Tag Archives: oil

Natural Gas Makes Largest Gains Since June

Natural gas prices burst back above $4 with their largest day of gains since mid-June as a rush of early winter cold has traders expecting rising demand for the fuel.

Cool Canadian air is likely to spill over everything east of the Rockies by week’s end, creating the first jolt of heating demand for what had been a tepid market, weather forecasters and analysts said.

Traders responded to updated weather forecasts by buying up contracts as soon as off-hours trading began Sunday evening.

“What that tells me is people were freaked out,” said Todd Gross, chief investment officer at QERI LLC.

Natural gas is a notoriously volatile market, heightened now by competing pressure from record supply and winter worries. An onslaught of gas from U.S. shale drilling has pushed the fuel’s price low enough to make it competitive with coal and has several bank analysts expecting a glut by the spring. But with winter only weeks away, many traders are thinking of last winter’s record cold and demand spikes that pushed prices above $6 a million British thermal units.

Read the Full Story >

National Energy Board approves four more LNG licenses in British Columbia – no time to waste

Four more proposed liquefied natural gas (“LNG”) projects in British Columbia have received approvals for export licences from the National Energy Board, bringing the total number of licenced projects to seven. Three of the four projects have major backers and include These four projects include: BG Group’s Prince Rupert LNG Exports Ltd., the Petronas-led Pacific NorthWest LNG Ltd. and Exxon Mobil Corp.’s West Coast Canada LNG Ltd. The fourth project is a smaller venture called Woodfibre LNG Export, planned for the Squamish area north of Vancouver. The NEB is reportedly reviewing an additional four applications on top of these seven granted licences.

None of the approved projects, however, are in the terminal construction stage because the proponents say they first need to learn details of the B.C. government’s plans for taxation of the LNG industry and internal assessments still must be conducted on the economics of proceeding.

Apparently none of the approved projects are in the construction stage. One of the reasons construction has not started is that the various proponents need to understand the BC governments taxation plans for the LNG industry. With the NEB doing their part the BC government can ill afford to delay the process as perhaps the entire Canadian natural gas industry is in jeopardy.

Just the day before the NEB announced their license approvals, the Energy Information Administration released their Annual Energy Outlook that forecasts the frack induced boom in natural gas and oil production will continue through to 2040. Natural gas production is forecast to rise a staggering 56% from 2012 to 2040 and will reach 37.6 trillion cubic feet (Tcf) and the report also predicts that the U.S. surpass Saudi Arabia as the world’s biggest oil-producer in 2015. Truly an amazing turn of events. So it is quite clear that the U.S. will not be needing Canadian natural gas any time soon, and Canada better move fast to save the Canadian natural gas industry.

If Canadians want to retain the billions of dollars generated and the thousand of jobs created by the Canadian natural gas industry, it is absolutely imperative that the pipelines to carry gas to the BC coast, and LNG facilities to process it for export must be approved and built as soon as possible. There is no time to waste. The U.S. once our largest customer is now our largest competitor and will not revert back to being a customer till at sometime after 2040. By 2040, a robust global LNG distribution network will be in place making LNG distribution worldwide efficient and cost effective. In order for Canada to compete effectively it is apparent a domestic distribution system that plugs into the global network must be in place.

While Ottawa reviews the licenses, BC debates tax schemes, and Canadians debate about pipelines and LNG distribution systems, other countries around the world are building out their distribution facilities and moving forward in being first to market, and first to service the energy hungry markets in Asia. The opportunity is there for Canada to seize but there is no time to waste.

Update: Today, the Northern Gateway Pipeline review will be released.

Read more @ The Globe & Mail: NEB Approves four more LNG license in BC, but await Ottawa’s blessing

Florida nuclear project cancelled in face of shale gas boom

Its unfortunate that Duke Energy scrapped plans for a $24-billion nuclear project in central Florida citing the boom in shale gas as the reason for the cancellation. This short sited view will only result in a the project re-emerging at a later date at a substantially higher cost. Though the Horn River News has long been supportive of the opportunity presented by the boom in shale gas globally, and called it as being the most important energy source of the next century, it is important to realize that no one single source can meet growing global clean energy needs. Nuclear will play a critical role in developing a sustainable, low emission energy mix.

HRN

(Source) North America’s nuclear industry received more bad news last week when Duke Energy scuttled a planned $24-billion nuclear project in central Florida, as competition from low-cost gas has cast a pall over a long-promised renaissance.

Duke is only the latest in a list of companies that have either cancelled construction plans or announced closure of reactors that had been scheduled for costly overhauls.

