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52 comments on A Brief Natural Gas Update (It's Thursday)

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Nate Hagens on March 27, 2008 - 2:26pm Permalink | Subthread | Parent | Comments top

The Canadian government is predicting a fall in natural gas production because current prices are too low to support high drilling activity in Canada. This is going to make it difficult to refill those stocks. We can expect that stocks will fall until a price spike drives prices high enough to do more drilling.

NG in North America is not like world oil. Prices are only a thin margin above drilling costs.

Jon- this is the definition of a low energy gain, receding horizon, situation. Once nat gas prices increase, presumably drilling prices will also increase. Standing here today, market analysts will predict more production when we have higher prices but I'll bet dollars(err. Francs) to donuts that they are underestimating future costs that would accompany higher revenues.

Does the Canadian Energy Board forecast higher production after 2009?

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JonFreise on March 27, 2008 - 3:31pm Permalink | Subthread | Parent | Comments top

The NEB just released a new outlook to 2030. Mr. Hughes stated that it went to press before they finished the 2007-2009 outlook, and so it is too optimistic (most data ends 2005 before the drilling activity took a steep drop). You can see the whole thing here:

http://www.nrcan.gc.ca/com/resoress/publications/peo/peo-eng.php

However, even this optimistic forecast shows natural gas production declining (but not nearly as much as Laherrere). And net exports drop over the whole period and Canada stops being a natural gas exporter by 2022. (pg 49). Clearly, this is not good for the USA. Canada is expected to start importing LNG to support further growth in NG use.

Also of note, it is clear the NEB does not yet know about EROI because they forecast NG prices to drop and then remain flat over the whole 2010 to 2030. Nor do they seem to know that Japan is paying $19 per MMBTU today. Since prices are set on the margin it seems implausible for prices to drop and then remain low while importing LNG.

http://www.platts.com/Natural%20Gas/Resources/News%20Features/gasdiverge...

US NG Demand is 3x higher than the whole world market for LNG. Does that sound like a situation for falling prices? I admit being a naive engineer, but that sounds like higher prices to me.

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The Dude on March 27, 2008 - 8:11pm Permalink | Subthread | Parent | Comments top

NG in North America is not like world oil. Prices are only a thin margin above drilling costs.

Has anyone analyzed the potential for government subsidies supporting drilling? It's a national security matter, after all. And I doubt taxpayers would object to paying a bit more on April 15th for keeping the lights on and the house warm.

I keep telling people to reinsulate, even before anything about veggie gardens. Need/plan to take my own advice soon as well...

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JonFreise on March 27, 2008 - 9:31pm Permalink | Subthread | Parent | Comments top

Unfortunately that just causes the NG to run out faster at a lower perceived cost. It is very popular with oil companies however.

Generally subsidies need to be on the insulation side for older buildings/homes and tough regulation on new buildings. There is no reason new buildings need to use much energy to heat and cool.

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chemE on March 27, 2008 - 9:45pm Permalink | Subthread | Parent | Comments top

I have decided to voluntarily send an additional 10% of my income to the Government to support additional drilling for natural gas.

We keep the house cool in winters, warm in summers - however I am worried that my fellow Americans' multitude of commercial and residential spaces - shall not be sufficiently HOT in Winter and COLD in Summer.

I encourage all right thinking Americans and Canadians to do the same.

May the force be with you.

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Nate Hagens on March 27, 2008 - 10:20pm Permalink | Subthread | Parent | Comments top

youre kidding right? they have no allocation mechanism to do that-plus they would need millions. Your gesture is noble but maladaptive

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chemE on March 27, 2008 - 10:36pm Permalink | Subthread | Parent | Comments top

Yes I am kidding and was being sarcastic.

- I think that we use an excessive amount of fossil fuels & the oil drum has a nice quote - ...burning oil for fuel is like burning a Picasso for heat...

- The scale of American consumption is mind boggling (all 20 tcf annual NG burning is ultimately used for HVAC - even in manufacturing facilities

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52 comments on A Brief Natural Gas Update (It's Thursday)

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