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Page added on April 27, 2015

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US to launch blitz of gas exports

US to launch blitz of gas exports thumbnail

The United States is poised to flood world markets with once-unthinkable quantities of liquefied natural gas as soon as this year, profoundly changing the geo-politics of global energy and posing a major threat to Russian gas dominance in Europe.

“We anticipate becoming big players, and I think we’ll have a big impact,” said the Ernest Moniz, the US Energy Secretary. “We’re going to influence the whole global LNG market.”

Mr Moniz said four LNG export terminals are under construction and the first wave of shipments may begin before the end of this year or in early 2016 at the latest.

“Certainly in this decade, there’s a good chance that we will be LNG exporters on the scale of Qatar, which is today’s largest LNG exporter,” he said, speaking on the margins of the IHS CERAWeek energy summit in Texas.

Qatar exports just over 100 billion cubic meters (BCM), though Australia is catching up fast as the offshore Gorgon field comes on stream. It may pull ahead of Qatar later this decade.

Mr Moniz said the surge in US output from shale fracking has already transformed the global market. “We would have been importing a lot of LNG by now. Those cargoes would have gone elsewhere and have in fact had a significant impact in the European market,” he said.

Gas frackers assembled at the world’s “energy Davos” in Houston said exports could ultimately be much higher, potentially overtaking Russia as the world’s biggest supplier of natural gas of all kinds.

“We’re just fifteen years into a 150-year process,” said Steve Mueller, head of Southwestern Energy, the fourth biggest producer of gas in the US .

The mile-deep Marcellus basin stretching from West Virginia through Pennsylvania to New York state is driving the explosive growth. Interlocking fractures in the rock make it possible for a single well with advanced technology to extract much more gas than thought possible just five years ago.

Once thought to be in decline, the Marcellus alone produces 113 BCM a year. This is roughly equivalent to Russia’s exports to Europe through the Nord Stream, Yamal, and Brotherhood pipelines.

Mr Mueller defiantly sweeps aside those who claim that the US fracking industry is in serious trouble, insisting that drilling costs are coming down so fast that his company – and others – are staying a step ahead of falling prices.

“Rig efficiency was flat for thirty years but since then we’ve cut by five times. We have set in motion something that you can’t deny and is irresistible,” he said.

Mr Mueller said it had taken his company 17 days to drill a 2,600 ft well as recently as 2007. It has just drilled a 5,400 ft well in six days. “The new technology is amazing. We have a drill-bit with a chip inside that makes its own changes,” he said.

He is continuing to invest heavily and hopes to boost output by up to 10pc annually for the next three years, despite a drop in gas prices to around $2.60 per million British thermal units (BTU). “If it stays around $3, we’ll be fine,” he said.

The US Energy Information Administration (EIA) expects gas prices to rise to $4.88 in real terms by 2020, and $7.85 by 2040.

What is remarkable is that US drillers can produce a third more natural gas today with 280 rigs than they did in 2009 with 1,200 rigs. Total shale output has soared to over 350 BCM from almost nothing a decade ago. It now makes up half of US gas production.

The Obama administration has so far been slow to approve new export terminals for LNG, partly because of concerns that the US would lose its massive advantage in energy and feedstock costs for industry.

Gas sells at for $7 in Europe, and over $10 in North-East Asia, four times more expensive. This cost-gap has been a key driver behind America’s so-called “manufacturing renaissance”, stoking an investment boom in chemicals, plastics, and glass, and saving the country’s steel mills from slow death.

A corridor from Houston to New Orleans has attracted 33 petrochemical plants worth over $1bn each since 2011. The American Chemistry Council expects over $130 billion of industrial projects along this stretch by 2023.

The administration has concluded that the US lead is now so entrenched that there is little to lose from a partial levelling of the global playing field. The expense of freezing gas for liquefaction to minus 260 degrees Fahrenheit and shipping it across the Atlantic or Pacific in molybdenum-hulled vessels is enough to maintain a big cost advantage for US manufacturers.

