Sunday, July 19, 2009

News Roundup

Links and Stories of Interest

Is the Future of Alaska's LNG Plant About To Flame Out?

Massive Shale Gas Field Found in BC

"The Horn River basin is located just south of Fort Liard and the NWT – BC border. An estimated 250 trillion cubic feet of shale gas is estimated for the basin, of which 20 per cent is reportedly recoverable."
The future for Alaska gas
"GTL’s have an unlimited market in U.S. today, tomorrow and 20 years from now"
Actual achievements point to Denali pipeline plan a success (By BUD FACKRELL)
"At Denali, we continue to take a long-term view of the project and believe there is a place for Alaska's gas in the North American market. The announcement by Exxon Mobil and TransCanada to work together on a competing project has not changed Denali's plans or goals. We have accomplished much over the last year and are focused on doing the work to make the Denali project a success. We have the team that can get the job done right."
Kitimat LNG Signs MOU with EOG Resources Canada for Natural Gas Supply
Kitimat LNG Inc. announced today that it has signed a memorandum of understanding (MOU) with EOG Resources Canada (EOG) to supply natural gas to Kitimat LNG’s proposed liquefied natural gas (LNG) export terminal in Kitimat, B.C.

Sunday, July 12, 2009

The Threat of Shale Gas

This weekend the Anchorage Daily News (ADN) ran a story titled "Alaska natural gas gets new competition". This is not exactly what I would call news, this blog looked at the impact of shale gas back in February.

It's not yet time to give up on Alaskan gas and here's why:

1) Alaska gas can be delivered to the Alberta oil sands cheaper than shale gas from Albany NY. Take a look at the map from the ADN article and imagine the pipeline infrastructure needed to move an equal amount of gas to the oil sands. In Alberta heavy synthetic crude oil will be produced from Alaskan gas at a rate of 6 BTU (as oil) for every 1 BTU of gas consumed. It's a rock solid business model and gas from Pennsylvania can't compete.

2) Gas markets are extremely complex and volatile. T. Boone Pickens can nay-say the pipeline all he wants, but follow the money. Where's the money in natural gas these days?

  • LNG (international stranded gas) isn't free (link to $50 Billion dollar LNG project story). The availability of LNG will figure into the cost analysis of any gas development project within 500 miles of any coastline.
  • Shale Gas may be plentiful but it isn't free either. When the gas price drops the drill bits stop turning and producing wells are shut in. The tipping point seems to be around $4/MMBTU. Shale gas leader Chesapeake calls this "deferred production" and last April they deferred about 13% of their gas production including gas from the Barnett Shale . This quote from the Chesapeake news release says it all:
    In addition, because of the steeply declining production profile of new natural gas wells and the upward trending slope of the NYMEX natural gas futures curve, Chesapeake believes deferring production and revenue to future periods with higher natural gas prices creates greater shareholder value than selling production into the current unusually low priced natural gas market.
  • Coal: Natural gas demand will increase and displace coal over time. Clean zero emission syngas from coal is technologically possible, but not at $4/MMBTU.
  • Nuclear: Fear, high cost and unresolved waste storage issues will continue to support the overall value of natural gas. Don't bet on the 1950's fantasy of nuclear power too cheap to meter.
  • Wind/Solar - There's a good reason Boone Pickens likes wind turbines. For every megawatt of wind or solar we build plan on building a megawatt of power from a gas turbine - you'll need it at night or when the wind stops blowing, and Boone will be happy to contract some firm gas for that need.
3) Finally - In the game of which gas projects will shut down other gas projects look for the Alaska Gas Pipeline to stall the Mackenzie pipeline. Both of these projects can supply gas to the oil sands, but Alaskan gas may just get to the finish line first.