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Oddly enough, this will come at a considerable detriment to renewable electricity forms, which have been approaching the cost of natgas and even gotten cheaper.
Either way, we are about to see a shift away from coal for power, in a big way.
I hate posting full articles, since few ever read them all, but this one should be read in full, as it has some interesting implications.
Lower CO2 emissions, here we come.
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Difference Engine: Awash in the stuff
EVEN as it tries to slow production down, America is still pumping three billion more cubic feet (85m cubic metres) of natural gas a day out of the ground than it can consume. The country has become so awash in the stuff since “fracking” (hydraulic fracturing of gas-bearing shale deposits) began barely five years ago that the price has plummeted from $8 per thousand cubic feet to $2. (A thousand cubic feet of natural gas contains roughly a million BTUs of energy.) Not that long ago, natural gas was a tenth of the price of oil in energy terms; now it is a 50th.
If the natural-gas companies go on producing at the current rate, all the storage reservoirs in America will be full by autumn. With nowhere left to put the stuff, its marginal price will fall to zero. Such a situation is unsustainable.
Extracting natural gas from tightly packed shale deposits costs around $5-6 per thousand cubic feet. Wells have to be sunk thousands of feet underground and then drilled horizontally through the gas-bearing formations for thousands of feet more. A slurry of water, quartz sand and chemical additives has then to be pumped into the well at high pressure, to fracture the shale and open fissures for the trapped gas to escape. And all the waste water has to be pumped back to the surface to be processed and stored, at considerable cost.
At today’s spot prices for natural gas, producers are losing money hand over fist. Many could cease to exist as the industry is forced to contract. And consolidate it will. There are so many firms that the top ten producers account for less than half the market between them. The trouble is that fracking is almost too productive for its own good, and there is just too much shale gas out there. Only big companies with deep pockets will survive.
Back in 2000, America had enough accessible natural gas in the ground to provide a little more than 12 years of consumption. But once the country’s shale deposits started to be tapped in earnest, reserves leaped to over a century's supply. And because output from existing wells is not tapering off as fast as initially expected, the actual reserves could wind up being double present estimates.
Such a bonanza ought to be a blessing. And one day it will be. But right now finding users to suck up all that excess natural gas is a headache.
With the United States importing more than half its oil (at over $1 billion a day), and transport accounting for two-thirds of the country’s oil consumption, logically the biggest single market for natural gas ought to be motorists. If they could be enticed to switch from petrol to compressed natural gas (CNG)—as drivers in Brazil, Iran and Pakistan have done—America would no longer need to depend on foreign oil.
But do not count on it, even though there is much to like about CNG. For one thing, it is the cleanest burning of fossil fuels—producing significantly less carbon dioxide, nitrogen oxides and unburned hydrocarbons than petrol. Because it leaves no carbon deposits inside the engine, wear is reduced to a minimum and oil changes are required less often. At the equivalent of typically $2 a gallon, CNG is half the price Americans pay at the pump for petrol. It is also safer. If its pressurised container is ruptured, CNG does not pool on the ground, but disperses into the air. And with twice the ignition temperature of petrol, it is less likely to catch fire.
So, what is holding CNG back? One reason is that converting petrol engines to run on CNG is expensive. Conversion kits that meet Environmental Protection Agency (EPA) requirements cost anything from $6,000 to $16,000, depending on the vehicle. For another, the pressurised storage tank leaves little space for luggage in the vehicle’s boot.
Only one car designed specifically to run on CNG, the Honda Civic GX, is commercially available in the United States. Compared with its petrol-engined LX sibling, the GX has significantly lower power, has similar fuel economy, and has a sticker price that is $7,000 higher. But it is cheaper to refuel. The GX is also squeaky clean, having the least polluting internal-combustion engine in production anywhere. In California, it has the enviable right—like electric vehicles and certain hybrids—to use the car-pool lanes with only the driver aboard.
CNG cars have other drawbacks that similarly plague electric vehicles—including range anxiety. Refuelling stations are few and far between. At the last count, America had little over 1,000 natural-gas stations compared with 120,000 petrol stations. Honda sells a home-refuelling appliance called Phill, which uses the domestic gas supply to recharge the GX’s pressurised tank (equivalent to an eight-gallon petrol tank) in 16 hours, to give a typical range of around 200 miles (320km).