Four LNG terminals with a combined export capacity of 70 BCM are likely to be approved soon by the Energy Department. The front-runner is Cherniere’s $18bn terminal at Sabine Pass in Louisiana.

Experts are split over whether North America really can become the world’s dominant LNG player. Moody’s warned earlier this month that most of the 30 gas liquefaction projects planned in the US and Canada will never get off the ground, chiefly due to the linkage between LNG contracts and the price of crude. “The drop in international oil prices has wiped out the price advantage US LNG projects,” it said.

Michael Smith, head of Freeport LNG, said his company will press ahead regardless with plans for a $13bn plant near Houston, and predicted that the US could soon leap-frog all rivals to become the new gas hegemon. “Our projects are very competitive and we will continue to have an advantage over the rest of the world,” he said.

Russian president Vladimir Putin warned at the St Petersburg economic summit last year that US shale gas was abruptly changing the international order, with serious implications for his country. The early effects have forced down global LNG prices, creating a rival source of gas supply in Europe.

Any future American cargoes would further erode Gazprom’s pricing power in Europe, and erode the Kremlin’s political leverage. The EU already has a large network of import terminals for LNG.

Lithuania has just finished its “Independence” terminal, opening up the Baltic states to LNG. Poland’s new terminal should be ready this year.

America’s parallel drive for shale oil is equally breath-taking. Scott Sheffield, head of Pioneer Natural Resources, said his company has discovered huge reserves in the vast Permian Basin of West Texas.

“We think the Permian could produce 5-6m barrels a day (b/d) in the long-term,” he said. It is a staggering claim. This would be more than Saudi Arabia’s giant Ghawar field, the biggest in the world.

Ryan Lance, head of ConocoPhillips, said North American oil output could reach 15m b/d by 2020 and 25m b/d over the next quarter century, three times Saudi Arabia’s current exports.

A vault forward on this scale would establish the US as the leading energy superpower in both oil and gas, a revival that almost nobody could have imagined seven years ago when the United States was in near panic over its exorbitant dependency of imported fuel. It would restore the US to its mid-20th Century position as a surplus trading nation, and perhaps ultimately as world’s biggest external creditor once again.

Fracking is still an almost exclusive preserve of North America, and is likely to remain so into the early 2020s. China has large ambitions but the volumes are still tiny, and there is a shortage of water in key areas. Fracking remains mere talk in most other regions of the world.

Lukoil analysts say Russian extraction costs for shale are four times higher that those of US wildcat drillers. Sanctions currently prevent the Russians importing the know-how and technology to tap its vast Bazhenov basin at a viable cost.

John Hess, the founder of Hess Corporation, said it takes a unique confluence of circumstances to pull off a fracking revolution: landowner rights over sub-soil minerals, a pipeline infrastructure, the right taxes and regulations, and good rock. “We haven’t seen those stars align yet,” he said.

Above all it requires the acquiescence of the people. “It takes a thousand trucks going in and out to launch a (drilling) spud. Not every neighbourhood wants that,” he said.

Certainly not in Sussex, Burgundy, or Bavaria.

Telegraph



71 Comments on "US to launch blitz of gas exports"

  1. GregT on Tue, 28th Apr 2015 6:41 pm 

    “what would the number one reason be?”

    Trillions of US dollars in QE.

  2. Nony on Tue, 28th Apr 2015 7:06 pm 

    I think capital moves pretty fluidly around the world. there has even been a lot of foreign direct investment in US shale. Besides capital just goes to opportunity and flees from the lack. That is why shale turns on/off with oil price. Peakers seem disgruntled by the shale revolution and want to say it was a trick by the Fed.

    Bigger issues are private ownership of mineral rights, which helps influence political acceptance, history of oil/gas extraction (same), and availability of trained subctontractors at good pricing.

  3. Nony on Tue, 28th Apr 2015 7:08 pm 

    For natgas, the availability of distribution infrastructure and even market is also a difference. Oil, less so.

