Wednesday, June 30, 2010
Watching a kitchen faucet burst into flames is startling to say the least.
That’s one of the outrageous scenes you will see if you watch the new documentary Gasland, which was aired last week on HBO.
Produced like the in-your-face sensationalism of Michael Moore, director Josh Fox exposes his take on the negative effects of natural gas drilling in the United States.
Much of the criticism centers on the effects of hydraulic fracturing on drinking water, and the drilling frenzy in the Marcellus shale underneath Pennsylvania.
Actually, the movie wasn’t broadcast in Canada so I haven’t seen it yet. I’ve only smiled through the exaggerated trailer on YouTube and read through the predictably contemptuous blogs.
So I’m not really qualified to review the flick, even though much of the content looks thin on objectivity and fat on sketchy facts (apparently the gas coming out of the kitchen sink is naturally occurring biogenic gas, not natural gas as implied).
Anyway, Gasland is unlikely to have much effect on the booming North American drilling trend.
Like it or not, there is too much economic momentum behind the business – jobs and wealth creation in depressed regions have a tendency to trump fringe concerns.
And now there is a new twist to the real-life shale gas story – unfolding week-by-week to industry participants like an exciting movie plot – that will continue to keep drilling activity robust: the influx of Asian capital.
Historically, low natural gas prices have been effective in quickly crimping exploration and development investment, sending rigs home and moderating production output.
Waiting for investment to dry up has been the part of the shale gas movie everyone in the natural gas business has been anticipating.
Yet, an announcement by EnCana last week confirms that the plot is taking on a different direction.
Putting pen to paper in a memorandum of understanding, EnCana and the China National Petroleum Company (CNPC) now have a framework for the two companies to negotiate a potential joint-venture investment in prolific unconventional gas regions of Northeastern British Columbia, specifically, plays in the Horn River, Greater Sierra and Cutbank Ridge areas.
In other words, EnCana will be able to tap into deep, long-term Chinese pockets for exploration and development capital.
The dollar amount is not specified, but I know first hand that Chinese state-owned petroleum companies have difficulty thinking in anything less than 10 figures.
EnCana is not a pioneer in bringing Asian money to shale gas.
About a week ago Chesapeake Energy Corp., one of the biggest independent shale gas producers announced that it had sold $900 million in preferred stock to a group of private investors, mostly from Asian sources including China Investment Corp., Korea Investment Corp. and Temasek Holdings of Singapore. Money from India is spilling into North American shale gas too; recently Reliance Industries agreed to pay $1.36b for a 45% stake in Texan shale gas assets, including the liquids-rich Eagle Ford play.
The deal was the second by Reliance since April when it paid $1.7 billion to form a venture with Atlas Energy, a major player in the Marcellus country portrayed by Fox’s Gasland.
Assure yourself that there will be a lot more Asian capital pouring into resource rich areas of Canada and the United States.
But the plot underlying the natural gas movie will have to reach a denouement over the next couple of years, because investment dollars and low gas prices do not mix for long even if the dollars come from the other side of the world.
Relentless drilling at the current pace will continue to pressurize the continent with excess natural gas, to the point where Americans and Canadians will have natural gas coming out of every structural orifice, from kitchen faucets to manhole covers.
Something will have to give before that happens.
You know you have a real energy megatrend when someone makes a contrarian documentary with outrageous claims. Yet the story of natural gas using hydraulic fracturing is no longer just about new technology, aggressive drilling, environmental concern and production growth.
There is a broader plot here that will take the North American shale gas story through another twist or two: the influx of Asian capital followed by reciprocal exports of LNG to Asian markets.
Announcements by large natural gas producers over the past few weeks are like a movie trailer for what’s to come.
© Copyright (c) The Calgary Herald
Posted by Larry at 4:29 AM
Tuesday, June 29, 2010
By Dina Kraft · June 28, 2010
TEL AVIV (JTA) – More than a year after a massive natural gas find in the Mediterranean Sea off the Israeli coast sparked hopes in Israel of a new era of energy independence, the project is running into concerns about how the gas can be delivered safely.
The BP spill in the Gulf of Mexico has raised concerns in Israel about processing the gas and its delivery within the country.
