More on Jamaica LNG

The Jamaica LNG story gets interesting, as even there the government is far more informed than some I can mention.  First off a that was then story:

The decision to shift Jamaica's reliance from oil to natural gas stemmed from a 2004 agreement between the government of Trinidad and Tobago and Jamaica that assured the supply of the fuel from the twin-island republic. Trinidad's National Gas Company subsequently informed the Jamaican Government that it would not be able to supply the gas after all. as global LNG supply became extremely tight.
In October 2006, the Government approached several private LNG companies — British Gas, British Petroleum, Repsol and Suez — and even went to LNG-producing countries such as Algeria and Qatar, but none could accommodate as their supplies were already committed while ministry officials observed that several of the firms doubted the LNG project would come to fruition in Jamaica.

The word who, kick, now and themselves come to mind today:

"Apart from the drop in demand caused by the global recession, gas supplies have increased rapidly due to the technological breakthroughs in the extraction of shale gas in the United States," said documents supplied to the Business Observer by the energy ministry. "This development caught the global gas industry, including the major companies, by surprise and almost overnight there was a doubling of the estimated recoverable gas reserves in the US as a result of the shale gas phenomenon."
The shift in the US gas market caused by shale has have forced suppliers to seek alternative markets while some "who previously were dismissive of Jamaica in the 2006 to 2008 period, (are) now demonstrating active interest in the supply of LNG to Jamaica".

At least they're getting some good advice.  I'll bet no one asked Ofgem.

As for potential suppliers:  Jamaica could do a HH Minus deal with any number of countries today, I can think of at least three.  T+T is obvious, and they are desperate, although nowhere near as desperate as Nigeria or Equatorial Guinea. Though you could throw in Peru into the mix to keep people honest.  Although if they are looking for security of supply, which in an island with little storage room is a good idea, the idea of doing a deal with actual countries is outdated. I'd mosey on over to Sabine Pass myself.

More big news from Asia

After the slight delay on the AIPAC story, this one is hot off the presses.  From India via Bloomberg:

India, beaten by China in the race for energy assets across the world, plans to offer shale-gas areas for exploration for the first time, the nation's oil regulator said.

The government will appoint an expert by early July to assess potential reserves and then create rules to tap unconventional energy sources before auctioning areas in about a year, S.K. Srivastava, director general of hydrocarbons, India's exploration regulator, said in an interview in New Delhi today.

Anyone who knows India, knows they learned bureaucracy, for better of for worse, from Whitehall, so their take on regulation is worth considering.

India will need to change exploration laws for shale gas to be produced because current exploration licenses don't include unconventional sources, Srivastava said.

We have to run now, we can't just walk," Srivastava said. "We don't yet know the extent of our reserves and we hope to put everything together within a year."

India runs toward shale, but Britain crawls – in reverse.  How sad. But India can see what the target is:

Oil & Natural Gas Corp., India's biggest energy exploration company, awarded a 1.2 billion rupee ($26 million) contract to Schlumberger Ltd. in April to drill for shale gas in east India, according to Chairman R.S. Sharma. Drilling wells to assess the reserves may be completed by the end of this year, he said.

"Shale rocks have been found in Gujarat, Assam, Jharkhand," Sharma said June 25. "We have to study the extent of the reserves and the economics of producing it."

The shale rock found in India is similar to those in the U.S., Bhowmick said. The cost of producing the gas may be different because the rocks are found deeper in the ground in India than in the U.S., he said.

"The rocks are definitely gas-charged," Bhowmick said.

Finally a statement that maybe is slightly optimistic.  That sounds stunning coming from me I know, who says that shale is a story of reality outrunning hype. But it's not quite as easy as this. Yet. Give it a few months?

"Shale-gas development has become economical," Srivastava said. "Technology is available off the shelf now."

Big news from Asia

The big news from Asia, (sorry it's six days late!) is this from Platts:

Amid brightening prospects for increasing unconventional gas production and supply, energy ministers from the Asia-Pacific Economic Cooperation countries meeting recently recognized the need to explore ways to secure supplies coming from streams other than conventional gas.

