Natural Gas - Bridge to sustainability by Tom Hewett
Steve Andrews says it’d be nice to have more viewpoints from ‘inside the industry,’ so who am I too let the big guy down! I’m a petroleum engineer going on 24 years. My first 6 years were on platforms in the Gulf of Mexico and gave me an appreciation for the teamwork and technology that go into the drilling business Charlie Brister sometimes writes about on these pages. My last 18 years have been in the Denver offices of four independent O&G companies where my job is to evaluate drilling locations and acquisition candidates. It’s a competitive business that involves computer models, massive databases of land holdings and production results, and that all-important intangible - luck.
But before more on that, a word about my views. I wouldn’t be honest if I didn’t admit to doomer tendencies. For example, who else would be reading Ravi Batra’s Surviving The Great Depression of 1990 as a 27 year old? Fortunately, I read it in 1991 so I could read with an air of disbelief. And as the economy cruised through the 90’s it was obvious that predicting economic collapse isn’t a precise business. So I moved on from worrying about the economy to worrying about resource depletion. A cold winter in 1996-97 drew down natural gas inventories and so I started monitoring continental supplies. Then some years later ‘The Oil Drum’ and ASPO popped up, providing a community of bloggers and commentators to learn from.
What I hope to share via my experience is that anyone predicting the imminent decline of oil supplies and, as a result, our civilization, could be premature, just as Ravi Batra was in calling the next great depression.
The natural gas price since 1976, per the EIA , is graphed below. Because prices are higher since 2000, it’s tempting to extrapolate that a continuation of that trend is inevitable. However, thevolumes of natural gas in shale far exceed the volume of conventional supply. It’s currently expensive to unlock it, but who am I to conclude that will always be the case? You’re reading from someone who can’t solve a Rubik’s Cube! But I can vouch that the shale-gas resource is huge and that it’s distinctly possible that we might produce it for decades at the kind of prices that have been customary since 2000.
Liquified Natural Gas (LNG) is also a story I follow. No one can ever know how much natural gas was vented in the early days of the oil business - it was a useless byproduct. Because development of foreign reserves lagged those in the USA, this resource was better preserved overseas. Numerous corporations have invested billions on the belief that there will be an ample supply of natural gas to import and at prices that will compete with our domestic supplies. The only reason LNG is not arriving to the US is because other importers are currently willing to pay more. It’s a testimony to the US E&P business that we are continuing to produce domestically at prices that beat the imported LNG price. I find it reassuring that we have the LNG option to fall back upon.
I have no personal experience with natural gas from hydrates except to say that the resource is reported as huge and at relatively shallow depths. I’m always eager to read more on this topic because my intuition is that innovative people will eventually bring this to market.
Because I understand natural gas to be abundant relative to the volumes that we consume, I, like T Boone Pickens, am optimistic that natural gas can supply an important bridge to the sustainable future that we all seek.
I write about natural gas because that’s what I know best. However, the same logic applies to oil and so enlightened peak oil observers will admit that the backside of the peak doesn’t have to decline sharply and that there’s the distinct possibility of a few false peaks along the way.
At the 2009 ASPO conference, it was an honor to meet so many of the editors and contributors to The Oil Drum and to ASPO-USA. But for sure my favorite encounter was to meet “Stoneleigh” who in August 2007 posted “The Resurgence of Risk - A Credit Primer” on The Oil Drum and who returned my attention to concerns about debt. I’m also a fan of anything written by Kevin Depew at Minyanville.com whose witty perspective is valuable to me.
Is the global economy teetering because of resource depletion or because it’s just a natural cycle? I find it very interesting but at the end of the day I only know enough to not really know. It’s frustrating to share this earth with some people who don’t give a darn to know but humbling to also share it with others who see the possibility in every problem. There’s something for everyone and on my best days, I make it my job to go find it.
Tom Hewett P.E. is a Denver-based petroleum engineer with 24 years of industry experience - mostly with natural gas fields. He estimates reserves, picks drilling locations, determines optimal well spacing, and evaluates property acquisitions.
