Christian Science Monitor – With all this gas, who needs oil?
On April 22, 2012, the Christian Science Monitor published a lengthy feature article titled With all this natural gas, who needs oil? that helps illustrate the extent of America’s current love affair with methane, a fuel that we have been using commercially for about 150 years.
According to some of the people quoted in the article, converting more trucks, buses, and power plants to use natural gas is a “no-brainer” that should have been done a long time ago. Even though that transition was not done then, these same people think it could be done today – virtually overnight.
Though the article does eventually point out that natural gas extraction activities have hazards and environmental impacts that must be mitigated, the general impression that one gets from the article is that anyone who would even consider using a different fuel source in a modern power plant would be a little kooky. You can find the following quote on page 2 of the article.
No one disputes the prevalence of natural gas in America’s basement. For evidence look no further than an Erector Set of pipes and docks and storage tanks in the marshes of Sabine Pass, La., on the edge of the Gulf Coast. There, Houston-based company Cheniere Energy Inc., which opened the facility four years ago to import natural gas amid an impending shortage, is now spending billions to transform it into an export site.
In fact, as recently as five years ago, oil and gas executives thought the nation’s accessible natural gas reserves were almost played out. The industry was proposing building 47 import terminals to bring liquefied natural gas into the US. Five were actually constructed. Now most of them sit underutilized.
In March natural gas imports hit a 20-year low while domestic production hit a 20-year high. The US is now the largest producer of natural gas in the world.
The dramatic turnaround in supply is a product of technological advances and high oil prices. Hydraulic fracturing, the controversial drilling technique, has made it possible to access trillions of cubic feet of natural gas locked in shale formations deep beneath vast swaths of the country. High oil prices have made it economical to extract.
There is balance and caution in the article, but the author never really explores some of the technical reasons why natural gas still faces strong competition from other fuels and why it has not been a clear winner in many markets. There is no discussion about energy density, the challenge of safely storing an explosive vapor, or the large capital investments required to build out an extensive distribution infrastructure. Methan gas has many advantages as a fuel source, but the people who made other choices in fuel selections over the past 150 years have not been universally short sighted.
Sometime soon, I plan to write a little more about energy density and the importance of having fuel sources that can be warehoused for later use.
Rod,
What you are proposing to write up about energy density and being able to warehouse fuels reminds me of a little project I started several weeks ago. I will forward you the little bit of back and forth that Cal Abel and I had about it. You may want to include aspects from it.
– Joel
Rod, The notion that we have an almost unlimited supply of low cost natural gas is pure bunk. The first unconventional natural gas play was the Barnett Shale Play that centered around Fort Worth, Texas. Since I lived in Dallas untill late 2I have watched the Barnett Shale play almost from its ince[tion around 2003, untill I left Dallas in late 2009, i have a rairly good idea about how a natural gas play runes. By 2009 drilling had slowed dramatically. Furthermore, procuction from older gas wells had dropped dramatically. Many of the origina; companies that were involved in the Narnett shale play, Sold off their wells and mineral rights to other companies.
Only three of the sixteen counties origionally believed to contain large amounts of shale gas, turned out to be majot natural gas producers. Drilling in Fort Worth fif not dtopp completely, but compaired to the boom years it had declined. The original players, who had sold out, moved on to shale gas plays.
Arthur E. Berman and Lynn F. Pittinger offered an analysis of three recent natural gas plays including The Barnett Shale play on The Oil Drum, August 5, 2011 (Shale Gas, Less Abundance, Higher Cost). They find that for Barnett Shale wells: Initial decline rates are steep but transition after 10-15 months to a flatter exponential decline trend that is the basis for extrapolating remaining reserves. This long period of flatter exponential decline represents depletion of a boundary-dominated system.”
They further state: “Our analysis indicates that an average EUR/well is approximately one-half of the value typically claimed by major operators in the Barnett, Fayetteville, and Haynesville plays. . . . Our analysis indicates that an average EUR/well is approximately one-half of the value typically claimed by major operators in the Barnett, Fayetteville, and Haynesville plays.”