It was arguably the first recognition of the need to develop unconventional gas at any energy ministerial talks, which underlines the potential of unconventional gas to meet the demand that is now being met by LNG, particularly in Asia.

Following a day of talks in Fukui over the weekend, APEC energy ministers agreed that the group, which accounts for about 60% of world energy demand, should pursue ways of exploiting unconventional gas sources such as shale gas. The goals: reduce carbon intensity of current demand, and enhance the energy security of their economies.

"We therefore need to evaluate the potential for unconventional gas resources to increase gas production and trade in APEC," the ministers said in a joint statement. "Enhanced natural gas production and trade, drawing upon new discoveries, can ease the transition to a low-carbon economy, since gas has a far lower carbon footprint than other fossil fuels for power generation," they added.

Wouldn't it be nice if we had something similar from the G8 or G20 or dare we suggest, from the EU? BTW, the EU is getting up to speed on unconventional very quick, so we could see something from them yet. One thing for sure, it will be long, long, long wait for any thinking like this to come from DECC.  How sad.

Can you imagine David Cameron desperately calling Alistair Buchanan to update him on shale ahead of an international summit?  How well informed would that advice be?

So, it won't just be Chinese and Indian companies in North American shale.  Although we do have Japanese investors like Mitsui in the Marcellus already, and Korea Gas (Kogas) made the biggest impact of all by going first on Kitimat way back last September,  there are going to be more.

Shale gas = no UK nukes.

This is interesting, but only if you know the ins and outs of UK energy politics.  If you were one of the UK conventional wisdom energy "experts" you should be following the Ofgem line that shale is happening far away and can't impact anything in the UK.

But the real bosses of the utility industry, and we guess their bankers too, are a bit more realistic as this from the WSJ shows.  BTW, isn't it also a national embarrassment that the UK can only read about this in the "foreign" press?:

EDF SA's chairman and chief executive, Henri Proglio, is still undecided on whether to sell the company's U.K.-based power distribution unit EDF Energy, even though the sale process is well underway and the proceeds would help the French power giant substantially cut its debt, he said Tuesday in an interview.

Analysts have estimated EDF could get as much as €5 billion ($6.09 billion) from the sale of the unit, and the sale process is advanced, with potential buyers currently conducting due diligence. Nonetheless, there's no decision yet from EDF and Mr. Proglio said he could take "one more month" to make up his mind. He is keeping his options open about the best way to reduce the company's debt burden, he said, and plans could include keeping the grid.

That's not the way I hear it spun. I hear they can't find a buyer, and if they can't find a buyer then they can't fund the nukes the UK so desperately wants. But the true story may start here:

And Mr. Proglio said the company now puts financial pragmatism ahead of political pressures. On the same day as the French junior industry minister, Christian Estrosi, said an EDF project to build a gas terminal in northern France had been put on hold because financing hadn't yet been secured, Mr. Proglio said the company had shelved the project because of a fall in gas prices. He said it would cost EDF €700 million to build the terminal, and the emergence of shale gas and consequent fall in prices called the profitability of conventional gas-related investments into question.

"Shale gas shook up the whole energy industry. One can feel that conventional gas producers, such as Russia and Qatar, are getting worried," he said, adding that EDF has no particular plan to get in on the shale gas business.

Interesting how he says that shale has shaken up the entire industry, as EDF has minimal exposure to gas.  It's hard to see why EDF would need the Dunkirk terminal in the first place, but could we see an effect like this:

Because of shale's impact EDF doesn't build Dunkirk, or more correctly Total don't go in on it with them because Total is an actual oil and gas company who have already spent a lot of money with Chesapeake and are busily producing shale at the other end of the world in Patagonia (No Hot Air last September). They can see that an LNG terminal is the last thing anyone needs in this day and age, especially one an hour's drive away from Zeebrugge.  Because of Dunkirk they can't afford to sell the UK networks at the price they wanted. Because they couldn't  get that price, they can't afford to build the nukes without an even bigger subsidy than they already needed.  Result: shale gas=no nukes.

