Friday, August 18, 2017

GWPF Newsletter: U.S. Shale Flooding World Markets








Shale Forever: A Near Infinite Energy Resource?

In this newsletter:

1) U.S. Shale Flooding World Markets: Henry Hub Emerges as Global Natural Gas Benchmark
The Wall Street Journal, 17 August 2017 
 
2) Shale Forever: A Near Infinite Energy Resource?
David Blackmon, Forbes, 17 August 2017 
 
3) Shale Rush: China To Build New Shale Gas Bases
Reuters, 15 August 2017
 
4) U.S. Coal Makes A Comeback
The Wall Street Journal, 16 August 2017
 
5) Indian Govt’s Chief Economic Adviser Slams ‘Carbon Imperialism’
Gireesh Chandra Prasad, Live Mint, 17 August 2017
 
6) Al Gore: The Gift That Keeps On Giving
Steven Hayward, Power Line, 17 August 2017
 
7) Reporter Confronts Al Gore On Sea Level Rise Claims, Gets Called A ‘Denier’
Michael Bastasch, Daily Caller, 17 August 2017

Full details:

1) U.S. Shale Flooding World Markets: Henry Hub Emerges as Global Natural Gas Benchmark
The Wall Street Journal, 17 August 2017 
Alison Sider and Christopher M Matthews
 
Henry Hub is helping to set prices around the world as wave of U.S. natural gas reaches Europe, South America, Asia


 
ERATH, La.—An unassuming confluence of pipelines here in the heart of Cajun Country is becoming the most important place in the world for natural gas prices.
 
The Henry Hub has for years been a benchmark for U.S. contracts. Now it is helping to set prices from Mozambique to Japan, as a wave of U.S. natural gas being unlocked by shale drillers reaches Europe, South America and Asia.
 
In the first half of the year, there was a 31% increase in the volume of Henry Hub natural gas futures traded outside of typical U.S. trading hours, compared with the same period last year, according to CME Group, which owns the New York Mercantile Exchange. That is a sign that traders abroad are increasingly dabbling in the U.S. gas benchmark.
 
Henry Hub’s growing prominence underscores how the burgeoning trade in liquefied natural gas is weaving disparate regions together into an increasingly unified global marketplace, more like that for crude oil. That could transform what has been a niche market that swings on slight shifts in the weather forecast into a reflection of the global economy.
 
“The U.S. is going to be the price setter for majority of the freely traded market,” said Peter Keavey, global head of energy at CME. “You’re exporting the Henry Hub benchmark to the rest of the world.”
 
U.S. LNG exporters are hoping Henry Hub will emerge as the global price setter because it would remove significant risk from their business model. These exporters buy all of their natural gas at Henry Hub prices and could stand to lose money if they have to sell it to their customers at oil-linked prices if the margins are unfavorable.
 
Until recently, natural gas markets remained staunchly regional. But that’s changing rapidly.
 
Analysts say the U.S. is set to become the world’s swing supplier of LNG as construction is completed on several new terminals that will chill natural gas until it turns to a liquid that can be carried away on tankers.
 
Full story
 
2) Shale Forever: A Near Infinite Energy Resource?
David Blackmon, Forbes, 17 August 2017 
 
“We should view the Permian Shale Basin as a permanent resource. The Permian is best viewed as a near infinite resource – we will never produce the last drop of economic oil from the Basin.”
 
Allen Gilmer, Co-Founder and Executive Chairman at DrillingInfo, Inc., is not a man who minces words, an attribute that has served him well during a long career in the oil and gas industry.  When it comes to the Permian Basin and the amount of oil and gas resource contained in it, he becomes positively loquacious.
 
“We should view the Permian Basin as a permanent resource,” he says, “The Permian is best viewed as a near infinite resource – we will never produce the last drop of economic oil from the Basin.”
 
No one disputes that the resource in the Permian is huge, but ‘infinite’ is a big word. I asked him to expand on that concept. “That is the practical reality with the amount of resource that is in the ground,” he says, “The research we’ve done indicates that we have at least half a trillion barrels in the Permian at reasonable economics, and it could be as high as 2 trillion barrels.  That is, as a practical matter, an infinite amount of resource, and it is something that has huge geopolitical consequence for the United States, in a very good way.  It has a huge consequence in terms of GDP, and right now it is creating an American energy global ascendancy.”
 
