Peak Oil is You
Donate Bitcoins ;-) or Paypal :-)
Page added on April 8, 2014
Age of Gas Seen as Sideshow to U.S. Producers Prizing Oil
The “golden age of gas” that the International Energy Agency foresees as a result of the U.S. energy boom is hardly the future being embraced by industry executives.
At least based on comments from company officials presenting at the Independent Petroleum Association of America’s conference in New York yesterday. For them, oil is still the prize. Gas is almost an afterthought.
Abraxas Petroleum (AXAS) Corp. Chief Executive Officer Bob Watson boasted about how much of his company’s proved reserves are oil and liquids rather than gas (74 percent). PDC Energy (PDCE) Inc. said it’s sitting on huge leases in gas fields that aren’t worth drilling. Whiting Petroleum Corp. (WLL) Chairman and CEO James Volker explained why: oil sells for three times as much as the equivalent amount of natural gas.
That’s no knock against the producers for chasing oil – the commodity that makes the best return for their shareholders. Still, at a time when President Barack Obama is saying natural gas will be a bridge for the U.S. economy from fossil fuels to clean energy, the industry’s views put some realism into the discussion about what energy resources get unlocked by fracking shale rocks.
Tumbling Gas
U.S. natural gas futures have plunged 72 percent from their 2005 peak to $4.476 as supply expanded to a record. Even after the coldest winter in decades drained stockpiles, the fuel costs about half as much as in Europe. Crude oil, by contrast, is stuck at around $100 a barrel. Even as the growth of U.S. oil supplies has brought the domestic price below the international benchmark, it’s still 7.6 percent higher than a year ago.
The U.S. is still very much addicted to oil. Consumption will inch up to 19 million barrels a day this year, more than Europe and China combined, the IEA estimates. Even as expanding domestic supplies reduce imports, they haven’t curbed reliance on oil outright.
If natural gas is to be a bridge fuel, the transition can’t depend on supply alone.
Now that natural gas is so abundant, it needs more uses. While power plants are switching to gas, the U.S. still gets more electricity from coal.
Billionaire Pickens
Billionaire T. Boone Pickens wants trucks and buses to run on natural gas. The chemical industry is investing more than $100 billion in expansion projects spurred by cheap shale gas, according to the American Chemistry Council in Washington. And the Energy Department has approved seven projects to export about 9.3 billion cubic feet a day of natural gas in liquid form.
In the time it takes for those new demand sources to develop, making natural gas more valuable in its own right, its role as a byproduct of oil drilling is contributing to more pollution. In North Dakota, drillers pumping oil in the Bakken shale formation are burning off about $1.4 million worth of natural gas every day.
While politicians and industry may pay lip service to natural gas as the clean fuel of the future, the companies out exploiting America’s oil fields leave no doubt that they’re interested in the same fuel as 100 years ago.
14 Comments on "Age of Gas Seen as Sideshow to U.S. Producers Prizing Oil"
Davy, Hermann, MO on Tue, 8th Apr 2014 11:43 am
Oops, gas supplies set to go down after we crippled our other national energy systems in the name of greed and market distortions. Lynch those lobbyist when you are cold and hungry. Bastards!!
Arthur on Tue, 8th Apr 2014 2:26 pm
So the Independent Petroleum Association of America if against a ‘golden age of gas’?
What else is new?
buddavis on Tue, 8th Apr 2014 3:16 pm
I thought it was pretty obvious why they are chasing oil. Same reason why most producers are chasing oil.
rockman on Tue, 8th Apr 2014 4:11 pm
bud – And same reason we were chasing NG in 2008…the price. Expectations were for prices to continue above the $12/mcf we had at the time. And then prices collapsed. If you haven’t seen my tale before: I was at Devon working with the drilling dept that was drilling/frac’ng the Haynesville’s Shale in E Texas at the time. They had 18 rigs under long term contract. When prices fell they paid $40 million in cancellation penalties to drop 14 of those rigs. And the industry followed with a 75% reduction in rigs drilling for NG. And though it might not be likely but if oil prices crashed we would see the same fall off in oil drilling.
It always amazes me when stories like this come out that we’ve just entered an unknown economic model. This is exactly how the dynamics have worked in the oil patch for the last 100 years.
bobinget on Tue, 8th Apr 2014 5:25 pm
In the next decades we are gonna need all kinds of fuels, natural gas included, in defense of those pesky
storm serges flooding all important business districts.
http://www.usatoday.com/story/news/nation/2013/07/29/sea-level-rise-cities-towns/2593727/
This from 2013 as if we didn’t know:
“A rise in sea levels threatens the viability of more than 1,400 cities and towns, including Miami, Virginia Beach and Jacksonville, unless there are deep cuts in heat-trapping greenhouse gas emissions, says an analysis out Monday.
Prior emissions have already locked in 4 feet of future sea-level rise that will submerge parts of 316 municipalities, but the timing is unclear and could take hundreds of years, according to the paper in the Proceedings of the National Academy of Sciences. If global warming continues at its current rate through the year 2100, at least an additional 1,100 cities and towns will be mostly under water at high tide in the distant future.”
Sea level rise is happening already. (warmer water expands).