Just like that,

China and Australia shale

Last week we had the game changing story of Chinese investments that take advantage of North American shale gas.  But first in Australia, in a similar vein, Sinopec are on the prowl in another  empty, resource rich Commonwealth country:

China's biggest move so far to buy into technology that will increase its own gas reserves is its $3.44bn 50:50 joint venture with global energy major Royal Dutch Shell's to buy Arrow Energy.

It may be expensive, but the technological payoff for China is enormous.

The country has an estimated 30 trillion cubic metres of untapped coal-seam gas, and 36 trillion cubic metres of shale gas. To put that in perspective, BG has 0.3 trillion cubic metres.

"All they are in it for is the technology. All those who are wondering why they are paying 36 times — or whatever the number — what it is worth are missing the point ," one analyst said.

They just want the technology.  All they want is the secret fracing sauce. And at 36 times earning, it's a steal.

Gasland again

Who better than Peter Tertzakian to rebut Gasland with the real story of the week, the China/Encana deal:

Waiting for investment to dry up has been the part of the shale gas movie everyone in the natural gas business has been anticipating.

An announcement by EnCana last week confirms that the plot is taking on a different direction.

Putting pen to paper in a memorandum of understanding, EnCana and the China National Petroleum Company (CNPC) now have a framework for the two companies to negotiate a potential joint-venture investment in prolific unconventional gas regions of Northeastern British Columbia, specifically, plays in the Horn River, Greater Sierra and Cutbank Ridge areas.

And in his inimitable way, he tells us what the real story is about:

Relentless drilling at the current pace will continue to pressurize the continent with excess natural gas, to the point where Americans and Canadians will have natural gas coming out of every structural orifice, from kitchen faucets to manhole covers.

Something will have to give before that happens.

You know you have a real energy megatrend when someone makes a contrarian documentary with outrageous claims. Yet the story of natural gas using hydraulic fracturing is no longer just about new technology, aggressive drilling, environmental concern and production growth.

There is a broader plot here that will take the North American shale gas story through another twist or two: the influx of Asian capital followed by reciprocal exports of LNG to Asian markets.

Announcements by large natural gas producers over the past few weeks are like a movie trailer for what’s to come.

Pouring cold water on the flaming faucet theory

An emotive and the more telegenic part of last week's Gasland movie was the water catching fire clipThe Telegraph thought it important enough to pour cold water on the shale hype:

Still politically scorched from BP’s giant Gulf of Mexico spill, it couldn’t be a worse time for America’s oil giants to find themselves roasting in another environmental firestorm.
But new flames of controversy are on the horizon – in fact, literally emanating from the drinking water of US citizens living near so-called “shale gas” fields.
A controversial documentary, Gaslands, which was aired on television channel HBO this week, shows one Colorado homeowner bending over his tap, holding a lighter with outstretched arm and igniting his chemical-laden water.

But don't believe all you see.  The water is on fire sure.  But the cause is not shale drilling, and has been around for a while as this from 2006 in the pre-shale era shows.  Thanks Wally for this!

Methane gas, also known as natural gas, occasionally enters private drinking-water wells in Pennsylvania. This rare problem is usually confined to deeper water wells in the state’s coal-producing western and northern regions.
Methane may occur in a water well from natural deposits or it may enter a well from various areas such as coal mines, gas wells, and landfills. Naturally occurring methane is a colorless, odorless, tasteless, and combustible gas. Occasionally, production-grade methane penetrates groundwater through a gas well blowout or from an underground gas storage field. Production-grade methane is marked by its pungent odor from mercaptan; a chemical odorant added to methane to help detect leaks.
Methane gas alone does not cause health problems in drinking water, but it does escape quickly from water, causing an explosive hazard in poorly ventilated or confined areas. Escaping gas may seep into confined areas of your home, where it may reach dangerous concentrations. There have been rare cases in Pennsylvania where houses, camps, or wells have exploded due to methane accumulation.
The prevalence of methane in water wells in Pennsylvania is unknown. A survey of 171 groundwater wells in West Virginia found detectable amounts of methane gas in 77 percent, but dangerous concentrations only occurred in about 8 percent of the wells.

Now this clip is dangerous, please don't try this at home.  Remember kids, gas is dangerous!

