Posted on 08/05/2015 5:49:29 AM PDT by thackney
The Obama Administration is often accused of being sluggish in granting permits for projects to ship liquefied natural gas (LNG) to countries that do not have a free trade agreement with the U.S. Critics claim it has thus denied the U.S. a historical opportunity to become a leading natural gas exporter on par with Russia and Qatar. Whether ten approvals out of forty applications in four years is sluggish or not is a matter of perspective. But the debate on the pace of approvals has masked a much more important fact: American gas is no longer desired abroad, no matter how many permits are granted, and certainly not in Asia – the fastest growing market for gas.
Here is why: LNG prices in Asia are linked to oil prices; when oil prices were high Asian economies were forced to pay exorbitant prices for their imported gas. In the case of Japan where the Fukushima incident led to the shutdown of 54 nuclear reactors, at one point LNG prices reached almost $20 per one million British thermal units (mmbtu). During that time the North American fracking revolution unleashed a huge amount of gas into the market, creating a fantastic opportunity for the U.S. gas industry to capture the arbitrage between Asian and North American prices and export daily billions of cubic feet to foreign destinations. So promising was the LNG play that a 2014 report by Citi Group projected that the U.S. would become the world’s leading LNG exporter by as early as 2020.
But ironically the same fracking miracle that flooded the North American market with surplus natural gas also led to a spike in oil production and contributed to the fall in global oil prices. Since oil and gas prices are linked the collapse in oil prices led to an even sharper decline in LNG prices. LNG spot prices in Asia have recently fallen below $7/mmbtu, a level nearly one third of last year’s peak. While at the well head U.S. gas price –below $3/mmbtu – is among the cheapest in the world, when slapped with liquefaction and tolling costs the price could reach $9/mmbtu, no longer competitive in many markets including Asia. The slowdown in China’s growth, the European recession, the restarts of Japanese nuclear power plants, the rise in Australian LNG exports, the new gas pipelines China and Russia are planning to build in Siberia and the specter of Iranian gas entering the market once the sanctions are lifted all mean that in the foreseeable future America’s gas may not be attractive for most buyers.
With the dream of becoming a major player in the Asian market quickly fading the U.S. should consider alternative uses for its gas. America's immediate neighborhood, the Caribbean basin and Central American markets, could be the first markets for America's gas. Many of those countries - Granada, Jamaica, Barbados, Nicaragua and Cuba to name a few - still generate large portions of their electricity from oil products and their economies are susceptible to occasional oil shocks. The same is true for Puerto Rico which is effectively bankrupt and could benefit greatly from switching its power sector from oil to natural gas. But most of those markets are too small and too poor to justify the construction of LNG receiving terminals where LNG is re-gasified into dry gas that can power electricity turbines. For such regional markets the gas can be delivered in the form of low pressure Compressed Natural Gas (CNG) on board dedicated vessels. This way the gas can simply be shipped in its gaseous form without having to go through a costly and energy intensive conversion into liquid and then back into gas. Moving gas in CNG vessels would offer the U.S. gas producers new nearby markets while sparing the customers the need to invest billions of dollars in LNG infrastructure.
The second potential market for America’s gas is the transportation sector. While a large amount of gas is used for power generation, with important economic and environmental benefits, only one percent of U.S. natural gas is used as automotive fuel. This is a real folly. Even at the currently depressed crude prices North American natural gas is still three times cheaper than oil on an energy content basis. But despite the cheap price of our gas, the U.S. is home to only about 150,000 of the world’s roughly 18 million natural gas vehicles. In China, where natural gas prices are 3-4 times higher, gas is used much more widely in vehicles. A new report by the United States Energy Security Council reveals that though China’s overall vehicle fleet is half the size of America’s it has ten times more natural gas vehicles and twice as many natural gas refueling stations than the U.S. Furthermore, China is in the process of converting its vehicle fleet to run on methanol, an alcohol fuel that can be made from natural gas as well as coal and biomass. Indeed, though poor in gas China seems to be utilizing the resource better than the gas-rich U.S.
The answer to the North American gas glut isn't building multi-billion dollar LNG terminals along U.S. coasts with the hope of exporting gas to distant markets where it is no longer wanted. Promoting innovative approaches to exporting gas to our neighbors in configurations other than LNG and advancing fiscally conservative solutions to opening the transportation sector to natural gas-derived fuels are the only ways for U.S. natural gas producers to ensure that if they continue to drill for more gas there will be takers.
‘As it stands now NG producers flare and burn off the excess; it is all wasted.’
An outright lie.
Go join the social experiment called the Democrat party.
Saudi is building up their Natural Gas production as well. I think for the next few decades, Qatar will have a large surplus to export Nat Gas to Europe.
They also have begun GTL, Nat Gas to liquids like diesel. Expensive, but for Qatar the domestic gas is cheap feedstock and the export competes with LNG.
Shell built and operates their GTL plant.
http://www.shell.com.qa/en/products-services/pearl.html
There’s plenty of US demand for domestic natural gas used in electric generation. If US natural gas is to be used for export, it’s more economic to convert it to more valuable products such as methanol, ammonia, and urea.
Our supply continues to outrun demand at global prices. The conversions are expensive and takes extremely low feedstock price. While that may exist today, I don't expect us to continue for the life of those plants.
