A slight feeling of disquiet
Posted by Heading Out on October 4, 2006 - 11:09pm
Topic: Supply/Production
Tags: eni, gas storage, gazprom, lng, newsweek, sabine pass [list all tags]
The feeling was regenerated when a reader directed us to Robert Amsterdam's site. Currently he is posting about the story in today's NYT dealing with the construction of the new LNG port at Sabine Pass, LA.. The port is one of several that is being built to bring foreign natural gas to help with the coming shortage in the US. To quote CERA, as the article does:
Liquefied natural gas represents only a 3 percent share of total American natural gas consumption, which is mostly used for industrial purposes and home heating. Cambridge Energy Research Associates estimates that imported liquefied natural gas will account for 10 percent of American use by 2010, and potentially as much as 25 percent by 2020.Bob Amsterdam believes that by 2010 this 10% will largely come from Russia in general, and our friends in Gazprom in particular, with the projected source of supply likely being Shtokman.
President Vladimir Putin has signaled his intention to reassert state control over the energy sector, calling the industry the "holy of holies," as high oil prices have driven the country's economic growth in the last few years.It was only this week that the Eni Vice President was writing a story in Newsweek stating that the world would soon be awash in energy. Russia, as you may remember, recently passed KSA in terms of the production of oil, and so some of the prediction may well have been based on the anticipation that Eni was going to get a slice of that bonanza.
Well it turns out that it may not be quite that easy. There is some concern arising in Italy about the deal,
The accord on oil, gas, power and liquefied natural gas was to be signed after months of talks. It was expected to give Eni access to Russian oil and gas fields and let Gazprom sell gas directly in Italy.Now, as it happens Eni has other interests in that part of the world, that are also of interest to Gazprom. Just yesterday Russia and Kazakhstan signed an agreement to produce gas from the Karachaganak field.A source in one of the companies said Tuesday that Eni was not ready to let newcomers into its market, and that Gazprom did not want to see new companies in Russia's oil and gas fields.
Russia will be represented by gas monopoly Gazprom, while Kazakhstan's KazMunaiGas state energy firm will own the other half.Truly it is a small world.Gazprom is keen to contract incremental supplies of gas from Central Asia to cover Russia's domestic needs, freeing up its own production to supply to lucrative European export markets.
Karachaganak is co-led by Italy's ENI and Britain's BG, which both hold 32.5 percent stakes, while U.S. Chevron owns 20 percent and Russia's LUKOIL has a 15 percent interest.
But this all gets us back to the LNG problem, since getting gas from Kazakhstan, and Turkmenistan may help Russia send LNG our way, if they decide they want to.
Which brings up a slightly different problem, that was recently raised in the OGJ. It relates back to the problem the UK traders had with gas this week. Namely that natural gas is a product that, as a general rule, flows fairly swiftly from the well to the user. There is not a huge amount of storage that is built into the system. This can be a problem when, for example, winter (whether in Moscow or Denver) decided to be a bit harsher than normal for a while. Or when suddenly there is too much coming through a line. Problems with the supply line can lead to disruptions. This may well become more of an issue, as the gas starts to come in chunks from tankers, rather than flowing, controllably, from wells.
As the article points out there is a considerable variation between summer and winter use
The total swing from summer to winter can be 60 bcfd or more. These seasonal swings are likely to become greater as residential and commercial heating loads continue to grow and more gas-fired power generation is added.Two problems are now anticipated as more of the countries supply comes in tankers. Firstly the shipper wants to unload the tanker and turn it around to go get some more, as soon as possible, whether there is an immediate need for the gas or not. (Recognizing that it may not be possible to meet the winter demand with immediate supply). And so there needs to be an increased storage capacity within the system especially sinceThis current summer-winter gap is served by gas storage. Roughly 3.3 tcf of working gas underground storage capacity are throughout the US and Canada. These 385 or so facilities can deliver up to 50 bcfd of withdrawals and inject up to 35 bcfd. Current gas storage can barely handle current seasonal swings and more is needed to serve the growing gap between supply and demand. The market has evolved to the point where gas storage is not only needed to meet winter demand, but also to meet gas-fired electric generation summer load requirements as well.