The industry has run into a number of problems including weak power demand and cost over-runs. But it has also become hard to justify new nuclear in the face of a shale gas boom that not only has brought low prices, but is expected to keep a lid on the fuel costs for decades to come.

Ontario is currently redrawing its long-term energy plan, and will be reviewing proposals from Westinghouse and Candu Energy to build two reactors to make up for the loss of capacity when older ones reach end of life in the next decade.

Full Article: Globe & Mail; Florida nuclear project cancelled in face of shale gas boom

Happy Birthday to the Pickens’ Plan

Pickens-Plan-LogoThis week marks the fifth anniversary of the announcement of the Pickens Plan. Mr. T. Boone Pickens has launched a video celebrating and summarizing all of the accomplishments of the Pickens Plan and an op-ed that he wrote which was published in the Dallas Morning News.

Congratulations on five successful years T.Boone! Here’s to five more.

Obama sets stage for Keystone XL approval

Photo: AP Photo/Charles Dharapak

Photo: AP Photo/Charles Dharapak

In a speech yesterday in President Barack Obama stated the Keystone XL pipeline will be rejected unless it’s clear that it won’t exacerbate global warming.

“Allowing the Keystone pipeline to be built requires a finding that doing so would be in our nation’s interests,” the President said, adding “our national interest would be served only if this project does not significantly exacerbate the problem of carbon pollution.”

President Obama has appeased the opposition while setting Keystone up for approval later this year because Keystone will easily meet the stated requirements.

First, with or without the Keystone pipeline the Alberta oil-sands will increase production over the coming years. The pipeline will not have an impact on this growth or the carbon emissions from the oil-sands production.

Second, the increased shipment of Alberta oil-sands product via the Keystone is intended to replcace heavy oil from Venezuala and other suppliers. So again, the keystone pipeline will not result in a net increase in emissions.

In fact, if the Keystone is not built there will be an increase in emissions as oil-sand bitumen will be shipped to the USA from Alberta buy diesel powered locomotives and also have an increased risk profile compared to shipping via pipeline.

President Obama has set the criteria know that it will be achieved and when approved will be able to defend his decision.

The alternative solution would be to build refining capacity in Canada and ship end products rather then raw bitumen to the USA. The Americans would happily buy it and it would create all those jobs in Canada rather then the USA (apparently they don’t want the jobs or don’t need them in the USA!)

Keystone XL will get built, and so will the Northern Gateway pipeline which will open a secondary market for Canadian oil and gas in Asia as it will also meet the same criteria. It is not good business to be dependent on just one customer just as the USA is not dependent on one supplier.

UK shale gas survey likely to reveal reserves higher than expected

(Source: The Guadian) New estimates of the UK’s reserves of shale gas will be published on Thursday, and are expected to be much larger than originally thought – potentially supplying the UK with decades’ worth of natural gas, if a high proportion of the gas in the rocks can be extracted at a low cost. However that key question that cannot yet be answered due to the lack of experimental wells drilled so far and the challenges posed by the UK’s high density of population.

New shale gas drilling is likely to come under fire from protestors, though ministers are hoping to put off opposition by offering local communities incentives to encourage them to agree to the fracking operations. The incentives which may take the form of energy bill discounts or improvements to local amenities.

The survey of shale reserves, carried out by the British Geological Survey at the request of the Department of Energy and Climate Change, has been much delayed, reflecting how politically controversial it is. Read full story.

Deloitte: Shale gas, oil potential increasingly apparent

Oil and gas production from tight shale formations clearly is a long-term phenomenon and not a short-term trend, Deloitte LLP officials told reporters. The financial services company found growing confidence in unconventional energy resources in a survey it conducted last year, said John England, a vice-chairman and leader of its oil and gas practice.

“Huge investments are flowing into this sector from previously unheard from sources,” he said on May 21 during Deloitte’s 2013 Washington Energy Conference at nearby National Harbor, Md. “It’s a reason so many foreign companies have come into the US. Investment recently has flowed to midstream infrastructure, but there’s still strong interest upstream.”

More natural gas liquids are being recovered along with the shale gas, and that’s attracting investments too, he observed. “It’s interesting that we’re having this debate about authorizing more [LNG] exports when we’re already export significant amounts of NGLs,” England said.

Growing tight oil development also is generating more investments, he continued. “Even in the Eagle Ford and Bakken formations, recovery rates are still quite low so there’s a real technology opportunity,” he said.