(Note: Commentaries do not necessarily represent ASPO-USA’s positions; they are personal statements and observations by informed commentators.)
Comments
By Scott Benson on February 2nd, 2010 at 11:05 am
Just a quick note from the experience we had with CNG (compressed natural gas) vehicles in the 1990s. While we may be on to something with the predicted large amounts of (shale) natural gas now being found around the country, I would remind everyone that you have to compress that gas to 3,600 psi at least to get enough BTUs onboard a standard-sized vehicle to propel it. That is a LOT of pressure to be sitting on, despite its proper claims of safety thus far. Putting a 50 year old secretary into such a vehicle takes energy all by itself. If you’ve never heard a gas pipe on a truck rupture, and I have, it sounds like a bomb going off. All our CNG pickups had to be recalled because someone forgot to prevent the acid-filled rainwater from collecting in the plastic cylinder covers, which essentially “bathed” every cylinder in liquid acid. There are lots of good things about natural gas for vehcles, but from a practical perspective, we’ve stopped buying them.
By Scott Benson on February 2nd, 2010 at 11:06 am
And don’t get me started on the heaving and creaking you hear when you are trying to fill up the tanks. You feel vunerable just standing next to them.
By Bill Simpson in Slidell on February 5th, 2010 at 10:45 am
An interesting article Tom. Natural gas had better be a bridge fuel, or we are all in serious trouble. Shell and Qatar just invested a lot of money to build the Pearl natural gas to liquid fuel plant. Shell’s web site explains the whole process. I doubt that they would build such a huge industrial complex if they didn’t think that it would be profitable. How much gas is wasted in the conversion process, I don’t know, but nuclear or solar electricity may eventually be able to reduce any gas wasted in the conversion process. Whether enough gas can be found for widespread use of the process is the great question. Since a liquid is a lot denser than a gas, I’ll bet that it takes a lot of gas to make a gallon of diesel. Is there enough gas out there to keep GTL plants going for a few decades? If there is, that could help a lot with peak oil.
We want to push back a liquid fuel shortage as long as possible, because the escalating cost of liquid fuels will wreck the economy long before the actual physical fuel shortage becomes a critical problem.
Methane hydrates (clathrates) supposedly contain more energy than all other fossil fuels combined. Recently, a team of Japanese and Canadian researchers produced some gas from them with a well in the Canadian Arctic. Will extraction ever be economic, is an open question.
Everyone should be aware that the huge Russian Arctic continental shelf may contain vast volumes of natural gas. It is nearly half the size of the USA! It is shallow water, but iced over. Four large rivers have been depositing organic material into the Arctic Ocean from Siberia for a very long time. I will be surprised if a lot of gas isn’t found there. I have been urging the Russians to increase seismic work there for the last couple of years.
By Don Hirschberg on February 5th, 2010 at 12:19 pm
If we had been using CNG as motor fuel for the last hundred years, knowing the properties of gasoline, we would have had great safely concerns if someone proposed replacing CNG with gasoline. Considering gasoline’s volatility, flammability and explosive limits the idea of millions of air breathing atmospheric tanks in the hands of unknowing people could well have been judged too hazardous.
By Mark Nease on February 6th, 2010 at 6:51 am
“What I hope to share via my experience is that anyone predicting the imminent decline of oil supplies and, as a result, our civilization, could be premature, just as Ravi Batra was in calling the next great depression.”
Premature, perhaps, but not by much…
By Tom Hewett on February 9th, 2010 at 3:42 pm
I have quite accidentally realized that comments can be posted here. Thanks for the comments!
Bill, In hindsight, I would change the title to “Natural Gas - It had better be a bridge!” Fortunately, there are many reasons to count on it being so and thanks for adding the potential of the Siberian shelf to that list.
CNG as a motor fuel is not my area but I know exactly who to talk to and perhaps I can get him to write an editorial soon.
Thanks for reading.