This LNG corridor (around Sabine Pass) will be home to an estimated six LNG terminals between now and 2013, adding potential sendout volumes of 13 bcfd. These LNG terminals include CMS Trunkline (existing, at Lake Charles, La), Freeport LNG and Freeport LNG expansion (2008 and 2010, respectively), Cheniere Sabine Pass (2009), ExxonMobil Golden Pass (2010), Sempra Cameron (2011), and Cheniere Creole Trial (2012-13).By 2010, an additional 4.4 bcfd of gas will be flowing, on average, through this region heading east toward Florida, mid-Atlantic, and Northeast markets. At maximum sendout, this figure doubles to 8.8 bcfd. When Texas exports and Louisiana offshore gas production destined for these same eastern markets are added in, the total flow from this specific region will increase to 12 bcfd (on average) and 16 bcfd during peak sendout.
The second problem is that gas-fired electric generation facilities do not use a steady stream of gas all day, but as electric demand fluctuates, so their use of gas follows the same curve. Which means that there needs to be some capacity for storage in the system to cope with that shorter term fluctuation also. The question that the article raises is as to where all this storage should be built.
(Grin - do I hear a bid from Nantucket ?) I guess that Dave and I will puzzle out where we are going to get all this gas on another day.
No link because their vulnerability is embarassing.
I can give you what you want.
I can make your heart beat short.
Somebody should do a graph plotting Oil and NG together as Dollars per BTU. Barrels. Try to convert NG to Oil Barrels.
Leanan will probably delete this last sentence.
suggests that oil prices (not refined products prices) are heading up because the amount of crude oil which can refined has been reduced after a refinery accident. And since U.S. refinery utilization was lower than expected, this also contributed to a rise in crude prices.
Am I missing something here - because the market now has more crude oil, the price went up? That is, higher supply leads to higher prices?
Again, I am only talking in reference to this article, not to OPEC's various moves.
Somehow, the information flow too is becoming very strange. This may also be a symptom of system oscillations, which is something to be expected around peak. Or peak plateau, for those who like to wear another chapeau
I guess maybe you could argue that futures might go up due to anticipated increased demand later to make up for a shortfall. That is the only explanation I can think of, and I am not entirely sure it is a valid one. Another possibility is a lot of people trading oil don't really have much grasp of how the system actually operates. Or they understand it, but they're trying to anticipate what others will think, regardless of whether it makes sense or not.
What I find interesting is how the information flows themselvers are starting to get unhinged - that is, in a number of areas, all reasons are considered valid explanations for what is happening. Oil prices are up because production is down, or oil prices are down because production is down.
At some point, the noise completely covers the signal. Whether we have reached this point (GAY REPUBLICAN CONSPIRACY!!! - see, noise) is harder to judge, considering how much of the American MSM has been full of little but noise for years. (ANOTHER MISSING BLONDE!!!) (BRITNEY, JESSICA, LINDS - is that with an 'e' or an 'a'? - inquiring minds don't care.)
http://www.atimes.com/atimes/Central_Asia/HI29Ag01.html
They seem to know what they're doing.
The Asian Times remains one of my favorite information sources.
I agree, thus the sooner we abandon the '3 Days of the Condor' scenario, the better off we will be as a country. IMO, the govt. should be rapidly moving ahead to shift most of the labor force to relocalized living and permaculture.
Bob Shaw in Phx,Az Are Humans Smarter than Yeast?
Agree and I am pushing for more manufacturing base in the midwest. Historically manufacturing followed available energy. New England water begot mills. Pennsylvania coal begot foundries. Texas oil begot refineries. Each step led to manufacturing of goods based on what raw materials were produced. Mills = food, cloth, lumber. Foundries = metals, tools, building components. Refineries = carbon compounds, plastics, portable energy. All of these industries are now offshore with labor following them.
We need a new energy base of biofuels, wind and solar which will lead to ---- what? Whatever it is will require labor and new plant construction. The point is not to grow the economy so much, as to employ people to make things locally. Lots of multiplication of the money when there is a good manufacturing base locally. And I am convinced we need to be producing the energy locally to get that base back.
