The Oil Drum

I recently visited BP America's tight gas facility in Wamsutter, Wyoming on a trip paid for by the American Petroleum Institute. I was the only representative of internet media on the trip. The other reporters on the trip were from AP-Cheyenne, Casper Star-Tribune, and Natural Gas Weekly. On the trip, we spent a day and a half listening to presentations and touring facilities. We also stayed overnight at the facility BP built for visiting workers.

Figure 1 - Two natural gas wells plus solar panel - Click for larger picture

In this post, I will tell a little about what I learned. I will also look at prospects for the future -- both in terms of being able to expand operations and threats to maintaining current production levels.

Jean Laherrère kindly agreed to give an interview to TOD:E by e-mail. For several years he was virtually the sole researcher modelling Coal depletion in the same vein it is done for Oil and Gas. Despite being considerably different from the common sense of limitless Coal, his forecasts were this year confirmed by several studies and reports. TOD:E got some comments on this matter as so on the general Fossil Fuels depletion picture and our future beyond them.

Easy Come, Easy Go, or: The Incredible Disappearing 140 Tcf of Canadian Gas.

I posted an article "The Future of (Natural) Gas from the Western Canada Sedimentary Basin?" a few months ago, suggesting that the numbers suggested for Western Canadian gas in the NRCan report "Canadian Natural Gas Review of 2004 & Outlook to 2020" were exceedingly optimistic, basing that conclusion on both National Energy Board Scenarios and actual events.  I did not expect that the next NRCan report in the series would reflect this view, but it has since come out, and its contents prompted me to look further back in the series and then to look at how other official and unofficial assessments were changing.

'Brutal' period faces gas producers

A double whammy of rising costs and falling prices threaten to undermine the competitiveness of Canada's natural gas industry, observers said Thursday.

And producers face another summer of discontent characterized by bulging storage inventories and weak prices, said Bill Gwozd, a senior vice-president with Calgary-based Ziff Energy Group.

"I see more brutality coming later in the year," he said in an interview. "Pity the poor producer."

Oil and gas trusts to lose up to $2-billion in value: report

Canadian oil and gas trusts will lose up to $2-billion in net present value over the life of their assets because of the federal government's tax changes to trusts, a Scottish consultancy said in a report released Friday.

Anger, relief over tax move

Ottawa's decision to start taxing income trusts has opened up a sharp fault line in the executive suites of Corporate Canada.

The ruling has emerged as a divisive issue, pitting those who run trusts against those in non-trust businesses, according to a new survey of top executives.

The quarterly survey of 175 chief executive officers, chief financial officers and chief operating officers shows a dramatic split among those who back Ottawa's move and those who dislike it. The quarterly C-Suite survey was conducted by the Gandalf Group for Report on Business and ROB-TV.

About 58 per cent of those surveyed support or strongly support the decision, while 40 per cent oppose or strongly oppose it.

I recently attended the ASPO-USA World Oil Conference: Time for Action - A Midnight Ride for Peak Oil in Boston, MA. Interestingly, the conference organizers appended the acronym ASPO, to represent the Association for the Study of Peak Oil and Gas for this gathering. Indeed, much more time was spent discussing the North American natural gas problem than at any prior Peak Oil conference I am aware of. Prominent among the presenters addressing this situation was David Hughes of NRCan. Mr Hughes is a senior geoscientist with the Geological Survey of Canada who has been speaking widely on global and North American energy sustainability issues over the past few years to governmental agencies, industry forums and the popular press. He painted a sobering picture of North American Natural Gas Supply - in effect we are trying harder and harder and spending more energy and dollars just to maintain flat production. This post is essentially a summary of David Hughes ASPO NG presentation (he also gave a talk on the Oil Sands) with some added comments and perspective.

North American natural gas producers are likely in Georges shoes...

Finding it easier to add new reserves on Wall Street than from E&P in the ground, Anadarko bought both Kerr-McGee and Western Gas on Friday, June 23rd in a $21 Billion Deal in the Oil Patch -- from the Houston Chronicle.

In an unexpectedly bold move Friday, Anadarko Petroleum Corp. announced it would purchase not one but two oil and gas companies for a combined $21.2 billion, in a ringing endorsement of U.S. energy exploration....

It's buying Kerr-McGee, a storied energy company out of Oklahoma City that is heavily entrenched in the Gulf of Mexico's deep waters and the Rocky Mountains, and the smaller Western Gas Resources of Denver, which also has significant reserves in the Rockies.

The double deal had some analysts doing a double take.

This analyst was also a bit stunned and a little investigation turned up a number of interesting things. Let's check this deal out.

Here we go again, this story is about natural gas supplies in North America and the US in particular. Lately, TOD has had some posts on Liquified Natural Gas (LNG) imports as the way to solve the North American natural gas crisis (here, here and here). The point of these posts concerning LNG is that there are real unavoidable concerns that LNG imports will not provide us with sufficient supply to meet inelastic demand soon enough by 2010 or even come anywhere close to meeting these supply problems in the period beyond the end of this decade. Beyond oil and the apparent world-wide peak in light sweet crude, the more I think about our energy problems, the more I come to the conclusion that natural gas shortages in North America are imminent in the timeframe beginning now and for the forseeable future (perhaps 5 to 10 years out or beyond). The damage this could do to the US economy is enormous. In my view, there is a real crisis pending so this post examines another whole part of the equation in future projections for providing natural gas to meet projected demand involving drilling for Unconventional Natural Gas Resources (pdf)-- an overview of what these resources are. The importance of unconventional gas (pdf) is expected to grow out to 2025.

I hope you'll bear with me here. This is one of those really long posts I do from time to time to try to understand an important issue I didn't know much about. I even try here and there to emulate HO's "techie talk" tradition here on TOD though with, I'm sure, limited success.

With the return to an approximation of the original natural gas flow conditions through the Russian-Ukrainian pipeline, the immediate crisis would appear to be over.  The consensus would appear to be that Russia made a diplomatic mistake by suggesting that, albeit courtesy of the Ukrainians, it is no longer a reliable source of supply.

But I am just a little tempted to say "so, what?"  There was no immediate switch over to other pipelines that would have allowed maintenance of supply, since these alternatives are not immediately available.  In the case of Ukraine the second string to their bow, the Turkmenistan supply, comes through Russia and is equally vulnerable to the same pressure as Ukraine applied to Western Europe. And when all the dust settles, I suspect that Ukraine will have to pay the price that has been asked.

The fall-back suppliers to Western Europe have, in the past, been the reserves in the North Sea.  But the UK is now importing gas and has its own worry about supply stability.  Norway has a problem also.  From the Scotsman

And in another risk to western European economies, Norway, Britain's biggest gas supplier, warned it would not be able to increase output to meet any shortfall from Russia.