Shale Oil Fiasco

[Gerry Maddoux + 3,627]

1 hour ago, wrs said:

People don't realize how desolate it is out in West Texas and how far out everything is.  That is why the infrastructure has been so long in coming but it's all falling into place now.  I think the flaring will be reduced substantially this year.  However with NG prices this low, it's not much help to sell it.

Relief can't come soon enough! Most guys in oily shale would just shrug at a buck-fifty per btu for their natural gas, as long as they could drill for oil. Maybe they wouldn't be jubilant, but at least they're getting something, and not paying for takeaway. 

Right now, state regulatory agencies are sticking their necks out, in order to help small and medium producers stay alive. Statewide Rule 32 of the Texas Railroad Commission was written to regulate wellhead and casinghead gas. It allows venting of gas for only 24 hours and flaring for ten days. North Dakota, ditto.

 Bring on the pipelines! Just get rid of the damn stuff and let the LNG boys worry about it.

[Old-Ruffneck + 1,245]

1 hour ago, Gerry Maddoux said:

 Bring on the pipelines! Just get rid of the damn stuff and let the LNG boys worry about it.

It's not that simple!! Right now there is not only a shortage of pipeline capacity (NG), but a serious backlog of NG infrastructure to complete a even a short 250 mile 3' or 4' diameter line to the Midland refinery. Plus the refinery itself is maxed out. Not all NG is equal, some is very corrosive, some lethal (H2s) and some have lots of liquid. You can tell by the color of the flares the better quality of said gas. 

My solution would be to centrally locate a massive powerplant instead of them windfarms and solar arrays. Since we import the solar panels from China, we could in theory eliminate them too. The electric grid would get a bonus and is American.

[Gerry Maddoux + 3,627]

21 minutes ago, Old-Ruffneck said:

My solution would be to centrally locate a massive powerplant instead of them windfarms and solar arrays.

I think you're right. I was getting a little melodramatic because I hate the venting & flaring. I sell quite a bit of gas, but I'd like to see low enough prices to drive the LNG industry. You know this, I'm sure, but the Russians are developing a massive field in the Yamal Peninsula, with LNG carriers ready to ply the Northern Sea Route behind two nuclear-powered ice-breakers. This cuts the trip to Shanghai or Tokyo in half, without going through the Suez Canal. We need to establish solid LNG contracts with India, China, Japan, S. Korea, and basically forget the European Union. If NG at the wellhead has to go to a buck to get this nailed down, fine with me. It looks as though Montreal and Boston are more willing to buy LNG from Putin than their own countrymen, so let's go for the real markets: 4 billion Asians who mostly like LNG.

[D Coyne + 305]

On 1/20/2020 at 4:35 PM, Gerry Maddoux said:

The cost is going to come down more than you think: The technology is well established, the trains are not terribly expensive to build, and permits are now easy to procure.

LNG is free of contaminants: zero Hg, sulfides, long carbon chains, water or slug. Transportation is free, except for amortization of the ship and the cost of the crew. The liquid natural gas boils in the thermos bottles holding it. About 0.1% of the contents boils off and hangs above the liquid as "boil-off" gas. This is diverted into the steamers and used for transportation fuel.

LNG is going parabolic. If you look at NG piped to Mexico and to US LNG export facilities, we're at about 11-12 bcf/d, which represents 30% growth year over year. The Cameron Parish Louisiana facility (Sabine Pass) has added two new trains (now either six or seven). Corpus Christi has a couple new trains. Elba Island (Georgia) and Freeport (Tx) have opened. 

The LNG market is an infant, maybe 10% of where it will be in five years. Pipelines get paid off in about five years; thereafter it's gravy. I'll bet these LNG terminals are paid off in five years, too. This is all falling into place: Massive volumes of NG are going to be piped from the Permian into Sabine Pass, Corpus Christi, Alba Island, Freeport, and wherever else on the Gulf facilities are added. The Sabine Pass Shipping Channel is exceptionally efficient--it's only 3.7 nautical miles to open water and 23 miles to the outer buoy.

As global oil supply gets tighter, with resultant higher pricing, it will drive the drilling of more shale wells. Gas lifting (especially ethane) is already revolutionizing shale, as is holding the well-bore pressure higher for longer. Next comes refracking, the price of which is coming down dramatically (at least in the Bakken). Natural gas production will more than likely double from its current level, and almost all of that will go to LNG exports.

The recent cold snaps scared the bejiggers out of a lot of people. Without hydrocarbon heat, the human race would be forced back into the caves. It's going to take one hell of a lot of wind turbines and solar panels to replace that kind of protection from the elements. The Greenies holding ban-fracking signs, for example, would freeze their little tushes if they didn't have natural gas. 

Modi has promised to make LNG one-half of India's long-term energy requirements. China will likely follow suit, as part of the trade deal. Once countries commit to energy, it is hard to turn around. And, after all, LNG will dovetail perfectly with wind and solar--such as they are.     

Gerry,

How cheap do you expect the tranport and processing costs to become?  I suggest a drop of 50%, even with zero fuel cost (note the trip is two ways) the ship costs money and so do crews.  As far as abundant natural gas, this will not last beyond the peak of tight oil output in 2026 (or perhaps sooner if oil prices remain  low).  The cheap natural gas price currently in the US means zero profit for producers and that situation will not continue for long.

