Comments on: Natural Gas – We Got it Half Right

By: michaela

michaela — Wed, 03 Feb 2010 23:43:34 +0000

Visit the blog http://realm-energy.com to learn more about Shale plays in Europe.

By: Joseph Somsel

Joseph Somsel — Tue, 02 Feb 2010 20:48:53 +0000

Stan,

In 2005 the Petroleum Institure did a study on LNG. It looks like it takes at least $6 gas landed to make it work. That would put help shave some peaks.

One problem here in California is that our importation terminal is in Mexico. The first, small contract was for Indonesian gas but all the expansion capacity is earmarked for Russian gas from Siberia. Indonesia is peaked on LNG production while Saklin Island is just coming on-line, now that Russia has seized over half of it.

Since California’s marginal and future electric production is all natural gas-fired, this situation has a strong potential to let Putin decide whether or not the lights stay on in California.

By: Mike H

Mike H — Tue, 02 Feb 2010 16:02:25 +0000

Carl, it seems that almost like clockwork with the new shale gas deposits opening up, opposition spearheaded by environmental groups to shale gas explorations has turned from a trickle to a torrent. Already, shale gas extraction is being ground to a halt in the Northeast. Could the rest of the shale gas boom be brought down by fear mongering environmentalist and their ignorant lackeys in the press?

By: Carl from Chicago

Carl from Chicago — Tue, 02 Feb 2010 03:31:03 +0000

I will be posting again on nuclear power again soon.

As far as property rights and shale extraction, agreed that there is hype but also this fundamentally opens up new fields in areas close to demand. While there is difficulties with extraction and exploration sadly enough these are dwarfed by the problems facing the electricity generation and transmission businesses for a variety of reasons, and financing exists for exploration (which not much financing exists for electricity generation and transmission investments).

I am fine if the LNG terminals only go one way – we can receive foreign gas if it can be sold in the US at a profit (thus reducing our cost on the margin) but happy to see US gas not go overseas :).

By: Stan in Sugar Land

Stan in Sugar Land — Tue, 02 Feb 2010 01:24:01 +0000

The article is interesting, however, based on my work, gas at about $7.00/mmbtu, NYMEX, is required to earn an acceptable return on investment for gas production from shale(lower prices will not end development, just encourage losses). Another point – most of the land where shale development is taking place is private, the gas/oil companies make a deal directly with the resource owner. The resource owner then gets $ before production of gas and more when gas is produced, thus he is excited for production and it creates wealth. Our biggest resource problem in the US is the volume of resources owned by the government and is off limits, not for environmental reasons but more for reasons of ideology, think the current Sec of DOI. American leads, of led, the world for 3 simple reasons 1) Freedom, 2) Property Rights and 3) a predictable rule of law – all of which are under under attack and being lost. If allowed the oil/gas industry could add 2-5 millon barrels of oil per day over the next several years, yielding cheaper energy and a whole bunch of jobs. But our academic and political elites know better, so it will never happen.

By: Joseph Somsel

Joseph Somsel — Mon, 01 Feb 2010 18:45:51 +0000

We should view the PR campaign of the natural gas industry with some skepticism. The technological possibilities have certainly improved but costs go unmentioned. I expect that the previously high cost of extracting gas from tight shale has decreased but not as much as the PR campaign implies.

Turning a LNG terminal built for receiving into a terminal for outgoing shipments requires major investment in liquefication trains but the storage tanks and docking facilities can be shared.

Don’t get me wrong, more gas is good but let’s dig a bit deeper before we base our energy policies on this PR campaign.

Of course, I build nukes so consider that a disclosure of self-interest.

I did do an analysis about 6 years ago of the competitive costs of LNG-fueled electricity vs new nukes here:

http://www.energypulse.net/centers/article/article_display.cfm?a_id=623

By: david foster

david foster — Sun, 31 Jan 2010 22:18:21 +0000

Good post.

One thing I’ve observed is that construction of new gas pipelines doesn’t seem to have the same level of NIMBYism problems that new electrical transmission lines typically encounter…probably because they’re less visually intrusive. Even without regulatory issues, people would probably hate high-voltage transmission lines more than they hate gas pipelines.

Another significant point in favor of nat gas is that you can use it in combined-cycle turbines (gas turbine followed by steam turbine for waste heat recovery)…these are significantly more efficient than straight steam turbines, but you can’t use coal in them directly…also, you don’t need the coal-handling infrastructure with rail sidings, conveyors and pulverizers, etc…there factors make it feasible to pay somewhat more for gas than for coal on a straight BTU basis.

(Disclosure: I have investments in several pipeline MLPs as well as various production and gathering companies)