No Hot Air Today

(c) 2009 F. Bruce Abel

This from No Hot Air, the most coherent blog on natural gas and coming from Great Britain:

No Hot Air
Pages
Can Shale Gas transform UK energy policy?
Contact Us
http://nohotair.typepad.co.uk/no_hot_air/coming-july-2009-wwwigasandelectriccom.html
About the Links to Switching Sites
Need an Energy Consultant? Maybe Not.
About No Hot Air
Recent Posts
Who's screwing who?
Why do we fear Russia on energy?
Why electric cars will impact your natural gas bill
Optimism v pessimism
Russia and Shale 2
Russia and Shale
He's a fan. Sort of.
ENI on gas prices
Talking about my (electricity) generation
Shale Gas in India
Categories
Books
Current Affairs
Design
Energy Prices
Energy Tech
Fixed Price Madness
Food and Drink
LED lighting
LNG
Next Big Things
Prices
Prices and Politics
Renewables
Science
Shale Gas
Smart Metering
Sports
Travel
Web/Tech
Archives
October 2009
September 2009
August 2009
July 2009
June 2009
May 2009
April 2009
March 2009
February 2009
January 2009
More...
About
Email Me
Subscribe to this blog's feed



Oct 26, 2009
Who's screwing who?
If you are a gas trader, then the view is far different from being a gas consumer:
Shale Is Really Screwing Natural Gas Investors
Production of natural gas from shale has been surprising both industry players and analysts on the upside, which clearly isn't helpful for natural gas prices either now or into 2010.
Whoa! When prices were over £1 a therm in summer 2008, was that helpful? For end-users now, or at least for those who have consistently followed our advice and only, and we mean ONLY, bought on day ahead prices, then things are looking better all the time:
Thus the era of ultra-cheap natural gas could be upon us, which would be bad news
Not so disastrous news for end users, and not so bad for the economy either. Everyone has to pay for energy, what is so bad when we all can pay less for it? Energy is simply a tax that isn't democratic: taxation without representation. If taxes were lower, markets would be ecstatic. Lower energy should be good news too. But not at some guys over the Barrel at Platts:
One recent example of just how jaw-dropping the US shale gas story has become came from big independent Newfield Exploration. Houston-based Newfield said in a conference call this week that its production from Oklahoma's Woodford Shale today is 308,000 Mcfe/d, versus about 240,000 Mcfe/d at June 30 -- up nearly 30% in less than four months. Moreover, the company has an inventory of 28 drilled but uncompleted Woodford wells waiting to be put online by early 2010, signalling the potential to boost production still higher.The astounding output jump prompted a comment from analysts at investment bank Wells Fargo, who in an October 22 report called Newfield's gushing Woodford production trend "disturbing." They noted the company's output had "reached recent highs despite (a drilling) slowdown and deferred completions."
But Newfield, and the Woodford field, are hardly the only purveyors of über-volumes of gas. Despite cutbacks in activity elsewhere, dozens of companies both large and small are drilling away at shale and other unconventional plays which they claim continue to offer towering economic rates of return. Their efforts have resulted in huge gas volumes flowing around the US and also recently in Canada. But with just a week left in the refill season, US gas storage bins are brimming over with the commodity. And current demand is not enough to use it all, which could continue the surplus into next year.
Put us with the happy end-users and the realist traders
While prices are now teetering at the $5/Mcf level, many industry observers look at storage figures and scratch their heads. Says one: "Given the amount of gas sitting around out there, it's a mystery why prices are so high.
Posted at 08:37 PM in Energy Prices, Next Big Things, Shale Gas Permalink Comments (0) TrackBack (0)
Why do we fear Russia on energy?
A foundation of UK energy policy is that we're running out of gas, making us dependent on the charity of others.
