A 'Hidden Agenda' in Gas-Supply

The government has hijacked the public’s concerns over energy supplies in the coming hot season as part of a hidden agenda to build more environmentally unfriendly power plants in the South, conservationists said yesterday.

Energy Minister Pongsak Ruktapongpisal said earlier that the ministry was preparing emergency measures for April to deal with an imminent shortage of power due to an expected disruption of gas supplies from Myanmar and Malaysia. 

Regional environmental conservationist Witoon Permpongsacharoen, director of the Mekong Energy and Ecology Network, argued that the gas supply from Myanmar was just one-fourth of the Kingdom's total supply. The planned halt in the supply for pipeline maintenance would not be a power crisis in Thailand, he said.

"If the shortage of supply from Myanmar could create a crisis as the minister claims, there would be a serious problem in our national energy system," Witoon said.

Jintana Kaewkhao, leader of the Ban Krut Conservation Group, said Pongsak was simply exploiting fears of a power shortage to boost support for the government's plan to build more power plants.

On Saturday, Pongsak went on TV to warn the public of a possible power shortage in April as Myanmar would shut down its natural gas fields temporarily to fix drilling rigs, causing Thailand to lose access to 1,100 million cubic feet of natural gas. 

The minister said Thailand had already lost access to 270 million cubic feet of natural gas through the Thai-Malaysian gas pipeline, but Chakree Buranakanon, vice president of PTT Plc's natural gas business unit, said the problem at the Thai-Malaysian pipeline had been fixed and supplies were normal.

"The consumption of power by Thais has not reached a crisis level yet. If a crisis occurred, it would affect large industrial projects, [rather than the general public]," Jintana said.

Witoon said the minister had stoked fears of a gas shortage to build support for the government's plan to build coal-fuelled power plants in the South.

The authority is now opening bids for six power plants to generate a combined 5,400 megawatts under the Independent Power Producers scheme, amid opposition from conservationists and southern residents in the areas where the plants would be located, he said.

Korn Kasiwat, a petroleum expert, said the closure of the gas fields in Myanmar would not affect the general public or household consumption.

Korn said the general public has been consuming petrol and diesel oil at a constant rate of about 73 million litres per day, while natural gas consumption is growing at a slow rate of 10 per cent per annum.

He said the shortage of natural gas would affect the petrochemical industry most because it uses 2.4 million tonnes of natural gas a year at a cheaper rate than is paid by the public. He said household consumption of cooking gas was 2.6 million tonnes a year, while vehicles used natural gas at a rate of 900,000 tonnes a year. The country has capacity to produce 3.5 million tonnes a year. He believed Pongsak expressed concern because the Energy Ministry might be planning to implement certain energy measures that would lead to price hikes.

Chakree Buranakanon, vice president of PTT Plc's natural gas business unit, told Nation Channel he believed Thailand would not experience a power-supply crisis.

Chakree said the short supply of natural gas would cause the power reserve to become low, which might prompt the government to believe that there is a risk of power instability in case of emergency.

He said Myanmar closed the fields to fix drilling rigs every year, but this year the closure would come early, starting on April 4 instead of during the Songkran holidays, when less gas is consumed. He said PTT would set up a "war room" to monitor the situation closely.

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Natural-Gas Drilling Lease to Pay Conservancy District $40.3M

The Muskingum Watershed Conservancy District approved a $40.3 million natural-gas lease yesterday for 6,500 acres at Seneca Lake in Guernsey and Noble counties.

The lease with Colorado-based Antero Resources was approved 5-0 by district commissioners, despite continued protests from a grass-roots group, the Southeast Ohio Alliance to Save Our Water.

The district will be paid a leasing bonus of $6,200 per acre plus a royalty of 20 percent on natural gas, oil and natural-gas liquids from Antero wells under district-owned land, district spokesman Mark Swiger said.

That makes the district, which stretches from southern Akron to the Ohio River, one of the biggest beneficiaries of the Utica shale boom in eastern Ohio. It will get $77.4 million for the Antero lease and two earlier leases at other lakes. Additional and significant royalty income also is expected from the wells at the three sites.

The district covers 14 reservoirs and dams in 18 counties.