    P.s. Fracking goes/has gone in lots of conventional wells for decades.

  4. GregT on Tue, 28th Apr 2015 9:08 pm 

    “Another year is under way, and we are in the midst of yet another central bank-induced credit bubble. This time, the culprit is shaping up to be the oil and gas industry. Hydraulic fracturing, or “fracking,” has seen a marked rise in usage in the United States over the last six years. It represented a new and innovative way to extract hydrocarbons from rock formations deep underground. Many may be tempted to say that the emergence of fracking, as well as the jobs it has created, is further evidence of the free market at work. However, as David Stockman makes clear in this excellent article, the fracking bubble would never have materialized if not for artificially low interest rates instituted by the Federal Reserve in the advent of the 2007–2009 financial crisis.”

    “If not for the six years of Zero Interest Rate Policy (ZIRP) and several rounds of Quantitative Easing (QE) from the Federal Reserve, many of these upstart wildcatting firms would not be able to sustain the cost of exploration and extraction.”

    “Years of QE and ZIRP have recreated an asset bubble in our economy with tremendous implications, and as the specific asset class may continue to change the same underlying problem of malinvestment and misallocation of resources will persist if central bankers do not change course.”

    https://mises.org/library/fracking-—-new-bubble-new-year

  5. Northwest Resident on Wed, 29th Apr 2015 1:40 am 

    GregT — I installed my nuc hive today. One week ago I installed a package. Went with Italian bees. Two hives, for starters I guess. I’m off to the races!! 🙂 Now that I have learned much more about beekeeping, I see what you mean when you mentioned the need for plenty of spare foundation back when I first stated my intent to get into beekeeping. I think I screwed up when I installed my package — I attached the queen cage to the side of the hive rather than to the middle of the center frame. I’m going to do my first inspection tomorrow — hopefully the queen got “rescued” anyway and has gone to work. Fascinating hobby, now that I’m into it. Only been stung once, and it wasn’t bad…

  6. Northwest Resident on Wed, 29th Apr 2015 1:50 am 

    Nony — Great effort on your part these last few weeks or more since you broke your promise to stop posting on this site. Your dedication to dispelling all notions of eventual economic collapse and to promoting even the most ludicrous oil/NG memes of “all is well” is exemplary. Fine job on spreading the bullshit — keeping the illusion of BAU forever alive and well. No doubt, many curious and concerned website surfers visit this site, seeking answers to their legitimate concerns about the state of the economy and their future. Thanks to you, and Plant, and Marmico, and several others, many of those visitors no doubt find refreshment and easing of their deeply held doubts after reading the distorted info posted by you guys. I realize that is your goal — exactly what drives you all to post so prolifically on this forum, daily (and by the hour) disputing any and all notions that something is deeply amiss in this plastic existence we are all living. I don’t think you guys are S-T-U-P-I-D enough to actually believe everything you are posting. Rather, I am certain that there is a method to your madness — a subterfuge that is all part of the daily work you do. I for one find your posts absurd, distorted, false to the extreme and frequently rude to the extreme. But I’m sure it is all part of the plan. BTW, you should bring back Papa Smurf. Why not? This forum allows any asshole on the internet to post their shit.

  7. Nony on Wed, 29th Apr 2015 6:20 am 

    NWR,

    I will try to let you all enjoy your arena of the Internet. I don’t know what it is about me to want to prove you wrong. It doesn’t matter since 99 out of 100 will refuse to admit wrong, regardless of proof. Peace, brah, and enjoy the sun and the honey. Nothing wrong with that.

  8. Davy on Wed, 29th Apr 2015 7:06 am 

    N/R, my bees have been in since Friday. I added some sugar syrup yesterday. They are doing what they are supposed to do building on the frames. Lots of activity around the hive. I have my fingers crossed they like the hive and location. It feels good to be doing my part for the environment by providing habitat for a wonderful insect.

