Monday, May 10, 2010

Natural Gas: The Game-Changing Resource That Will Revolutionize the Industry and Change the World

"Over the past decade, a wave of drilling around the world has uncovered giant supplies of natural gas in shale rock. By some estimates, there's 1,000 trillion cubic feet recoverable in North America alone—enough to supply the nation's natural-gas needs for the next 45 years. Europe may have nearly 200 trillion cubic feet of its own.

We've always known the potential of shale; we just didn't have the technology to get to it at a low enough cost. Now new techniques have driven down the price tag—and set the stage for shale gas to become what will be the game-changing resource of the decade.

I have been studying the energy markets for 30 years, and I am convinced that shale gas will revolutionize the industry—and change the world—in the coming decades. It will prevent the rise of any new cartels. It will alter geopolitics. And it will slow the transition to renewable energy."

Read more here of the WSJ article "How Shale Gas Is Going to Rock the World."


15 Comments:

At 5/10/2010 9:30 PM, Anonymous Anonymous said...

In Virginia there is a 20 yhear old law that requires land owners to sell their gas rights at a fixed price.

Thats one way to revolutionize industry.

 
At 5/10/2010 11:44 PM, Anonymous Anonymous said...

The EPA now has the power to say no to all that natural gas. Even if the EPA gives the go ahead, government and their cap and tax friends are going to want a lot of cash from the companies that would drill.

 
At 5/11/2010 6:17 AM, Anonymous Anonymous said...

Thanks for the article! This could move the HVAC field I teach in away from geothermal and solar energy! Well, we still have the green awareness initiative with huge federal funding outlays to fall back on.

 
At 5/11/2010 6:41 AM, Anonymous Anonymous said...

Old Barack Obama:

"So if somebody wants to build a coal-powered plant, they can. ... It's just that it will bankrupt them"

New Barack Obama:

"So if somebody wants to build a gas-powered plant, they can. ... It's just that it will bankrupt them"

 
At 5/11/2010 8:17 AM, Anonymous Eric H said...

"It will prevent the rise of any new cartels."

Now that's funny.

Walt, you still have to air condition. Maybe natural gas engine-driven chillers will become the rage - gov't incentives to install high-end, 4-pipe systems.

I think the DX variable refrigerant flow systems and digital scroll compressors are about to supplant closed-loop geothermal in terms of life cycle cost.

 
At 5/11/2010 8:22 AM, Anonymous morganovich said...

shale gas is going to be a very big deal. it will take a while to adapt to a more NG centered economy, but if the price is right, it will come.

here's another technology worth watching. it's likely 10 years from commercialization, but the fact that it's a self assembling nano structure would mean it could be VERY easy to mass produce. if we can used doped viruses to replicate photosynthesis and split hydrogen from water using solar power, that could be the basis for a great deal of very clean power.

early days still, but a very interesting and fundamentally sound approach.

http://web.mit.edu/newsoffice/2010/belcher-water-0412.html

 
At 5/11/2010 11:16 AM, Blogger juandos said...

Personally I love Ms. Jaffe's article in the WSJ BUT what about the ATTATCK OF THE CONGRESSIONAL GREEN-TARDS?

 
At 5/11/2010 11:25 AM, Anonymous Anonymous said...

Walt. I've had a geothermal HVAC for 15 years. Works great.

I'm surprisd it is still relatively unknown.

My biggest headache was getting the county to let me put it in.

 
At 5/11/2010 11:27 AM, Anonymous Anonymous said...

Walt, you still have to air condition.

Not really, my rental property has the geothermal heat pump, but my home has no AC except High ceilings, big windows and lots of trees.

 
At 5/11/2010 11:53 AM, Blogger Benjamin Cole said...

Shale gas is huge, and will only get bigger: As Jaffe pointed out, inevitably reserve estimates go up, as better technology and knowledge improves ability to extract fossil fuels.

Here is another game-changer for you, not mentioned by Jaffe: Methanol (a liquid fuel) is made from natural gas, and sells for about $1 a gallon (check out Methanex website).

Methanol is what Indy 500 cars used to run on, before ethanol and the all-powerful ethanol lobby.

The ethanol lobby may strangle the methanol baby in the crib, and beating farmers is impossible--they own the Republican Party, that confederacy of feckless pygmies.

But a fascinating and bright future may be ahead--if we can dump ethanol, and embrace methanol.

 
At 5/11/2010 2:15 PM, Blogger Paul said...

Benji,

"The ethanol lobby may strangle the methanol baby in the crib, and beating farmers is impossible--they own the Republican Party, that confederacy of feckless pygmies."

It will be even tougher to beat ethanol because Obama, who you voted for, is in deep with Big Ag, even flew around on ADM private jets during the '08 campaign. He fought alongside fellow ag state Democrats to keep the Brazil ethanol tarriff Bush wanted to repeal. McCain had a long history of being anti-ethanol but people like you decided to vote for the cool guy.

