Gassing on some more
Posted by Heading Out on November 17, 2005 - 2:18am
The world' liquefaction capacity is projected to reach 41 Bcf/d in 2010 from 2004's total of 17 Bcf/d, he said. There are already firm commitments to build 35 Bcf/d in liquefaction capacity by 2009, he added. LNG produced in the Atlantic Basin would mostly be shipped to the US and Europe, while LNG produced in the Pacific Basin would primarily be shipped to Asia, he said. The growing amount of production in the Middle East will help develop a global LNG swing market because the area is positioned between Atlantic and Pacific markets, he said.
In an adjacent article Platts also notes that of the import potential there will be 1 Bcf coming from Qatar in 2008 that will fill the needs of a regasification plant that ExxonMobil currently plans to build in Sabine, Texas.
The IEA in their recent MENA Outlook report estimates that it will take an investment of something on the order of $16 billion per year, if the infrastructure is to be emplaced that will meet world needs for LNG from that region over the next 25 years. (Which will treble gas production from the region during that time frame). The greatest increases in production are projected, by them, to come from Qatar, Iran, Algeria and Saudi Arabia. (Remember that the 5 rigs that Aramco were borrowing from GOMEX were going after deepwater gas). To give a comparison, the IEA anticipates that the oil investment required will be $23 billion a year, which is more than twice the average annual investment over the past decade.
The most significant resource for the increase, providing 33% of it, will be from the super-giant North Field/South Pars which is shared between Qatar and Iran, while the Hassi R'Mel field in Algeria is anticipated, by the IEA, to provide another 13%, and they go on to comment that no new gas will need to be discovered to attain projected gas outputs up to the year 2030.
It is, however, anticipated that some of the Qatari gas will be used in GTL translation. The first plant to do this will come on stream next year, with a capacity of 34 kbd, while Shell have a 140 kbd plant and ExxonMobil have a 154 kbd plant, both in the advanced planning stage, which will all combine (if on time) to give a total production of around 330 kbd in 2011. In contrast Algeria is anticipated to only have a single 36 kbd GTL plant in operation by 2010, and Iran won't have any until later in time.
While the IEA comments that the world as a whole has 66 years of natural gas reserves, at current rates of consumption, MENA, under those same bounds, has 211 years worth. With which cosy outlook,, and having for the second night of the season, just thrown more wood into the tile stove, its time to crawl under the winter covers - with the thought that the predictions for the winter seeming to get a little worse as it approaches.
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In the first of your posts, you stated that US demand was going to be 25 TCF by 2012, but I don't see how it could go that high. We've been using 11.8 TCF for the past two years, and now that the supply situation is getting more and more constrained, I don't see how we double in 7 years.
More industry is moving overseas, and people are getting wise to the gas situation. I believe that we're going to see more and more people replacing gas furnaces with heat pumps, going for the highest efficiency units (92-95%) when they stick with gas, and burning more wood in the coming years. Those trends are already clear this year just because of the fear invoked by the drumbeat of media reports on higher heating prices this winter.
I know Peter Dea said that half of the gas we'll need by 2012 hasn't been discovered yet, but I didn't catch that he was assuming 25 TCF demand. If that's the case, then it's not as bad as it sounds from the standpoint of NG. It could be worse for pollution, however, as more people use electricity (mainly coal) and wood.
If it's true that we could import 10-20 BCF/day, we may be OK for a while after the demand destruction kicks in. There are still a lot of unknowns, however. For example, how likely are we to really get that 10-20 BCF/d when other countries closer to the source want it worse than we do? Peter Dea mentioned the LNG tanker that was on its way to the US this summer (fall?) when Spain offered more than the $14/MCF we were going to pay and the tanker turned around and went to Spain. I think that's one of the trickiest parts about this whole thing.
According to EIA data, US demand over the past few years has been at about 22 Tcf/year. US production has been flat at about 19 Tcf/year.
Oh, well, it's been a long day, and I'm past peak thought now, so I guess I'll just go to bed.
Have you heard about the NG boom in the MidSouth?
Drillers have leased everything from White County AR to Tunica County MS.
The first Exploratory well went in the 1st of November in North Woodruff Co. The Driller says the gas is 6000 ft down, they're drilling with water pressure to break thru the shale, and this "pocket" extends up to the MO Bootheel and into Illinois.
I've seen nothing about this anywhere.