Lorries and buses are a much better proposition. Operating on fixed duty cycles and returning to base at the end of the working day, buses, delivery vans and waste-collection vehicles are ideal candidates for CNG. Indeed, the vast majority of America’s fleet of 114,000 CNG vehicles are buses and other municipal vehicles.
With diesel even more expensive than petrol, trucking companies have started converting their long-haul fleets to run on CNG. mins, a maker of heavy-duty engines, is doing good business with its new natural-gas engine as lorry owners re-equip their fleets to comply with new EPA regulations, starting in 2014, for lower carbon-dioxide emissions.
But none of that is going to happen overnight. Nor will it come anywhere close to mopping up America’s excess supply of natural gas. What will, though, are developments afoot in the process and power-generation industries. In both, the switch to cheap shale gas is underway—and represents nothing less than a renaissance in American manufacturing. A typical case is Dow Chemical, which had planned to build a new petrochemicals plant in the Middle East, but is now constructing it in America instead, to take advantage of the low cost of natural gas.
In fact, cheap shale gas is giving American chemical companies a compe ive edge over foreign rivals. That is because domestic processors use ethane, a natural-gas liquid derived from shale gas, as a feedstock for various chemical products. Foreign compe ors rely on naphtha, a more expensive oil-based feedstock. The American Chemistry Council, a trade association, calls shale gas a “game changer” that is rejuvenating industry and bringing jobs back home.
That is all to the good. But your correspondent is convinced that the one thing that will do more than anything else to revitalise America will be to hasten the on-going switch from coal to natural gas for generating electricity.
Right now it costs twice as much to make electricity from dirty coal as it does from clean natural gas—ie, 12 cents or more per kilowatt-hour versus six cents. Yet, coal still accounts for 45% of power generation, compared with 24% from natural gas (plus 20% from nuclear, 6% from hydro, 4% from renewables and 1% from oil). Retire 30% of today’s coal-fired capacity and replace it with shale, and the savings would be enough to peg electricity prices for a decade, or even lower them.
This is no pipe dream. By April 2015, power stations throughout the United States will have to meet stringent new requirements for the amount of mercury they can emit. As a result, some 250 coal-fired plants built in the 1950s and later will have to be retired. Replacing them with clean natural-gas capacity will create demand for billions of cubic feet of shale gas. Even though gas prices will most assuredly rise, the savings for the country over the next 30 years—in environmental as well as economic terms—will be enormous.
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http://www.economist.com/blogs/babba...05/natural-gas
Short term:
Those drilling jobs are about to vanish.
One can expect, in the short term, a rise in unemployment as the jobs in making new wells are cutback sharply, especially given that the wells are more productive than previously thought. They will not need to be replaced as fast.
The other effect will be to push jobs as noted above, to vehicles and power plant construction to take advantage of this.
The chemical facility will be the first of a wave of things.
You will see aluminum plants being converted from coal to gas.
Sucks to be a coal company in the US. We will start exporting it as demand shifts, and that will logically go to China.
LNG (liquid natural gas) terminals being built, will also pump up our exports, although deveoping the global supply/demand networks will take a bit of time.
All in all, seems good for the US in the long term.
Oddly enough, this will come at a considerable detriment to renewable electricity forms, which have been approaching the cost of natgas and even gotten cheaper.
Either way, we are about to see a shift away from coal for power, in a big way.
Looks like the public transportation system will be buying more natural gas fueled buses in the future. I believe TriMet here in Portland has been going exclusively to natural gas on all current and future purchases already. I don't know that as fact though.
Just because supply is higher than current demand, it doesn't mean we can move the automotive base to it. I'll bet that would shift the dynamics back to less supply than demand.
If we could only get China to either burn coal with the latest clean technology, or convert as well, we might eliminate AGW.
That will take awhile. , I hear they are just flaring off natural gas byproducts on "wet" wells at the wellhead down here in the eagleford shale instead of bothering to transport it and they have shut down drilling completely in the dry part.
Shale Gas Hype: Subprime 2.0?
At the same time, scientists began to conclude that America’s reserves of natural gas have been overhyped. In January, the Energy Department cut its estimate of the amount of gas available in the Marcellus Shale by nearly 70 percent, and a group affiliated with the Colorado School of Mines warns that there may be only 23 years’ worth of economically recoverable gas left nationwide. Even worse, new studies suggest that because of fugitive emissions of methane from wellheads and pipelines, natural gas may actually be no better than coal when it comes to global warming.