Higher natural gas prices will be needed for US shale gas to be profitable to produce, whether the US can compete with Qatar, Russia and Australia on natural gas cost in Europe and Asia  remains to be seen.  I am far more skeptical than you.

In addition, over the longer run, falling wind and solar costs may take market share from natural gas in the electric power sector.

The higher natural gas prices go, the quicker this transition will occur.  At $5/MCF or more (in 2018$) natural gas will find it hard to compete after 2035 or so.  Natural gas will become a backup fuel in the electric power sector after 2040.

[D Coyne + 305]

On 1/20/2020 at 5:24 PM, 0R0 said:

I look at marine transport baltic rates http://marine-transportation.capitallink.com/indices/capital_link_maritime_chart.html?ticker=CLLG

The spot rates are low and steady for a while now. From the oxford energy paper, the charter portion should now be about half of what it was when the article data cutoff was.. and LNG and source is about half as well. So about $0.3 and the LNG cost itself is $3 at the source so that portion is $0.2 fuel cost (if that, industry talk is referring to it as "free") total.about $0.6. If you take Cheniere's liquefaction fee down to 15% margin then it is $1.85 so total cost would now be around $2.45 and probably still some room to fall. Some bandy about a $2 cost next year. 

So it is still going to be good at a $4.50 for Russian pipe gas as competition in Europe and we expect for China. That leaves you competitive at $2 going into the LNG plant. .   

0R0,

No shale gas focused company makes any money at $2/MCF, so the problem for LNG in the US is after NG price rises to a level that will be profitable for producers ($3/MCF), the US LNG may not be competitive on World markets.  The whole LNG enterprise may not be very profitable over the long term for US operators.

It would not be a bet I would make, but hey I am not a gambler. 

Edited January 21, 2020 by D Coyne

[0R0 + 6,251]

1 hour ago, D Coyne said:

0R0,

No shale gas focused company makes any money at $2/MCF, so the problem for LNG in the US is after NG price rises to a level that will be profitable for producers ($3/MCF), the US LNG may not be competitive on World markets.  The whole LNG enterprise may not be very profitable over the long term for US operators.

It would not be a bet I would make, but hey I am not a gambler. 

Yes, it is a commodity business and making a profit at each stage of it consistently is not in the books over time. It will grow like mad and then become cyclical. The current cash cost breakeven is not that far above $2. At $2.70 there are plenty takers for hedges, so they obviously make money on that. Not so much for $2.20. But it is the pipelines and LNG part that is clogging up the works, particularly for approvals to get through the coastal metro strip from Appalachia. The US is the swing supplier, everyone else will raise prices as US prices rise. But even at $3 gas,,you will have <$5.50 LNG at the receiving end - still way below recent history. If that. But so long as NG is an oil byproduct it is below HH which is the benchmark for the LNG contracts.  

 

[D Coyne + 305]

1 hour ago, 0R0 said:

Yes, it is a commodity business and making a profit at each stage of it consistently is not in the books over time. It will grow like mad and then become cyclical. The current cash cost breakeven is not that far above $2. At $2.70 there are plenty takers for hedges, so they obviously make money on that. Not so much for $2.20. But it is the pipelines and LNG part that is clogging up the works, particularly for approvals to get through the coastal metro strip from Appalachia. The US is the swing supplier, everyone else will raise prices as US prices rise. But even at $3 gas,,you will have <$5.50 LNG at the receiving end - still way below recent history. If that. But so long as NG is an oil byproduct it is below HH which is the benchmark for the LNG contracts.  

 

I think we are mostly in agreement.   I just think long term, the US LNG industry will find it hard to compete, especially as renewables start to take over and the World market becomes oversupplied with gas, the resource in the US may be left in the ground because it cannot compete with cheap NG elsewhere in the World.  The LNG terminals and trains will become stranded investments in 10 to 15 years in my opinion.

[Gerry Maddoux + 3,627]

2 hours ago, D Coyne said:

The cheap natural gas price currently in the US means zero profit for producers and that situation will not continue for long.

Natural gas, both in the US and Russia, is now a loss-leader. 

We both want the geopolitical and financial advantage of providing China, Japan, Korea and India with LNG. 

Russia is intricately involved with the New Silk Road--the One Belt/One Road Initiative. All roads begin in China, traverse the Middle East, and end in Russia. But wait, China wants something in return. Well, Russia has found a way to supply China (and her neighbors) with inexpensive LNG--by having a Yamal LNG Qmax carrier follow a couple of ice-breakers through the Russian arctic economic zone along the Northern Sea Route, cutting out 6,000 miles and the Suez Canal. Yamal has the same problem we do: too much gas. The only way to handle the oil is to get rid of all that dratted gas. Global warming has melted the arctic ice enough to give them a strategic advantage.

Can the US compete with that? Only if NG remains rock-bottom. And so what if it's zero profit for producers, so long as they're not having to pay to get rid of the gas and they can go about the profitable business of producing LTO. 

