Jack's Picks VI
What follows is a discussion in which I will post/share industry related articles that I believe to be of general interest to some who frequent this site.
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Permalink Reply by Jack Straw on
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Source:
http://www.hardassetsinvestor.com/features/5990-us-natgas-export-er...
Written by Sumit Roy |June 23, 2014
US NatGas Export Era Begins In 2015, Fueling Upside In Prices
- Details
The U.S. will export significant quantities of natural gas by the end of the decade.
Anyone who’s followed the U.S. natural gas market for any length of time is well aware that it is an isolated market. With the exception of Canada and Mexico, the U.S. does not have the capability to export its natural gas.
Imports are another story. The U.S. has several LNG import terminals, but they’re slowly being converted into export terminals—a consequence of the fact that U.S. natural gas prices are well below those seen around the world.
For example, European natural gas prices were last trading around $10/mmbtu, while those in Japan were at $16. Compare that with the U.S. benchmark futures contract at $4.50. Clearly, there’s money to be made shipping cheap U.S. natural gas into higher-priced markets.
Source: Cheniere Energy
That’s what companies such as Cheniere Energy plan to do. Cheniere has been leading the charge in the U.S. push to export natural gas. The company, which owned several money-losing import facilities, is in the process of converting those facilities into export facilities.In the pre-shale-boom period several years ago, when it seemed like the U.S. would actually run out of natural gas, import facilities—which convert liquefied natural gas back into gas—seemed like a good idea.
Now that the U.S. has more natural gas than it knows what to do with, Cheniere is turning those facilities into liquefaction terminals, which convert natural gas into liquefied natural gas. That will allow LNG to be shipped around the world to higher-priced markets.
Other companies are also planning to build export terminals of their own, pending government approval. The federal government has cautiously embraced the idea of natural gas exports, though it has been wary of any dramatic price increases that could occur in the U.S., which would hurt the country’s manufacturing sector.According to Cheniere, there are 13 or more proposed LNG export projects totaling 16.85 bcf/d of capacity in the pipeline. For context, total U.S. natural gas production in the lower 48 states was 77 bcf/d in March.
Source: Cheniere Energy
If the U.S. began shipping more than 20 percent of its natural gas overseas, prices would undoubtedly spike higher. But at the same time, those higher prices would encourage more production. That’s a reason to be bullish on U.S. natural gas, and U.S. natural gas exploration and production companies in particular.
The onset of U.S. natural gas exports will come slowly as more and more terminals are improved. The first notable quantities will between 2015 and 2017, when Cheniere puts the first four trains of its Sabine Pass facility into operation. -
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Permalink Reply by Jack Straw on
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The New Global Dictator
Last week I attended an energy conference in Aberdeen. Getting away from my desk, and the virtual world I live in, it allowed me to mix with real energy professionals and I got to wondering why it was that I disagreed with so much that was said. University professors got up and read from the renewable energy or global warming scripts and seemed to believe this was leading edge energy research.[Image: WSW facing solar panels in the shade of a tree, University of Aberdeen. It is unlikely that badly mounted panels at this latitude will ever produce enough electricity to recoup the energy used in their manufacture.]
New energy research is being directed by policy and diktat that has been decided in advance of the research being conducted. In Europe, this has origins in the 20 20 20 policy that was decided in 2007 that itself has roots in the Kyoto Protocol and the desire to reduce global CO2 emissions. The 20 20 20 policy has the following aims to be met by the year 2020:
- A 20% reduction in EU greenhouse gas emissions from 1990 levels;
- Raising the share of EU energy consumption produced from renewable resources to 20%;
- A 20% improvement in the EU’s energy efficiency.
These binding targets, created by unelected technocrats (who may not even know what the SI unit of energy is) have a profound effect on all of our lives. One of the more insidious effects is to direct university and government based research. If you happen to be a renewables enthusiast then it is easy to get a job and funding for research into the delivery of the policy. If you happen to have a mind that questions everything, and in particular the wisdom of government on such a vital issue, you may become marginalised from the process. A selection process then occurs where universities recruit like minded individuals and before you know it 97% of all energy researchers will agree that a dramatic growth in renewable energy is of benefit to the population and to the planet.
Setting targets for renewable energy has become an international sport where one government tries to outdo the other. Thermodynamics, engineering and economics are thrown to the wind in this pursuit of government popularity. Scotland, no longer able to compete on the global soccer stage, is vying for pole position in this renewables bidding war with a target to produce 100% of electricity equivalent from renewable sources by 2020. Where is the research that shows this will benefit the Scottish people and the environment? I will return to have a closer look at the Scottish Government energy policy shortly.