Lea Harper of Senecaville, spokeswoman for the grass-roots group, said the board had failed to listen to health and environmental concerns repeatedly raised by her group and experts assisting the group.

Added supporter Greg Pace of Senecaville: “You can’t drink money. That says it all.”

At Seneca Lake, no wells or related developments, including roads and pipelines, will be permitted on district-owned land under the agreement. But Antero could drill under the lake and district-owned land from wells at other sites, officials said.

The lease arrangement also adds protections to adjacent private properties within a half-mile of district-owned land, the district said.

Swiger said the number of acres could change slightly, depending on the outcome of title searches on the mineral rights.

The district owns about 7,600 acres at Seneca Lake, most of which has not been leased for drilling. The 3,550-acre lake is the third-largest inland lake in Ohio.

A total of 13 drilling companies had expressed interest in the Seneca Lake property, with two firms, Antero and Texas-based Carrizo Oil and Gas, making formal presentations.

The district signed leases in 2011 with Gulfport Energy at Clendening Lake in Harrison County and in 2012 with Chesapeake Energy Corp. for land at Leesville Lake in Carroll County.

Gulfport paid the district a $15.6 million lease bonus on 2,800 acres and royalties on natural gas produced.

Chesapeake paid the district $21.5 million in lease bonuses on 3,700 acres plus royalties.

The district has used the initial leasing bonuses to pay down its debt and to invest in improvements for public access and for its recreational facilities.

The district has identified more than $80 million worth of deferred maintenance, compliance issues and needed upgrades at its facilities.

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Oil and Gas Feeding Off Each Other While They are Fueling Economic Recovery

Talk of America’s energy independence is centered on its newfound wealth of tight oil and shale gas deposits. While the market place is shifting, the winners will be those that can outlast today’s low prices and its limited infrastructure.

Oil and natural gas are often found alongside one another, making it completely logical that the oil companies would be making hefty investments in shale gas. Getting access to those deposits, however, is not for the feint-of-heart. Environmental and regulatory issues abound, not to mention the need for billions in new infrastructure to make practical use of the finds.

“After years of talking about it, we are finally poised to control our own energy future,” says President Obama, in his State of the Union. “We produce more oil at home than we have in 15 years … We produce more natural gas than ever before … The natural gas boom has led to to cleaner power and greater energy independence.”

ExxonMobil Corp., for example, finalized its $1.6 billion purchase in December of Texas-based Denbury Resources’ Bakken Shale assets. Meantime, the Monterrey Formation in Southern California is said to hold 15.4 billion barrels of crude, or four times that of the Bakken field. Who else is betting on shale gas? Chevron bought Atlas Corp. in February 2011 for $3.2 billion. RoyalDutch Shell, meantime, acquired East Resources for $4.7 billion in cash in 2010.

According to the U.S. Energy Information Administration, the country has 25 billion barrels in proved reserves of unconventional shale oil.  

The agency also says that 2,552 trillion cubic feet of potential natural gas resources exist. It adds that shale gas had comprised about 23 percent of all natural gas production in 2010 and that it expects the fuel to make up roughly 46 percent of all such development by 2035.

Besides the Bakken and Barnett regions, the other major shale fields include the Fayetteville, Haynesville, Marcellus, Utica, Anadarko Woodford and Eagle Ford regions. In 2009, the Barnett shale play was the most prolific play, accounting for almost 62 percent of the total shale gas production, says KPMG Consulting. The second largest one was from the Fayetteville play, accounting for 8 percent of the total production, it adds.

“The rising domestic shale gas production will have profound implications on the global energy sector,” says KPMG Global Energy Institute. “Imports into the United States are likely to drop 27 percent, over the period 2007-2011.”

As the country’s fortunes brighten, more oil and gas will be required to feed a recovery. While the prospects for both are bullish, the economics behind finding those resources and then delivering them are tricky.

Consider: The Marcellus Region in the East is best known for shale gas plays and the natural gas liquids that spinoff from those searches, or ethane, propane and butane. The cost of that acreage has been high relative to the present low price of natural gas, although such lease prices are falling as some drillers pause.