IOW, this scheme doesn't work in spite of zero profit, but because of it. Again, there's so much NG--all over the world--that it has become a loss-leader, with LNG as its sole beneficiary. 

[Gerry Maddoux + 3,627]

The incredible woes of having too much NG to deal with!

Not to go on and on about this, but from a new article looking back on "high impact drilling" in 2019 (which pretty well translates into offshore), 91 wells were drilled. The article is somewhat misleading, causing the reader to think this is all about huge oil finds (Guyana; the shallow waters of the Kara Sea off the Yamal Peninsula; etc.). There is one dispositive line: 77% of this was . . . . . . . gas.  

The logical conclusion? All the "easy" big oil finds have been exploited. Offshore is, by necessity, drilling into difficult stratigraphic zones, many of which yield huge volumes of gas along with substantial amounts of oil. 

In other words, one could derive that offshore is in sort of the same boat as shale: it ain't great but it's all that's left. 

With a high percentage of hydrocarbons in the most attractive shale basins being gas, but also, at least in 2019, over 3/4 of the finds in offshore high impact wells being gas, one has to conclude that we are now in the "Age of Gas." In order to handle the oil, something has to be done with all that gas. Worldwide natural gas prices are, by necessity, going to the floor.

So, what happens if the price of oil doesn't rise? Offshore exploration slows down precipitously--even mighty Exxon and Novatek can handle only so much gas, and both Guyana and Yamal have infrastructure challenges out the wazoo. But if the price of oil doesn't rise, the shale fields will falter too (they're already doing it). Texas is quickly building out infrastructure; they're old hands at responding quickly to oil and gas needs. Guyana? Well, that's going to take a while. And the Arctic Ice Circle? Challenging. 

However, there's no getting around this--in order to get at what oil is left in this old world, an astronomical volume of natural gas has to be diverted into world markets (it can't be flared forever). Much of this will go to LNG, which still has to be considered a nascent endeavor. The massive NG glut will obviously serve as an impetus for better CNG, which will quickly get so cheap that cross-country transports can't deny it and refueling stations will be built out.

Russia has so much NG that Gazprom will look at its Victory of Siberia pipeline into northeast China and either expand that or, more likely as part of the New Silk Route, "encourage" Novatek to supply China with cheap LNG--again transporting it through Russia's Exclusive Economic Zone in the Northern Sea Route, avoiding 6,000 miles and the Suez Canal. Competition for the Asian market is going to become a dog fight.

NG is likely going to a dollar. The mantra is rapidly becoming: Just get rid of this stuff so we can extract the oil.

Edited January 24, 2020 by Gerry Maddoux

[ceo_energemsier + 1,818]

IHS: LNG industry set six new records in 2019

Records set by the LNG industry in 2019 are indicative of a sustained growth trend, with global LNG capacity expected to increase by more than 50%—from 283 MMtpa in 2015 to 437 MMtpa in 2020, according to a new report from IHS Markit.

 

 

 

Records set by the liquified natural gas (LNG) industry in 2019 are indicative of a sustained growth trend, with global LNG capacity expected to increase by more than 50%—from 283 million metric tonnes per annum (MMtpa) in 2015 to 437 MMtpa in 2020, according to a new report from IHS Markit.

“The ongoing pace of new investment is especially noteworthy considering a market context of weak global prices,” said Michael Stoppard, chief strategist, global gas at IHS Markit. “Not only did LNG grow at an unprecedented rate in 2019, but the industry also laid the foundations for continued strong growth into the middle of the decade.”

2019 LNG industry records

Record levels of new investment. Final investment decisions (FIDs) for liquefaction projects were made at an extraordinary level of 70.4 MMtpa—40% higher than the previous all-time high reached in 2005 (50.4 MMtpa). The US, Russia, and Mozambique each set individual highs for levels of annual FIDs.

Record levels of FIDs without long-term contracts. Some liquefaction FIDs were made either without long-term contracts or were underpinned by sales to affiliates. Such “affiliate marketing” reached a record 43 MMtpa. Affiliate marketing at this scale has not been common in the LNG industry. Historically, most projects have instead secured long-term offtake contracts prior to committing to investment. By choosing to proceed without third-party contracts, projects can be developed more rapidly.

Record liquefaction project start-ups. New liquefaction start-ups amounted to 38.8 MMtpa of capacity, narrowly surpassing the previous high set in 2009. Recent start-ups were concentrated in the US, Australia, and Russia. The pace of project starts is expected to slow in 2020 to 28.6 MMtpa of capacity. The US will continue to dominate in this area as it mostly completes its current wave of projects.

New global supply leader. Australia surpassed Qatar as the top LNG exporter for 2019, reaching 80.2 MMt relative to 72.5 MMt in 2018. Australia is expected to extend its lead in 2020 and retain its position as top exporter until 2023 when US is projected to become the largest LNG producer.

Record European imports. Europe set records for imports each single month as well as for the year as a whole. Annual net imports totaled 87.2 MMt which exceeded the previous record of 65.5 MMt set in 2011. Imports are expected to remain strong in 2020 due to additional new liquefaction supply coming to market. New supply in 2020 is expected to outpace Asian demand growth and therefore maintain sales into Europe.

