Thanks for your comments, Katie. I scanned the article and noted the same attitudes and assumptions that you point out.
I wish I had the time to write oped critiques to these various publications to point out the magnitude and importance of what they are not reporting on. And they say that the locals have the narrow view!! Gay On Mon, Mar 15, 2010 at 8:20 AM, Katie Quinn-Jacobs <[email protected]>wrote: > It's always enlightening (in an Orwellian way) to read about NG dev't from > the loftier other side: the exploiters vantage point, rather than the > ground zero framework of the exploited. This article, which examines the > players and geo-politics of global NG demand and supply, is a keen reminder > of how a-local an issue drilling in the Marcellus really is. Underscores > are mine. Source: > http://www.economist.com/business-finance/displaystory.cfm?story_id=15661889 > > > "Demand is a _bigger problem_. Even without recession or European shale, > the assumption that Europe's consumption will keep growing is looking shaky, > because the EU's _efforts to boost efficiency and reduce carbon emissions > are making gradual headway_. Edward Christie, an economist at the Vienna > Institute for International Economic Studies, says the EU could be importing > a third less natural gas in 2030 than the European Commission forecast in > 2005." > > Interestingly, North America has a "bigger problem" than Europe. Though > not brought up in the narrative, the same diagram that cites Europe's > compounded annual consumption at a disappointing 0.8%, has North America > increasing at half that rate, 0.4%. Not sure what the cause of that is: > recession? > > Although the relative greeness of NG, compared to coal and oil, is > sprinkled strategically throughout the article, the externalities of > production are not addressed (predictably) head-on. Localism does make a > brief appearance (sort of) in this lengthy article, albeit buried in the > bottom of the second third of the article. > > > "Second, there are reasons for caution above ground, too. Despite natural > gas's greener credentials than oil's or coal's, shale drilling has critics > among environmentalists, who worry that water sources will be poisoned and > landscapes despoiled. > > The industry says cement casing of wells and the depth to which they are > drilled make the practice safe and relatively unobtrusive. _But so far it > has been drilling mainly in North America, where land is plentiful and > people are accustomed to the sight of oilmen's detritus._ In densely > populated Europe, _the rapacious rate_ at which shale plays must be drilled > to sustain production is less likely to be tolerated. > > _Even in America_, opposition to shale gas is rising. New York state has > imposed a moratorium on drilling in its portion of the Marcellus Shale, > which it shares with Pennsylvania. Lawmakers in Congress want to study the > ecological impact of fracing. The Environmental Protection Agency, a federal > body, also raised concerns about "potential risks" to the watershed." > > I enjoyed the "accustomed to the sight of oilmen's detritus" as a classic > example of European insight into American sensibilities. Would expect > nothing less from the UK published /Economist/. > > Thanks for posting, George. > > -- Katie Q-J > > > > George Frantz wrote: > >> - AN ARTICLE FOR YOU, FROM ECONOMIST.COM - >> >> See this article with graphics and related items at >> http://www.economist.com/business-finance/displaystory.cfm?story_id=15661889 >> >> Go to http://www.economist.com for more global news, views and analysis >> from the Economist Group. >> >> AN UNCONVENTIONAL GLUT >> Mar 11th 2010 >> >> Newly economic, widely distributed sources are shifting the balance of >> power in the world's gas markets >> >> SOME time in 2014 natural gas will be condensed into liquid and loaded >> onto a tanker docked in Kitimat, on Canada's Pacific coast, about 650km >> (400 miles) north-west of Vancouver. The ship will probably take its >> cargo to Asia. This proposed liquefied natural gas (LNG) plant, to be >> built by Apache Corporation, an American energy company, will not be >> North America's first. Gas has been shipped from Alaska to Japan since >> 1969. But if it makes it past the planning stages, Kitimat LNG will be >> one of the continent's most significant energy developments in decades. >> >> Five years ago Kitimat was intended to be a point of import, not >> export, one of many terminals that would dot the coast of North >> America. There was good economic sense behind the rush. Local >> production of natural gas was waning, prices were surging and an >> energy-hungry America was worried about the lights going out. >> >> Now North America has an unforeseen surfeit of natural gas. The United >> States' purchases of LNG have dwindled. It has enough gas under its >> soil to inspire dreams of self-sufficiency. Other parts of the world >> may also be sitting on lots of gas. Those in the vanguard of this >> global gas revolution say it will transform the battle against carbon, >> threaten coal's domination of electricity generation and, by >> dramatically reducing the power of exporters of oil and conventional >> gas, turn the geopolitics of energy on its head. >> >> DEEP IN THE HEART OF TEXAS >> The source of America's transformation lies in the Barnett Shale, an >> underground geological structure near Fort Worth, Texas. It was there >> that a small firm of wildcat drillers, Mitchell Energy, pioneered the >> application of two oilfield techniques, hydraulic fracturing >> ("fracing", pronounced "fracking") and