It doesn't matter if this isn't as much as currently provided by fossil fuels. New England had a thriving economy based on water power 250 years ago using a fraction of the energy they use now. It's the difference between making and buying that leads to a viable economy. We only buy now and that has to change.
I watch the western banking system (the real power), and so far they're staying with imperial plan. I suppose they realize if global capitalism dies, they die, too.
So the wealth needed to rebuild and relocalize our towns, cities and countryside is instead going into the vast military machine.
I feel like such a meaningless bystander in all this ...
If you hit the eject button on your DVD player you can remove your 2 days of the Condor DVD and put in some other movie.
Matt
Thxs for responding. I think that scenario best expresses worldwide detritovore desire, therefore I encourage all to post it as often as possible until we see a worldwide shift to a more appropriate direction. I often wonder what degree of future horror will be ignored by the average American. The population declines in Iraq, Darfur, and other places don't seem to concern most Americans now. If 2/3 of Mexico dies due to energy shortages: will Americans be shocked, or just accept that as normal routine? If 1/3 of Americans are in hard labor camps under a harsh Govt. boot: will the other 2/3 still applaud these actions as long as they have food and water? I think they will. Consider this link on Dieoff:
Bob Shaw in Phx,Az Are Humans Smarter than Yeast?
Does the world submit to becoming resource colonies of the West? Or does Asia/Middle East have its own plans for the future?
But the fact is that all Russian pipelines (both for oil and gas) go West for now, and those that will eventually go East (i) are far from being built, (ii) will use other reserve areas than the Western ones to be filled, (iii) bump against China's unwillingness to pay more for natgas than prices used to be in the good ol' days ($2-3/MBTU), and (iv) are still subject ot Russia's games viz. Japan and China.
So sure, Russia and China talks. I'm not convinced it means much in practice, in the short term anyway.
But there's more. Qatari gas is not secure. They are just a few miles away from Iran across the Persian Gulf. Iran is aligned politically with Russia and China. Again, I say, you don't have to be genius to figure this out. The world's changing but you dismiss it.
I can't read where you are coming from on this stuff. Why do you downplay these obvious reports?
What's the link on your Eurotrib article?
I think this is the great game, the resource war, and I think it's all extremely dangerous.
I like France; I like how it's prepared (somewhat) for peak oil. I like its preservation of local agriculture. I love Paris.
But France will not be immune if this all goes badly.
Thus the attractiveness of LNG, more easily tradeable. The trouble is that the LNG chain is surprisingly hard to master. Iran has proved totally incapable of it, and Russia is discovering that it is harder than pipelines.
We'll see, but i am not convinced that Russia's long term strategic interests are aligned with China's. Taking advantage jointly of the absolute stupidity of the current White House host is one thing, committing to the allies of the moment for much longer is another.
First let's all say together, we all blew it. Well, most of us anyway. I will speak for myself first:
There is no way I could have predicted the direction and range over only the last year, if I had been sinking real money in based on my own estimates, I would have been wiped out. There, how many will be that honest. I can go further....If I had been betting with CERA at the front end, I would be wiped out and if I had been betting with Matt Simmons and T. Boone Pickens at the tail end, I would have been wiped out....if i could have timed by milisecond, there's a chance I would have broken even. So, all in all, I would have done about as well as the "big boy" derivative funds, and their managers make millions!
---------------
So, bravely on into the future! Let's kick around some thoughts
(1) The American prospects for LNG importation. Leaving aside the political/nationalistic issues mentioned above, the American LNG industry faces a challenge never before seen in the LNG market to this point: Never in history has an LNG industry had to compete with a still vibrant, although maturing domestic land pipeline natural gas industry. In Japan and South Korea, the two largest and most mature of the LNG markets, LNG functions as the only major supply of natural gas.
In the U.S., however, the risks of a glut of pipeline gas from the mainland domestic industry makes the risks to LNG very great. If pipeline gas prices tumble as has just recently happened, LNG is not competitive. But it has to go somewhere, and fast, because LNG shipping is very tightly scheduled.