They conclude, “We have shown that the true structural cost of shale gas production is higher than present prices can support ($4.15/mcf average price for the year ending July 30, 2011), and that per-well reserves are about one-half of the volumes claimed by operators. Relatively long-lived production history data in the Barnett and Fayetteville shale plays is compelling. A shorter production history for the Haynesville Shale play permits more latitude in forecasting projections. There is, however, sufficient data to conclude that results for the play are disappointing.
Our work on the three most mature shale plays has profound implications. Facts indicate that most wells are not commercial at current gas prices and require prices at least in the range of $8.00 to $9.00/mcf to break even on full-cycle prices, and $5.00 to $6.00/mcf on point-forward prices. Our price forecasts ($4.00-4.55/mcf average through 2012) are below $8.00/mcf for the next 18 months. It is, therefore, possible that some producers will be unable to maintain present drilling levels from cash flow, joint ventures, asset sales and stock offerings.
Decline rates indicate that a decrease in drilling by any of the major producers in the shale gas plays would reveal the insecurity of supply. This is especially true in the case of the Haynesville Shale play where initial rates are about three times higher than in the Barnett or Fayetteville. Already, rig rates are dropping in the Haynesville as operators shift emphasis to more liquid-prone objectives that have even lower gas rates. This might create doubt about the paradigm of cheap and abundant shale gas supply and have a cascading effect on confidence and capital availability.
On the other hand, major oil companies, foreign investors and overseas energy companies have shown a surprising appetite for joint ventures and acquisitions of producers in these plays. Although this trend might result in a different cast of players, it may also introduce a stabilizing effect on the distress scenario described in the previous paragraph. The entry of better-capitalized producers does not change the economic fundamentals of shale gas, but it suggests that there may be strategic reasons for large companies to pursue market share in the North American gas arena.
We suspect that the current euphoria about shale gas will follow the path of other energy panaceas including coal-bed methane and tight sandstone gas. Shale gas will remain an important part of the North American energy landscape but its costs will almost certainly be higher, and its abundance less than many now believe. Producer behavior will be modified by the effect of changing perceptions on capital availability and the entry of new, more substantial players.”
http://www.theoildrum.com/node/8212
It is clear then that Arthur E. Berman and Lynn F. Pittinger have made a strong case against the natural gas will save us story.
Building/converting vehicles to run on natural gas, and the associated fuel distribution network, seems to me a more complicated and less cost effective approach than building or converting vehicles (much less expensively) to be “liquid” flex-fueled (gasoline, ethanol, methanol), and would involve building some methanol plants to feed the demand. In fact, most flex-fuel vehicles can already run on methanol blends such as M85 with little if any additional modifications. See: http://en.wikipedia.org/wiki/Methanol_economy. Methanol (15.6 MJ/liter) may not have the same energy density as gasoline (34) or ethanol (24), but it doesn’t require special tanks for pressurized gas or compressors needed for a methane fueling system, and could more easily be integrated into the current fuel distribution network. At half the energy density of the E10 that is prevalent in today’s gas stations, an M85 blend (85% methanol/15% gasoline) would give you half the autonomy of pure gasoline per fill-up, but still better range than most pure electrics and at a lower vehicle and “infrastructure” price. Methanol can also be made not only from methane, but also from coal and biomass, thus diversifying the production base and not having to depend on the volatility of natural gas pricing or the ethical issues surrounding ethanol made from food sources. In fact, current prices of methanol (when scaled for energy density) are quite competitive with gasoline, at $1.34 per gallon (http://www.methanex.com/products/methanolprice.html). I would guess that an M85 blend would be about $1.60 per gallon, equivalent to about $3.20 per gallon of gasoline to acocunt for energy density, plus any fuel taxes, distribution costs, and profit margin – which probably do not exceed $4.00 per gallon equivent gasoline). Of course, increased demand for methanol may lead to higher M85 prices over time, but prices among competing fuels would tend to be self-regulating as customers with a single vehicle could choose among gasoline, ethanol, and methanol fuels. An in-vehicle app might even be developed to choose the optimal fuel to use for any given mix of prices…
Whenever I’m reminded of the headlong rush to Methane an old Jerry Jeff Walker lyric comes to mind: “… Makin’ all the same mistakes we swore we’d never make again….” I really think this headlong rush has a sad, kind of funny, but *very* appropriate anthem: <a href=" http://www.youtube.com/watch?v=EZDBXm11WXY"
Not on this topic, but there is a program tomorrow night that might be of interest to Atomic Insights readers. On PBS at 10 eastern on 4/25 “Electric Nation” will air on PBS. It will include a tour of Watts Bar Unit 1.