Obviously, it is also a practical matter that the pace at which the crude resource that underlies the Permian region in multiple formations will be constrained to some extent by commodity prices, costs, infrastructure and other potentially limiting factors.  We have seen the Basin go into another boom over the last 12 months despite relatively low prices and, more recently, rapidly rising costs.  Gilmer believes that infrastructure will be the most significant constraint going forward.
 
“The biggest thing that will get in the way of the Permian’s growing to its full potential is infrastructure,” he says, “I’m not sure you can really put any more trucks on that main highway [US 285] that goes up from Fort Stockton to Carlsbad.”  
 
He relates a story of a recent trip he and his wife took to Ruidoso, where his family has a home, and sitting at single highway intersection for more than 45 minutes because there was a mile-long backup of mostly oilfield service trucks trying to get through.  “That used to be the back road I would take to go home to Ruidoso when I was a kid.  Those roads can’t take that – you literally cannot put 50%, or even 20% more traffic on them.  So we are reaching infrastructure limits in the basin.”
 
I had the idea for this interview when I saw Gilmer give a presentation at a conference in April, during which he discussed his view of the Permian, classifying it as America’s “Super Basin.” The data he presents to support his findings was stunning, and compelling.  Gilmer says one of the main reasons he’s been giving a series of presentations this year was as a response to the current “Keep it in the Ground” movement coming from the anti-fossil fuel community.
 
“I’ve never understood this ‘Keep it in the Ground’ movement.  I wonder if they even know what they’re talking about keeping in the ground,” he says,  “Because the reality is that [where the Permian Basin is concerned] you’re talking about keeping in the ground an economy that is somewhere between the size of India and China, and that makes no sense to me.”  I know that feeling.
 
If Gilmer’s estimate of the real scope of Permian Basin oil is on target, it would represent a prize of somewhere between $25 – $100 trillion at current prices. The mid-point of that range is equal to more than 3 times the current U.S. federal debt, the low point of it is 40% more than total U.S. gross domestic product for 2016.
 
But how does that resource estimate square with the much more conservative resource estimates coming out of the Energy Information Administration (EIA)?  “From 1923 forward, we have historically underestimated the reserves we have in the United States,” Gilmer answers, “From 1923 forward, the official estimates of forward reserves have consistently been no more than 15 years, and in the last 50 to 60 years, its been no more than 10 years of forward production.  And yet, all these years later, we are still increasing production, and we still have that 10 year estimated number sitting there.”
 
Wallace Pratt wrote a paper for AAPG [American Association of Petroleum Geologists] in 1952 in which he showed that, for some reason, the experts in our industry have historically massively underestimated the resource potential. He cited a USGS paper from 1905 that predicted the country only had a few years of oil supply left,” he laughs.  “We have always done this, and we have always created terrible energy policy because we’ve always done this.  It perpetuates this concept that we’re running out of oil, and it’s a concept that has persisted since 1905.  It’s a brilliant paper.”
 
Full post
 
3) Shale Rush: China To Build New Shale Gas Bases
Reuters, 15 August 2017
 
BEIJING (Reuters) - China is likely to build two shale gas bases in the south of the country and open up tenders for more oil and gas exploration blocks in the world's biggest energy producer, the Ministry of Land Resources said on Tuesday.


 
At a news conference in the capital, ministry officials said China is likely to start commercial production of shale gas in southern city of Anye in Guizhou province and Yichang in Hubei province. The ministry did not give a timetable for the start date.
 
The steps come as China ramps up its exploration efforts as crude oil production from ageing wells drops. Beijing is also on a mission to lift natural gas consumption to help combat smog.
 
In the north of the country alone, China's crude oil and gas exploration efforts cover a vast 500,000 square kilometers, with new natural gas and light crude reserves having already been discovered there, the ministry said.
 
Full story
 
4) U.S. Coal Makes A Comeback
The Wall Street Journal, 16 August 2017
 
Coal is showing signs of a revival and breathing economic life into West Virginia and other coal states. It is becoming more competitive as a fuel source as the price of natural gas has risen 63% since March 2016


 
Not long ago liberals hailed the demise of coal as inevitable while the Obama Administration strangled the industry with regulation. But don’t look now, Tom Steyer, because coal is showing signs of a revival and breathing economic life into West Virginia and other coal states.
 