horizontal drilling, to release >> natural gas trapped in hardy shale-rock formations. Fracing involves >> blasting a cocktail of chemicals and other materials into the rock to >> shatter it into thousands of pieces, creating cracks that allow the gas >> to seep to the well for extraction. A "proppant", such as sand, stops >> the gas from escaping. Horizontal drilling allows the drill bit to >> penetrate the earth vertically before moving sideways for hundreds or >> thousands of metres. >> >> These techniques have unlocked vast tracts of gas-bearing shale in >> America (see map). Geologists had always known of it, and Mitchell had >> been working on exploiting it since the early 1990s. But only as prices >> surged in recent years did such drilling become commercially viable. >> Since then, economies of scale and improvements in techniques have >> halved the production costs of shale gas, making it cheaper even than >> some conventional sources. >> >> The Barnett Shale alone accounts for 7% of American gas supplies. Shale >> and other reservoirs once considered unexploitable (coal-bed methane >> and "tight gas") now meet half the country's demand. New shale >> prospects are sprinkled across North America, from Texas to British >> Columbia. One authority says supplies will last 100 years; many think >> that is conservative. In 2008 Russia was the world's biggest gas >> producer (see chart 1); last year, with output of more than 600 billion >> cubic metres, America probably overhauled it. North American gas prices >> have slumped from more than $13 per million British thermal units in >> mid-2008 to less than $5. The "unconventional"--tricky and expensive, >> in the language of the oil industry--has become conventional. >> The availability of abundant reserves in North America contrasts with >> the narrowing of Western firms' oil opportunities elsewhere in recent >> years. Politics was largely to blame, as surging commodity prices >> emboldened resource-rich countries such as Russia and Venezuela to >> restrict foreign access to their hydrocarbons. "Everyone would like to >> find more oil," says Richard Herbert, an executive at Talisman Energy, >> a Canadian firm using a conventional North Sea oil business to finance >> heavy investment in North American shale. "The problem is, where do you >> go? It's either in deep water or in countries that aren't accessible." >> This is forcing big oil companies to get gassier. >> The oil majors watched from the sidelines as more entrepreneurial >> drillers proved shale's viability. Now they want to join in. In >> December Exxon Mobil paid $41 billion for XTO, a "pure-play" gas firm >> with a large shale business. BP, Statoil, Total and others are sniffing >> around the North American gas patch, signing joint ventures with >> producers such as Chesapeake Energy. A wave of consolidation is likely >> in the coming months, as gas prices remain low, the drillers seek >> capital and the majors hunt for the choicest acreage. >> >> Shale is almost ubiquitous, so in theory North America's success can be >> repeated elsewhere. How plentiful unconventional resources might be in >> other regions, however, is far from established. The International >> Energy Agency (IEA) estimates the global total to be 921 trillion cubic >> metres (see chart 2), more than five times proven conventional >> reserves. Some think there is far more. No one will really know until >> companies explore and drill. >> >> The drillers are already arriving in Europe and China, which are both >> expected to import increasing amounts of gas--and are therefore keen to >> produce their own. China has set its companies a target of producing 30 >> billion cubic metres a year from shale, equivalent to almost half the >> country's demand in 2008. Several foreign firms, including Shell, are >> already scouring Chinese shales. After a meeting between the American >> and Chinese presidents last November, the White House announced a >> "US-China shale gas initiative": American knowledge in exchange for >> investment opportunities. The IEA says China and India could have >> "large" reserves, far greater than the conventional resource. >> >> Exploration is also under way in Austria, Germany, Hungary, Poland and >> other European countries. The oil industry's minnows led this scramble, >> but now the big firms are arriving too. Austria's OMV is working on a >> promising basin near Vienna. Exxon Mobil is drilling in Germany. >> Talisman recently signed a deal to explore for shale in Poland. >> ConocoPhillips is already there. The first results from wells being >> drilled in Poland, in what some analysts believe is a shale formation >> similar to Barnett, should be released this year. >> >> No one expects production of shale gas in Europe to make a material >> difference to the continent's supply for at least a decade. But the >> explorers in China and Europe present a long-term worry for those who >> have bet on exporting to these markets. Gazprom, Russia's gas giant, is >> the company most exposed to this threat, because its strategy relies on >> developing large--and costly--gasfields in inhospitable places. But >> Australia, Qatar and other exporters also face a shift in the basics of >> their business. >> >> CHOKED >> These producers are already getting a taste of the global gas glut. >> Almost in tandem with the surge in American production, recession >> brought a slump in world demand. The IEA says consumption in 2009 fell >> by 3%. In Europe, the drop was 7%. Consumption in the European Union >> will grow marginally if at all this year