Tuesday, October 20, 2009

Natural Gas Changes the Energy Map; New Data Show 90 Years Supply at Current Consumption

Experts now believe that the country has far more natural gas at its disposal than anyone thought three or four years ago. The revised estimates are largely due to advanced drilling techniques that make it economically feasible to extract the fuel from shale. And while the Marcellus is the most recently discovered and possibly the largest shale-gas deposit (covers PA, NY, VA and OH), others are scattered throughout the country.

The U.S. consumes about 23 trillion cubic feet (TCF) of natural gas a year, according to the Department of Energy's Energy Information Agency (EIA). The Potential Gas Committee (PGC), an organization headquartered at the Colorado School of Mines, put the country's potential natural-gas resources at 1,836 TCF in a biennial assessment released in June. That's 39% higher than its estimate of two years earlier. Add to that the 238 TCF that the EIA has calculated in "proved reserves" (the gas that can be produced given existing economic conditions) and the PGC pegs the future supply at 2,074 TCF.

In other words, there is enough natural gas to supply the country for 90 years at current consumption rates. Even if we used natural gas to totally replace coal in generating electricity, domestic supplies would last for 50 years.

Natural gas offers advantages over other fossil fuels. It burns cleaner than coal, producing much less carbon dioxide. Since coal-fired power generation is responsible for a third of U.S. carbon dioxide emissions, replacing at least some of that coal with gas could significantly reduce such pollution. And using natural gas to replace gasoline and diesel fuel in vehicles could reduce the country's reliance on foreign oil.

"It doesn't matter what the exact number is," says Mark Zoback, a professor of geophysics at Stanford University. "The numbers are all so big it means we have an extremely large domestic resource that is going to play a significant role in the country's energy future."

The availability of vast natural-gas resources in the Marcellus shale and similar sediments around the United States has changed energy calculations in a fundamental way. The discovery of this large and seemingly economical new source of fossil fuel has surprised even geologists who have spent their careers studying the shale. Little wonder, then, that policy makers and politicians are just beginning to try to figure out what the discoveries mean.

MIT Technology Review via Paul Kedrosky

Watch a video here that illustrates how advanced horizontal drilling allows gas producers to follow a shale deposit for up to a mile, greatly increasing the productivity of the well.


At 10/20/2009 1:43 PM, Anonymous Benny The Real Man said...

It is very feasible to convert vehicles to run on compressed natural gas, and thanks to gas boys in Penn. and LA, we have gobs of the stuff.
Improved lithium batteries are coming to market soon.
Oddly enough, the oil industry may be in real trouble--who will want oil in 20 years?
OPEC has employed a strange business model: Threaten your customers with high and erratic prices, and unreliable supplies, and toss in a stab or two at blackmail (remember the Oil Embargo?).
Bush loved the Saudis, but I think that era is passing as a part of American foreign policy, and OPEC's influence will wane continuously (though they do finance a global system of terror schools).
With natural gas, and lithium batteries, energy independence is not only doable, it is downright desirable.
There is ever less need for the bloated, parasitic military we have, and these chronic foreign entanglements--the same sort of entanglements our founding fathers warned against.
We can direct hundreds of billions in savings into the domestic economy and energy production. Let free markets rule!
We have a better, more prosperous future for America ahead.

At 10/20/2009 2:57 PM, Anonymous Anonymous said...

Watch for the natural gas industry to promote CO2 reduction. Will create conflicts in the oil industry.

At 10/20/2009 3:01 PM, Blogger QT said...


Isn't it likely that OPEC will do exactly what it did the last time around? ie. drop oil prices to below the cost of alternatives to eliminate the competition.

The Saudis weren't born yesterday.

At 10/20/2009 3:13 PM, Anonymous Benny The Real Man said...


A fascinating question.

I suspect there is so much boobery, corruption, incompetence and autocracy in the thug states that make up the oil-exporting world, that they will lose their markets.

Nigeria, Libya, Russia, Iran, Iraq, KSA, Venezuela, Mexico--hopeless fools all.

In addition to having inherently weak cultures to begin with (commercially speaking), all of these countries have been "ruined" by easy oil money, and the laziness and decadence that breeds.
You have whole societies that want government to take care of them, that want subsidies or to wear a uniform and draw a paycheck, or win some patronage etc. Especially in the ruling classes.

Imagine a whole nation made up of subsidy-needy farmers or military men on the federal payroll. I have just described a typical oil thug state--except substitute oil for farms.