Last week I learned that Ban Ki-moon the Secretary General of the United Nations has now led the world into the renewables bidding war with a new initiative called Sustainable Energy For All that has three pillars to be achieved by the year 2030:- Ensure universal access to modern energy services.
- Double the rate of improvement in energy efficiency.
- Double the share of renewable energy in the global energy mix.
I will not take issue with the aspirations to bring “modern energy services” (electricity?) to all of the people of the world nor to improve energy efficiency. But I do suspect that the outcomes of these two pillars may not be what is currently anticipated by the UN. But as with the EU and Scottish government targets I wish to take serious issue with the renewable energy target. Where is the evidence that this will be beneficial to Mankind and Planet Earth?
I wish to make clear at the outset that I am not against renewable energy per se but wish to draw attention to the fact that there is no such thing as a free lunch in the energy world. Renewables are all too often and naively presented as clean, green, free energy. In many cases the exact opposite is true. Ban Ki-moon needs to understand that with energy, he is interfering with the lifeblood of the global economy and the welfare of the global population. Where is his mandate to do this and what is the source of his knowledge that leads him to believe his policy is right? I am sure his intentions are good ones but this could end in tears.
The first thing we need to know is what is the current share of renewable energy in the global energy mix that is to be doubled by the year 2030? On the assumption that global energy production will continue to rise in lock step with population then renewables production will have to more than double from current levels in the next 16 years. My recent look at Global Energy Trends based on BP 2014 suggests that hydro currently accounts for 7% of global energy and new renewables (wind, solar, biofuels etc) a little over 2%. Note that BP gross up renewable electricity production by a factor of roughly 3 to take into account the thermal losses from power stations. But BP data does not take into account biomass that is an important source of fuel throughout the undeveloped world. Data I received from Rembrandt Koppelaar many years ago, based on the work of Vaclav Smil, suggests that biomass may run at around 6% of the total suggesting that around 15% of global primary energy currently comes from renewable sources. Ban Ki-Moon’s ambition, therefore, is that this should rise to 30% in 16 year’s time. I already sense a catastrophe in the making.
According to BP 2014, 7% of global energy came from hydro and a little over 2% from new renewables in 2013. Adding an estimate of 6% for biomass (wood) suggests a global renewables total of 15%.
Current levels of biomass use are leading to slow deforestation. Forests play a vital role in stabilising Earth’s climate and ecosystems and if anything the use of biomass should be reduced and not increased. Most, if not all of the expansion of renewables must therefore fall to hydro and the suite of new renewable technologies.[Image: the ugly face of deforestation in Indonesia. Setting global renewables targets may unwittingly lead to more habitat destruction.]
Let me begin by considering hydro electric power my and most other peoples favourite renewable energy source. Hydro electric power provides a renewable energy store, that like fossil fuel and nuclear energy stores, can be used when we need it. Hydro can be switched on at 17:00 hours every day to meet peak electricity demand and to be sold at top prices. It is the Rolls Royce of renewable energy. But there are costs, it is not a free lunch. Building dams and creating large lakes can have a profound impact on people and the environment. It is estimated that 1.5 million people were displaced by the recently built 3 gorges dam in China. In Scotland, migratory salmon and sea trout are becoming extinct in hydro river systems. Adult fish may use a fish ladder when ascending the river but many young fish may be mashed by turbines on their return journey to the sea. But this is as good as it gets in the renewable world. It is a delicate trade off between the cost of certain environmental destruction and human suffering and the benefits of having a sustainable energy resource.
After hydro and biomass, wind power is the next largest source of renewable energy today. Used mainly by city dwellers, onshore wind has blighted the lives of thousands of country dwellers who are consulted and then ignored by wind power developers. The landscape impact of onshore wind is being increasingly acknowledged resulting in an accelerating move off shore where costs escalate. Offshore wind is among the most expensive forms of electricity generation yet deployed. And the high cost of construction does not begin to take into account the cost of load balancing the grid that is currently borne by fossil fuel (FF) generators. Until grid-scale, cheap, energy efficient electricity storage is invented, and I doubt it ever will be, then wind power is locking the world into a future that MUST continue to burn FF.