Record Chinese imports. China overtook Japan as the world largest LNG importer in the month of December 2019, with volumes for the month reaching 7.3 MMt, compared to Japan’s 6.9 MMt. Even though Japan is expected to continue to be the world’s largest LNG importer on a total annual basis through 2022, 2019 marked the second year in a row of declining imports for the country, continuing an overall downward trend since 2015. China entered its fourth year in a row of record LNG imports, increasing its LNG imports 13.4% on a year-over-year basis.

2019 LNG trade figures

LNG supply in 2019 totaled 373.0 million tons (MMt), up 11.8% from 2018 or 39.5 MMt. The largest increases in LNG exports came from the US (37.7 MMt total, up 15.2 MMt), Russia (30.2 MMt total, up 10.1 MMt), and Australia (80.2 total, up 7.7 MMt).

Net LNG imports reached 358.8 MMt in 2019, up 40.5 MMt from 2018. Regionally, LNG imports grew the most into Europe, totaling 87.2 MMt relative to 49.9 MMt in 2018. For individual countries, the UK registered the largest growth (13.3 MMt total, up 8.1 MMt), followed by France (16.3 MMt total, up 7.8 MMt), and China (62.4 MMt total, up 7.4 MMt).

 

Japan remained the largest LNG importer, receiving 77.5 MMt in 2019. However, this was a decline from 83.2 MMt in 2018, making Japan the market with the largest decrease in LNG imports in 2019. China remained the second largest importer over the entire year. South Korea remained the third largest importer in 2019, with 41.0 MMt, however it also had the second largest decline relative to 2018 (down 3.5 MMt).

[D Coyne + 305]

On 1/21/2020 at 9:02 PM, Gerry Maddoux said:

Natural gas, both in the US and Russia, is now a loss-leader. 

We both want the geopolitical and financial advantage of providing China, Japan, Korea and India with LNG. 

Russia is intricately involved with the New Silk Road--the One Belt/One Road Initiative. All roads begin in China, traverse the Middle East, and end in Russia. But wait, China wants something in return. Well, Russia has found a way to supply China (and her neighbors) with inexpensive LNG--by having a Yamal LNG Qmax carrier follow a couple of ice-breakers through the Russian arctic economic zone along the Northern Sea Route, cutting out 6,000 miles and the Suez Canal. Yamal has the same problem we do: too much gas. The only way to handle the oil is to get rid of all that dratted gas. Global warming has melted the arctic ice enough to give them a strategic advantage.

Can the US compete with that? Only if NG remains rock-bottom. And so what if it's zero profit for producers, so long as they're not having to pay to get rid of the gas and they can go about the profitable business of producing LTO. 

IOW, this scheme doesn't work in spite of zero profit, but because of it. Again, there's so much NG--all over the world--that it has become a loss-leader, with LNG as its sole beneficiary. 

Gerry,

Most of the US NG comes from Marcellus + Utica and there are not enough liquids there to make further extraction profitable at $2/MCF (or perhaps less).  The tight oil in the Permian will result in some natural gas produced, but that too will peak and decline, all the while wind and solar will continue to fall in cost and may take market share from coal and natural gas.

Also despite the myth of unlimited natural gas, oil depletion will lead to less associated gas produced after 2025 as oil output peaks and declines and the natural gas resource that is economically recoverable is not unlimited, output of natural gas is likely to peak between 2030 and 2040, best guess 2035.  The LNG trains probably assume a 30 year life, those being constructed today may become stranded assets after the natural gas peak.

[D Coyne + 305]

18 hours ago, ceo_energemsier said:

IHS: LNG industry set six new records in 2019

Records set by the LNG industry in 2019 are indicative of a sustained growth trend, with global LNG capacity expected to increase by more than 50%—from 283 MMtpa in 2015 to 437 MMtpa in 2020, according to a new report from IHS Markit.

 

 

 

Records set by the liquified natural gas (LNG) industry in 2019 are indicative of a sustained growth trend, with global LNG capacity expected to increase by more than 50%—from 283 million metric tonnes per annum (MMtpa) in 2015 to 437 MMtpa in 2020, according to a new report from IHS Markit.

“The ongoing pace of new investment is especially noteworthy considering a market context of weak global prices,” said Michael Stoppard, chief strategist, global gas at IHS Markit. “Not only did LNG grow at an unprecedented rate in 2019, but the industry also laid the foundations for continued strong growth into the middle of the decade.”

2019 LNG industry records

Record levels of new investment. Final investment decisions (FIDs) for liquefaction projects were made at an extraordinary level of 70.4 MMtpa—40% higher than the previous all-time high reached in 2005 (50.4 MMtpa). The US, Russia, and Mozambique each set individual highs for levels of annual FIDs.

Record levels of FIDs without long-term contracts. Some liquefaction FIDs were made either without long-term contracts or were underpinned by sales to affiliates. Such “affiliate marketing” reached a record 43 MMtpa. Affiliate marketing at this scale has not been common in the LNG industry. Historically, most projects have instead secured long-term offtake contracts prior to committing to investment. By choosing to proceed without third-party contracts, projects can be developed more rapidly.

