofits give them an advantage. But the west, and particularly the UK, so embarrassingly behind the rest of Europe on all of the above energy tech, needs to change some outdated concepts. Read the four flawed scenarios of Ofgem's Project Discovery and a subtext is the UK in competition for declining energy supplies with China.  An updated version, realistically anchored in the present as opposed to being mired in the past, would include how we should learn from China in an optimistic spirit - not see them as a threat.

China and shale.

Energy experts at Ofgem , the various energy consultants who push the same product of energy risk and many gas traders often share the same story:  Now that Russophobia isn't working, lets talk up China as the big bad energy guzzler who will suddenly suck up all the LNG that's meant to go to plucky little candlelit Britain.

We've pointed out in quite a few posts that China gets more than enough LNG from Australia thanks, so much that the Ozzies are getting nervous, and the Qatari's are having kittens since they were depending on sitting in the middle of the world LNG web with Europe on one side and China on the other.

We've also pointed out that China as smog ridden energy hog is a story from 2006. China is a leader in solar, wind, efficiency and energy tech in general. Their rate of energy use is slowing. China wants to be better than us, and unlike us, has the capacity to learn from energy mistakes. China also has the capacity to play energy leapfrog and go straight to the best energy tech without stopping at the old ones.

For two examples, China is slowing down on nuclear, and skeptical about CCS, as this Bloomberg story from August pointed out:

“Carbon capture and storage, particularly for China, is not one of the priorities -- the cost is an issue,” Su said in an Aug. 4 telephone interview from Beijing. “If we spent the same money for CCS on energy efficiency and the development of renewables, it would generate larger climate-change benefits.

But what if China had shale gas in similar quantities to North America? There are three legs to the world LNG trade. One died this year when the US stopped importing. That leaves Europe (basically the UK, France and Spain) and China, Japan and Korea. Then taking out China demand would be great news for European consumers even in the unlikely event we never found any shale here. Hang on to your hats end users, or try and save your necks gas bulls.  China does have shale

China boasts abundance of unconventional natural gas resources, and their development is significant to satisfy the domestic demand for natural gas, said a National Energy Administration (NEA) official.

Zhang Yuqing, director of Natural Gas Department of NEA made the remark when attending the fourth Sino-U.S. Energy Policy Dialogue opened Sunday in the coastal city of Qingdao, east China's Shandong Province.

The resource volume of China's low permeable gas, coal bed methane, and shale gas are each respectively estimated at 100 trillion cubic meters, 30 trillion cubic meters, and 100 trillion cubic meters. Besides, China is rich in high sulfur natural gas and carbon dioxide-containing natural gas.

At present, China has an annual coal-bed methane output of 5.8 billion cubic meters, and it is preparing for the pilot development of shale gas.

Zhang added that developing unconventional natural gas resources can help China adopt leading natural gas development technology and experience, and it is meanwhile favorable for China to perfect related policies.

China will probably export shale gas mining to us!

Behind the Times

Ofgem's relentless pessimism is front page news in the UK, but at the NYTimes this is today's lead:

Italian and Norwegian oil engineers and geologists have arrived in Texas, Oklahoma and Pennsylvania to learn how to extract gas from layers of a black rock called shale. Companies are leasing huge tracts of land across Europe for exploration. And oil executives are gathering rocks and scrutinizing Asian and North African geological maps in search of other fields.

One recent study by IHS Cambridge Energy Research Associates, a consulting group, calculated that the recoverable shale gas outside of North America could turn out to be equivalent to 211 years’ worth of natural gas consumption in the United States at the present level of demand, and maybe as much as 690 years. The low figure would represent a 50 percent increase in the world’s known gas reserves, and the high figure, a 160 percent increase.

We've always loved shale as being a classic experts are wrong story. Unconventional gas is all about a vindication for unconventional wisdom. That includes NHO of course.

The projections suggest that the new method of producing gas “is the biggest energy innovation of the decade,” said Daniel Yergin, chairman of the Cambridge consulting group. “And the amazing thing is there was no grand opening ceremony for it. It just snuck up.”

Early estimates of recoverable European shale gas resources range up to 400 trillion cubic feet, less than half the industry’s estimates of what is recoverable in the United States. But European energy executives say they are excited about the prospects because the Continent’s conventional gas reserves are too small to meet demand.

“It is obvious to everybody that it has huge potential,” said Oivind Reinertsen, president of StatoilHydro USA and Mexico, a Norwegian company with growing shale interests. “You see a lot of land-grabbing by different companies in Europe, potentially spreading to the Far East, China and India.”

It's not so obvious to anybody who reads only the UK papers.  But let's face it, half of UK journos, simply read the NY Times during the week and the same story pops up in the Sunday edition (usually marked exclusive!, or the Times/Observer/Independent/Telegraph has learned) two or three weeks later.

The story doesn't add much to what we already know, although it's invaluable to have this on the front page. Only part we disagree with:

Donald I. Hertzmark, a consultant who advises multinational oil companies on gas projects, said that in a decade or so, the new shale gas resources would improve Europe’s ability to withstand any future reduction in Russian pipeline shipments. 

Why should it take a decade, when the US shale revolution took only two or three years? We think we'll see European shale starting up next year, and certainly by 2015 being in a similar position, or better, than the US today. But shale, via the price signals from the Henry Hub and the massive wave of LNG coming to Europe is already making Russia as irrelevant as Kingsnorth.