"You don't just open the valve and everyone's happy," said Zeev Aizenshtat, a fossil fuels expert who works as a chemistry professor at Jerusalem’s Hebrew University. "In a country that has security problems, especially with the imminent threat of missiles coming in, you need to makes sure the pipes are well protected.”
The question is how to bring the gas, which was discovered in February 2009 one mile below the sea floor approximately 50 miles off the Haifa coast, to Israel, and then how to distribute it throughout the country. Natural gas is highly flammable, and Israel also lacks the infrastructure of piping needed to distribute the gas nationwide.
If Israel finds a way to deliver it safely and efficiently, the treasure trove of some 24 trillion cubic feet of natural gas could be Israel's ticket to energy independence, providing the country with some 70 percent of its energy needs for the next 20 years, according to experts.
The trove is a combination of two major gas fields -- called Leviathan and Tamar, named for the granddaughter of Israeli energy mogul Yitzhak Tshuva. It was Tshuva’s Delek Group and a U.S. partner that were responsible for the drilling that led to the finds.
Israel’s energy needs are now provided mostly by coal. Israel imports natural gas from Egypt via a pipeline, and it imports coal and oil from countries around the globe, including Russia, Mexico and Norway.
"This discovery is nothing short of a geopolitical game changer," Gal Luft, executive director of the Institute for the Analysis of Global Security, a Washington-based NGO that deals with energy and security issues, wrote earlier this month in the Haaretz newspaper.
But several challenges come first. Lebanon claims it has rights to the Leviathan find because they say the northern part of the find is in Lebanese territorial waters. Israel dismisses the claim, saying it is firmly within its own maritime boundaries.
“We will not hesitate to use our force and strength to protect not only the rule of law but the international maritime law,” Minister of National Infrastructure Uzi Landau told the Bloomberg news agency last week, responding to the Lebanese claims.
Then there is the question of how to deliver the gas and avoid accidents like the BP spill especially if, as is now being considered, Israel builds a natural gas processing plant in the sea rather than on land.
The underwater plant has two potential benefits. It could offer the processing plant additional protection from attack by terrorists or enemy aircraft, and it could circumvent the not-in-my-backyard syndrome that stands as an obstacle to the construction of a processing plant near Israeli population centers along the coast. Local opponents already have emerged against each of six potential sites for the plant on land.
Israelis are concerned that the gas power plants could become military targets or turn into fireballs, said Amit Bracha, executive director of the advocacy group Adam Teva V'Din, The Israeli Union for Environmental Defense.
"The not-in-my-backyard syndrome takes on new meaning in Israel, which is so small," Bracha said.
Adam Teva V'Din supports the alternative option of establishing the plant underwater.
"No one can bomb it," Bracha said, "and it's safer because it's not near any neighborhoods."
But safety concerns attend to that option, too.
A spill in the water would cause serious environmental damage, albeit less than a toxic oil spill. Even on land, Israel would have to build a network of pipes that would be secure and able to shut down automatically if there is a leak.
The government is conducting a survey to determine the best option for constructing the natural has processing plant. In any case, the gas itself won't be tapped until 2012 because it takes time to set up a distribution infrastructure.
In a statement to JTA, the National Infrastructure Ministry wrote that even if a decision is made to build an underwater plant, it does not preclude the possibility that one might also be built on land.
Aizenshtat said the natural gas find could help Israel achieve newfound independence.
"We were promised a land of milk and honey by God, but nothing was ever said about petroleum," he said. "But the moment you do have it, people start looking at you differently.
"Energy today is a commodity that countries live and die by," he said. "Whoever has control of the faucet can have a strong influence on the world. Politically this find is very important."
Posted by Larry at 2:18 AM
Sunday, June 27, 2010
If the United States — and by extension the world — has a hope of shifting to a low-carbon future, that shift will almost certainly involve burning a vast volume of natural gas. So concludes an assessment by researchers at the Massachusetts Institute of Technology in Cambridge, who estimate that the US could reduce greenhouse gas emissions from the electricity sector by at least 10 percent virtually overnight by shutting down inefficient coal-fired plants and ramping up gas-powered generators.
"In a carbon-constrained future, gas plays a particularly important role as a bridge," says Ernest Moniz, who headed the project as director of MIT's Energy Initiative (MITEI).