In 2001, the U.S. natural gas decline rate was about 23% and the annual replacement requirement was 12 Bcf/d when total consumption was 54 Bcf/d. Today, the decline rate is estimated to be 32% and increased consumption of gas means that approximately 22 Bcf/d must be replaced each year.
The shale revolution did not begin because producing oil and gas from shale was a good idea but because more attractive opportunities were largely exhausted. Initial production rates from shale are high but expensive drilling and completion costs make economics challenging…
Shale plays have produced a land grab business model in which hundreds of thousands of acres are acquired by each company. Unprecedented lease costs have become the norm often based on limited information and science.
Operators have indulged in over-drilling these plays for many reasons but adding reserves, holding leases and company growth are among the main factors particularly with the low cost of capital. The inevitable result has been the collapse of prices as supply exceeded demand. Most analysts forecast that the future will be much like the present, and that natural gas will be abundant and cheap for decades to come. There are, however, strong and consistent indicators that natural gas supply may be less certain than most observers believe and require a higher price to be developed economically. Natural gas demand is growing as fuel switching for electric power generation continues, and will be increased by environmental regulation in the coming years. The U.S. will shift more of its future energy needs to natural gas in many sectors of the economy. The best justification, in fact, for the land grab and over-drilling spree is expectation of higher prices. Those companies that grabbed the land and held it by production will profit greatly once the true supply and cost of shale gas is recognized.
n March, Wolf Richter also explained why the super low shale gas prices ($2.28/MMBtu) were not a sign of a great new energy source, but lack of producer discipline:
Natural gas is dirt cheap, hovering at a 10-year low. In the US, that is. In other parts of the world, natural gas is four, five times more expensive—a rare discrepancy in a globalized economy…
But there is a problem: price. Natural gas is too cheap…drilling activity is collapsing. In 2008, the peak of the drilling bubble, there were at one point over 1,600 rigs drilling for natural gas in the US. During the financial crisis, the rig count fell off a cliff, then recovered a bit, but now is in free fall again. Last year at this time, there were 882 rigs drilling for gas. Two weeks ago, the count was down to 691. Last week it was down to 670 rigs (Baker Hughes).
Fracking has turned into a massacre for producers…at current prices, drilling activity will continue to shrink while production at wells drilled over the last two years is plunging. At some point, the massive amount of gas in storage will be drawn down below a normal level. But production can’t be cranked up from one week to the next. Perceived or real shortages will drive up the price, but not to an equilibrium where producers barely break even and consumers enjoy low-cost energy. It will be a e. We’ve been through this before.
http://www.nakedcapitalism.com/2012/...=Google+Reader
Maybe an energy bubble is next?
I don't know which bubble is next, but the financial sector s bags either know or are looking hard how to inflate the next one.
food/fuel bubble
lenders are again shipping out Ms, Bs, of cc offers, now with no interest and no fees first year, to suck people into debt. aka, household/personal debt bubble deja vue.
Commercial real estate bubble.
^^^^^^^This^^^^^^^
have u guys noticed todays gas prices is the same as petrol prices a decade ago, slowly increasing each fkn quarter...
Media Goes Silent as Gas Prices Fall After Obama Crack Down On Oil Speculation
http://www.politicususa.com/obama-gas-prices-fall.html
Les Leopold: How Wall Street Drives Up Gas Prices
http://www.nakedcapitalism.com/2012/...as-prices.html
A Sharp Drop In Gas Prices
http://247wallst.com/2012/05/07/a-sh...=Google+Reader
...
I'm surprised that hasn't happened by now.
I'm getting my real estate license by the end of summer. It's going to be a good 2013 I tell ya. God bless
It's my understanding that it's really supposed to "pop" in 2013 because that is when all the loans balloon and everyone defaults.........should be really fun.
Not that silent.
lol
link to the right-wing hate media and Fox Repug Propaganda network talking about falling gas prices? They were the ones blaming the gas prices on BHO
...and you were one of them saying that the President has nothing to do with gas prices.
Now you agree with Fox News that a President can make gas prices come down?
I'm confused...
http://www.foxbusiness.com/markets/2...e-uncertainty/
Right there on the front page of the website.
Someone quote me on that, boutons has me on ignore cause I hurt his feelings in 2006.
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