Thanx,
James
The U.S. Geological Survey estimates there are 26 trillion cubic feet of natural gas equivalent in the Barnett Shale, although no one really knows how far the play extends.
Sounds plentiful, but the NG is trapped in small crevices that must be fractured, so I would think there would be considerable setup costs.
http://houston.bizjournals.com/houston/stories/2005/11/14/story1.html
The point is: is this drilling in the Bartlett Shale a sign of how desperate things really are? I mean it seems like this is pretty difficult to get to. How realistic are these estimates of the amount of gas available? How much supply is this in years?
With one of the County Historians (aka Geezer) by my side, I can locate old rail beds, brickmaking facilities, old tile drains, and... an old gas well, abandoned.
Why was the well abandoned?
I think, like you, dex3703, because the gas is in pockets, fractured. And it wasn't economical.
These guys plan to put in a well every 40 acres !? if they hit with the well they're now drilling.
Is this possible? How many rigs are we talking, and is a water injection system necessary for each well? I was told a rice irrigation well (12 " diameter pipe) was needed to drill. That's alot of water.
James
Protecting America's NG supply by building accidents waiting to happen.
Natty gas is coming form the Sakhilin Islands in Russia.
From what I've seen, natural gas from LNG will cost about $8-9, if everything goes as planned. Still no bargain here, ahhh the days of $2.00 natual gas.
No. 1 - Russia -- They already have several pipelines to Western Europe and have no reason to go LNG. It's a win-win supply-demand relationship that neither side wants to rock, but Europe's demand is rising faster than Russia can supply.
No. 2 - Iran -- They have toyed with the idea of LNG in the recent past, but have no active projects. Iran has a three-tier strategy (as voiced by a number of Majlis members and NIOC officials): (a) Export gas only by pipeline (to India via Pakistan, and longer term, Europe via Turkey). They already export gas via pipeline to Armenia and Turkey. (b) Use gas for re-injection into large oil fields undergoing depletion. (c) Export value-added gas products. This includes condensate and LPG, as well as methanol, olefins, and derivatives. The largest steam cracker and methanol plants in the world are being built there. (I think the ethylene plant is complete and the Zagros Methanol is due to startup in '06.)
No. 3 - Qatar -- Here is the darling of the western oil and gas companies. Unlike Russia and Iran that have a large domestic natural gas demand, Qatar has few options but LNG and GTL. The problem is that they have maxed out on how many projects they can handle. There are more expat E&C personnel there than Qatari citizens! The ports cannot take any more ships delivering compressors and pumps. A few months ago, Qatar Petroleum cancelled/postponed several BCF/D worth of gas export projects with Conoco Phillips, Marathon, and others.
No. 4 - Algeria -- They had a big explosion in an LNG facility a couple year ago that killed ~200 people. So despite their long history as an LNG exporter, they are not as enthusiastic about it anymore. There are presently three pipelines connecting North Africa to Europe: one through Morocco to Spain, another to France, and a new one from Libya to Sicily.
I guess we can go on and talk about Nigeria too...but not much is going on there that I know of. So there you have the largest ones. LNG is not going to be a solution to America's gas shortage.
A number of years ago Delaware enacted its Coastal Zone act which forbids the construction of new heavy industrial facilities, including bulk material handling facilities, within areas designated as Coastal Zone. What does this have to do with New Jersey? Well, through a quaint accident of colonial history, the northern boundary of Delaware was established as a line forming a 12-mile radius from the New Castle, DE courthouse. As such, the northeastern boundary of Delaware extends across the Delaware River to a few hundred yards from the Jersey shore.
As the proposed BP LNG terminal would largely sit inside the Delaware boundary, Delaware exerted its perogative re the Coastal Zone Act and denied BP a permit to build the terminal. New Jersey is howling mad, and there is now vigorous litigation that is rapidly moving all the way up to the Supreme Court.
Silly? Yes, but I think it's a good example of some of the problems we're going to face getting LNG terminals up and running.
It may get so bad that New Jersey will reactivate the battleship New Jersey,currently a museum ship docked in Camden, and send her down river to shell Wilmington. Of course my beloved Delaware won't take this sitting down and will rearm Fort Delaware, the old Civil War fort sitting smack in the middle of the Delaware River so that no LNG tanker will ever make it up river in one piece. Hey, this is but the start of the First Delaware-Jersey War :-)
Having some gas come from Australia seems a better choice than Iran.