A sub text of much of the same policy is security of supply. But why are fears over security of supply directed against Russia who is accused of following in the footsteps of Molotov in any number of places, this one just happening to be today's FT, but it could be anywhere
The US ambassador to Sweden last year denounced Nord Stream as a "special arrangement between Germany and Russia" and called on the EU to counteract "Russia's energy weapon".
The reality is far more boring, and one of Britain's top energy experts, Jonathan Stern of the Oxford Institute for Energy Studies pointed out earlier this year talking about the Russia/Ukraine dispute of January 2008, in slide 16 of this fascinating presentation:
Worst Crisis of Russian gas supply imaginable had no significant effect on UK gas supplies and prices
No Hot Air, somewhat like Jonathan Stern, believes in facts, not anecdotes. He points out that the worst disruptions to energy supply come from the UKCS not from external sources. He also points out that they are for the most part short term, not structural. In other words, sometimes bad luck happens. To which we would add, it's much more bad luck to try and avoid it. Think of how many people bought long term prices that only provided the dubious value of paying double or more for energy in the name of risk avoidance.
Back to the Red Menace. Oops, we don't call it that anymore. Maybe we should mention the Cold War, so we can see how insane today's view of Russian energy weapons are. Example number one: Coal.
Coal and Gas are roughly tied as sources of generation. We always thought it bizarre that although 70% of UK coal is imported, no one has kittens over security of supply. But that was before we found out who the number one source of imports to the UK is.
How does the UK reconcile dependency on Russian coal with concerns about over-dependency on gas?
Coal supply is fundamentally more flexible  Not dependent on pipelinesMore diverse supplier base
We know a thing or two about energy. But we didn't know this! Coal supplies about 40 per cent of UK electricity, 70 % is imported (28% of total), Russia supplies 60% of that. Or in other words, 15% or so of UK electricity is directly at the mercy of the evil empire: Russia's energy weapon.
But why do we hear about gas. Russia supplies at tops 5% of UK demand, and that is debatable, Jonathan Stern says it's none and there isn't a better expert on Russian gas around. But why don't we hear how insecure we are about coal? Gas is just as fundamentally flexible, doesn't depend on pipelines and has a far more diverse supplier base than coal.
Posted at 07:31 PM in Current Affairs, Energy Prices, Prices and Politics Permalink Comments (1) TrackBack (0)
Oct 25, 2009
Why electric cars will impact your natural gas bill
We always have thought that a key paradigm shift in energy is how we are using less of it. But what would be the impact of electric vehicles on gas and power use?
The answer is that we don't yet know, but we should at least start asking the question. One more transformation over the next few years looks like being EVs.
After years of hope and hype, electron-powered driving finally appears to be on the verge of reality.In the next three years, at least a dozen pure electric or plug-in hybrid cars are slated to hit the market in the U.S. Electricity-driven vehicles from giants such as General Motors Co. and Nissan Motor Co., as well as start-ups like Fisker Automotive Inc. in Irvine, will provide consumers with a wide variety of choices. ..
Battery makers and automakers alike are tooling up factories to produce big volumes of electric vehicles. Meanwhile, power utilities and regulators are scrambling to figure out just how big the market will be...
"This is happening and it's happening soon," said Mark Duvall, director of electric transportation at the Electric Power Research Institute, an independent, nonprofit research group. "By the end of 2011, consumers will have more choices in vehicles they can plug in than they currently do for hybrids."...
But in the last couple of years, huge improvements and new battery chemistries "opened the opportunity" for ambitious product plans, she said. Gioia predicts that as many as a quarter of new vehicles sold by 2020 will be electrics, plug-in hybrids or traditional hybrids.
It's too early to say at this point how much electricity, and gas to generate that, will be needed to power EVs. But it's not too early to say that abundant natural gas and distributed generation is the way to supply those needs whatever they end up being.