The way that Japan/Korea have overcome this is through very tight schedules, long term contracts, and owning the "LNG train" from one end to the other, supplier terminal/ships/recieving terminals. Due to lack of competition from domestic mainland gas, this makes sense in those countries.
But the North American market is different. Would I sign a long term $8.00 per mm/BTU contract for billions of feet of LNG, knowing that a mild winter, a bit of outsoursing of industrial use, and a bit conservation could drive prices for domestic pipeline gas down to $4.00? It could be a catastrophic financial failure for me if I did.
So, to protect myself, I would ask for more flexible terms, something closer to spot market prices and more flexible acceptance terms on delivery schedules. This of course would create a very risky and volatile market.
The call for storage is a good one, but does not cure the problem. Even with storage, I can only afford to sit on millions or billions of dollars worth of natural gas for so long. Then, as the British example shows, I would have to get rid of some at whatever price to release the money, which could be earning interest/investment income somewhere else.
Some commodities, as much as we hate to admit it, do NOT lend themselves well to globalization, despite what Daniel Yergin may believe. It is why we do not import milk from China. Natural gas may turn out surprisingly hard to globalize, especially for an "Island market" like North America, where the big reserves are far across the sea from where we are.
But the best minds in the world still see, over the longer view, a decided shortfall of natural gas compared to demand in the U.S and North America. Both Matthew Simmons and Daniel Yergin served on the famous NPC (National Petroleum Council Report) requested by Spencer Abreham in 2003, a fascinating free small book that can be downloaded from their website at
http://www.npc.org (go to reports by year, and at 2003 download
"Balancing Natural Gas Policy -
Fueling the Demands of a Growing Economy (2003). Next to Matt Simmons "Twilight In The Desert" this is the other "great" energy document of the new century.
So what are the prospects for "cheap" natural gas over the longer view (2010 and beyond)? It is hard to find a reason to believe at this moment that "cheap" natural gas will be plentiful, but technology and radical developments are now moving very fast. Given the demands for a ecologically clean fuel, the "low carbon fuels natural gas and propane should be in huge demand.
Natural gas is being and is intended to grow as a major supplier of source fuel to (a)electric power generation (b)home and industrial heat source (c) tar sand industry and (d) ehtanol industry. If there were a shortfall in transportation, it would be expected to fill in there too.
But recall we are talking potentially 2010 or later. Alternative developments are moving very, very fast. Extremely advanced solar electric cells, once such hugh makers as Honda join the competion, could fall rapidly in price and rise rapidly in efficiency. Ths would supplant the some fo the need for new consumption of natural gas for electric power generation. Advanced batteries and designs of motors, controllers and drivetrains are making it possible that people will begin to look at the Plug hybrid car on the basis of performance and convenience as well as efficiency. And of course, if the price rebounds, the North American gas drillers will bring the best technology to bear on lands they have for decades been forbidden to drill in.
So, natural gas prices could go (a)through the roof or (b) into the dumper, depending on the speed of technical development, the pace of investment in both gas and alternatives, and the weather. And this is not just short term, but long term as well.
O.K., time to bet your money! Which way you going on natural gas and propane (astoundingly cheap!)...long or short?
Remember, it's your prosperity at stake, but what the helll, it's only money!
Roger Conner known to you as ThatsItImout
A utility company executive view is that they will competing in the spot market for tanker loads from Trinidad and the Middle East, against European and Japanese buyers. Deloitte & Touche published a review of energy executive views recently, I think.
I think also the Artic Gas phenomenon becomes important: Canadian Arctic and Alaska gas pipeline. These lines will eventually be built.
I don't think, unless there is a big move towards pricing carbon emissions or emission rights trading, that gas is going to increase market share.
Nor do I think that new energy technologies will displace core carbon fuel demand.
It's all very bullish for coal in North America, really.
Re: the Alaskan pipeline
That will be online in 2015 at the earliest. No immediate or mid-term help.
that's not entirely true.
Those lines were never going to be built without government aid-- the industry always said that. The economics have never looked that good, when there was enough gas in Canada and Lower48.
LNG is not a big part of the North American fuel portfolio, so logically the only 'competition' for those lines was domestic production.