Record liquefaction project start-ups. New liquefaction start-ups amounted to 38.8 MMtpa of capacity, narrowly surpassing the previous high set in 2009. Recent start-ups were concentrated in the US, Australia, and Russia. The pace of project starts is expected to slow in 2020 to 28.6 MMtpa of capacity. The US will continue to dominate in this area as it mostly completes its current wave of projects.

New global supply leader. Australia surpassed Qatar as the top LNG exporter for 2019, reaching 80.2 MMt relative to 72.5 MMt in 2018. Australia is expected to extend its lead in 2020 and retain its position as top exporter until 2023 when US is projected to become the largest LNG producer.

Record European imports. Europe set records for imports each single month as well as for the year as a whole. Annual net imports totaled 87.2 MMt which exceeded the previous record of 65.5 MMt set in 2011. Imports are expected to remain strong in 2020 due to additional new liquefaction supply coming to market. New supply in 2020 is expected to outpace Asian demand growth and therefore maintain sales into Europe.

Record Chinese imports. China overtook Japan as the world largest LNG importer in the month of December 2019, with volumes for the month reaching 7.3 MMt, compared to Japan’s 6.9 MMt. Even though Japan is expected to continue to be the world’s largest LNG importer on a total annual basis through 2022, 2019 marked the second year in a row of declining imports for the country, continuing an overall downward trend since 2015. China entered its fourth year in a row of record LNG imports, increasing its LNG imports 13.4% on a year-over-year basis.

2019 LNG trade figures

LNG supply in 2019 totaled 373.0 million tons (MMt), up 11.8% from 2018 or 39.5 MMt. The largest increases in LNG exports came from the US (37.7 MMt total, up 15.2 MMt), Russia (30.2 MMt total, up 10.1 MMt), and Australia (80.2 total, up 7.7 MMt).

Net LNG imports reached 358.8 MMt in 2019, up 40.5 MMt from 2018. Regionally, LNG imports grew the most into Europe, totaling 87.2 MMt relative to 49.9 MMt in 2018. For individual countries, the UK registered the largest growth (13.3 MMt total, up 8.1 MMt), followed by France (16.3 MMt total, up 7.8 MMt), and China (62.4 MMt total, up 7.4 MMt).

 

Japan remained the largest LNG importer, receiving 77.5 MMt in 2019. However, this was a decline from 83.2 MMt in 2018, making Japan the market with the largest decrease in LNG imports in 2019. China remained the second largest importer over the entire year. South Korea remained the third largest importer in 2019, with 41.0 MMt, however it also had the second largest decline relative to 2018 (down 3.5 MMt).

Interesting,

this is likely to lead to a World price for Natural Gas similar to what has existed for oil for many years.  Of course what this could lead to is an earlier peak as some areas of high natural gas demand (Japan China, India, and Europe) might see lower natural gas prices which could accelerate the pace of consumption growth.  The faster the natural has is used, the quicker we reach a World wide peak in natural gas output.  Then natural gas prices will rise to destroy demand and accelerate the build out of alternative sources of energy that are cheaper.

[Boat + 1,324]

1 hour ago, D Coyne said:

Gerry,

Most of the US NG comes from Marcellus + Utica and there are not enough liquids there to make further extraction profitable at $2/MCF (or perhaps less).  The tight oil in the Permian will result in some natural gas produced, but that too will peak and decline, all the while wind and solar will continue to fall in cost and may take market share from coal and natural gas.

Also despite the myth of unlimited natural gas, oil depletion will lead to less associated gas produced after 2025 as oil output peaks and declines and the natural gas resource that is economically recoverable is not unlimited, output of natural gas is likely to peak between 2030 and 2040, best guess 2035.  The LNG trains probably assume a 30 year life, those being constructed today may become stranded assets after the natural gas peak.

Just a guess but renewables and nat gas are very labor and infrastructure intensive. Just like that chart above steady growth will be enjoyed for decades. Will nuclear and coal lose out to price? I think so. Electric cars, semis and trains switch to renewables or nat gas electricity with CHP. Yea For these reasons the shelf life of nat gas and renewables grow in tandem much longer than  20 years. Maybe closer to 75. 

Edited January 23, 2020 by Boat

[Gerry Maddoux + 3,627]

1 hour ago, D Coyne said:

Most of the US NG comes from Marcellus + Utica and there are not enough liquids there to make further extraction profitable at $2/MCF (or perhaps less).

Dennis, you may be missing my point. Or maybe I'm just so naive I can't see the big picture.  

I'm not sure it's of any concern to Mr. Putin that the Marcellus and Utica producers are running into trouble at these prices. Russia has all this new gas from the Yamal Peninsula--and they're drilling like there's no tomorrow. They have to move the gas forthwith, if they're to get at the oil. Further, they now have a shortcut to the big Asian markets. Everyone has gas--pun intended. Everyone wants that four-billion-population Asian market. The pricing pressure is immense because there's so much gas. And it's coming from all over the world! The Utica/Marcellus is becoming a smaller and smaller piece of the global pie.