 
At 5/11/2010 3:29 PM, Anonymous Benny The Man said...

Paul-

I held my nose and voted.

Let's see: Two open-ended wars in crap-hole countries, a collapsed financial system, supertankers of federal red ink and a recession turning into a Depression.
That is what Bush and the R-Party brought to us. In eight years. After the 1990s, one of the best decades ever, when we ran federal surpluses.

I ain't happy with Obama. It was a Hobson's choice.

Whaddya say to Palin-Bachman in 2012? Would you vote for that ticket?

 
At 5/11/2010 6:43 PM, Blogger Paul said...

"..ain't happy with Obama. It was a Hobson's choice."

Oh, bullshit. Citizens Against Government Waste ranked Senator Obama with an 18% career rating. As of 2008, McCain had a career rating of 88%, not perfect, but a "good, solid B+" to paraphrase your boyfriend, and a huge leap from Obama's. Joe Biden, whom you apparently never thought twice about because you were too busy looking down your nose at Sarah Palin, actually scored a zero in 2007. His lifetime is a tad better than Obama's at 22%, but that's still an F. The National Taxpayer's Union also shows huge disparities on par with CAGW's analysis, but I don't feel like looking them up. National Journal ranked Obama as the Senate's most liberal Senator in 2007.

You had to have known this if you were paying the slightest bit of attention. Instead, you bought into the cult and were swept away by the official candidate of People Magazine. I don't believe for a second that you "held your nose" based on the repeated nonsense you spew here.

As for foreign affairs, that's the blowback from our holiday from history in the '90's, when Bill Clinton was too busy painting the Republicans as heartless budget cutters. Meanwhile, Arabs were enrolling in flight schools across the United States.

"Whaddya say to Palin-Bachman in 2012? Would you vote for that ticket?"

Probably not my dream ticket, I'd for that duo in a second over your boyfriend and his idiot sidekick.

 
At 5/12/2010 9:08 AM, Blogger juandos said...

pseudo benny making it up as he goes along: "a collapsed financial system, supertankers of federal red ink and a recession turning into a Depression"...

Don't let the facts hit you in the ass on the way out the door pseudo benny...

 
At 5/14/2010 8:03 AM, Blogger VangelV said...

From everything that I have seen, shale gas is not a game changer but a scam. Yes, one can get natural gas out of shale but it is not economic to do so at anywhere near current price levels. In the absence of efforts to replace cheap conventional production, shale gas production becomes a big bottleneck and causes prices explode over the long term, particularly if there is any sign of real recovery in the real economy.

Let us begin with some of the problems with the claims.

First, many of the producers are claiming that their wells will keep producing for forty to fifty years while the data shows that twenty years would be an excellent result. When the life of a well is cut in half the economics change significantly.

Second, there is the depletion rate. While shale wells start off at high production rates pressure drops off sharply and after a year the production rate is a fraction of the original. An analysis of the Heynesville shale area indicated that projected annual decline rates ran to the 80−90% range. There is no way to justify shale production at such depletion rates unless prices are much higher and costs remain contained. But to get to the production rates being predicted costs can't remain contained because there are not enough drill rigs and crews to meet the projected demand. Bottom line is that the economics do not work.

Third, the energy density of shale means that drilling activity is much more limited than in conventional fields. Wells have to be drilled far apart from each other and require more infrastructure to support production. The cost of that infrastructure has to be paid off over the duration of the well's producing life, which means that it is possible for producers to game the numbers by assuming a much greater lifespan for their wells. Such manipulation of the cost numbers may be good for the short term price of the stocks but is not good for long term production or shareholder value. One has to wonder why Chesapeake would take the high risk of developing deep water fields if shale gas were such a promising area.

Forth is the geology. Shale is not some uniform perfect rock formation that is easy to develop. Thicknesses of the formations can vary and there are faults that can create great difficulty with the frac process. If the fractures get to the boundary where permeability is much greater the hydrocarbons can escape and will not be coming out of the well. The same is true if they reach fractures where the migration path is even larger. Eventually the hydrocarbons (along with the drilling muds and fluids) will make their way out of the shale and can impact groundwater quality. Such events would do far more economic harm than could be done even if the gas production were economic and the legal system will step in to stop production and take its pound of flesh.

The bottom line is that the media and academics are running behind the trend. They have not figured out that many of the early players are now running short of cash and cannot afford to work the shale angle at the low prices that natural gas is going for today. We have already seen Petrohawk Energy sell off its Haynesville pipeline assets and cut the number of rigs it is using in on the formation by around 20%. Given the low price of natural gas and the decline in share prices the smaller players in the area will be unable to generate sufficient cash to continue their drilling activities. That means that more and more of the areas will go in the hands of majors who have the discipline to wait for prices to recover by enough to make a decent return possible. Unfortunately for the optimists, that would mean that production levels will not increase as projected and that the US cannot depend on shale gas for a solution any more than it can depend on solar or wind power at this time.

 

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