  9. ghung on Wed, 29th Apr 2015 7:41 am 

    Let Nony spin his BS as far as I’m concerned. Keep the masses in their BAU grove as long as possible while those of us who work their Plan B continue to leverage what’s left of industrial society to build in some resilency. Yesterday I tested my PV-powered roto tiller to use in my green house (arriving later this week). Works famously.

    Hoping those who get it spend less time countering Nonyesque dribble.

  10. Davy on Wed, 29th Apr 2015 7:46 am 

    NOo, the difference between you and me is I am open to good news. I hope there is something we can do to give people happy lives even if that is with less. We are at or near a point without a happy ending for most of us. The problem is the cornucopian message of all is well with little if any effort towards mitigation and adjustment. The problems and predicaments of the limits of growth, diminishing returns, and over population are a brick wall being explained away by the cornucopians.

    The NOo message and by extension the greater global cornucopian message is greed is good because it creates more for everyone. That may have been true for a very short interval but currently it is about exploitation, corruption, and manipulating. The pie is shrinking but growing for a few. This is being done in the moral hazard of wealth transfer at the top by a fascist partnership of industry with the political. This is a global phenomenon leaving no country or region an example of equity with dignity.

    This is in effect a usurpation of the public for private gain. It is also contributing to the destruction of our global ecosystem and climate. It is your message NOo of “greed is good” with no limits or reflection that is currently bordering on evil. I say this because the unfettered development in the name of growth is putting us as a global people in the position of a collapse all for the benefit of a few and at the expense of the many.

    With that said in our small worlds of you and I the issue is balance and fairness. NOo, why can’t you talk about any negatives? Why do you insist on a message of little if any problems? You show your ignorance or you show your deceit with this message. Either you are too stupid or negligent to acknowledge the huge amount of problems and predicaments or you are preaching a deceitful message all is well but knowing better.

    If you know better you are lying about the truth. You are distorting our reality and influencing people in the wrong direction. If or when we have a crisis you will have steered people in the wrong direction at their expense. Your message is dangerous because it has no limits and no reflection on our direction.

    Your message is clearly the message at the top from those in control at the top. You are complicit with the lies if you know better. This message points to the hijacking of the world for a few. In the beginning of the descent it will be the many that suffer first with the worst. Yet, the rich will have their turn. The higher you are the farther you will fall.

    I have a hunch you will fall far NOo. Please change your ways to being at least cautious about where we are going for your sake and others and yourself. Yes, NOo, I am open to your hopium but I see little to be hopeful for. The problems, unfairness, and destruction are speeding along like a runaway train with a derange engineer at the controls.

  11. GregT on Wed, 29th Apr 2015 7:50 am 

    Congrats on the Bees guys! Wait until you see how they circulate the air through the hive to concentrate the honey. If you haven’t already done so, mark your queens so they are easier to find. It will make your job as a keeper much easier.

  12. Davy on Wed, 29th Apr 2015 8:35 am 

    G-Man, I am torn with your message because I am doing exactly what you are doing with a different focus. I am leveraging BAU to prepare for its end. My concern is all this preparation will mean little longer term if our communities have no preparations in place. Our communities will be exposed to a nation with little preparations and extending on to the effects of no global action.

    The only way action can happen at the higher levels is a crisis. This crisis will ultimately be liquid fuel and food based. Other elements of crisis are there but food and fuel are the most critical. Food and fuel can stop a war. We know the financial system will flounder lowering consumption once food and fuel supplies are insecure. Some kind of martial law centralized control will step in to keep things limping along at least in the shorter term.

    My reason for bashing the cornucopian message is the sooner a crisis of liquid fuel and food begins the sooner the two most important adaptation and mitigation areas can begin. When we have a fuel crisis we will have to end poor attitudes and lifestyles. When we have food insecurity we will have to move back to the land locally to produce food. Production agriculture will fall greatly and a local effort will have to ramp up by necessity.