If a coming hurricane season wipes out a few cities populated mostly by white Republican leaning folks,
I promise you, there will be Federal action.
One major component in gasoline, cement, steel, glass, plastics fertilizer manufacturing is, as you know, natural gas.
Before that, we need twice as much pipeline capacity to shlep gas from wellhead to cement factory.
Plantagenet on Tue, 8th Apr 2014 6:01 pm
Its silly to complain that the “age of gas” hasn’t started immediately.
Its going to take decades to replace oil with NG.
Plantagenet on Tue, 8th Apr 2014 6:05 pm
@ bobinget
Your suggestion that we will only get “federal action” if hurricanes wipe out cities inhabited by “white Republican” folks doesn’t make any sense. Do you really think Obama doesn’t care if cities inhabited by black democrats are affected by hurricanes?
rockman on Tue, 8th Apr 2014 8:20 pm
P – “It’s silly to complain that the “age of gas” hasn’t started immediately.” I suppose it’s a matter of perspective and who specifically you’re talking about. From my perspective with respect to the US our “age of gas” started many decades ago. US NG production reached current levels over 40 years ago. We’ve been on a plateau more or less since then. If it were for our huge and early developed NG resources the US might well be the largest coal burning country on the planet. Even more than China. Cumulatively we would certainly be the No. 1 coal consumer of all time IMHO.
http://en.wikipedia.org/wiki/Natural_gas_prices
In fact, for much of the last century the US was THE NG producer on the planet. I can’t find the chart but Russia began producing a significant amount of NG long after the US did. and toda just two countries, the US and Rusia, produce almost half the NG on the planet. It’s the rest of the world that is coming into its “age of gas”. But it’s a very different game then what the US experienced. We weren’t importing it from other countries through very long pipeline systems that we didn’t control nor paying for expensive LNG compression and shipping.
We also had many decades to expand the local NG distribution systems in the US. Getting a lot of NG via pipelines or LNG isn’t much help to a population that doesn’t have access to it. Heck: I live in the middle of one of the most prolific NG producing areas in the country and I don’t have a NG utility connected to my home.
shortonoil on Tue, 8th Apr 2014 9:34 pm
“While politicians and industry may pay lip service to natural gas as the clean fuel of the future, the companies out exploiting America’s oil fields leave no doubt that they’re interested in the same fuel as 100 years ago.”
As Herb Stein put it, “is that things go on until they can’t, and then they don’t.”
The Eagle Ford is now producing over 1 mb/d of field condensate. That is essentially pentane, which is used as a diluent, and as a chemical feed stock. The chemical industry is now moving away from pentane to much cheaper ethane for many processes. The bread and butter of the field condensate market is as a diluent to make dilbit for the Canadian tar sands, and the Eagle Ford is 3000 miles from Texas. The Duvernay shale play in Western Alberta is now coming on line to supply the Alberta tar sands market with condensate. The Duverany is about 250 miles away from the tar sands, and is a condensate field 200 miles long and 20 miles wide. EXXON, Chevron and other heavy weights are moving in to develop it. With a good sized piece of their market likely to go in the next couple of years, US drillers had maybe better start scouting out NG again.
Of course when the light sweet crude is gone, its all gone!
http://www.thehillsgroup.org/
.
shortonoil on Tue, 8th Apr 2014 9:37 pm
correction:
the Eagle Ford is 3000 miles away in Texas
Plantagenet on Tue, 8th Apr 2014 9:50 pm
R-
The age of gas will begin when oil is supplanted by NG.
Yes we’ve used NG for decades. No, it hasn’t supplanted oil yet.
rockman on Wed, 9th Apr 2014 1:18 am
P – Perhaps but I’m not very optimistic it will do the job. Yep, we have lots of NG today…and we burn it up just as fast as we produce it. At least the 93% that we produce ourselves. Just a guess but I have my doubts that if we ever get enough NG sourced energy for transportation to serve as an oil substitute we’ll run out of NG as fast or faster then we are with oil. If I were to make an even bigger WAG is that we’ll eventually head more towards e- vehicles with coal being the primary source of e-. Maybe alts will beat out coal but I wouldn’t bet on it.
But neither of us been around to know if I’m full of crap or not. So there. LOL.
Nony on Wed, 9th Apr 2014 2:24 am
Well do an analysis. Show me 1P/2P/3P reserves. Show the cost curve versus production. Show what happens after Marcellus infrastructure is built out.
Rockman on the peak oiler website “feels” something as opposed to smart people (no perfect, but trying to do the right thing) from USGS/EIA doesn’t strike me as a trump card.
The natural gas “cliff” of the mid 2000s TODsphere is a JOKE. Hubbard’s predictions of natural gas are a joke. Berman 2009 statements are a joke. There’s a record of peakers really really fouling up their guesses on gas. You can’t even claim undulating 3x price plateau.
Anyhow, you all have fun in your little echo chamber for TOD refugees. The rest of the country has moved on.
simonr on Wed, 9th Apr 2014 9:31 am
Hi Nony
as Nestor said … ‘but you do not reach a conclusion’
of course I paraphrase, but seriously what is your conclusion ?
Simon