That dynamic is giving the largest players such as Exxon a competitive advantage because they can hold their leases for decades and can afford to wait until the price of natural gas rises. Before the smaller players drill, they must factor in such issues as their capital and lease costs, as well as the price of the underlying commodity.

Today’s gold mine, though, may now rest with natural gas liquids, which are more correlated to the high price of oil. Producers are therefore focusing on those shale gas plays that are rife with such liquids, says Valerie Wood, president of Energy Solutions in Madison, Wis. Conversely, she says that many producers are idling rigs in dryer gas basins.

“The price correlation between natural gas liquids and crude oil is changing a little but it is unlikely to cause a significant reduction in shale gas production,” says Wood, in a talk with this writer. “Eventually, the economics of natural gas liquids may cause a slow down in that area but we won’t see that for a while.”

Wood also explains that some producers are moving from dry natural gas basins to crude oil regions where they are finding associated gas, although in some cases they are “flaring” that gas because of the lack of pipelines. If they are able to transport the commodity that is found at shallower depths than oil, then the added supply will serve to keep prices temporarily low.

America’s energy picture is getting brighter. Domestic fields are awash in tight oil and shale gas. As such, Big Oil is reaching out to natural gas producers, which may need greater access to capital. The ultimate alignment is unknown but the oil industry has the wherewithal to endure today’s climate and it will assuredly play a key role developing the shale gas fields.

Source: www.forbes.com

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Natural Gas Isn’t the Only Reason U.S. Carbon Emissions are Falling

It’s become something of a cliché in energy-policy discussions: The United States is making headway on global warming and slashing its carbon-dioxide emissions all because of a glut of cheap natural gas that’s elbowing out dirtier coal power.

But perhaps that natural-gas story is overly simplistic. A notable new analysis by Trevor Houser and Shashank Mohan of the Rhodium Group suggests that America’s budding renewable-energy sector — particularly wind power and biomass — deserves a big chunk of the credit for driving down U.S. emissions. On the flip side, the report also suggests that coal could soon make a comeback.

Houser and Mohan take a novel approach to analyzing the recent drop in carbon pollution. They start by noting that at the end of 2012, U.S. carbon emissions were about 13 percent below 2005 levels. They then tried to tease out the causes of this drop by constructing a counter-factual — what would have happened if energy trends from the 1990s and early 2000s had continued apace?

The recession and financial crisis, obviously, made a big difference. A weaker economy has meant less demand for energy — that was responsible for more than half the drop compared with business as usual.

Meanwhile, Houser and Mohan find the U.S. economy actually hasn’t become vastly less energy-intensive over time (the blue bar). Yes, overall efficiency has gone up — Americans are buying more fuel-efficient cars and trucks, etc. But the country is also no longer shedding manufacturing jobs as quickly as it was during the 1990s. So the amount of energy we use per unit of GDP has generally followed historical trends, improving only gradually.

The real change has come in the type of energy that the United States is using. The country is now relying more heavily cleaner forms of energy than it used to, and that explains about half of the fall in emissions. This is where natural gas proponents usually take credit. But according to Houser and Mohan, natural gas is only responsible for part of this shift:

Natural gas is indeed pushing out dirtier coal, and that makes a sizable difference (burning natural gas for electricity emits about half the carbon-dioxide that burning coal does). But wind farms are also sprouting up across the country, thanks to government subsidies. What’s more, industrial sites are burning more biomass for heat and electricity, while biofuels like ethanol are nudging out oil. All of that has done a lot to cut emissions.

(Note that these calculations do not include fugitive methane emissions from natural gas or changes in land use from biofuel production. So that’s one key caveat.)

The other side of this analysis, however, is that Houser and Mohan aren’t particularly optimistic that U.S. carbon emissions will continue to decline. That’s because natural gas prices are starting to rise again, and coal is likely to take back some of its market share in the years ahead:

That’s one reason why many environmentalists are now warning that the United States will miss its climate target — keeping carbon emissions 17 percent below 2005 levels by 2020 — unless the Obama administration takes further steps, such as regulating coal plants through the EPA and tightening efficiency standards. The recent plunge in emissions has been dramatic. But it’s not likely to last without further policy changes.

Source: www.washingtonpost.com

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