That cuts out the absurdly large liquefaction costs inherent to exporting LNG,
Those cost of conversion exceed the cost of producing LNG.
Qatar, Saudi Arabia, Iran?
You are correct, point, EU wants off Russian Gas and get US LNG.
Some people need to get their head out of their posteriors.
From August 2014, one year ago:
> “Every day, drillers in the Bakken burn off about 350 million cubic feet of natural gas.”
http://www.cnbc.com/2014/08/22/the-rush-to-implement-north-dakotas-new-flaring-standards.html
You claimed “all is wasted”
You think a third is equal to all?
And you’ve already been shown where that is greatly diminishing.
You should read the link I gave you in post #13.
North Dakota’s plan calls for reducing flaring to 23 percent of all production by Jan. 1. That will fall to 15 percent by the beginning of 2017 and 10 percent by 2020.
> “You claimed “all is wasted”
Statistically speaking of the ‘excess’.
All the more reason to push for LNG exports which is the subject of this poor trash you’ve posted.
> “You think a third is equal to all?”
You reveal yourself as someone who just wants to argue and defend your self-appointment as the energy know-it-all.
The solutions to the NG flaring are dismal and infantile. They are not a complete solution. Exporting LNG is a much broader solution.
Regulators can grandstand all they want about flaring. They are still stupid and incompetent.
The Nat Gas in North Dakota was flared because it wasn’t economic to bring it to market. The infrastructure wasn’t in place to gather it, let alone get it out of North Dakota. If you cannot complete those steps, building LNG terminals a thousand or so miles away is not a solution.
Insults and name calling doesn’t change the facts.
By the way, do you understand that if North Dakota captured and produced 100% of the Natural Gas they bring out of the ground already, they would still be less than 2% of the US Nat Gas Production?
North Dakota just isn’t significant in the LNG export industry.
http://www.eia.gov/dnav/ng/ng_prod_sum_a_EPG0_FGW_mmcf_m.htm
Calling you a self-appointed energy know-it-all is not name calling, it is a factual description.
You spend far too much time arguing about trivial details without keeping the bigger picture.
LNG exports are a solution that drives the development of infrastructure. As Trump would say you make the trade deal with the foreign market, facilitate the investment and stand aside while it rolls out.
The regulators you referred to are stupid and incompetent. By mandating the gathering systems as infrastructure to reduce flaring, the gathered excess NG has nowhere to go but it must go somewhere because there is too much for regional commercial and consumer usage. This is not addressed except to say if the excess NG is not used regulators whisper a threat to shutdown producers.
The NG excess is too great for domestic utilization, hence flaring. Shutdown or export are the only other outcomes. New tech is a wildcard that is unknown in nearly all respects except in feeding back to power drilling equipment and facilities but that falls far short as a broad solution.
The economic and effective outcome is in outlets at liquefaction plants at ports. Laying NG pipeline is not a new activity and laying pipeline to such plants at ports can be done on a crash basis over a few years. As soon as the export contracts are underwritten, there will be a line of investors and plenty of contractors to lay pipe.
Have fun with your thread.
I would say you spend too much time posting false claims.
LNG exports are a solution that drives the development of infrastructure.
LNG exports is not going significantly raise the price of Natural Gas. The ND wells are primarily oil and the natural gas is a low volume byproduct.
It wasn't economic to build out those gathering system when Nat Gas prices were 2 to 3 times higher than they are today. Exporting 10% or so of our Nat Gas production isn't going to raise the price above that.
the gathered excess NG has nowhere to go but it must go somewhere because there is too much for regional commercial and consumer usage.
The US is still importing Natural Gas. It is still imported through pipelines including one running through North Dakota. If the Natural Gas produced in North Dakota was economic to gather, it would have already replaced the Gas imported via the Northern Border Pipeline. More gas is imported from Canada through North Dakota, than is vented and flared in North Dakota.
U.S. Natural Gas Pipeline Imports by Point of Entry
http://www.eia.gov/dnav/ng/ng_move_poe1_a_EPG0_IRP_Mmcf_m.htm The NG excess is too great for domestic utilization, hence flaring.
Another false claim. Last Month the US imported over 200 billion cubic feet of Nat Gas and the North Dakota flared ~12 bcf.
The economic and effective outcome is in outlets at liquefaction plants at ports.
It costs about $5/mmbtu to move LNG across the ocean, see charts above. Currently, that price differential is way down and not an economic driver. It will return, in time, with the future rise in oil price. But it is going to take time.
“Some people need to get their head out of their posteriors.”
And if you did get it out of your bottom, you would know this is like global warming hysteria where one believes that 100% of all climate change occurs due to burning carbon.
Look, you have no basis of saying(and I quote) “As it stands now NG producers flare and burn off the excess; it is all wasted.”
An outright lie that no one but a lib would ever dream of posting.
No one in industry disputes that some natural gas is flared. Lying about it all being flared and wasted is zero truth.
Don’t waste your valuable time trying to convince hostage.
He is wrong and likely a troller.
You do a commendable job and that is one who does not need convincing, but a lobotomy.
I write more for everyone else reading the thread.
I do not want Free Republic to be the source of false information.
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