Another negative aspect of wind power is the use of the rare earth element neodymium in the manufacture of turbine magnets. This greatly improves the performance of the turbine enabling the development of the 2 to 6 GW monsters that are now being deployed. Rare Earth mining and processing is particularly nasty, so much so that China is one of the few countries to permit the activity at scale with a high environmental and human cost. Wind enthusiasts seem able to simply wave this harm away, since it takes place in someone else’s back yard.[Image: rare earth element mining in China is required to build wind turbines in Germany and the USA.]
The talk of smart grids, interconnections, energy markets and load shifting incrementally adds costs while collectively failing to provide a workable solution. The way things stand, wind fans are locking the world into a FF future, the exact opposite of policy goals. The impact on populations are higher electricity bills (the result of consumer paid subsidies), infrastructure everywhere, landscape and environmental degradation and the transfer of wealth from the poor to the rich. Is Ban Ki-moon absolutely certain this is the future he wants for our world?
Moving on to solar photovoltaics we have a renewable technology that may have potential to sensibly contribute to the global energy mix in certain very specific niche circumstances. Correctly deployed solar panels in sunny climates may, for example, be used to power air conditioning units in advanced economies, where demand and supply are well-correlated on diurnal and annual demand cycles. In Africa solar cells have been used to power cell phone networks that have a liberating impact on undeveloped communities. It seems possible that solar photovoltaics may liberate off grid communities that are not already tied into a very specific demand pattern and for so long as maintenance services can be provided and roaming militias do not vandalise the investments.
But none of this begins to make a dent in achieving a doubling of renewables in 16 years time. And it is at this point that mindless mass deployment takes hold, subsidised by consumers, regardless of benefits. Solar, like wind, can create large swings in diurnal power that needs to be balanced by FF, once again locking the world into a FF future. And at high latitudes, where annualised loads are <10%, it seems unlikely that solar photovoltaics will ever recover the energy costs of manufacturing, deploying and maintaining these complex devices. The Co2 associated with these schemes is emitted before any energy is produced. This is fast tracking emissions production, again, the exact opposite of the policy goal.
Finally, biofuels are worthy of brief consideration. Sugar cane ethanol, produced in the tropics where there is a large amount of solar energy to capture, does indeed provide a means of creating a liquid fuel with significant positive energy return. In other words significantly less energy is used in the production process compared with the final energy produced. But moving to temperate regions plants are much less efficient at producing starch and sugars. This is in part due to lower levels of insolation and in part due to a different photosynthetic pathway. Multiple studies have shown that temperate latitude bio fuel production – corn ethanol and bio-diesel, barely achieve energy break even. The energy inputs by way of methane gas used in the manufacture of ammonium sulphate based fertilizers, diesel used in planting harvesting and transporting the crops and electricity in refineries all add up to a similar amount of energy contained in the bio-fuel produced. Nothing is gained. Crop land and water once used for growing food is now used for fuelling traffic jams. This process is enabled by badly informed government policies and by the transferal of money from poor to rich.
Providing all of the world’s people with electricity services and improving energy efficiency will have two certain outcomes. More people and more energy consumption. It will result in greater prosperity and more comfort. Where the increased amounts of energy will come from should be left open to debate. Placing this in a straight jacket of inefficient renewable energy at the outset may guarantee the failure of the whole Sustainable Energy For All Initiative. Replacing the renewable energy aspiration with a non-FF aspiration may be a wise move at this juncture. There are a very large number of engineers and scientists who envisage nuclear fission as the near term bridge to a nuclear fusion future. The United Nations should take care not to prejudice this possible outcome that may turn out to be the better course for humanity.
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Permalink Reply by craig on
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Amen, Jack.
Once again, thanks for your knowledgeable posts presented in a neutral way.
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Permalink Reply by Jim Litwinowicz on
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Jack; very good article. Thanks for posting it. It would be great if solar and wind would actually work....but they don't. Perhaps in the future they will be much better and then not only be competitive but dominant. Until then nuclear and nat gas are our best options.
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Permalink Reply by Booger on
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good article......I wonder where the hydroelectric numbers come from....I worked at a hydroelectric plant once that used more electricity then it generated..........they pumped water to the top of a PA mountain at night with cheap nighttime electricity, then during the day, the water flowed back down through the turbines to create expensive daytime electricity........they make money.....but use more electricity then they generate....I wonder if this plant and others like it are counted in the 7%.
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Permalink Reply by Jim Litwinowicz on
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That would be the plant at the Kinzua Dam.