http://entreprenuclear.blogspot.com/2012/04/7-short-tv-programming-note.html
Rod – I liked the Christian Science Monitor’s story “With all this natural gas, who needs oil?”. I felt that the story was balanced, and explored both the potential and the problems that might be associated with more widespread use of America’s natural gas resources for transportation (and, to a lesser degree, for load balancing and peak energy power generation to stabilize the grid).
I favor building new reactors to supply the energy America needs to build a better future.
I favor using American natural gas for transportation use to avoid energy security problems and energy related economic threats.
In the race for the Presidency of France, the extremely complex primary rounds are under way. Holland is leading. The green party is eating dust.
So what’s the big deal Daniel you may ask.
Well, for the last year Holland was worried about about the green party and took the position to take nuclear from 80% to 50% of base load electricity.
Now, as a socialist first, and with a weak green party performance in the lock, Holland cannot afford to lose the well paid nuclear jobs.
Nuclear is back in France and so is partisan politics. Gotta love it when it works for you.
It’s hard to say what he will really do. Are you French, Daniel ? If so, read some of the analysis SLC (Sauvons Le Climat) has made month ago of his program (maybe also Proteos, or was it Verel ?).
From start, the agreement with the green was so written he can stop only *one* plant during his mandate and not have formally broken it.
Also and as shown in the sites I referenced, it’s perfectly possible to reach the 50% level in 2025 by letting the energy use continue to grow at the current rate, and building no new nuclear, instead more gaz powered plant. EDF seems to quite like the CCGT and is planning to build quite a few.
It’s bad for climate, it’s bad for energy independence, it’s bad for the economy (France produces no gaz, coal or oil, and has had more than 10 billions of euro of increase of energy cost last year), but the green will be very happy with a lot of gaz power and a few token wind turbines, and it can slip in step by step, with no decisive and antagonizing decision, which as far as we know suits perfectly Holland’s personality.
So it may very well be the true plan of Holland, closing Fessenheim (ignoring that the cost of that decision reaches almost 1 billion € a year), substituting with the EPR in 2016, letting gaz grow and grow
That’s if he doesn’t realize what so much gaz means for the economy of France, or if he believes that the offshore wind turbines will truly save a lot of gaz.
Or if he didn’t read the footnote saying they cost more than 200€/MWh, that’s not counting the overhaul of the grid power they require which will be billed separately and not attributed to wind power to the French (as is done currently in Germany, and everyone swallowed it without understanding what was happening)
And as for the green, the really decisive thing will be the deputee election. They never did well in the presidential one, and didn’t actually do much worse than usual. They still can save the day in that election. The mood is not good, but it’s not a decided battle.
PS : My estimate for the closure of Fessenheim may seem high. But you need to realize that economically, the closure of one production unit that was cheap and made a lot of benefits is *not* the production cost of that unit, but the production cost of the most expensive energy you will need to use instead of it, and the cost of finding another way to keep the whole company benefits at a similar level.
It’s a *lo*t more expensive that it may seem at first sight. It will look cheaper if it waits until the EPR starts. But the apparently cheaper part here in fact cover the lost opportunity cost of not having more cheap energy available, and needing to buy more costly fossil.