3 hours ago, D Coyne said:

The faster the natural has is used, the quicker we reach a World wide peak in natural gas output.  Then natural gas prices will rise to destroy demand and accelerate the build out of alternative sources of energy that are cheaper.

 Are we really going to run out of natural gas? When you tour the Haynesville Shale, to use a domestic example, you have to be stunned at the available targets for future exploitation. That basin is very close to the big Sabine Pass LNG facility--so when Jerry Jones put his half-billion to work, it was there, not the Utica/Marcellus. That thing will still be going in twenty years . . . if we need it.

But thinking more globally, I personally feel that the crust of this planet is so richly endowed with natural gas that we'll have it as long as it's a viable commodity. Since this LNG revolution is making natural gas a worldwide-consumer commodity--instead of just a worldwide-trading commodity--it is important to look at the whole world when you model exactly when we'll run out of gas. I tell you, it is being found and exploited all over this old world. Argentina has it; Brazil has it; they're just too inept at the moment to exploit it. But Russia will be all too happy to help them figure that out. My solid conjecture: we are not going to run out of gas. Not globally. And for the moment, wherever NG is discovered in huge quantities, LNG trains will go in.

3 hours ago, D Coyne said:

all the while wind and solar will continue to fall in cost and may take market share from coal and natural gas.

It's very easy to talk about renewables when times are good. I'm not pushing for one, but some day we'll have a recession. People will want whatever it takes to keep them warm. If the Europeans can keep themselves warm using windmills and solar panels, God bless them. But my deep, unalterable hunch is that they're going to get themselves in such an economic bind that they will take whatever is cheapest. Just as hydrocarbons brought us out of the cave, they will prevent our entry back into the cave. I shudder to think of a planet covered in solar panels and windmill farms. Further, I think there will be such profound unintended and unexpected consequences that the next generation after this current group of crybabies is going to blame their fathers and mothers for mucking up the globe with them.

 

[Coffeeguyzz + 454]

Just a brief heads up to all the folks who continue to follow the shale/hydrocarbon/energy world ...

It has been mentioned a few times upthread by posters (cough ... Dennis ... Mr. Roughneck ... cough) that Coffeeguyzz is an unabashed admirer of 'new' gadgets, technologies etc.

Unabashed mea culpa, maxima mea culpa to that for various reasons.

Specific case in point is the rapid expansion in the conversion of older, less economical - smaller LNG ships to become Floating Storage and Regassification Units (FSRUs).

From Croatia to Brazil to Turkey to various African and Asian nations,  quick, cheap hardware and processes are now enabling the rapid buildout of LNG import terminals all across the globe. 

Whether it is to provide simple natgas, fuel for power generation (modern CCGPs are game changers),  or a combination, these projects are upending long standing practices on a vast scale.

Specific projects such as Northeast Gateway (Boston), Bangledesh, El Salvador - amongst a couple of dozen, presently - are bellweathers of what to expect in the coming years.

Events are unfolding at warp speed.

[0R0 + 6,251]

15 hours ago, Boat said:

Just a guess but renewables and nat gas are very labor and infrastructure intensive. Just like that chart above steady growth will be enjoyed for decades. Will nuclear and coal lose out to price? I think so. Electric cars, semis and trains switch to renewables or nat gas electricity with CHP. Yea For these reasons the shelf life of nat gas and renewables grow in tandem much longer than  20 years. Maybe closer to 75. 

That is my thinking. The displacement of NG will happen according to the success of moving the recent successes from the lab to production and then at scale. In the meantime, the existing renewables tech is already competitive while running. Unfortunately, it runs only part of the day and sometimes (wind) is missing for several days running. So storage was the limiting factor. Which has finally started to fall in cost to where it can provide a full cycle without needing a NG.turbine or ICE generators to fill in.  Nat Gas is very low labor. Renewables are low-moderate labor. 

[0R0 + 6,251]

5 hours ago, Coffeeguyzz said:

Just a brief heads up to all the folks who continue to follow the shale/hydrocarbon/energy world ...

It has been mentioned a few times upthread by posters (cough ... Dennis ... Mr. Roughneck ... cough) that Coffeeguyzz is an unabashed admirer of 'new' gadgets, technologies etc.

Unabashed mea culpa, maxima mea culpa to that for various reasons.

Specific case in point is the rapid expansion in the conversion of older, less economical - smaller LNG ships to become Floating Storage and Regassification Units (FSRUs).

From Croatia to Brazil to Turkey to various African and Asian nations,  quick, cheap hardware and processes are now enabling the rapid buildout of LNG import terminals all across the globe. 

Whether it is to provide simple natgas, fuel for power generation (modern CCGPs are game changers),  or a combination, these projects are upending long standing practices on a vast scale.

Specific projects such as Northeast Gateway (Boston), Bangledesh, El Salvador - amongst a couple of dozen, presently - are bellweathers of what to expect in the coming years.

Events are unfolding at warp speed.

Do you have an estimate of how much new offtake capacity the new standard and FSRU terminals will provide over the next few years?

Any idea when the pipelines and LNG terminal on the Mexican Pacific coast will come online?

[ceo_energemsier + 1,818]

US Oil Industry Made History in December

 

 

U.S. crude oil production and exports reached historic highs in the final month of 2019, the American Petroleum Institute (API) reported Thursday.