My point? The oil-thug states will not be able to provide a steady supply of oil at good prices, and the market will pass them by.

The price mechanism is a wondrous thing.

At 10/20/2009 4:08 PM, Blogger juandos said...

"It is very feasible to convert vehicles to run on compressed natural gas"...

Can be problematic cold weather environments if what I see at the airport in St. Louis, Mo is any indication...

None the less natural gas has a lot going for it: Compressed Natural Gas as an Alternative

"Improved lithium batteries are coming to market soon"...

Personally I can't wait for these kinds of sources but they do have some serious drawbacks today...

At 10/20/2009 4:22 PM, Anonymous Anonymous said...

Wait till the government starts regulating it...Then there will be mass shortages....

At 10/20/2009 5:34 PM, Blogger Paul said...

What an awesome video. As I was watching it I recalled Hillary's interview last year with O'Reilly where she was justifying her plans to seize oil company profits. "..They're not inventing anything new", proclaimed Mrs. Clinton.

At 10/20/2009 7:37 PM, Blogger OA said...

The sheer volume of oil usage means it'll be in use for a long time. Converting infrastructure over to natural gas isn't free so would take decades even if natural gas stays relatively cheap.

But at some point the relative prices of oil and natural gas would start evening out. Oil dropping and natural gas rising. Sure OPEC will make less money, but they still have the lowest per barrel production costs so they'll be the survivors. The early adopters will get a nice differential in price between natural gas and gasoline, but after a while, it'll be closer.

Plus oil is used for stuff like lubrication and making plastics that I don't think natural gas can match.

And lastly, the US Government, mainly the military, is the largest consumer of either oil or refined petroleum products in the world. I doubt tanks, aircraft, ships, and even many routine transport vehicles are going to be converted over. Natural gas just doesn't get you the same range and performance, which is way more vital for them than commuters.

At 10/20/2009 8:10 PM, Anonymous gettingrational said...

Natural Gas is great for heating human indoor space and hot water as well as for delivery vehicles.

Benny, your founding fathers argument of avoiding foreign entanglements needs some enlightenment. James Madison, Thomas Jefferson and John Adams all dealt with Islamic factions in the Mediteranean demanding tribute -- and so it has been for over 200 years.

At 10/20/2009 8:55 PM, Blogger juandos said...

"Benny, your founding fathers argument of avoiding foreign entanglements needs some enlightenment"...

pseudo Benny won't read the Constitution, I can't imagine him reading something from City Journal...

At 10/20/2009 9:12 PM, Anonymous Anonymous said...

To answer the comment about regulation we had it in natural gas from the 1950's to the 1980's. This lead to the crisis of the Carter years.
Actually gas is a good way to reduce co2 emissions both because its a less carbon intensive fuel and because new gas turbines are 60%+ efficient. Also gas plants are quick start as well (10 mins). So a gas plant makes an ideal backup for wind, as it can track the changes in the wind. (The Texas Grid has nearly 9gw on line, with 60 gw in permits in the queue).Also gas turbine plants are cheap enough that they can run part time and still make money.

At 10/20/2009 9:53 PM, Anonymous Steve said...

The amount of shale in the new England area is quite amazing.

At 10/20/2009 11:07 PM, Blogger BMWright said...

QT said, "Isn't it likely that OPEC will do exactly what it did the last time around? ie. drop oil prices to below the cost of alternatives to eliminate the competition."

No worries young lady, The Saudis weren't born yesterday.

Only a fool would lower the price oil to under their cost of production around $18 when they can charge $78 a barrel in a recession. The notion that they wanted to force the price of oil in 1998 to ultra low levels is false.

The Saudis are not forcing us to buy their oil....the point is what have we done over the last 35 years to get off oil? We've known about these NG supplies for three years and we've done nothing to convert more coal Electric Util. to NG. We've known about shale oil 100 year supplies since the 70's. We've powered our Navy Subs and Carriers on Nuke-power since the 60's but we've not built one new Nuke Power Plant.

At 10/21/2009 11:34 AM, Anonymous Benny The Truth Man said...

I don;t know if anyone is reading anymore, but our Founding Fathers detrested foreign entanglement and stranding armies.