Burning natural gas to generate electricity emits roughly half as much carbon dioxide as coal. Following up on earlier reports covering nuclear power and coal, Moniz and his colleagues took an in-depth look at natural gas supplies and the role they could play as the world moves toward a low-carbon energy system. The new report on The Future of Natural Gas comes at a time when 'hydraulic fracturing' technologies have opened up huge reserves of gas associated withshale formations across the US. The technique, which involves injecting high-pressure fluid into rock to open cracks and release gas, has also raised environmental concerns because of contamination risks to aquifers and surface water.
"The environmental risks are manageable but challenging," says study co-chair and MITEI Visiting Engineer Anthony (Tony) Meggs who is a retired group vice-president of technology for BP. He notes that a typical high-volume 'frac job' may return 50 to 100 thousand barrels of fluid to the surface, which would require safe disposal to avoid contamination. To safeguard against environmental problems, the report calls for transparency in gas-field practices, integrated water use and disposal plans and mandatory disclosure of the ingredients in fracture fluids.
The MIT study pegs the US supply at around 2,100 trillion cubic feet, which is enough to fuel the country for roughly 92 years at 2009 consumption levels. That puts the United States behind only Russia and the Middle East as a whole in terms of supply — a dramatic transformation compared to less than a decade ago, when falling production rates triggered price spikes and speculation that the US would soon be forced to begin importing large quantities of liquefied natural gas. According to the report, the greatest potential for growth is in the electricity sector, although natural gas could also be deployed to fuel fleet vehicles, buses and long-haul trucks in the transport sector.Significantly, the study found that with a 'level playing field' approach in which the relative prices of various energy sources are set to reflect the carbon dioxide they produce, gas could almost entirely displace coal burning in the US by 2035. Under such a policy regime, natural gas consumption would begin to taper off by 2050 because of the need to limit all sources of carbon, says Moniz, "but for a good period of time, if we are going to crank down on carbon emissions, we need natural gas to play a critical role."
As a concrete example, the study includes an in-depth modelling analysis of the Texas electric system, which is largely self contained, and found that a 22 percent reduction of greenhouse emissions from the power sector was achievable in the short term, with similar opportunities available across the United States.
"Gas is where you have the most leverage over climate on the energy supply side right now, and I think this report does a good job of emphasizing that," says Mark Thurber, associate director for research at Stanford University's Program on Energy and Sustainable Development. Although there are no technical barriers, the political challenge is getting the monetary incentives or regulations in place to help gas displace coal, Thurber says. "In my mind, the next discussion should be, 'Okay, well how do we do it?'"
Posted by Larry at 1:37 AM
Thursday, June 24, 2010
by STUART on JUNE 23, 2010
On the face of it, Reliance Industries of India’s purchase of a stake in Pioneer Natural Resources for US$1.35 bn looks like a simple diversification by India’s largest listed company into a solid long term investment. The report in FinancierWorldWide.com states that Reliance will take a 45% stake in the Eagle Ford shale gas field in southern Texas. This comes on top of Reliance’ joint venture with Atlas Energy in April and resulting 40% stake in its Marcellus Shale operations in the eastern US.
That all makes good sense, although the price of natural gas has plummeted in North America (and indeed worldwide). This, driven by a surge in supply from new shale gas deposits and the low cost of shale bed drilling makes these deposits still attractive. A Times of India blog article explains why Anadarko Petroleum is ramping up drilling in the relatively low yielding Marcellus Shale (stretching hundreds of miles from West Virginia to New York), even though natural gas prices are low. The firm is aiming to achieve a 10% rate of return at a gas price of $2.50/mm British Thermal Unit. This is well below the current US price of $3.70, and a fraction of the $13 last seen in June 2008.
But maybe the Reliance investment in the US shale gas market should be seen in the wider trend by foreign oil companies to buy into US gas explorers to secure access to the technology for exploration at home. Much as BP, Statoil and Total have each struck deals with Chesapeake Energy partly to buy into solid investments but also to position themselves for the flurry of exploration opportunities in Europe, Reliance could have an eye on the potential for shale gas back in India. India has huge shale deposits across the Gangetic plain, Assam, Gujarat, Rajasthan, and many coastal areas. Natural gas from shale could be accessed at a fraction of the cost of the offshore fields Reliance is developing in the Krishna-Godavari Basin in Andhra Pradesh basin.