API stated that petroleum exports set a new record of 9 million barrels per day (bpd) in December, citing data from its December 2019 Monthly Statistical Report (MSR). The organization added that U.S. crude production posted its fifth consecutive monthly increase to hit 12.9 million bpd – another all-time high the industry achieved last month.

“The strong December performance capped a historic year in America’s energy revolution,” API Chief Economist Dean Foreman commented in a written statement emailed to Rigzone. “The global impact of this success story has become increasingly clear as the U.S. provided stability in a global marketplace rattled by geopolitical and economic headwinds. Look no further than the market’s mild reaction to recent Middle East tensions, which less than a decade ago would have rocked consumers and financial markets. This is good news for American households and businesses.”

Crude oil exports make up 3.6 million bpd of the last month’s 9 million bpd in petroleum exports, according to the latest MSR. Month-on-month and year-on-year, crude exports were up 13.8 percent and 50 percent, respectively, the report indicated.

In addition to highlighting the 12.9 million bpd oil production figure for December 2019, API pointed out the U.S. natural gas liquids output concurrently hit 4.9 million bpd. The organization added that the five-month string of U.S. oil production records occurred despite a 23.5-percent year-on-year (as of December) decline in oil-targeted drilling activity.

“While EIA (U.S. Energy Information Administration) estimated well productivity improved nationwide, new production coming from a 10-percent drawdown in the backlog of drilled but uncompleted wells (DUCs) also contributed over the latter half of 2019, enabled by increased pipeline capacity,” API notes

[Gerry Maddoux + 3,627]

35 minutes ago, ceo_energemsier said:

U.S. crude oil production and exports reached historic highs in the final month of 2019, the American Petroleum Institute (API) reported Thursday.

Yeah, we're drilling ourselves right into bankruptcy. What a pyrrhic victory!

This whole thing is a . . . . fiasco. 

[ceo_energemsier + 1,818]

1 hour ago, Gerry Maddoux said:

Yeah, we're drilling ourselves right into bankruptcy. What a pyrrhic victory!

This whole thing is a . . . . fiasco. 

So what do you suggest we do? in your expertise of an export market?

[Gerry Maddoux + 3,627]

HaHa, I'm no expert in exports. As a guy who makes his living selling oil and gas, as well as wind energy, I'm critical of a process that allows unabated venting and flaring of natural gas, encouraging the production of much, much more LTO in the pipelines than would have made it there, were the regulations strictly followed. I feel for the small and medium-sized operators who v/f into the environment in order to avoid paying takeaway fees. However, Statewide Rule 32 says 24 hrs of vent, 10 days of flare. 

Look, we have a national treasure. There's only so much oil. What we have is hard to get at. Doing so costs a lot of money. And yet we're running roughshod over the shale basins. The Texas Railroad Commission and the North Dakota Industrial Commission have enabled this, at the expense of a double black eye. I'm usually not in favor of regulations, but without this one being enforced, we're seeing satellite pictures of the oilfield basins at night show up on the Internet, and in the process, we're flooding the market, driving down the price of oil to an unsustainable level. Violation of StatewideRule 32 has helped generate more losses in the shale basins--again by enabling exploitation of oil and gas that would not otherwise have been released quite yet from its 250-million-year-old tomb. 

If Apple, say, were to find their inventory of iPhones backing up, they'd probably cut back production. If the FDA found that Kraft Foods was releasing a noxious gas into the atmosphere, maybe from a processing plant, they'd swoop in. Yet here we have an industry that is producing as hard as it can in the face of a glut and in the process releasing Methane/Ethane/Propane/CO2/H2S/Hg into the global wind currents and nothing is being done. It just strikes me as silly, that's all: to both flood the market and sully our reputation all for naught.

I'm sorry if I insulted your sense of fair play or competition. Plus, as a guy with an interest in a half-dozen wells coming online, I hate to see the oil sold into a market that is below breakeven for the companies that drilled them. That's a pretty honest answer: if the people drilling those wells can't make it, economically, there will be no further wells. 

So, to answer you question, I suggest we rein it in. Wait for the pipelines. I know people are going to jump all over that, but I don't care, it's the truth. The regulatory agencies, in an effort to help the little operator, are actually hastening his demise.

 

[Boat + 1,324]

3 hours ago, ceo_energemsier said:

US Oil Industry Made History in December

 

 

U.S. crude oil production and exports reached historic highs in the final month of 2019, the American Petroleum Institute (API) reported Thursday.

API stated that petroleum exports set a new record of 9 million barrels per day (bpd) in December, citing data from its December 2019 Monthly Statistical Report (MSR). The organization added that U.S. crude production posted its fifth consecutive monthly increase to hit 12.9 million bpd – another all-time high the industry achieved last month.

“The strong December performance capped a historic year in America’s energy revolution,” API Chief Economist Dean Foreman commented in a written statement emailed to Rigzone. “The global impact of this success story has become increasingly clear as the U.S. provided stability in a global marketplace rattled by geopolitical and economic headwinds. Look no further than the market’s mild reaction to recent Middle East tensions, which less than a decade ago would have rocked consumers and financial markets. This is good news for American households and businesses.”

