Tuesday, February 1, 2011

A Natural Gas Glut?

January 27, 2011
U.S. Company, in Reversal, Wants to Export Natural Gas

Mr. Souki’s plan “can be made to work,” said Nikos Tsafos, a gas expert at PFC Energy, a consultancy firm. He warned, however, that as more companies began exporting American gas, it could pull the price of the commodity up in the United States and push it down in international markets.

Skeptics predict that the current gas glut in the United States will spread around the world as shale is drilled in Europe and Asia, major producers like Russia increase exports and more L.N.G. export terminals are built in the United States.

“For heaven’s sake, Israel just discovered 16 trillion feet of gas,” said Mr. Gheit. “Indonesia, Qatar, Algeria, Nigeria and now Israel can all sell cheaper than the U.S.”


Here's a chart of inflation adjusted natural gas prices from 1922 through 2009.



I have added its median inflation adjusted price over the period in red. I'm not suggesting that natural gas prices (adjusted for inflation) will return to the median, but there would seem to be ample room for more downside surprises. As one who heats his home with natural gas, you would not see me complaining.

November 9, 2010

Natural gas glut changes global energy forecast

Even rising global gas use, which will increase faster than any other fossil fuel, won't overcome a production surge that is emerging from shale gas resource development in the United States, and in Canada.

"The gas glut will be with us 10 more years," IEA chief economist Fatih Birol told Reuters.


International Energy Outlook 2010: Natural Gas

Although the extent of the world's tight gas, shale gas, and coalbed methane resource base has not yet been assessed fully, the IEO2010 Reference case projects a substantial increase in those supplies—especially in the United States, but also in Canada and China. In the United States, one of the keys to increasing natural gas production has been advances in horizontal drilling and hydraulic fracturing technologies, which have made it possible to develop the country's vast shale gas resources, and have helped to increase total U.S. natural gas resources by almost 50 percent over the past decade.

August 18, 2003
INTERVIEW WITH MATTHEW SIMMONS

Well, I know you understand it, but people need to understand the concept of peaking and irreversible decline. It’s a sharper issue with gas, which doesn’t follow a bell curve but tends to fall off a cliff.

There will always be oil and gas in the ground, even a million years from now. The question is, will you be a microbe to go down and eat the oil in small pockets at depths no one can afford or is able to drill to? Will you spend hundreds of thousands to drill a gas well that will run dry in a few months? All the big deposits have been found and exploited. There aren’t going to be any dramatic new discoveries and the discovery trends have made this abundantly clear.


Oops.

Update:



The red trend line shows the 12-month moving average.

Here's a chart that adjusts for population growth.




December 27, 2005
Hurricane Impacts on the U.S. Oil and Natural Gas Markets

Hurricanes Katrina and Rita damaged a number of natural gas processing facilities on the Gulf Coast.

Source Data:
EIA: Natural Gas Prices
EIA: U.S. Natural Gas Gross Withdrawals
BLS: CPI
St. Louis Fed: Population

14 comments:

Stagflationary Mark said...

This is probably the most optimistic post I've ever done on my blog.

It's a good day. I am encouraged by what I'm seeing in natural gas.

September 23, 2007
Productivity Miracle

If I'm wrong to be a stagflationist, this is the sort of thing that would do me in. It is also something one needs to factor in when hoarding hard assets in general.

Natural gas isn't technically a "hard" asset, but it is close enough.

I was hoping Mr. Fusion would help us out over the long-term, but perhaps Mr. Natural Gas is good enough.

I'm still bearish on long-term job creation and mounting debts, but what's new? I'll take what I can get.

remy said...

I attended a conference that had a guest from San Diego Gas and Electric... Sounds like we currently import 30% of our NG. This figure is expected to be 0% by 2035.

Cost of gas is expected to remain between 4-$5 over the next 25 years!

cheers,

remy

watchtower said...

Mark, after checking out your post I googled something and found out that Matt Simmons had died.
I had no idea that he had passed away on 8/9/10.

Sorry, I know that's not relevant but it kind of shocked me.

dearieme said...

I had a consulting job a few years ago with one of the oil majors. It was to do with exploiting abundant cheap natural gas. And that was before "fracking" became so successful. It's oil where there's the depletion worry, not gas. Hell, many failed drillings for oil find gas anyway.

Oil gives you transport fuels and lubricants. You could make 'em from coal but it's pricey. You could make 'em from gas if you found it profitable. If you look at the carbon:hydrogen ratio, you could in priciple make them from a combination of coal and gas.

In fact, there must be parts of the Western US with adjacent coal, gas, and snow fields (= water): boy, you chaps could do well out of that. What's stopping you? As if I need ask.

Stagflationary Mark said...

remy,

Cost of gas is expected to remain between 4-$5 over the next 25 years!

If that is true then perhaps the inflation adjusted price of natural gas really could come back down to the median. Wouldn't that be something.

Stagflationary Mark said...

watchtower,

I saw that Matt Simmons had died. I read a book/paper of his online for free a few years ago. I didn't really know what to make of it. It was more of a "peak energy" book and although it certainly scared me a bit, I don't think with a sun 93 million miles away we will run out of energy in my lifetime.

The conspiracy theorists were all over his death of course.

His education came from the Harvard Business School, so to me he wasn't exactly a scientist.

Matthew Simmons, 1943-2010

Stagflationary Mark said...

dearieme,

What's stopping you? As if I need ask.

Yeah, no need to ask. We'll get to it eventually I suppose. The good news is that we're not draining our reserves I guess.

Use up the energy of other countries first? Maybe that really is our long-term plan?

Stagflationary Mark said...

Coal

The United States has the world's largest coal reserves.

getyourselfconnected said...

Peak Oil and or gas never really hit he that much. Should have peaked by now, yes? Cheap oil, yeah, but in my lifetime?

mab said...

This is probably the most optimistic post I've ever done on my blog.

Let's see if we can ensure that the optimism isn't fleeting. I'm thinking we should introduce home-owers imputed snow shoveling into the GDP account. It would do wonders for GDP "growth".

As long as the enjoyment home-owers don"t get from shoveling snow is exceeded by the money saved by not paying the mortgage on their underwater and deflating property it should all work out. Maybe not.

getyourselfconnected said...

Mab,
Thats a big NO! My efforts today alone will subtract GDP because I cannot move, hence cannot buy anything!

mab said...

GYC,

Maybe you haven't heard, but it's all pretend now. Fictional GDP is the same as real GDP.

Besides, if you can't move, you can use Al (Mr. Global Warming) Gore's internet to buy stuff from home.

You need to get yourself connected! ;)

getyourselfconnected said...

Ugh, good point!

Stagflationary Mark said...

I should have checked my email sooner.

I missed out on all this Snowfest economics! ;)