Now that prices have moved up and there is the demand from the Tar Sands, and mainland supplies are running low the Mackenzie Delta line, at least, will get built.
What she ignores is that gas prices have been too low to justify the pipeline. The Energy Crisis of the early 80s ended, and gas prices fell.
Actually the Berger Report was in the 70s, I believe-- I am old enough to remember reading it.
http://archives.cbc.ca/IDC-1-73-295-1552/politics_economy/pipeline/clip8
1977. She could have checked on Google (as I just did). To be fair, she is right that Berger nixed the Mackenzie Valley line, but that line would not have been built without government subsidy in any case, as far as I can recall.
On the LNG point, what has changed is the open water issue. The sailing days in the Arctic have increased massively since the 70s, (when there was a global cold snap), as the ice pack has receded.
It looks, very soon, like the Northwest Passage will be open all year round. What the explorers sought, has finally happened.
Just to confuse the pipeline issue, the surface issues have gotten a lot more complicated: the permafrost appears to be melting.
"PS I don't see Honda as a PV player. PV is a chemical and electronic technology and is more the preserve of electronics companies, not auto companies."
Better tell, Honda, because they are coming big, they say as early 2007. That's a done deal:
http://www.renewableenergyaccess.com/rea/news/story?id=40851
http://www.redherring.com/article.aspx?a=18186
"In December, Honda Motor said it will enter the thin-film business and mass-produce cells by 2007."
http://www.evworld.com/view.cfm?section=article&storyid=697
Roger Conner known to you as ThatsItImout
Thanks for the heads up!
Granted from low bases. PV is stymied by a worlwide shortage of silicon (we have just passed the point where more silicon is used in PV, than in electronic devices such as computers and phones).
But wind is getting serious-- something like 40GW capacity worldwide, growing 20%+ pa. PV I think has just crossed 1GW (for power generation purposes).
That is a doubling every 3.5 years. Now it will slow down-- indeed there is a global shortage of wind turbines. Also the US wind subsidy has yet to be renewed, and there is always an order drought until it is.
On the production facilities, I am not sure where we are on silicon fabs. Wind I believe new turbine factories are getting built.
I agree there are time lags, but I also think the pace of growth is impressive.
It took 14 years to build the first GW of UK wind power, and 14 months to build the second.
I don't think it will (growth doesn't usually sustain that fast, and the US subsidy timing factor is big), but it is a measure of how fast an industry can move if we want it to.
Whereas a new coal plant can take 5-7 years (and even the Chinese, with no significant planning consultation, probably take 3), an individual wind turbine can be built and deployed in 3 months.
I think you and are actually agreeing. Renewable energy is small potatoes compared to fossil fueled energy.
If (enormous if) the world moves to a realistic level of carbon charging/ carbon permit trading, then I could see RE surprise all of us.
In the US wind is exploding: 9GW total installed at the end of 05, 12GW at the end of 06, and 12GW of installations planned for 07! The US's growth is the reason for the short supply of turbines. Now, not all of that will be built, but it's the single biggest form of electrical generation being planned for 07 in the US (43%, adjusted for capacity).
see http://www.nei.org/documents/Energy%20Markets%20Report.pdf
Solar is growing at 40%+ per year, and the single biggest fab is being built in California, at 430MW per year.
As Rummy would put it: Could renewables be growing faster, with an Apollo type project? Golly, yes. Would that be a good idea? Gee, whiz, sure. Is it growing pretty darn fast, anyway? Absolutely!
The current power subsidy will expire in 2007. Historically what has happened is there is then a gap of some months before Congress renews it, leading to a 'rush' of turbine developments just before it expires, and then a 'drought'.
They are trying to get Congress to give wind more legislative stability, but at the moment that is the situation.
So 2007 will be nuts, and 2008 will be a pretty quiet year.
Also of course Capacity is not Kilowatt Hours. Since your capacity factor in US wind is, I would guess, 30-35%, 1GW of gas turbine is c. 3.5GW of wind capacity.
Coal is going to be the big US power source for new capacity unless some form of carbon restriction/ taxation is introduced. Not by this President!