Former Environmental Protection Agency Administrator Gina McCarthy proclaimed in 2015 that coal “is no longer marketable.” She planned to be the lead undertaker. The Obama Administration worked tirelessly to fulfill her mission and may have succeeded had Hillary Clinton become President. “We’re going to put a lot of coal miners and coal companies out of work,” the 2016 Democratic nominee famously promised.
 
Yet the Trump Presidency seems to have lifted animal spirits and coal. Weekly coal production has increased by 14.5% nationwide over last year with even bigger bumps in West Virginia (19%), Pennsylvania (19.7%) and Wyoming (19.8%). Exports were up 58% during the first quarter from last year. Apparently coal can be marketable if regulators let it be.
 
***
 
The Obama Administration first targeted coal consumption with rules on mercury emissions and ash disposal that would have made it next to impossible to build a new coal-burning power plant. Then came the 2015 Clean Power Plan that would have forced the existing fleet of coal plants into early retirement.
 
Finally, the Obama anti-coal warriors sought to shut down coal’s export potential. Thick-seamed coal on federal land in the Powder River Basin overlying Wyoming and Montana is relatively clean-burning and inexpensive to mine. The Obama Interior Department suspended new coal leases on federal land last winter and then reassessed royalty payments—thereby reducing investment and profitability. In December came the coup de grâce: Interior’s stream rule usurping state authority over permitting.
 
President Trump has called a cease fire to his predecessor’s “war on coal.” In February he signed a resolution repealing the stream rule under the Congressional Review Act. The Supreme Court stayed the Clean Power Plan in February 2016, and EPA Administrator Scott Pruitt is dismantling the power rule as well as the ash and mercury rules. Interior Secretary Ryan Zinke has re-opened leases and rescinded the royalty revaluation.
 
Meanwhile, coal is becoming more competitive as a fuel source relative to natural gas, whose price has risen 63% since March 2016 amid an expanding market. The Energy Information Administration says the U.S. will be a net exporter of natural gas this year.
 
Growing pipeline networks have boosted gas exports to Mexico and are providing new domestic outlets for gas trapped in the Marcellus and Utica Shales. Pipeline export capacity to Mexico is expected to nearly double by 2019. Several interstate pipelines are under review to deliver gas to the Midwest, eastern Canada and Gulf Coast for export. Liquefied natural gas exports have increased six-fold in the last year, and five new terminal projects are expected to be completed within three years. While coal and natural gas compete as electric power fuels, they can both prosper if energy markets expand.
 
This is all horrifying to the climate-change lobby, but they might note that U.S. coal exports are rising to countries that claim climate-change virtue. Exports to France increased 214% during the first quarter of this year amid a nuclear power plant outage. Other European countries like Germany and the U.K. are utilizing U.S. coal to stabilize unreliable renewable sources and make up for electric capacity lost from the shutdown of nuclear plants. First-quarter coal exports were up 94% to Germany and 282% to the U.K. Et tu, Angela Merkel ?
 
Coking coal used to make steel is also currently a hot commodity, and its price can soar whenever a storm hits Australia and shuts down mines as one did this spring. Metallurgical exports to China rose 357% during the first quarter. As much as Mr. Trump denounces China’s overproduction of steel, U.S. coal miners are benefitting.
 
***
The bigger story is that there’s still demand for U.S. coal if regulators allow energy markets to work. The Energy Information Administration in June projected that U.S. coal power generation will increase by 13% by 2025 “as the existing fleet of coal-fired generators can be more fully utilized and fewer coal-fired generators are retired.” With the Obama Clean Power Plan, the EIA had forecast a 2% to 16% decline.
 
Coal production will likely never return to its heyday of decades ago. Recent bankruptcies that have made coal companies leaner and more competitive also mean that fewer workers are needed to produce the same output. But even the current modest rebound is helping coal states.
 
Full editorial
 
5) Indian Govt’s Chief Economic Adviser Slams ‘Carbon Imperialism’
Gireesh Chandra Prasad, Live Mint, 17 August 2017
 
Coal will and should remain the primary source of energy for India in the short to medium term as the fossil fuel remains the cheapest source of energy for India’s development needs, chief economic advisor Arvind Subramanian said on Thursday.
 

click on image to watch news report
 
Renewable energy, on the other hand, comes with hidden costs, Subramanian said in a lecture organised by think tank The Energy and Resources Institute (TERI).
 
