Dennis Lamb was quoted as saying "Anytime you can get an alternative fuel source that has 10% of the toxins emitted for half the price, it's a win-win." I certainly have no idea what this incoherent statement refers to. Pulling statements out of context is often unfair and discourteous, but I am puzzled nonetheless. What toxins is he referring to? Half of what price and where? The two nearest CNG stations to Jackson are in Riverton and Rock springs and the current price is $1.96 and $1.61
respectively. I am under the impression that these prices do not include fuel tax. Prices in the nearest metro areas of and Denver range from $2.33 to $2.80 and appear to be just ove $1.30/ gal in Salt Lake. The 10% toxins part of Lamb's comment if that is indeed what he said, is mystifying. Promoters of NG like to state that NG is the cleanest fuel of the big three but that is misleading. It is true that there is somewhat less CO2 emitted per BTU of NG when burned at the source.. Here is a link to a graph of emissions of the three energy fuels and their relative emissions over a 20 year period. The graph shows that shale gas emissions exceed emissions from diesel, oil, and coal. Another important fact to remember is that methane is 105 times more powerful than CO2 as a greenhouse gas. Hence the worries about the methane hydrates in Siberia which could be released by Global Warming. All fossil fuels contribute to global warming and NG is no less a culprit than coal or oil if you believe this power point presentation. I fail to see the win-win situation as promoted by Lamb. Looks like win-win if Lamb obtains free taxpayer funds and lose-lose for the rest of us. Which brings up the point of subsidies. How much subsidy did Bob Shervin receive when he built his Sinclair station just up the street from where Lamb wants to site his? I haven't talked with Shervin but if the taxpayer is going to subsidize Lamb, then I think Shervin and the other station owners deserve the same subsidy, even if it has to be given after the fact.
I would now turn to the supply side of the argument in more detail which I briefly covered in my earlier post. Willott seemed to agree with me when I said there was a 11 to 23 year supply of NG and then he added that "some would say it's more than 150 years of supply." There is no one credible who is saying any such thing. John flipped from reserves which are economically recoverable to resources which are not at current historical prices. In fairness to John, the NG resource base world wide is probably huge especially from Alaska and Canada through Siberia not to mention worldwide deep water gas resources. Nobody has surveyed Antarctica which almost certainly has a resource. But again:think Reserves not Resources! Could these enormous resources be tapped as John says? Of course they could, but they are not affordable. It's the same for coal resources. They are huge but the reserves of affordable coal are not. There of course is no concrete number of affordability of an energy resource but at least in the case of oil, when the per barrel cost gets much above $100, the world economy gets cranky. The at times deceptive statements from the energy promoters almost always ignore the concept of net energy. If a resource is so deep or so distant that it takes as much energy to mine it as the energy you get out of it, then it is for all intents and purposes a resource that will never be tapped. This is the fraud of the Green River Oil shale formation in Wyoming, Utah and Colorado. It is not even oil, but waxy kerogen locked in rock and if it were recoverable as oil it would be the largest fossil energy source in the world. But remember: Economically recoverable and net energy recoverable. It is not now economic and never has been. Remember: It takes energy to get energy. Let's return to gas.The next graph is a credible estimate of how much gas we have. It is from 2011, I believe and will soon be updated. It was prepared by the the Potential Gas Committee(PGC), a quasi independent group representing the industry. The numbers are in trillion cubic feet:
I also must again state that if gas were to stay this low as John expects, I can guarantee bankruptcies or buyouts in the gas sector. John's boss, Rex Tillerson was asked in testimony before the Council of Foreign Relations last June 27 how Exxon was coping with the low NG prices. Here is an excerpt from his testimony as reported in the Wall Street Journal:
By JERRY A. DICOLO And TOM FOWLERNEW YORK—-Even energy titan Exxon Mobil Corp. is showing signs of strain from low natural-gas prices.
On Wednesday Exxon Chief Executive Rex Tillerson broke from the previous company line that it wasn't being hurt by natural gas prices, admitting that the Irving, Texas-based firm is among those hurting from the price slump.
"We are all losing our shirts today." Mr. Tillerson said in a talk before the Council on Foreign Relations in New York. "We're making no money. It's all in the red."
His comments mark a departure from remarks made earlier this year on how lower natural-gas prices hadn't yet hurt the company because of its operational efficiency and low production costs.
It should be noted that Exxon/XTO is the biggest NG player and wants to get its gas into LNG ships where the real money is, ASAP . The idea that the US should keep its gas at home to keep US energy prices low and promote jobs in the domestic Fertilizer and petrochemical industries apparently hasn't crossed Rex's mind. Rex like all corporate titans cares only about Exxon's bottom line and making money for EXXON and the shareholders and if he get's his LNG export terminals, he will be making money in spades.
Now let's take a look at how these low NG prices are killing the producers. Art Berman, an independent analyst in a recent paper noted that $22 Billion/qtr is needed to maintain domestic NG supply. Cash flow of the 34 largest producers is only $12 billion a quarter which of course leaves a deficit of $10 Billion/qtr!
With losses of this magnitude there is no such thing as retained earnings and so companies like Chesapeake and others have been selling off assets and seeking joint ventures or assuming more debt to keep the party going. Berman's source was the highly respected Calgary based Energy Player, ARC Financial . Here is their graph:
As a disclaimer I have both short and long financial positions in many North American energy producers and pipelines including Exxon. I have no intention of converting my car or truck to CNG.
Andreoli, D., 2011, The Bakken Boom - A Modern-Day Gold Rush. The Oil Drum: http://www.theoildrum.com/node/8697.
Berman, A.E. and L. Pittinger, 2011, U.S. Shale Gas: Less Abundance, Higher Cost. The Oil Drum: http://www.theoildrum.com/node/8212.
EIA Annual Energy Outlook 2011 Early Release Overview.
EIA Annual Energy Outlook 2011 Natural Gas Tables: http://www.eia.gov/oiaf/aeo/tablebrowser/#release=EARLY2012&subject=0-EA....
Gilbert, D. and R. Dezember, Chesapeake Energy Pulls Back Amid Natural-Gas Glut: Wall Street Journal, January 24, 2011: http://online.wsj.com/article/SB1000142405297020380650457717865173251197....
Potential Gas Committee 2010 Report: http://www.potentialgas.org/.
And of course my previous blogs on the same and related subjects.
Hugh Owens MD Jackson Hole 2013