A bit of Thomas jefferson here:

"There are instruments so dangerous to the rights of the nation and which place them so totally at the mercy of their governors that those governors, whether legislative or executive, should be restrained from keeping such instruments on foot but in well-defined cases. Such an instrument is a standing army." --Thomas Jefferson to David Humphreys, 1789. ME 7:323

"I do not like [in the new Federal Constitution] the omission of a Bill of Rights providing clearly and without the aid of sophisms for... protection against standing armies." --Thomas Jefferson to James Madison, 1787. ME 6:387

"Nor is it conceived needful or safe that a standing army should be kept up in time of peace for [defense against invasion]." --Thomas Jefferson: 1st Annual Message, 1801. ME 3:334

"Standing armies [are] inconsistent with [a people's] freedom and subversive of their quiet." --Thomas Jefferson: Reply to Lord North's Proposition, 1775. Papers 1:231

"The spirit of this country is totally adverse to a large military force." --Thomas Jefferson to Chandler Price, 1807. ME 11:160

"A distinction between the civil and military [is one] which it would be for the good of the whole to obliterate as soon as possible." --Thomas Jefferson: Answers to de Meusnier Questions, 1786. ME 17:90

"It is nonsense to talk of regulars. They are not to be had among a people so easy and happy at home as ours. We might as well rely on calling down an army of angels from heaven." --Thomas Jefferson to James Monroe, 1814. ME 14:207

"There shall be no standing army but in time of actual war." --Thomas Jefferson: Draft Virginia Constitution, 1776. Papers 1:363

"The Greeks and Romans had no standing armies, yet they defended themselves. The Greeks by their laws, and the Romans by the spirit of their people, took care to put into the hands of their rulers no such engine of oppression as a standing army. Their system was to make every man a soldier and oblige him to repair to the standard of his country whenever that was reared. This made them invincible; and the same remedy will make us so." --Thomas Jefferson to Thomas Cooper, 1814. ME 14:184

"Bonaparte... transferred the destinies of the republic from the civil to the military arm. Some will use this as a lesson against the practicability of republican government. I read it as a lesson against the danger of standing armies." --Thomas Jefferson to Samuel Adams, 1800. ME 10:154

At 10/21/2009 4:01 PM, Blogger ExtremeHobo said...

this isnt alarmist enough for me. I thought we were going to run out of all fuels in the next decade and had to switch to corn power?

At 10/22/2009 7:21 AM, Anonymous Anonymous said...

Benny, the local natural gas utility had all it's service pickup trucks and a number of it's company cars running on compressed natural gas in the 60's and 70's. (South Louisiana.) All large number of farmers had tractors & pickups running on LPG/Butane during the same time period.

The drawbacks are the same for natural gas as butane/propane,LPG:

The tanks are big and heavy. You get a noticeable decrease in power and mileage. The power loss can be somewhat offset if the engine is setup for natural gas from the get go. Mileage will always be less. Fill ups are a bitch. High pressure hose is heavy and nowhere near as flexible as a gasoline hose. High pressure fitting are a hassle to mate tank and hose. And today's environmentalists would never let up vent vapor as you fill your tank, thus necessitating a smaller return vapor line. None of this is necessarily a deal killer but it all makes the handling of natural gas more troublesome.

At 10/23/2009 6:24 PM, Blogger VangelV said...

It is a nice video but if anyone is paying attention some issues stand out.

First, the implication that aquifers are safe just because some concrete was pumped out to secure the casing and prevent contamination may be wishful thinking. While there is little chance of contamination at that particular point there may be fractures that will allow some of the chemicals and muds used during the frac process to migrate to the aquifers.

Second, shale gas production is very expensive and has a relatively low return on energy invested when compared to conventional production. As shale gas becomes a bigger portion of total production, the energy cost of that production increases substantially and less is available to the final consumer.

Third, because the shale is tight the frac process will not permit much of the gas to be recovered unless the expensive frac process is repeated several times. Then there is the issue of pressures causing the pathways to close. That requires the pumping of glass, ceramic, or sand beads to be used during the frac process. These add to the cost and energy investments.

Fourth, the depletion rates from such wells are very large. Operators would be lucky to have 20% of the original production level by the time the first year is over. While additional fracturing could increase production again, the extremely low density of shale formations and tight formations require that many expensive horizontal wells are drilled off.

All this means that natural gas will be expensive once the conventional reservoirs run down. That means that low margins for high cost shale wells would cause producers to be weary of creating temporary supply gluts that create losses for the producers. So unless there is even better technology that can increase the energy return on the energy invested we are likely to have trouble with supplies well into the future, no matter what the USGS says can be ultimately recovered under the right price conditions.


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