    It will only be through crisis sooner than later this forced rebalance will occur. Once this crisis rebalance starts global population will begin its forced generational adjustment process. The danger is total collapse but that is a danger we must face. This danger is coming in either case anyway so we have to just focus on survival instead or worrying about collapse. Once we go down this path there is no return to prosperity even for the few that are profiting now. G-Man these are my thoughts.

    I am probably wasting my time because the cornucopian message will be alive and strong until the bitter end. I remember Baghdad Bob saying all was well when the US troops were in downtown Baghdad. Instead of a more gradual crisis it is going to be a dangerous occurrence of rapid change. This is never good for an exposed population.

  13. beammeup on Wed, 29th Apr 2015 9:45 am 

    GreT – Thanks for the link to the article. In it, there is a link to a very excellent article by Stockman on the downside of Fed monetary policy and the implications for shale. Definitely worth the read:

    http://davidstockmanscontracorner.com/this-time-its-the-same-like-the-housing-mania-the-subprime-shale-bubble-is-in-plain-sight/

  14. Northwest Resident on Wed, 29th Apr 2015 9:45 am 

    Nony — You wrote: “I don’t know what it is about me (that wants) to prove you wrong.”

    Let me guess.

    Short story: When I was in the Navy, there was this huge and rather dumb guy (deck ape, naturally) who had an interesting hobby. He would work his day, go into town and hang out in gay bars, would choose his victim for the evening, get the guy outside, then beat the hell out of him. Simply put, he hated gays and was HIGHLY motivated to crack their skulls. THEN, while overseas, in Sicily where speed across the counter is legal, he bought and overdosed on a bunch of that crap. Being junior dude in the medical department at the time, I got stuck with the task of babysitting this amped-up hulk all night long, listening to him rant and rave as he lay strapped to the bed flopping around. During that long night of rants, he broke down crying and started talking about how he had been forced to give his uncle blowjobs when he was a little kid. THAT is where the hate and anger came from.

    Now, back to you. Nony, you know enough to KNOW that economic collapse is rapidly approaching, that BAU is untenable, that our fossil fuel powered existence can not long continue. But you can’t face that grim reality — you try to disprove it to yourself all day long every day by attempting to disprove it to other “doomer” posters on this forum, and elsewhere no doubt. You’re like that guy I knew in the Navy — you’d rather “beat up” the people who make you so uncomfortable rather than face the dreadful reality of where that “need” derives from.

    My bill for psychiatric consultation is in the mail… 🙂

  15. nony on Wed, 29th Apr 2015 9:58 am 

    Ok. I admit it. I was violated during my shell back ceremony. Now I just want to paddle assessment and make people eat cherries out of belly buttons. 🙂

  16. nony on Wed, 29th Apr 2015 9:59 am 

    Asses. Stupid spell correct

  17. Davy on Wed, 29th Apr 2015 11:54 am 

    NOo, your the Boy Wonder and lots of fun but what is coming is not going to be a laughing matter. We are talking the death of Billions of people. Do you want to be complicit in that kind of results of a failed message you are part of?

  18. zoidberg on Wed, 29th Apr 2015 12:34 pm 

    Im guessing fracking is going to spread around the world if money and logistics are the only barriers to entry.

    Its had such a dramatic effect only from NA so far. Any guesses about global production possibilities. Like how far out itll push peak oil? (And dont say it peaked in 2005 with conventional oil oil produced still counts regardless of cost its about the absolute volume imo.)

  19. Nony on Wed, 29th Apr 2015 1:48 pm 

    Davy, nothing is over until we say it is over…

    https://www.youtube.com/watch?v=q7vtWB4owdE

    😉

  20. Nony on Wed, 29th Apr 2015 2:05 pm 

    zoid, I don’t know. Some places like Russia, Australia, Argentina, China seem like they would work well (favorable governments and rural settings). France may be a harder nut to crack. Look at NY state for instance. Or IL or MD. Or look at how long we have forbidden most offshore drilling and all Great Lakes Drilling (and ANWAR).

  21. nony on Fri, 29th May 2015 2:59 pm 

    Hh back down to the 2.6 es.

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