Posted at 06:24 PM in Energy Tech, Next Big Things, Renewables Permalink Comments (0) TrackBack (0)
Optimism v pessimism
Barack Obama certainly still believes in hope, as we see from his visit Friday to the energy innovation leaders at MIT:
Firstly he concentrates on the good news:
Dr. Moniz is also the Director of MIT's Energy Initiative, called MITEI. And he and President Hockfield just showed me some of the extraordinary energy research being conducted at this institute: windows that generate electricity by directing light to solar cells; light-weight, high-power batteries that aren't built, but are grown -- that was neat stuff; engineering viruses to create -- to create batteries; more efficient lighting systems that rely on nanotechnology; innovative engineering that will make it possible for offshore wind power plants to deliver electricity even when the air is still.
What a contrast to the the UK doom and gloomsters, who are cheerleaders for blackouts, Peak Oil, high price and blaming greens for everything since the Garden of Eden. But the President knows that there are plenty of people who want to fail in the US as well:
The naysayers, the folks who would pretend that this is not an issue, they are being marginalized. But I think it's important to understand that the closer we get, the harder the opposition will fight and the more we'll hear from those whose interest or ideology run counter to the much needed action that we're engaged in. There are those who will suggest that moving toward clean energy will destroy our economy -- when it's the system we currently have that endangers our prosperity and prevents us from creating millions of new jobs. There are going to be those who cynically claim -- make cynical claims that contradict the overwhelming scientific evidence when it comes to climate change, claims whose only purpose is to defeat or delay the change that we know is necessary.
Let's consider cynicism. As far as we can figure out, CC deniers are in two camps. Firstly, those who unrealistically aren't very comfortable with any idea of change and seem to be proposing an ostrich approach, and refuse to confront change. These are the guys who were complaining about how restrictions on children in coal mines would burden British industry.
But it's the second group of CCD's who are more exactly energy security hypocrites. On one hand, industry will be crippled by climate change costs, but to avoid either carbon or security of supply issues (they often mix them up), they are in line with their hands out asking for state handouts for CCS, Nuclear, and more gas storage. There is also a sub group of mad scientists schemes ranging from the promising (tidal power) through the interesting (space based solar) to the barking (geo-engineering).
But the President again on the general attitude of pessimists:
...this one is far more dangerous because we're all somewhat complicit in it. It's far more dangerous than any attack made by those who wish to stand in the way progress -- and that's the idea that there is nothing or little that we can do. It's pessimism. It's the pessimistic notion that our politics are too broken and our people too unwilling to make hard choices for us to actually deal with this energy issue that we're facing.
There are a lot of people who strongly believe that government will never solve anything, despite a number of government successes: World War Two, mass education, public health, infrastructure, etc etc.
Cynicism is healthy. No Hot Air is built on it's near at hand neighbour, skepticism. And we often think that pessimism is useful in that one is never disappointed and sometimes surprised, where optimists are just asking to be let down.
The pall of permanent doom that hangs over much of UK political thought is far more dangerous than any clouds of smog. This is even more dangerous in energy policy where the new world of abundant energy combined with the optimism coming out of places like MIT is totally at odds with the unreality of energy catastrophe the doomsayers want to peddle.
Posted at 12:00 PM in Current Affairs, Next Big Things Permalink Comments (0) TrackBack (0)
Oct 23, 2009
Russia and Shale 2
More on Gazprom and US shale via AFP:
There is little doubt Gazprom has the resources to reach its US trading targets, particularly if Russia's massive arctic Shtokman field comes online in 2014 as planed.
But according to Fadel Gheit, a senior oil and gas analyst at Oppenheimer & Co, Gazprom and other foreign majors may be entering the US market for reasons beyond market share.
Gazprom's real goal, he said, could be acquiring cutting edge technology that can exploit the difficult-to-access but potentially massive reserves of gas from shale rock.
"The United States has far more advanced shale gas drilling technology. It is basically in the hands of the smaller producers, not the Exxons, not the BPs and not Shell.
"These companies are paying very hefty entry fees to gain a window into the technology. Gazprom I don't believe is interested in production itself, they are interested in production technology. It's pay to learn."