Subramanian called for setting up a global coalition for clean coal technology, mirroring the international solar alliance, which could find ways of sustainable use of coal in power generation.
 
“India needs coal in the short to medium term. Renewable sources must be part of the energy mix but they also come with hidden costs, which should not be overlooked in our headlong embrace with renewables,” said Subramanian.
India cannot allow the narrative of “carbon imperialism” to come in the way of realistic, rational planning for the country’s energy future, he added.
 
Subramanian’s call for caution in the adoption of renewable energy comes at a time when many state power utilities are forcing solar power developers to lower their power tariffs in a market where tariff discovered in subsequent auctions keep declining.
 
Although the solar power tariff keeps declining due to a fall in imported solar panel costs, renewable power projects bear the extra cost of power storage equipment. However, industrial consumers, which bear cross-subsidy for domestic consumers, find solar power cost attractive. This leads to reduced capacity utilisation of coal-based thermal power plants, adding to the stress in the power sector.
 
“Coal will remain and should remain. The time is ripe for creating a green and clean coal coalition mirroring the (international) solar alliance. That, rather than unconscionable calls to phase out India’s cheapest source of energy, will serve the cause of climate change and India’s development needs,” said Subramanian.
 
Full story
 
Al Gore: The Gift That Keeps On Giving
Steven Hayward, Power Line, 17 August 2017
 
Political scientists at the University of British Columbia conclude that Gore’s efforts on behalf of climate change have only succeeded in polarizing the issue, setting back the cause of climate action.

Almost ten years ago, not long after Al Gore’s first entry into the slasher/horror film genre (An Inconvenient Truth), I had occasion to ask a straight-shooting “mainstream” climate scientist I know slightly what he thought of Gore’s film. I was fishing to see whether he’d comment on some of the more obvious howlers that Gore included in the film, but instead after a long pause he said, “I wish he’d made the film with John McCain.” In other words, Gore should have tried to make it a bipartisan effort. McCain is the perfect person and is so vain that he surely would have done it. He had, at that point, sponsored two greenhouse gas emissions-trading bills with Democratic senators, and also a bill with John Kerry to mandate much higher mileage standards in the American car fleet (22 Senate Democrats voted against that proposal, incidentally).
 
Now that Gore is out with a sequel (that is bombing at the box office, so there probably won’t be a sequel Oscar in Gore’s future), it is worth taking in the reflections of two young political scientists at the University of British Columbia who conclude that Gore’s efforts on behalf of climate change have only succeeded in polarizing the issue, and set back the cause of climate action.
 
An Inconvenient Truth about ‘An Inconvenient Truth’” has some interesting findings that run counter to the slogans of the climatistas:
 
However, 11 years after its release, there is also evidence that it might have had an unintended consequence: serving as a catalyst in the polarization of American public opinion on climate change.
 
We have studied in detail how the media covered the issue of climate change since the 1980s and how it may have played a role in polarizing the American public. The commonly observed pattern is that public opinion tends to follow, rather than lead, debate among political elites. . .
 
What we found is a nuanced story that sheds considerable light on why the public polarized on climate change. First, politicians became increasingly common in coverage, politicizing the issue as it grew in importance. As a result, the public has been exposed to a growing number of messages about climate change from party elites.
 
Second, When one side’s messages are clear and the other side’s are muddled, as was the case here, it’s plausible that Republican voters took their cues from Democrats. This should not be surprising. In an age of affective polarizationwhere Republicans and Democrats each increasingly dislike the other, it makes sense that Republicans may have taken an oppositional stance on climate change, at least partly, in response to signals from Democratic elites. Democratic messages have been more common in news coverage, and, unsurprisingly, consistent in a pro-climate direction. Meanwhile, Republican messages have been fewer in number, and, until the Obama presidency, ambiguous in direction. Contrary to conventional wisdom, only a small fraction of Republican messages on climate change explicitly denied the scientific consensus on climate change.
 
When one side’s messages are clear and the other side’s are muddled, as was the case here, it’s plausible that Republican voters took their cues from Democrats. This should not be surprising. In an age of affective polarizationwhere Republicans and Democrats each increasingly dislike the other, it makes sense that Republicans may have taken an oppositional stance on climate change, at least partly, in response to signals from Democratic elites.
 
