Tuesday, May 08, 2012

Tuesday Night Energy Links


1. Mark Green at the Energy Tomorrow blog points to the video above about the resurgence of jobs, hope and opportunity that has come recently to the Ohio steeltown of Lorain, thanks to the shale/hydraulic fracturing revolution. 

2. The shale "gold rush-like" revolution is spreading prosperity all over the country and bringing jobs and production to other states like Pennsylvania and Texas, based on this report from Plastics News:

"The [shale] discoveries have prompted several firms — including Dow Chemical Co. and Shell Oil — to announce plans to build new North American ethylene crackers, with Shell making the almost-unheard-of decision to place its new cracker in western Pennsylvania, near the gas-rich Marcellus Shale. Other companies, including Chevron Phillips Chemical and Formosa Plastics, have announced plans to increase their North American polyethylene output as a result of the shale gas wave.

It’s like the gold rush,” Dow executive Mauro Gregorio said of the shale boom. “The discovery of shale gas is one of the most important events in the U.S. in a long time.  It will be a winner for North America as a region,” added Gregorio, commercial vice president for Dow’s Performance Plastics unit in North America. 

Dow officials confirmed April 19 that their new ethylene cracker will be built at the company’s massive site in Freeport, Texas. The cracker is expected to open in 2017 and will have annual production of 3.3 billion pounds.

Shale discoveries “have given North America really inexpensive access to raw materials,” said PolyOne Chairman, President and CEO Stephen Newlin. “It’s made us more competitive."

3. And of course North Dakota leads the country in shale-related prosperity, with the lowest state jobless rate at 3% for March, and the highest growth in state per-capita personal income since 2000 at 78.7%, more than twice the national average of 37.4%.  An IBD editorial suggests that North Dakota's oil boom should inspire our federal energy policy, and they ask us to "Imagine the impact at the national level if Washington stopped blocking energy development."

8 Comments:

At 5/08/2012 10:22 PM, Blogger Benjamin said...

4/26/12

Dow Chemical Co. (DOW) Chief Executive Officer Andrew Liveris said it would be “smart” for the U.S. to limit natural-gas exports to 10 percent of output because expansion plans in his industry are rooted in low gas prices.

5/3/12

PARIS (Dow Jones)--The U.S. government is likely to impose limits on exports of liquefied natural gas in order to keep its domestic natural gas prices low, said executives from two major oil companies with operations in the country Thursday.

--30--

And ethanol use is mandated, at 10 percent of gasoline consumption---but why, when we have so much natural gas, that can be converted into methanol?

Right now, Methanex sells methanol at $1.38 a gallon.

In other words, our energy policy is what large energy producers and large consumers want it to be---not what might emerge in a free market.

You now, a free market, the kind you get when you do not simultaneously subsidize corn production, and then mandate its use.

 
At 5/09/2012 12:07 AM, Blogger Rufus II said...

A lot of people are going to feel silly, and scared, when Feb rolls around and nat gas is bumping against MOL (minimum operating level.)

 
At 5/09/2012 8:14 AM, Blogger VangelV said...

1. Mark Green at the Energy Tomorrow blog points to the video above about the resurgence of jobs, hope and opportunity that has come recently to the Ohio steeltown of Lorain, thanks to the shale/hydraulic fracturing revolution.

This shows that many jobs are dependent on shale production. The problem is that those jobs will be gone if the production is not economic. And anyone who has been looking at the 10-K filings or paid attention to what was said at the conference calls knows that the shale industry has not been very profitable once proper EURs are used to depreciate the drilling costs.

2. The shale "gold rush-like" revolution is spreading prosperity all over the country and bringing jobs and production to other states like Pennsylvania and Texas, based on this report from Plastics News:

"The [shale] discoveries have prompted several firms — including Dow Chemical Co. and Shell Oil — to announce plans to build new North American ethylene crackers, with Shell making the almost-unheard-of decision to place its new cracker in western Pennsylvania, near the gas-rich Marcellus Shale. Other companies, including Chevron Phillips Chemical and Formosa Plastics, have announced plans to increase their North American polyethylene output as a result of the shale gas wave.


These projects require long term contracts that guarantee their economics. Can anyone find any evidence of such contracts being negotiated or signed? If you can't all you have is empty narrative.

3. And of course North Dakota leads the country in shale-related prosperity, with the lowest state jobless rate at 3% for March, and the highest growth in state per-capita personal income since 2000 at 78.7%, more than twice the national average of 37.4%. An IBD editorial suggests that North Dakota's oil boom should inspire our federal energy policy, and they ask us to "Imagine the impact at the national level if Washington stopped blocking energy development."

As I pointed out before, look at the Elm Coulee field that many posters were hyping on this board when they were looking to Montana's growing production. Now that the trend has reversed they are very quiet. Will all of you naive fools shut up when the Bakken does the same in a year or two? Or when the SEC starts to charge industry executives with fraud?

By the way, when they do, do not blame any of the executives. Their filings and conference calls made very clear the trouble that their companies were in. The fact that greedy fools failed to pay attention is not a reason for convictions.

 
At 5/09/2012 8:56 AM, Blogger Junkyard_hawg1985 said...

Following the Panic of 1893, the U.S. economy was lifted out of depression by the Yukon gold rush. Likewise, following the Panic of 2008, the U.S. economy s being lifted by the energy boom.

 
At 5/09/2012 9:42 AM, Blogger VangelV said...


Following the Panic of 1893, the U.S. economy was lifted out of depression by the Yukon gold rush. Likewise, following the Panic of 2008, the U.S. economy s being lifted by the energy boom.


The Yukon had gold. And that gold was economic to extract. While there is shale gas you can't make money getting it out of the ground. That is a huge difference.

 
At 5/10/2012 12:35 PM, Blogger ranger275 said...

VangelV,
Here is a link to an article in the Energy Tribune which agrees with you about the price will have to increase but seems to think it will stabilize with an advantage over oil. I would like to know what you think about it.
http://www.energytribune.com/articles.cfm/10495/US-Natural-Gas-Price-Nears-$10-per-Barrel-Equivalence

 
At 5/10/2012 5:13 PM, Blogger VangelV said...

Here is a link to an article in the Energy Tribune which agrees with you about the price will have to increase but seems to think it will stabilize with an advantage over oil. I would like to know what you think about it.
http://www.energytribune.com/articles.cfm/10495/US-Natural-Gas-Price-Nears-$10-per-Barrel-Equivalence


I have a few observations.

First, the conversion ratios should be examined further because of SEC rules that allow companies to book reserves based on energy content. It makes sense to buy a gas company that will produce nothing but losses if the purchase will allow management to hide their reserve problems.

Second, shale gas production cannot survive $5-$6 prices for very long because the total cost is higher than that.

Third, the observation that there is not enough gas to make all of the claimed investments possible is important. But I would argue that there isn't ANY supply of cheap gas any longer so the malinvestment problem will be much larger than even many of the pessimists believe.

 
At 5/14/2012 6:46 PM, Blogger james said...

Maybe theirs a future for steel companies in the united states after all.

 

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