And Gazprom may face commercial challenges to US trade, even with its resource clout.
With China's economy growing apace and European energy prices still high, those markets remain more attractive.
Although Gazprom has a 20-year plan to bring liquefied natural gas to the United States from Russia's enormous Sakhalin-2 field, the firm has preferred to cash in on higher Asian demand and higher European prices.
Still, energy analysts expect regional price differences to ease as the market becomes more global and as regional powerhouses like Gazprom and Chinese firms move into new markets.
One boon for Gazprom's US business may come from an unlikely source -- the federal government. Congress is considering new regulation governing carbon emissions.
"It is all good," Hattenberger said of the proposals, arguing emissions curbs could propel gas use as a cleaner alternative to coal and oil.
"We are still very bullish on US demand," he said
Whatever is going on here, one rather obvious question to be asked in Europe is: Does this sound like the big bad Gazprom that we should be so fearful about that we should spend huge sums of money on technological dead ends like CCS, Nuclear, Storage or Nabucco to avoid being dependent on Russian gas? Far more money we must point out than any alleged economic damage from gas interruptions.
Gazprom is simply acting like a mature, grown-up international oil company. Let's folllow their example.

Posted at 03:06 PM in Energy Prices, Next Big Things, Shale Gas Permalink Comments (1) TrackBack (0)
Oct 22, 2009
Russia and Shale
Back in June, Stephen Holditch showed figures that the former Soviet Union had 627 TCF of shale, compared to 509 in Western Europe.
Gazprom recently went into the US market, allegedly to try and import more LNG, a thankless task in today's market. Another reason?
Gazprom said it may consider acquiring a US shale-gas producer to gain the know-how to exploit similar fuel deposits at home.“An acquisition of a shale-producing company could make a lot of sense,” John Hattenberger, president of Gazprom’s US energy-trading unit, said.“Russia has huge shale reserves,” he said in a Bloomberg report.
Posted at 10:35 PM in Current Affairs, Shale Gas Permalink Comments (1) TrackBack (0)
He's a fan. Sort of.
We've written before of support for natural gas and shale from US green groups like the Sierra Club, Waterkeepers' Alliance and the progressive Centre for American Progress.
But what about the biggest green of all: Al Gore. What does he think? He isn't for shale, but he doesn't open his mouth or start clutching his chest when others on the platform do.
Sen. Reid opened his remarks by saying, “I’ve been converted. I now belong to the Pickens church,” in reference to the plan pitched by Oklahoma oilman T. Boone Pickens to ramp up the role of natural gas (and wind power) in U.S. electricity generation. Natural gas has roughly half the carbon emissions of coal when used to generate electricity.
And here's the photo:
T. Boone Pickens is a most unlikely darling of environmentalists.T. Boone Pickens is a billionaire who made most of his fortune by purchasing and selling shares in energy companies. But, as detailed by Kambiz Foroohar for Bloomberg, Pickens is now touting the Pickens Plan, which would use natural gas to power the 6.5 million diesel trucks which drive up and down America’s roads. By doing so, Pickens says that the United States can save 2.7 million barrels of oil per day, which is over half of what the country imports on a daily basis from OPEC.
The obstacles are large, but if a former oilman like Pickens can win over Harry Reid and Al Gore, his plan may reach fruition.
News from China of Gore actually saying something:
Gore, whose remarks in Beijing focused on solar, wind and geothermal power, expressed skepticism that natural gas, nuclear power or biofuels were realistic energy sources to harness in order to achieve large reductions in carbon emissions.Gore, who won the Nobel Peace Prize in 2007 for his work to publicize the dangers of global warming, said nuclear power was too expensive and could be used to make weapons, biofuels might spark food price rises and natural gas, which emits two-thirds the carbon of oil, was only a “promising transition fuel.
"Promising transition fuel?" Could be better, could be worse. But we can live with that.