Joseph A. Stanislaw, Deloitte’s independent senior energy and sustainability advisor, said the whole global energy equation is changing because of what North America is doing with shales. “This new fossil energy abundance could benefit alternatives if we use it not as an end, but a means,” he suggested. Read more…

EU Seeks Energy Integration as U.S. Shale Gas Widens Price Gap

(Source: Blomberg) According to a commission report prepared for a summit of EU leaders, shale gas production has contributed to a widening gap between U.S. and EU industrial prices for energy. The increase in European energy prices is linked to the inconsistency of EU policies to boost the share of renewable energy, increase energy efficiency and cut greenhouse gases, as well as to national policies that distort the internal market, according to a study.

Bloomberg: “EU Seeks Energy Integration as U.S. Shale Gas Widens Price Gap”

Canada’s natural gas industry could be worth $1 trillion

The Conference Board of Canada published an analysis Monday that expects Canada’s natural gas industry to add more than $1 trillion to Canada’s economy over the next 24 years and support an average of 260,000 jobs a year over that time frame.  At HRN we completely agree!

The ambitious projection factors in all the direct investment, but also ancillary spinoffs down the supply chain and figures all regions of the country stand to benefit, even those provinces without any large natural gas holdings.

Read more: Canada’s natural gas industry could be worth $1 trillion

Is the shale gas “miracle” over-hyped?

In his upcoming book ““Cold, Hungry and in the Dark: Exploding the Natural Gas Supply Myth.”, Bill Powers argues that the shale gas miracle is over-hyped and will disappoint. Mr. Powers believes that shale gas will only last 10 years, and not the 100 years that many predict.

Certainly, in the recent presidential campaign both President Barack Obama, and Governor Mitt Romney both pointed to shale gas as a major contributor to America’s energy independence. But if there are only 10 years of shale gas in the ground the contribution of shale gas to this objective would be short-lived. Who’s right?

Everyone has their own “best estimates” all from expert opinions based on years of research and study. And Mr. Powers is one of many professional opinions. Certainly the shale gas boom in the USA, and Canada has brought on a massive new energy supply source that has fundamentally changed the North American and global energy markets. And the shale gas story will not end with the U.S. as new shale gas basins are discovered, developed and put into production around the world with major geopolitical impact.

But this is not about this story, the focus is the USA (North American) energy market, and whether the shale gas reserves will provide 10 or 100 years of energy.

The US Energy Information Administration (“EIA”) estimates that there are 2,203 trillion cubic feet (Tcf) of natural gas that is “technically recoverable” in the United States. At the rate of US natural gas consumption in 2011 of about 24 Tcf per year, 2,203 Tcf of natural gas is enough to last about 92 years.

However, given human nature and fundamentals to migrate to the lowest cost, as long as natural gas remains at current low levels, consumption is likely to increase as more power plants, trucks, cars, etc convert to natural gas. And during this same time of increasing demand we would likely see increases in natural gas prices which over time would temper demand. It is challenging to see how Mr. Powers gets from the EIA’s 92 year estimate to less then 10 years.  His theory is primarily based on stating that the data used by EIA and others is fundamentally flawed by over estimating the production life of shale gas wells. In other words, production drops off sooner and faster then most predict.

(The EIA states: “Technically recoverable reserves consist of “proved reserves” and “unproved resources.” Proved reserves of crude oil and natural gas are the estimated volumes expected to be produced, with reasonable certainty, under existing economic and operating conditions. Unproved resources are additional volumes estimated to be technically recoverable without consideration of economics or operating conditions, based on the application of current technology.”)

The key question here is what is the production life cycle of a shale gas well? It has always been know that this cycle is relatively short and dramatic compared to the longer production life of a traditional gas well. These life cycles differ between basins, whereby one basin may average longer production then another. It is not uncommon to see a production drop-off of 50% in the first 12 months of production in many wells. Numbers vary between basins and between wells.

Perhaps the EIA is wrong in their 92 year estimate, though their access to data seems to be quite extensive. There certainly are some variables including their usage of 2011 natural gas consumption rates their calculation and not predicting any increasing consumption rate over time. Either from economic growth, or increaseed usage of natural gas as part of the overall energy mix. Based on this alone one could resonable estimate that 92 years is not one hundred percent accurate. But with that said, predictions are never one hundred percent accurate and for this reason alone we know Mr. Powers calculations are likely off.

So if we took all the scientific calculations, and included Mr. Powers predictions we would like find a life span for shale gas between sixty and seventy years – about one generations worth of energy. Only time will tell who is right.

You can read a complete interview with Mr. Powers on the Energy Report: US Shale Gas Won’t Last 10 years

Forbes: In Obama’s Second Term, Shale Gas Production Not Likely to Slow Down