America’s bounty: Gas works

America’s bounty: Gas works

The Economist is one of our favorite weekly reads. It is packed full of news and information and well-written. That it has a European take on things is an advantage in our eyes becuase it brings a different viewpoint. This week it looks at the changing prospects for the U.S. as the oil and gas boom continues to out pace expectations and policy. It makes a good companion reading with our post yesterday linking to Walter Russell Mead’s disquisition on America’s future.

“Now shale contributes a third of America’s gas supplies. By 2035 the country’s share of total supplies (which may by then have risen to 820 billion cubic metres a year) could be nearly half. The rise has been helped along by a variety of factors, such as the liberalisation of access to existing pipelines by third parties that started in the 1970s, a deep and liquid gas market that allowed the risks of drilling to be hedged, ready access to capital, America’s home-grown oil industry and the entrepreneurial zip that provided the men and equipment. But the biggest difference was down to the efforts of one man: George Mitchell, the boss of an oil-service company, who saw the potential for improving a known technology, fracking, to get at the gas. Big oil and gas companies were interested in shale gas but could not make the breakthrough in fracking to get the gas to flow. Mr Mitchell spent ten years and $6m to crack the problem (surely the best-spent development money in the history of gas). Everyone, he said, told him he was just wasting his time and money.

“The technology is in use in the Marcellus, Haynesville, Barnett, Utica and other shale beds (see map), to startling effect. It is also being used for shale oil, which can be extracted from some shale beds in the same way as gas. Some wells also render valuable natural-gas liquids (NGLs) such as butane and propane along with the gas. Oily parts of the Eagle Ford are giving up the black stuff in big quantities. The Bakken shale in North Dakota, a state with little else to boast about, now contributes around half a million barrels a day (b/d) of oil. Some reckon that in a few years the oily shale beds might produce as much as 3m b/d, around a third of America’s current imports.

“The cost of getting at the gas has come tumbling down as techniques have become more efficient. Drilling multiple wells from a single pad, up to six at a time, has made operations cheaper. Three-dimensional seismic imaging has made it easier to find sweet spots where gas might flow in large quantities. Horizontal drilling sections have got longer. Break-even costs have plummeted,” the Economist says.

It concludes: “The fossil-fuel industry is only a small slice of America’s economy, but the relative drop in gas prices is so dramatic that it could boost a manufacturing renaissance. That might add 0.5% a year to GDP over the next five years, says UBS, a Swiss bank. Meanwhile low gas prices are already fattening American wallets. According to IHS Global Insight, a research outfit, they are saving the average American household $926 a year.

“Not everyone will win. Some coalminers, for instance, will have to find new work. But Mr Obama says that fracking might support 600,000 jobs by the end of this decade. Not bad for a business that barely existed ten years ago.”

Via Mark Green at the EnergyTomorrow Blog, who says: “The point here, as noted by The Economist, is that the United States is on the cutting edge of shale energy development through hydraulic fracturing. Generally, there’s support for this kind of energy development from the public, government (see here and here) and our way of life – private property, entrepreneurship and a history of pioneering energy development. Still, there are some who want to stop the revolution in its tracks. Instead of safe and responsible natural gas development, they want to halt development altogether – while offering little in the way of realistic alternatives to abundant, reliable natural gas.”

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Chinese solar manufacturers face blowback as trade war escalates

One major drag is that its cost of producing polysilicon is well below the spot price

Simon Montlake at Forbes says China’s headlong rush into solar-energy equipment for export to the West has stirred global trade tensions. 

“In May the U.S. Commerce Department said it would subject Chinese exporters to anti-dumping tariffs of up to 250% on solar panels. Last week, in an apparent retort, China said it was investigating U.S. and South Korean suppliers of polysilicon, a key ingredient in solar cells. China had sharply criticised the U.S. ruling as a protectionist measure. While the full effect of the U.S. tariffs won’t be felt until 2013, China’s solar industry is already in trouble.

“Oversupply of solar equipment and polysilicon in China means that companies are desperate for sales. Europe’s financial woes are already throttling government subsidies for installation of solar panels. China exports nearly $2 billion of solar panels annually to the U.S., and while not all companies will be hit by huge tariffs, it’s hard to see much upside. U.S.-listed Chinese solar firms have had a terrible year. Shares in Suntech Power (STP) are down 79%. JA Solar Holdings (JASO) is trading below 1$, down 30%.

“Bad timing, then, for Hi-Min Solar Power, a solar water-heater company that grew on the back of close political ties in its home province of Shandong. After a third attempt to list shares in Shanghai was rejected, founder Huang Ming lashed out at the news media for linking him to a disgraced politician in the province. He is particularly incensed at reports that former vice-governor Huang Sheng is a relative who helped him obtain cheap land in Dezhou for his solar factories and real-estate projects.