Posted at 10:26 PM in Current Affairs, Prices and Politics, Shale Gas Permalink Comments (0) TrackBack (0)
Oct 21, 2009
ENI on gas prices
Italy's ENI is the biggest oil and gas company most people have never heard of. although it's bigger than most companies who share it's heritage of national oil and gas champion such as Statoil, Pemex, Petrobras, PDVSA etc.
ENI has always been bigger in gas than most energy companies, going back to being one of the Soviet Unions first gas customers, followed by gas links to Norway and Algeria. In the European space, what CEO Paolo Scaroni says about gas prices should be listened to.
Crude oil prices may be showing signs of a recovery, but natural gas prices will stay depressed for years to come, the head of Italian energy company ENI SpA said in an interview on Tuesday—and the grim price outlook could force energy companies to rethink some investments in new gas projects.
Given ENI's long links to oil indexed Russian gas, we should listen up to this:
The price of gas has traditionally tended to take its cue from crude prices. But while oil has more than doubled since its lows of late 2008, the price of gas has lagged far behind...
Whatever the long-term outlook for gas is, some experts note a fundamental change in the market—a "decoupling" of oil and gas prices, particularly in the U.S....Oil now costs more than $75 a barrel, while the equivalent amount of natural gas costs just $25. "I don't see that gap closing any time soon," Mr. Scaroni said.
But there is now a big disparity between the long-term contract price of gas and the spot price.
Mr. Scaroni said that 18 months ago, he would have said the European market for natural gas would grow by 2% a year, as domestic production fell and demand for the clean-burning fuel rose. At that time, LNG cargoes were selling in the Far East for $20 per million BTUs, he said.
Since then, the demand outlook has changed dramatically. Germany is poised to backtrack on its decision to phase out nuclear power, meaning less demand for gas in Europe's largest economy, he said. Meanwhile, it is likely that the same technology that has been used to open up shale gas in the U.S. could now be used to develop unconventional gas resources in Europe, meaning more supply.
And of course ENI is buying up shale technology via it's holding in Quicksilver Resources Barnett Shale interests.
Let's go back to "the big disparity between the long-term contract price of gas and the spot price".
We've said here from day one, before even NHO had heard of shale that buying gas or power on a long-term contract is the surest way to a) pay way over the odds and b) enrich any energy consultant who advised it.
And the market is still at it. October day ahead gas is having a modest revival as it usually does this time of year on the back of slightly cold weather in the UK and early US snow. Q4 is traditionally the most volatile based on the misanthropic hope of gas traders that we'll freeze to death. By Q1 2010, reality usually intrudes and we see massive sell offs even when winter really bites. A fixed price today for one year from November would mean for example paying 46.41 for next October when this October is only 23.3 so far.
Whatever uncertainty there is about future gas prices, any idea of a 100% increase by next October is a) unlikely b) ludicrous c) disingenuous or d) fraudulent. Or all of the above?
Posted at 05:38 PM in Energy Prices, Fixed Price Madness, Prices Permalink Comments (0) TrackBack (0)
Oct 20, 2009
Talking about my (electricity) generation
In the UK, we're roughly equal at 40% each between coal and gas in fuel sources for generation. Coal, in it's present form has got to go. It's many years past it's sell-by date and we can't afford for it to poison us for much longer. But what to do about about replacing coal?
Let's pretend that we are UK policy makers, who have either never heard of shale gas, confuse it with shale oil or pretend that it's many years away. Let's also assume they also don't believe in negawatts, the electricity replaced with no power at all via efficiency. Smart metering, smart grids and LED lighting can knock 15 to 30% off total consumption.
Without gas on the energy menu, the replacement for coal would be either nuclear or CCS. Ignore for the moment that nuclear waste storage has been great-grandfathered to the 21st century equivalent of Ofgem: It's their baby, we just paid for building the power station, which the nuclear industry say is a snip at 4 billion euro each.
