The Oil Drum

Andrew Weissman took looked real closely at the implications (financially) of a massive LNG strategy

The potential 2025 contribution of LNG imports to the U.S balance of payments deficit is potentially 1 to 2 X the current total U.S. balance of trade deficit, which is at an all time record level (viz., $ 58.3 billion for January of 2005, the most recent month for which data is available). Even for a country with a $ 13 trillion per year Gross Domestic Product (GDP), these are staggering figures.
Over the 20 to 25 year life of these new supply projects, the required payments by U.S. purchasers are likely to total more than the budget for the entire federal government (with over 2.5 million employees) in any one year.

Or the liklihood that supplies will materialize as anticipated

Despite the overall strength of the U.S. economy, the U.S. could be at a significant disadvantage in competing
for these supplies.

We are running the largest trade deficit in U.S. history - and the largest trade deficit of any country in the
world. In part as a direct result, the value of the dollar is expected to continue to decline sharply over the next
several years.

Further, because of our location, for every current producer other than Trinidad, the amount of time a tanker
must travel in order to complete a delivery to the U.S. and therefore the cost of shipping LNG to the U.S.
market is significantly greater than for any other potential customer except Mexico. With tankers potentially
costing up to $ 250 million each, this is a significant disincentive to sell into the U.S. market.

It also means that, by definition, a U.S. manufacturer using LNG will be at a competitive disadvantage to almost
every other manufacturer worldwide, since (due to the shipping cost differential) the cost of LNG delivered to
the U.S. market inevitably will be higher than in any other market in the world.

Or the susceptibility to interruptions this would place us in.

If we rely heavily on LNG imports from West Africa or the Middle East, therefore, and the government in a
host country is overthrown, a strike temporarily shuts down production or, in the case of a Middle East
producer, shipments through the Strait of Hormuz are temporarily blocked, there may be a very real risk that
we'll not be able to keep homes warm in the middle of the winter or that the lights will go out in the summer.

Even if shortages never occur, however, from a pricing standpoint, the potential consequences of a supply
disruption in the LNG market, even for a short period, could also be severe - even if it involves only a single
major LNG project supplying the U.S. market.

THe article is a good read.  LNG really makes no sense as a solution, except to the LNG distributers.

http://www.physics.unc.edu/about/robertsonseminars/weissmanlng.pdf

As for timing, by 2025 I expect no more than "the greatest depression" - whereas I hold out hope that by 2100 we will have made it to the new stone age.

• I'm always careful when looking at a moving average, you have to apply a shift of 13 weeks (3 months) to the left because sliding windows are not centered.
  
• there was also a plateau in may 2005 but the prices continued to increase afterward.

At least thats the catastrophic theorist's viewpoint... all those hidden stresses building up for a break to a new attractor (temporary equilibrium) point.

Bingo!  The basic model of how the market works, esp. in terms of the role played by inventories, is changing as we (s)peak, and the commodities traders haven't noticed yet.

With the news that Iran has begun centrifuging uranium, plus all the oil and natural gas stats everyone here can cite ad infinitum, one would expect the market prices of oil and NG to be significantly higher.

It will happen, eventually, but the sooner the prices start to rise before there are supply disruptions, the better.

Both would proably be commercially interested in any specific project you have in mind.

Landfill gas  Over 1000 MWe of electricity are being generated today from landfill gas, referred to in the waste landfill trade as "LFG".  It can readily fuel piston engines and turbine prime movers. Potential is for 3-5x this via better technology, which is coming into play at Yolo County CA and elsewhere.  Thus the US potential for landfill gas is between 150,000 and 250,000 barrels oil equivalent (BOE) per day.  Plus you are addressing global warming by more efficiently recovering  methane that is tenfold the potency of carbon dioxide on a volume basis.  The energy potential is large simply because of the large amount of waste > 150,000,000 tons of largely organic material that the US landfills each year.   This much waste can make a lot of methane. Without getting into detail, I will just say that, in essence, there is still a lot of potential for more development and optimization of LFG technlogy.  There are problems to be overcome--for example effects of gaseous silicon compounds (of all things) that leave deposits in combustion systems.  

Sewage  Methane from sewage is about 20% of the energy potential of methane from LFG. and use is very roughly 50'% of the amount collected

Manure  The biggest developer of manure digesters in the western hemisphere has been RCM digesters and Mark 'Moser of Berkeley/Oakland, who we (IEM, Inc and Yolo County) talk to regularly.  The exploitation of manure to methane is much less advanced than LFG, with the exploited potential of manure methane (or biogas) being under 5% , but the business today is booming, such that there is a large backlog for RCM and others installing digester systems.  Manure solids and convertibility make the methane potential roughly 2x that of landfill gas

These biomethane sources are to date best suited to local use and primarily electricity genration, although  a little bit of pipeline gas is made. In our big study for California Dairy farmers we document the use of biogas in fueling vehicles in the 'European Union.  Google Westen United Regional Dairymen (WURD) and methane.  

Steve Andrews of ASPO-USA has called these technlogies "silver bb's"  which is a great term for energy resource that is smaller than a silver bullet.  

Based on manure, sewage and solid waste solids available to make methane, I would give the net energy potential of these resources together at over 500,000 boe per day for the US. The climate benefit can be enormous because of methane's greenhouse potency.  In addition atmospheric methane is also connected in a complex way to the Antarctic polar "ozone hole" (Blake and Rowland) and there are a lot of other angles to this.

This is why we need education about our energy situation and good public policy--to fight the natural tendency of people to focus on their immediate sitution and not extend their planning horizon.

As for oil prices a dollar appreciation will hurt oil importing countries and this will be another source of reduced demand. So, yes it is quite possible that we see a significant price drop - in the next few years supply capacity will probbaly remain flat, while demand will probably drop much faster. I don't see it as a good thing though.