Wednesday, October 14, 2009

The Natural Gas Energy Solution

There's big news coming out of the natural gas sector, but because it doesn't dovetail completely with the way "greens" want to intervene in the energy sector, mainstream media is quite silent.

Today, in Washington D.C, at the National Press Club, I attended a presentation by Natural Gas Supply Association chairman Patrick Kuntz who outlined the NGSA outlook for this coming winter. And although NGSA does not seen any dramatic moves in supply and demand factors for the current winter, what was dramatic in the presentation is news that of the changes in long range projections for the supply of natural gas.

New developments in technologies, particularly shale gas sustained production technologies, have sent long term estimates of natural gas supplies soaring. While new capacity between 2007-2011 will result in 15,000 MWs of coal produced electricity, new capacity for natural gas produced electricity will be 52,500 MWs.

The same type news came out of the The World Gas Conference in Buenos Aires last week. Ambrose Evans-Pritchard reported from the conference:

Advances in technology for extracting gas from shale and methane beds have quickened dramatically, altering the global balance of energy faster than almost anybody expected.

Tony Hayward, BP's chief executive, said proven natural gas reserves around the world have risen to 1.2 trillion barrels of oil equivalent, enough for 60 years' supply – and rising fast.

"There has been a revolution in the gas fields of North America. Reserve estimates are rising sharply as technology unlocks unconventional resources," he said.

This is almost unknown to the public, despite the efforts of Nick Grealy at "No Hot Air" who has been arguing for some time that Britain's shale reserves could replace declining North Sea output.

Rune Bjornson from Norway's StatoilHydro said exploitable reserves are much greater than supposed just three years ago and may meet global gas needs for generations.

"The common wisdom was that unconventional gas was too difficult, too expensive and too demanding," he said, according to Petroleum Economist. "This has changed. If we ever doubted that gas was the fuel of the future – in many ways there's the answer."

The breakthrough has been to combine 3-D seismic imaging with new technologies to free "tight gas" by smashing rocks, known as hydro-fracturing or "fracking" in the trade...

As for the US, we may soon be looking at an era when gas, wind and solar power, combined with a smarter grid and a switch to electric cars returns the country to near energy self-sufficiency.

This has currency implications. If you strip out the energy deficit, America's vaulting savings rate may soon bring the current account back into surplus – and that is going to come at somebody else's expense, chiefly Japan, Germany and, up to a point, China.
Back in D.C., Kuntz, who is also vice-president of Natural Gas and Crude Sales at Marathon Oil, confessed that just a few years ago he was thinking about peak gas.

One key lesson here, is that like in healthcare, fear mongers who want to manipulate the economy base their projections on current supplies and technologies, while they let demand projections run wild. They always miss the point that the world is constantly changing with new technologies and developments. Government intervention simply starts by freezing the status quo and suffocating the potential technology advances.

The answer for all these fear mongers is to chill. If supplies stay the way they are, in any given product, the price mechanism will take care of rationing, but, more likely, higher prices will result in additional intensity of focus that will bring about new technologies. Government planning simply kills this.

The developments in the natural gas arena appear to be very exciting and need to be watched very closely. As Evans-Pritchard points out, the potential ramifications are broad ranging, and on a long-term basis could even have currency market implications.

I need to study this area more closely to jump completely on the natural gas bandwagon to the degree Evans-Pritchard has, but something very significant may be here.

1 comment:

  1. Drillers in West Texas are doing lots of fracking. It's freeing up crude and gas, the very junk they used to burn off.