But as a University of Greenwich study says, nuclear isn't an economical option either:
Oct. 19 (Bloomberg) -- A group of U.K. academics advised the government against subsidizing development of nuclear power because of the "huge" costs to consumers and taxpayers. Professors from Imperial College, Sussex University and University of Greenwich will advise against subsidies at meeting of lawmakers, policy advisers and industry executives today at Westminster in London, according to a statement. The group said subsidies such as loan guarantees, fixed carbon prices and consumer taxes to support prices will be needed to develop new U.K. nuclear power. "If the government caves in to nuclear industry demands for subsidies and guarantees, it will be electricity consumers and taxpayers that will pay huge additional costs," Steve Thomas, a professor at the University of Greenwich, said in the statement. Subsidies may also be challenged under European Union competition law, the group said.
Meanwhile the US National Research Council, in a study commissioned by Congress studies the true cost of generation. It ain't pretty for coal either:
Congress commissioned the report during the preparation of the 2005 Energy Act to get a handle on what energy really costs—not how much we pay for it. That includes the “health, environmental, security, and infrastructural external costs and benefits associated with the production and consumption of energy.”
Coal-fired electricity costs the country $62 billion per year, largely in health impacts from particulate matter. Natural gas for power generation, in contrast, adds about $740 million a year in hidden costs.
Looked at another way, coal’s hidden pricetag adds up to 3.2 cents per kilowatt hour. Compare that to the 2 cents-per-kilowatt hour that wind power gets from the government—that’s less a subsidy than a partial attempt to level the playing field.
OK, what about CCS? Tony Hayward of BP's opinion:
We also need a more diverse energy mix which will enable energy security and help address the issue of climate change. Alternative energy - nuclear, wind, solar and biofuels, along with fossil fuels - will all play an important role.But we need to be realistic - the transition to a lower-carbon economy won't happen overnight.Although Carbon Capture and Storage is often trumpeted as the path to cleaner coal, it still faces a number of challenges which will take time and effort to resolve.I don't believe we'll see the commercial use of CCS at scale for at least another decade or more and it won't come without a price. Until renewables gain a sizeable share of the power sector and cleaner coal is available through Carbon Capture and Storage, I can see only one way of doing it - by increasing the use of natural gas.Gas is the fuel that offers the greatest potential to provide the largest reductions at the lowest cost - and all that by using technology that's available today.
Gas is becoming the new Borg: Resistance is futile. It makes such a compelling case that no one can deny it. So why isn't more happening?
Posted at 10:34 PM in Energy Prices, Energy Tech, Next Big Things, Prices and Politics, Shale Gas Permalink Comments (0) TrackBack (0)
Oct 18, 2009
Shale Gas in India
China are fans, so why not India. Energy bulls want us to blame the BRICs for surging oil prices, to scare energy buyers into buying gas long. Brazil has the great fortune to have the world's largest ethanol fuel infrastructure meeting recent massive off-shore deep water oil and and gas discoveries. Russia,is obviously not a problem and China seems well able to fend for itself via Australian LNG and a confidence in both shale, efficiency and renewables. But we haven't heard much from India, a country that despite great advances still has trouble keeping the lights on for three quarters of its citizens. India is looking for shale as a solution:
In India, shale deposits are found across the Gangetic plain, Assam, Rajasthan and many coastal areas, but neither the government nor the corporate sector has carried out any exploration or estimation.
DK Pande, Director Exploration, ONGC, says the company is looking at the possibility and feasibility of gas production from shale. “The pilot project should start sometime in 2011. If we make a breakthrough, gas pricing will come down.”
But what is completely weird from British viewpoint is that in the UK we have had as far as we know no reference at all in broadcast media to shale gas, yet here we have an excellent report from Channel 18 CNBC. Paging Roger Harrabin!http://www.moneycontrol.com/video/economy/ongc-eyes-gasshale-pilot-project-to-start2011_419773.html
Posted at 09:29 AM in Next Big Things, Shale Gas Permalink Comments (0) TrackBack (0)
Next »