Saturday, October 10, 2009

Peak Oil a Moot Point with New Natural Gas Reserves Estimates

Liquified Natural Gas (LNG) Vessel

While pundits and oil experts argue the precise point of peak oil production, new methodology in extracting natural gas from shale formations may make the argument academic in the near term – meaning the next 100 years. The United States has led the way in new technologies that afford access to previously unobtainable natural gas trapped in shale formations. Other countries around the world are now learning these technologies and gains in their reserves are sure to follow.

Natural gas, the cleanest of fossil fuels, has seen a 40 percent gain in reserves in the U.S. as a result of these new extraction technologies. Since natural gas emits fewer green house gases than coal or oil, its increase in global production will reduce total emissions. The most conservative estimates are that global energy reserves will increase by 20 percent due to newly accessible natural gas.

A recent study by the IHS Cambridge Energy Research Associates consulting group calculated that the recoverable shale gas outside of North America could be equivalent to 211 years’ worth of natural gas consumption in the United States at the present level of demand, and perhaps as much as 690 years. The lower figure would represent a 50 percent increase in the world’s known gas reserves, and the high figure, a 160 percent increase.

Companies leading the way in this sector are Exxon Mobil, Devon Energy, Total, and ConocoPhillips. Early estimates of recoverable European shale gas resources range up to 400 trillion cubic feet, about half of what is estimated to be recoverable in the United States.

“It is obvious to everybody that it has huge potential,” said Oivind Reinertsen, president of StatoilHydro USA and Mexico, a Norwegian company with growing shale interests. “You see a lot of land-grabbing by different companies in Europe, potentially spreading to the Far East, China and India.”

These newly accessible natural gas shale fields, when coupled with the development of huge natural gas finds such as Gorgon in Australia, means that an efficient world market for Liquefied Natural Gas (LNG) will finally emerge, presenting an energy alternative to oil.

The new supplies from Gorgon and other projects in Australia could lead to a fundamental shift in the way gas is priced throughout the world. As more natural gas travels by free-ranging ships rather than immovable pipelines, traditional regional price differences could begin to erode as big buyers such as China gain more power to negotiate prices by playing competing suppliers against each other.

"We're seeing the first stages of what will ultimately be a more global natural gas market," said Mark Gilman, an analyst with Benchmark Capital in New York. The convergence of these two sources of natural gas from shale and LNG suppliers will alter politics and economies the world over in the next 100 years.

Richard L. Wottrich, Editor


Anonymous said...

NG and clean coal seem to mean that
energy prices will remain stable for several decades for heating and
for power generation anyway. If so
then the public investment in green
energy may be at risk strictly for
economic reasons. Governments have
a poor track record for risk management, seems like a slow go approach is indicated by these new
energy supplies.

Richard Wottrich said...

Agreed to a certain point. There have been examples of governments that have pulled off major switches to alternative power sources:

Brazil has shifted to a 50%-plus sugar cane ethanol mode. It took over 30 years and has been quite expensive, but they are there now. The cost in terms of clear cutting and burning its tropical forests has been high, as they contribute significantly to global warming trends.

Denmark went through a similar transition in the last oil embargo in 1973. Forced to pursue other energy sources, they mounted a decade’s long effort in alternative energy, esp. wind power. They put in significant conservation policies. Denmark also adopted systems that micro-utilizes heat produced by local industry to heat near-by communities via steam tunnels. This all cost billions, but it has in fact produced a very efficient nation.