A couple of observations. First, what this study suggests is that Al Gore is the best friend climate skeptics ever had. Here’s to hoping Gore makes many more sequels to An Inconvenient Truth. With enemies like him, who needs enemies? Second, the first bolded sentence above—”Democratic messages have been more common in news coverage”—should not surprise us in the least, since the media is the echo chamber of the Democratic Party and most environmental “reporters” are just stenographers for activist group talking points. But in an age when public trust in the media is in free fall, how smart was this if you’re a sincere climate change worrier?
 
This passage from the story is especially interesting:
 
For example, Al Gore was featured in 48 per cent of climate change stories on Fox News in 2006 and in 57 per cent in 2007. There were explicit references to the movie in 28 per cent of the stories in 2006 and 17 per cent of the stories in 2007. On the other hand, a leading Republican climate change denier, Sen. Jim Inhofe, was not featured in a single story on Fox News in 2006 and in only one per cent of the stories in 2007.
 
The traditional media also focused heavily on Al Gore. In 2006 and 2007, the former U.S. vice-president was featured in 13 per cent and 17 per cent of news stories in the highest circulation newspapers in the United States, and in 16 per cent and 23 per cent of the network broadcasts.
 
In other words, if you tuned in to news about climate change in that time period, you were exposed to Al Gore and his message. And even though that message was unabashedly pro-climate and for strong climate action, it likely played a role in turning Republicans against that message, since to them, Gore was simply a Democratic politician they disliked.
 
Full post 
 
7) Reporter Confronts Al Gore On Sea Level Rise Claims, Gets Called A ‘Denier’
Michael Bastasch, Daily Caller, 17 August 2017
 
Former Vice President Al Gore labeled a British reporter a “denier” after he pressed the former vice president about scientific claims made in his recently-released global warming film.


 
“Are you a denier?” Gore asked The Spectator’s Ross Clark after a private screening of “An Inconvenient Sequel.” When Clark tried to finish his question, Gore said: “You are a denier.”
 
Clark questioned one part of Gore’s film that “cuts from Gore on his melting glacier to a flooded street in Miami Beach, with a voiceover from Gore making a strong connection between the two,” he wrote in an article.
 
“The implication is that sea-level rise is happening frighteningly quickly — and it is all down to carbon emissions, if not nature’s revenge for all those hanging chads which denied him victory in Florida and therefore the 2000 presidential election,” Clark wrote for The Spectator.
 
Clark was curious about the claim, so he asked Florida International University sea level expert Shimon Wdowinski about global warming’s impact on sea level rise. Wdowinski said glacial melt did impact sea level rise, but the recent surge in sea levels in Miami had more to do with “short-term variability caused by changes in ocean currents.”
 
Wdowinski also noted that subsidence is another major factor for flooding in Miami, much of which is built on reclaimed swamps and barrier islands. Clark wrote that “[s]atellite measurements reveal that some streets now lie 16 to 24 cm lower than they did 80 years ago.”
 
A recent study supports Wdowinski’s point. Sea levels south of Cape Hatteras rose about six times faster than the global average from 2011 to 2015, according to University of Florida researchers.
 
The study found “two large atmospheric patterns most likely accounted for the hot spot off the Southeast coast: the El Niño cycle and the North Atlantic Oscillation,” The New York Times reported.
 
Gore wasn’t interested in hearing inconvenient science. “As soon as I mention Professor Wdowinski’s name, he counters: ‘Never heard of him — is he a denier?’” Clark wrote, adding Gore soon accused him of being a “denier.”
 
Clark was also confronted by “a frosty PR woman” who told him “this is a film junket, to promote the film,” not an event to ask hard questions.
 
Clark isn’t the first to confront Gore on his scientific claims. Fox News host Chris Wallace asked Gore about failed predictions made in his 2006 film “An Inconvenient Truth.”
 
Wallace confronted Gore on his claim that “[u]nless we take drastic measures the world would reach a point of no return within 10 years,” there would be a “true planetary crisis” due to global warming.
 
Full story

The London-based Global Warming Policy Forum is a world leading think tank on global warming policy issues. The GWPF newsletter is prepared by Director Dr Benny Peiser - for more information, please visit the website at www.thegwpf.com.

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