and will not be sufficient to >> clear an overhang of supplies, contracted through take-or-pay >> agreements signed in the dash for gas of the past decade. IHS Global >> Insight, a consultancy, reckons that the excess could amount to 110 >> billion cubic metres this year, almost a quarter of the EU's demand in >> 2008. >> The glut has been exacerbated by the suddenly greater availability of >> LNG. Importers with the infrastructure to receive and regasify LNG can >> now easily tap the global market for spot cargoes. This is partly a >> product of the recession, which dampened demand from Japan and South >> Korea, the leading LNG buyers. But another cause is that many >> exporters, not least Qatar, the world's LNG powerhouse, spent the past >> decade ramping up supplies aimed at the American market. That now looks >> like a blunder. >> America is still taking some of this LNG, but the exporters' bonanza is >> over before it ever really began. "You'll always find a buyer in North >> America," says Frank Harris, an analyst at Wood Mackenzie, a >> consultancy, "but you might not like the price." And LNG will grow >> increasingly abundant as new projects due to come on stream this year >> add another 80m tonnes to annual supply, almost 50% more than in 2008. >> >> Qatar's low production costs mean it can still make money, even in >> North America. Others cannot. In February, for example, Gazprom >> postponed its Shtokman gasfield project by three years because of the >> change in the market. Some of the gas from that field, in the Barents >> Sea, was to be exported to America. But Shtokman's gas will be costly, >> because the field is complex and its location makes it one of the >> world's most difficult energy projects to execute. Some analysts now >> wonder whether gas will ever flow from Shtokman. >> >> China offers some hope for ambitious exporters, but even there the >> outlook has become cloudier. The Chinese authorities want natural gas >> to account for at least 10% of the country's energy mix by 2020 and are >> building LNG import terminals. With that target in mind, Australia, >> which has its own burgeoning conventional and unconventional gas >> supplies, has been busily building an LNG export business. But warning >> lights are coming on. In January, PetroChina let a deal to buy gas from >> Australia's Browse LNG project expire. The original agreement was made >> in 2007, when LNG prices were soaring in Asia, but China can afford to >> be picky now. "Too many Australian LNG plants are chasing too little >> demand," says Mr Harris. >> The shift in the global market has left China well-placed to dictate >> prices. This will be another blow to Gazprom, which has long talked of >> exporting gas to the country. Indeed, while the Chinese and the >> Russians have squabbled over the terms, Turkmenistan has quietly built >> its own export route to China. Even if Beijing's shale-gas plans come >> to nothing, supplies from Central Asia and new regasification terminals >> along its coast may allow China to reach its natural-gas consumption >> targets without pricey Siberian supplies. >> >> The glut has weakened Gazprom's position in Europe, too. It has been >> losing market share to cheaper Norwegian and spot-market supplies. In >> 2007 Gazprom talked of increasing its annual exports to the EU to 250 >> billion cubic metres. Now, says Jonathan Stern, of the Oxford Institute >> for Energy Studies, Gazprom will probably only ever supply the EU with >> 200 billion cubic metres a year (it shipped about 130 billion in 2008). >> The company forecast in 2008 that its gas prices in Europe would >> triple, to around $1,500 per 1,000 cubic metres, on the back of rising >> oil prices, which help set prices in long-term contracts. But the price >> dropped to about $350 last year and is expected to fall again in 2010. >> The weak market could last for another five years, believes Wood >> Mackenzie. Gazprom has been renegotiating with leading customers, >> injecting elements of spot pricing into contracts to make them more >> attractive. >> SHTOKMAN SHTYMIED >> Moreover, Europe's need for new pipelines to guarantee supplies >> suddenly looks less pressing. Construction of Nord Stream, Gazprom's >> flagship project to export gas directly to Germany through the Baltic >> Sea, will begin next month. It is due to come on stream in 2011. The >> scheduled doubling of its capacity to 55 billion cubic metres a year is >> in doubt, says Mr Stern, because Shtokman was to have supplied the gas >> for it. >> >> Demand is a bigger problem. Even without recession or European shale, >> the assumption that Europe's consumption will keep growing is looking >> shaky, because the EU's efforts to boost efficiency and reduce carbon >> emissions are making gradual headway. Edward Christie, an economist at >> the Vienna Institute for International Economic Studies, says the EU >> could be importing a third less natural gas in 2030 than the European >> Commission forecast in 2005. That makes the case for additional supply >> lines much less compelling. The IEA expects rich European countries' >> demand to grow by only 0.8% a year in the next two decades, against >> 1.5% for the world as a whole (see chart 3). >> >> An age of plenty for gas consumers and of worry for conventional-gas >> producers thus seems to be dawning. But two factors could reverse the >> picture again. The first surrounds the uncertainty about how fruitful >> shale exploration will be outside North America. A clearer >> understanding of the geology will emerge from pilot wells in the coming >> months. Second, there are reasons for caution above ground, too. >> Despite natural gas's greener credentials than oil's or coal's, shale >> drilling has critics among environmentalists, who worry that water >> sources will be poisoned and landscapes despoiled. >> >> The industry says cement casing of wells and the depth to which they >> are drilled make the practice safe and relatively unobtrusive. But so >> far it has been drilling mainly in North America, where land is >> plentiful and people are accustomed to the sight of oilmen's detritus. >> In densely populated Europe, the rapacious rate at which shale plays >> must be drilled to sustain production is less likely to be tolerated. >> >> Even in America, opposition to shale gas is rising. New York state has >> imposed a moratorium on drilling in its portion of the Marcellus Shale, >> which it shares with Pennsylvania. Lawmakers in Congress want to study >> the ecological impact of fracing. The Environmental Protection Agency, >> a federal body, also raised concerns about "potential risks" to the >> watershed. >> The path of demand in gas's new age is hard to predict, but abundant >> new sources could bring about profound change in patterns of energy >> consumption. Some of the downward pressure on price will ease: despite >> sedate growth, the LNG glut should dissipate, probably by 2014, says Mr >> Harris; and low prices will kill more projects, clearing the inventory. >> France's Total thinks global demand will recover strongly enough to >> require another 100m tonnes a year of LNG by 2020, on top of plants >> already planned. However, the Energy Information Administration, the >> statistical arm of America's Department of Energy, predicts decades of >> relatively weak prices. >> >> If this is correct, it makes sense, for both environmental and economic >> reasons, for the country to gasify its power generation, half of which >> comes from coal-fired plants. This could be done cheaply and quickly, >> because America's total gas-fired capacity (as opposed to production) >> already exceeds that for coal. Put a price of only $30 a tonne on >> carbon, say supporters, and natural gas would quickly displace coal, >> because gas-fired power stations emit about half as much carbon as the >> cleanest coal plants. The IEA agrees that penalising carbon emissions >> would benefit natural gas at the expense of dirtier fuels. >> >> There would be political obstacles. The coal lobby remains strong in >> Washington, DC. Climate legislation struggling through Congress even >> includes provisions to protect "clean coal", a term covering an array >> of measures, so far uncommercial, to reduce emissions from burning the >> black stuff. Ironically, oil companies that were once suspicious of >> proposals to control carbon now regard a carbon price or even a carbon >> tax as a potential boon to their new gas businesses. >> A more radical idea, and one that would have ramifications for the >> global oil sector, is to gasify transport. T. Boone Pickens, a >> corporate raider turned energy speculator, has launched a campaign to >> promote this, and has support from the gas industry. By converting >> North America's fleet of 18-wheeled trucks to natural gas, says Randy >> Eresman, boss of EnCana, a Canadian gas company, America could halve >> its imports of Middle Eastern oil. EnCana is promoting "natural gas >> transportation corridors": highways served by filling stations offering >> natural gas. >> All this is some way off. The coal industry will not surrender the >> power sector without a fight. The gasification of transport, if it >> happens, could also take a less direct form, with cars fuelled by >> electricity generated from gas. >> >> A gasified American economy would have profound effects on both >> international politics and the battle against climate change. >> Displacement of oil by natural gas would strengthen a trend away from >> crude in rich countries, where the IEA believes demand has already >> peaked as a result of the recent spike in oil prices. Another >> consequence of the energy market's bull run, the unearthing of vast new >> supplies of gas, could bring further upheaval. If the past decade was >> characterised by the energy-security concerns of consumers, the coming >> years could give even the world's powerful oil producers reason to >> worry, as a subterranean revolution shifts the geopolitics of global >> energy supply again. >> >> >> >> - ABOUT ECONOMIST.COM - >> >> Economist.com is the online version of The Economist newspaper, an >> independent weekly international news and business publication offering >> clear reporting, commentary and analysis on world politics, business, >> finance, science & technology, culture, society and the arts. >> Economist.com also offers exclusive content online, including additional >> articles throughout the week. >> >> - SUBSCRIBE NOW AND SAVE 25% - >> >> Click here: >> http://www.economist.com/subscriptions/offer.cfm?campaign=168-XLMT >> >> Subscribe now with 25% off and receive full access to: >> >> * all the articles published in The Economist newspaper >> * the online archive - allowing you to search and retrieve over 33,000 >> articles published in The Economist since 1997 >> * The World in - The Economist's outlook on the year >> * Business encyclopedia - allows you to find a definition and explanation >> for any business term >> >> >> - ABOUT THIS E-MAIL - >> >> This e-mail was sent to you by the person at the e-mail address listed >> above through a link found on Economist.com. 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