Crude oil exports make up 3.6 million bpd of the last month’s 9 million bpd in petroleum exports, according to the latest MSR. Month-on-month and year-on-year, crude exports were up 13.8 percent and 50 percent, respectively, the report indicated.

In addition to highlighting the 12.9 million bpd oil production figure for December 2019, API pointed out the U.S. natural gas liquids output concurrently hit 4.9 million bpd. The organization added that the five-month string of U.S. oil production records occurred despite a 23.5-percent year-on-year (as of December) decline in oil-targeted drilling activity.

“While EIA (U.S. Energy Information Administration) estimated well productivity improved nationwide, new production coming from a 10-percent drawdown in the backlog of drilled but uncompleted wells (DUCs) also contributed over the latter half of 2019, enabled by increased pipeline capacity,” API notes

What is extremely interesting to me is these records are being set with completions down around 100 over the last couple months. All this running out of tier 1 and sibling wells crimping production seems to be wrong. Wells drilled and completions were about 50 apart in the Permian so don’t expect that backlog to disappear any time soon. 
While we continued to read all this hyperbole about expected loss of production for unproved reasons hides the amazing amount of production with fewer and fewer drilled wells and completions.

Edited January 24, 2020 by Boat

[Coffeeguyzz + 454]

Oro

Regarding FSRU regasification capacity, companies (primarily Hoegh, Excelerate or Golar) tout 500 to 700/800 million cubic feet a day sendout as their upper limits.

A standard LNG tanker of 173,000 cubic meters holds ~3.2 billion cubic feet of vaporization potential.

Keeping in mind that demand for power/heat throughout a day fluctuates,  a single shipment could last weeks or months.

These older LNG ships are apt to be the Moss type tanks (aka 'golfballs') - like the one heading to Croatia -  and hold ~150,000 cubic meters. (World's largest FSRU is off Turkey and holds 263,000 cubic meters).

There are approximately 40 FSRUs operating right now worldwide.

 

As far as the 2 (ultimately 3, potentially, if Manzanillo is included) Mexican west coast LNG terminals go, the Costa Azul project from Sempra could be operational by 2023 if all goes smoothly. As it is already a functioning LNG import terminal with docks, storage tank and pipelines, Sempra plans to plunk down a modular 2.4 mtpa train to be up and running quickly. If all works out, an additional 6 trains (or more) might be added.

Puerto Libertad has supply pipelines and marine infrastructure, but needs full hardware buildout (3 standard 4 mtpa trains is what they are currently projecting).

So, a ~ 2025 timeframe would not be unreasonable for first production.

 

Follow up to this LNG topic ... Egypt just announced a curtailment of LNG exports from their offshore fields as the pricing is too low.

This follows Algeria cutting back pipeline deliveries to Europe for the same reason.

Observers to these matters ought to be mindful of the indexing for the LNG (Henry Hub versus various oil benchmarks) as well as the government(s' ... plural) need for hydrocarbon revenue for social/political ends.

Simply looking at superficial physical realities can prompt grotesquely distorted "real world" conclusions.

 

[Gerry Maddoux + 3,627]

1 hour ago, Coffeeguyzz said:

Simply looking at superficial physical realities can prompt grotesquely distorted "real world" conclusions.

What, exactly, do you mean by that, Coffee?

I can't tell if you mean Henry Hub indexing is used as a geopolitical tool, or if it's the honest one, based merely on production, supply and demand. It is my understand that Henry Hub indexing is based exclusively on bids by traders. No? 

Thanks.

[Coffeeguyzz + 454]

Mr. Maddoux

" ... Henry Hub indexing is based exclusively on bids by traders".

Exactly correct.

And the historic international pricing for natgas - primarily piped or Qatar's LNG - is STILL based off various fractions of different OIL price benchmarks. 

 

Singapore's piped gas from Malaysia and Indonesia is a percentage (~10%?) of whatever the current market price is from one of the Middle East oil blends.

This is what India, Japan, Korea, et al have been doing for years when they have been signing long term contracts with supplying countries such as Qatar, Australia, Russia.

 

The importance of this hit home when I read that Turkey's national gas company was paying something like $7.50/mmbtu to Gazprom (?) for their supply ... much more expensive than the ~$5.50 available on the spot market from - primarily - US LNG. As these supply/purchase agreements are customarily very confidential, little public data is widely available.

However, using a 10/12 per cent figure of Brent prices might be in the ballpark of what both piped and shipped (LNG) customers/suppliers have always  - historically - worked with.

 

The fact that Henry Hub even exists has had no bearing whatsoever on international gas market pricing.

That has changed ... bigtime.

 

The exceptionally low pricing of US LNG - combined with total flexibility in regards to ultimate destination - has created this environment of regional LNG pricing such as JKM, TTF, NBP wherein traders can focus on micro markets (think New Caledonia, El Salvador, possibly fertilizer plants in Brazil, aluminum smelters in Jamaica) in, literally, real time conditions.

This overall situation is apt to only enhance US LNG producers in the future as these FSRUs are going in all over the planet and will need near term (at least) supply of LNG.