You may ask why shale gas is not already a hot topic in India and you will not be surprised to hear the reason is government bureaucracy. India’s exploration policy allows companies to produce only conventional oil and gas from their exploration blocks. If they find non-conventional energy — such as coal-bed methane or shale gas — they are forbidden to produce it! Why? Because, the petroleum ministry regards any non-conventional deposit as an unwarranted windfall for the exploring company, and wants separate bidding for non-conventional energy. Clearly this has to change and you can be sure Reliance is playing its part lobbying the shadowy halls of power in Delhi (they may even have advance warning that the rules are going to be changed). Regardless, Reliance investments are a hopeful indication that shale gas could begin to be a significant power supply source in India where dispersed electricity generation facilities are desperately needed across the whole country. In the case of shale gas this could be done with much lower levels of environmental pollution than would be the case with the current coal fired power program underway in the country.
Posted by Larry at 3:31 AM
Sunday, June 20, 2010
(Reuters) - A new documentary purporting to expose the hazards of onshore natural gas drilling illustrates its point with startling images of people setting fire to water flowing from faucets in their homes.
"GasLand," which premiers on cable's HBO on June 21, fuels the debate over shale gas and the extraction process known as hydraulic fracturing, which involves blasting millions of gallons of water, sand and diluted chemicals into shale rock, breaking it apart to free the gas.
It comes at a time of heightened environmental awareness and scrutiny of the energy industry due to the BP oil disaster in the Gulf of Mexico.
Advocates promote shale gas as an abundant and relatively clean source of energy within the United States but critics including "GasLand" director Josh Fox assert there are environmental and health risks.
playwright, calls the industry's contention that such drilling is harmless too good to be true. He started asking questions about when his family was offered $100,000 plus royalties to allow hydraulic fracturing, also known as "fracking," on their property. Pennsylvania
"I don't think it's a gold mine. I think it's a trap," Fox said. He turned down the offer but many neighbors took the money.
The documentary traces Fox's cross-country journey and includes interviews with families who signed leases with the gas industry and now regret it.
, Fox shows families setting tap water alight due to what they say is gas that entered the water during the drilling process. Colorado authorities ruled out that scenario at one of the homes where Fox filmed. Colorado
"The film started with just a basic inquiry into what was happening with gas drilling," Fox told Reuters in an interview. "Quickly, though, I found out that it was a complete disaster for all the places that I visited."
The film, Fox's first feature-length documentary, won the Special Jury Prize for documentaries at the Sundance Film Festival.
The gas industry disputes the film's findings, saying for example that methane migration that allows water to catch fire can occur naturally.
"This filmmaker, while well-intentioned, is getting a lot of attention but he's not qualified at all to be an authority on this issue," said Jim Smith, a spokesman for the Independent Oil and Gas Association in
, an industry group. New York
In a lengthy "debunking" of the film, Chris Tucker at the Washington-based industry group Energy in Depth wrote, "Accuracy is too often pushed aside for simplicity, evidence too often sacrificed for exaggeration."
Fox's home sits on the massive Marcellus Shale formation, which extends across much of
Pennsylvania and parts of West Virginia, Ohio and , and is the nation's largest known shale reserve. New York
His inquiry led him to the northeast
Pennsylvania town of , where residents say gas drilling by Cabot Oil & Gas Corp contaminated their water wells with toxic chemicals, causing sickness and reducing property values. Dimock
The state's Department of Environmental Protection has since said Cabot contaminated the drinking water of 14 homes in Dimock by failing to comply with a order to fix defective well casings that discharged natural gas into ground water.
"The whole town was turned completely upside down," Fox said. "None of that stuff is mentioned when land men come to somebody's front door or send them a letter in the mail saying, 'Hey we're going to give you $100,000.'"
Smith said that while what happened in Dimock was "unacceptable," it was the result of operator error. He said there have been no cases of drinking water contamination that can be tied to fracking.
(Editing by Alan Elsner)
Posted by Larry at 9:21 PM