Whether environmental concerns will shrink once gas prices becomes more scarce and dearer remain to be seen.
I'd bet good money that the BP terminal will get built, and built soon.
And maybe when that happens, New Jersey will be spiteful and keep the gas to inself and let Delaware scrounge for its own.
Love your moniker! Excellent choice.
However, there is absolutely no reason to build more natural gas-fueled, baseload electric generation!!!!
Not only would so doing be scraffing up a scare commodity, but it would be uneconomical in $/MWhr.
Here's my comparative analysis of LNG-fueled electrical generation versus new nuclear plants. It ignores the field E&P and collection costs (rolls them into royalities). The basic assumption is the National Petroleum Council's estimate of capital costs for liquification, transport, and receiving terminal capital costs of $5 to $10 billion per 1 bcf/day.
http://www.energypulse.net/centers/article/article_display.cfm?a_id=623
It shows that nuclear is a clear winner on costs even giving LNG every financial and engineering break feasible. Since it now looks like my assumptions for royalities make $6 LNG wishful thinking, nuclear looks that much better.
However, do so has put so much pressure on gas demand that we now have a real problem. LNG is a half-assed solution, but a solution nonetheless, albeit a short-term one.
And yes, it is tragic, in the most literal sense, that for the a fraction of the price of Bush's Iraq adventure, we could have built many state-of-the-art nuclear reactors. Why is it acceptable to our rulers to spend $300 billion on a war to take over some else's oil resources (something which isn't even working), yet unacceptable to spend a fraction of that on something with clear long-lasting benefits? Ideology always seems to trump common sense.
It's like oil. The cheap oil is mostly gone, the reasonably priced oil is going fast, and it's cheaper to make synfuels out of coal then to drill for the expensive oil. Same for nukes.
For a factual report on the urnaium resource base, check here:
http://www.uic.com.au/nip75.htm
There's great gobs of the stuff waiting to be used - uranium resource availablity or costs are in no wise constraints on the expansion of commercial nuclear power within our lifetimes or those of our children or of the plants they build.
Go for it.
In Sept EnergySEER (M. Lynch's firm) issued a 2010 forecast for North America:
A increase in LNG imports from the current 1.8 Bcfd to close to 11 Bcfd.
A decrease in price to $4-5 per MMBtu, largely due to the lower cost of LNG and declining oil prices.
A increase in non-conventional gas production of 10 Bcfd (coal bed methane, tight gas, deep shelf, shale and
deepwater); they note that conventional gas production has been in decline since 1990.
www.energyseer.com/NEGas_September%2013,%20%202005%20Color.pdf
There are a number of interesting presentations on their site:
www.energyseer.com/Presentations.html#GAS
It's worth noting that they've been consistently wrong (low) on their gas price forcasts for a number of years now, similar to their oil forecasts. They also assume that LNG will drop the price for gas because the cost for LNG imported from Qatar to the East Coast is close to $3 per MMBtu. Of course price is only close to the the cost if there is ample supply and suppliers are competing to meet limited demand; in a world where demand is rising faster than supply the price is more likely set by what consumers are willing to pay and thus can be quite a bit higher. For these reasons I'm confident EnergySEER's price projections are again far too low.
Although we may be in a tight spot this winter, on the whole I am not so concerned about gas supply in the US. There are huge conventional gas reserves in remote locations around the world; if prices remain high long enough they will be developed and shipped as LNG. Like oil, there are also tremendous unconventional reserves that can be utilized if the price incentive is there, although I wouldn't methane hydrates in this category - it's still too uncertain whether these hydrates are worth harvesting at any price. The US is in a similar situation now with natural gas compared to where we were in the late 70's with oil - although we have to rebuild a lot of our infrastructure as we transition from internal to external sources, there is no reason why natural gas consumption can't growth (at more modest rates at much higher prices than the historical average) for decades to come.
As for decades... pretty tough to predict that far out regarding supplies that are far away.
Pencil it out with a 20% ROE at the midrange cost estimate, twenty year depreciation, add 50 cents/mmBTU gas owner royalty and you get $6/MMBTU delivered.
Compare to competitive uses for stranded gas like GTL, and the 50 cents for royalty looks real stupid.
People who promise $4 LNG are lying to you or using a market penetration stategy or both.