Behind the political uproar, there is an energy revolution underway
happening at breakneck speed. It is the delivery of shale gas into
the market. It naturally produces a huge flush production that
quickly recaptures the capital budget and allowing an additional well
to be drilled. However they do the numbers, you can be sure that
they are not going backward.
This has resulted in the abrupt displacement of the thermal coal
industry which is now working itself out. Other moves are afoot to
sharply increase domestic consumption and displace oil. All this
plus the rising expansion of North American oil production at a rapid
pace suggests that North American energy self sufficiency is both
achievable and quickly. 2020 looks feasible today.
This will mean a massive restoration of the USA balance of payments
and a rapid rise in the US dollar.
In the meantime, China and others are also scrambling to exploit this
resource and I expect it to be technically possible inside the next
five years. This is not a technology that is easy to hide or prevent
others from using. We just have first adopters advantage here.
The advent of cheap natural gas, and plenty of it will put both coal
and nuclear of life support.
Exposing China's
Weakness
By Keith Kohl
Tuesday, February
26th, 2013
In just a little over two years, the United States will finally
start shipping liquefied natural gas abroad, signifying a 180-degree
turn since 2008.
Cheniere Energy is scheduled to begin sending shipments from the
first of four processing facilities at their Sabine Pass terminal.
The Sabine Pass project sits roughly 3.5 miles off the Gulf Coast;
it will initially come online with a processing capability of a
little more than eight million metric tons of LNG from two of the
four planned trains.
Despite being the only project in the U.S. that's approved to
export LNG, we weren't wholly convinced this new outlet for natural
gas producers would really take off...
The first sign of trouble came in a budget hearing last year when
former Energy Secretary Steven Chu was grilled by Congressional
members about why we would even want to export our cheap
natural resources.
One look at what other countries are paying for the same
resource, and it's easy to question any benefits to losing our edge:
Exporting natural gas to Europe and Asia — where prices are
more than double and triple what we're paying in North America —
will directly cause prices to rise here in the States...
Their argument has some weight if you buy into the advantage
natural gas is giving both the sector and the U.S. economy, creating
over half a million manufacturing jobs within the last three years
and projecting more than five million additional jobs over
the next seven.
Now, I'll be the
first to admit I haven't been among the most ardent and outspoken
supporters of Uncle Sam becoming a heavy natural gas exporter.
But to be honest, I've slowly been warming up to the idea. If there's one sure-fire way to make me jump the fence, it's with numbers...
The Department of Energy's December report evaluates the impact of
potential LNG exports on the U.S. economy. (Click here to view
the full report.)
In every one of the reference cases, they saw a net benefit to the
U.S. — with natural gas production increasing by as much as two
trillion cubic feet.
The real kicker is the report's conclusions regarding the
manufacturing sector: “Manufacturing sector output decreases by
less than 0.4% while EIS and electric sector impacts could be about
1% in 2020 when the natural gas price is the highest.”
If you break down U.S. gas production using the EIA's own data,
you'll find that production is either flat or declining in every area
except shale gas wells (click chart to enlarge):
To put it bluntly, the success of U.S. LNG exports will depend on
the successful development of our shale gas resources. And so far,
the numbers say it's working. The U.S. is producing about 30 trillion
cubic feet of natural gas right now as conventional production
circles the drain.
Canada and the United States find themselves in a heated battle
over who can reach LNG customers in Europe and Asia first. Both these
places are promising, since neither will meet their respective
demands for natural gas in the decades to come...
That's why the Chinese are spending billions here in the U.S. for
shale exposure. The end goal for them isn't to simply get rich off of
U.S. energy resources (although that would help their supply-demand
issue), but rather to possibly apply that technology in their own
massive shale gas deposits.
You see, China
is home to the world's largest shale gas resources, one that dwarfs
our own. But their struggle lies in their methods of extraction.
They haven't figured
out a way to extract these fossil fuels economically.
China is years away
from tapping their shale gas deposits — and they'll have a gigantic
target painted on their backs until they do.
The bottom line: Potential U.S. and Canadian LNG exports will
become one of the most explosive win-win scenarios for early buyers
we've ever seen.
Will it happen? Absolutely. Again, Cheniere Energy already has
their first shipment scheduled for late 2015!
We can expect to see more export projects getting the stamp of
approval (especially if the Sabine Pass continues to pin down
additional long-term contracts). Right now, there's more than a dozen
LNG export projects waiting for the green light — and that's only
in the lower 48 states.
Tack on a vigorous campaign to progress Canada's LNG projects in
British Columbia, and the race is on...
So far, three export projects have approval by the Canadian
government. Now they're trying to attract more interest by setting
the tax bar as low as possible in the LNG industry.
In all of this, there has been only one commonality
that every potential LNG export project shares: access to
cheap, abundant natural gas.
And the only way to guarantee this access is through a piece of
drilling technology that enables companies to open up a vast amount
of our natural gas resources...
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