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Permalink Reply by Jack Straw on
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I find the following to be of significance to the people of the 'wet' Utica and Marcellus.
Condensate (aka natural gasoline) has been realizing low prices due to it's recent high supply.
As companies are now beginning to be allowed to export condensate ... it should be positive for the prices realized for condensate.
All IMHO
WSJ
EPD and PXD
By
Christian Berthelsen And
Lynn Cook
connect
June 24, 2014 5:14 p.m. ET
The Obama administration has quietly cleared the way for the first exports of unrefined American oil in four decades, allowing energy companies to chip away at the long-standing ban on selling U.S. crude overseas.
Federal officials have told two energy companies that they can legally export a kind of ultra-light oil that has become plentiful as drillers tap shale formations across the U.S. With relatively minimal processing, oil shipments could begin as early as August, according to one industry executive involved in the matter.
Using a process known as a private ruling, the U.S. Commerce Dept.'s Bureau of Industry and Security is allowing Pioneer Natural Resources Co. of Irving, Texas, and Enterprise Products Partners LP of Houston to export ultra-light oil known as condensate to foreign buyers who could turn it into gasoline, jet fuel and diesel.
Both companies confirmed they had received the rulings.
http://online.wsj.com/articles/u-s-ruling-would-allow-first-shipmen... -
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Permalink Reply by 015334grltd9m on
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BOOM!
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Permalink Reply by Jack Straw on
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I would like to make a personal recommendation ......
go out and purchase a Digital Voice Recorder.
I personally like the ones made by Olympus, but there are a number of other companies out there making them.
Around $150 will get you a very good one.; you want to spend enough that you get one easy to use (and dependable)
All states in the Marcellus/Utica are 'Single-Party' States EXCEPT Pennsylvania; this is a critical distinction .... in PA all parties to a telephone or personal conversation must be aware that a recording is taking place.
When dealing with a Landman, insurance adjuster, etc. it can be of critical importance to be able to 'prove' what has been said.
I think of a Digital Voice Recorder as a cheap 'Insurance policy" .... it assures that someone cannot subsequently deny having made a statement (and get away with it).
The only caveat is that it is IMPORTANT to know the laws of your particular state (and if a phone call, the laws of the state from which the other caller is located); especially important when PA is involved.
I am currently in a legal dispute, and my recordings of conversations has proven to demonstrate that my purchase (and use of) a Digital Voice Recorder was likely the best purchase I have ever made.
The new Digital Voice Recorders are super easy to use .... and the better ones record to a micro-SD card .... recording hundreds of hours of (time stamped) conversation on that one micro-SD card.
A picture may be worth 1000 words ..... but a 1000 words recorded on a Digital Voice Recorder can prove perjury in a Court of Law.
check out this website for information on the laws ....
http://www.dmlp.org/legal-guide/recording-phone-calls-and-conversat...
All IMHO,
JS
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Permalink Reply by jason irvine on
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Firstly. The pic or the ape loading there Forrest is so sad. They are tree dwellers and our closest ancestors and this is there fate. Sad sad sad. I guess we do worse to our own kind
As to the recorder. Be careful. Laws are different. My suggestion is to pull it out and tell them you are recording the conversation and ask for there permission. This will keep everything honest. -
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Permalink Reply by jason irvine on
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Losing. Not loading. Stupid spell check
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Permalink Reply by Jack Straw on
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RE: "The pic or the ape losing their Forrest is so sad."
The ape is an orangutan and the forest is on the island of Borneo (the World's largest island).
Orang is Malay/Indonesian for man.
Utan is Malay/Indonesian for forest or jungle.
So, orangutan = forest man.
Thirty + years ago, I was in Kalimantan (Kalimantan is the name for the largest (Indonesian) portion of Borneo); Japanese timber companies had towed huge barges up the rivers .... these barges were floating plywood factories .... they were turning the forests/jungles of Borneo into plywood; shipping the plywood down river for export to Japan. The island of Borneo was being turned into sheets of plywood!
The profits were shared by corrupt Indonesian officials and the Japanese companies.
The deforestation is on a massive scale; a human and ecological disaster.
Meanwhile, the indigenous peoples (Dayaks) and wildlife are driven from their homes.
The whole story is more sad than you could believe.
RE: "As to the recorder. Be careful. Laws are different."
Indeed, each State has it's own set of laws regarding the recording of conversations.
However, the laws are simple, simply stated, and simple to adhere to.
What the laws are for each individual State can be found by a simple Google search.
JS
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