The story behind Belarus gas

With friends like these

Belarus received financial aid to settle its debt to Gazprom from Azerbaijan, Belarussian President Aleksandr Lukashenko said during an interview on Euronews, RIA-Novosti reports.
"I approached [Azerbaijan President] Ilkham Aliyev and within 24 hours, even less, he lent me $200 million, of which we used $187 million to pay Gazprom", Lukashenko said.
Since June 21, Gazprom has been limiting supplies of gas to Belarus over a debt Minsk owes the Russian monopoly.
In the course of two days, the cuts affected 60 percent of supplies. Gazprom executives stated that Minsk owed about $190 million since it paid less than stipulated in its contracts. Belarus requested two weeks to make the payment, but Gazprom demanded immediate payment.

Thanks to reader Tomaz for this!

What happened to the other $13 million?  And do they have any spare going?

Time to call it a day on CCS?

Thanks to Kash Burchett of Datamonitor for this.

Carbon capture and storage research funding: time to call it a day?

In the report, entitled CCS: Progress and Next Steps, the International Energy Agency (IEA) argues that both an international agreement on climate change policy and a price for carbon emissions will be necessary to make carbon capture and storage (CCS) a commercially viable reality. However, as neither of these prerequisites is likely to emerge in the near future, the IEA is instead arguing for continued government funding for research projects, in order to make CCS competitive.

The IEA estimates that, to date, some $26 billion has been committed to CCS demonstration projects. However, the results have been disappointing: the technology has been available for years but the price tag remains too high.

This reality is starting to sink in among governments. Norway – a major CCS proponent – has just announced the indefinite postponement of its two pilot plants at Mongstad, citing ongoing difficulties and the "newness" of the technology. Translated, this means that CCS remains commercially unviable: at around $333 per tonne, the cost of carbon capture exceeds the EU Emission Trading System price of carbon by a factor of 10.

In light of this limited progress, and in the context of an ongoing surge in gas supply (implying low prices), it seems highly unlikely that CCS can even come close to competing with gas as a fuel for generation, without government intervention.

Unfortunately, propping up the coal industry is a vote winner: according to the IEA, global subsidies of coal consumption totaled $50 billion in 2008 alone. Governments across Europe and elsewhere have consistently sought to protect the industry because of the employment it brings. Indeed, Spain plans to resurrect its coal industry by forcing utilities to burn domestically produced coal and banning imports.

Global subsidies of coal are unjustifiable, particularly in light of the high carbon emissions arising from coal-fired generation, not to mention massive fiscal deficits. However, it is these very reasons that also make subsidies of CCS research unjustifiable, especially against the backdrop of low gas prices and the pressing need to reduce greenhouse gas emissions. Governments need to be willing to take unpopular decisions and stop distorting energy markets.

No Hot Air Live in London Thursday July 8

Here's one for the calendar.  Thanks to National Grid for the invite to No Hot Air to speak in London on Thursday July 8

National Grid is pleased to announce that it will be hosting its 10th annual industry seminar “TBE 2010: Powering Ahead” on Thursday 8th July 2010, as part of its Transporting Britain’s Energy (TBE) consultation process.
The next decade will bring unprecedented changes to the energy landscape within the UK. There are ambitious renewable energy targets, as well as considerable uncertainty regarding the level of UK gas demand going forward and the future gas supply makeup.
The event will be chaired by Alison Kay, National Grid’s Commercial Director, Transmission. In addition to National Grid’s latest forecasts, the event will focus on:
• UK Renewable Energy Strategy • Global and European supply / demand • LNG going forward • Alternative energy futures • Regulatory developments
To register please e-mail:   
Attendance at this event is free.

The location is One Great George Street London SW1P 3AA

My subject will be Shale Gas: What Now? What Next? I'll be on at 13.55.  Full agenda as soon as I have one. There's been a history of interesting and informed views from some of the leading UK and European energy experts over the years at this event but only last year I tried to explain to any number of journalists about shale and got nowhere.  This year, judging from other events that I've been to in London recently on energy, everyone has heard of shale but wants to hear more.

Shale Gas,No Hot Air live, great energy news and a free lunch in a fantastic location: What are you waiting for?