“Not so, claims Hi-Min’s chairman, though he admits that Huang Sheng was his friend and ‘benefactor.’ The disgraced Huang was expelled last month from the ruling party for accepting bribes and being “morally corrupt”. The suspicion is that Hi-Min’s application for an IPO was denied because of its association with him. During a stormy press conference on July 20, Chairman Huang Ming claimed that the reason was that Hi-Min had non-performing assets. 

The company has tried for years to go public, all to no avail. Chinese media reports that the corruption probe that brought down the vice-governor involved land transactions to clean energy companies in Dezhou. No wonder Huang Ming is feeling the heat.

“In southern Jiangxi province, solar power is also proving a headache for local authorities. Indebted LDK Solar, the world’s second-largest solar wafer manufacturer, has seen its ADRs drop 15% after losing $185m in the first quarter. One major drag is that its cost of producing polysilicon is well below the spot price.”

There’s more at the link.

Interior names solar ‘hot spots’ out West

The agency has already approved 17 large-scale solar energy projects on public lands that are expected to produce nearly 6,000 megawatts of electricity

John M. Broder of the New York Times reports: “After more than two years of study and public comment, the Department of Interior on Tuesday identified 17 sites on 285,000 acres of public lands across six Southwestern states as prime spots for development of solar energy. Agency officials said the government would fast-track applications for large-scale solar energy installations at those sites in the hope of speeding construction of thousands of megawatts of renewable, non-polluting electricity generation.

“The agency identified an additional 19 million acres of public lands in California, Nevada, Utah, Colorado, Arizona and New Mexico as potential venues for solar energy projects that could win rapid federal approval.

“But officials said they were fencing off more than 78 million acres of public land from solar development because the areas have less solar energy potential, do not have immediate access to transmission lines or pose a threat to important archaeological or cultural sites, endangered species, scarce water resources or other environmental values if developed,” the story said.

“’This is a key milestone in building a sustainable foundation for utility-scale solar energy development and conservation on public lands over the next two decades,’ the interior secretary, Ken Salazar, said. [...]

“On the solar energy front, the Interior Department on Tuesday issued a document known as a final programmatic environmental impact statement covering more than 3,000 pages that spells out the considerations in narrowing the sites for solar development and describes the process for permitting new projects.”

Iraq blacklists Chevron for Kurdish oil deals

Yet, Chevron has no material stake in the south to lose at the moment

Iraq hit out at Chevron Corp. over its just-signed oil contract with Kurdistan, barring it from any oil agreements with the central government in a move meant to deter other companies from dealing directly with the semi-autonomous northern region, according to a story at YahooNews.

“Baghdad has long held that contracts signed by the Kurdistan Regional Government (KRG) are illegal, and last year Exxon Mobil Corp aroused its anger by striking a deal with the region while also running a project at a supergiant oilfield in the south.

“Baghdad retaliated by banning Exxon from an exploration tender in May,” the story said.

“Chevron followed its larger rival into Kurdistan last week, and Baghdad’s action on Tuesday will be closely watched by other oil majors, such as France’s Total, which is widely expected to be the next to make a Kurdish oil play.

“‘In line with Oil Ministry policy based on the constitution, the Oil Ministry announces the disqualification of Chevron company and bars it from signing any deals with the federal Oil Ministry and its companies,’ the Oil Ministry said in a statement.

“Last week, Chevron said it would purchase 80 percent of two blocks in Iraq’s Kurdistan, an area where oil rights are a subject of fierce dispute.”

Here’s our archived story from July 19.

Japan PM atomic energy stance on trial in local poll

The local poll result could influence a government decision on its medium-term energy mix program

Japanese Prime Minister Yoshihiko Noda’s post-Fukushima nuclear energy policy will be on trial in a local governor’s election on Sunday, where an upset victory by arenewable energy candidate would deal Noda’s wobbly administration a new blow, Linda Sieg of Reuters says.

“Energy policy has become a big headache for Noda, who is battling to hold his Democratic Party (DPJ) together ahead of a possible parliamentary election this year.

“The prime minister has already suffered a series of defections over his approval of reactor restarts despite safety concerns after the 2011 Fukushima disaster, as well as his plans to double the sales tax.

“The DPJ’s fracturing coincides with mounting voter opposition to nuclear power, with some 100,000 people rallying against the reactor restarts in Tokyo on July 16.

“Now Tetsunari Iida, a well-known proponent of renewable energy as an alternative to nuclear, is running for governor of the western conservative stronghold of Yamaguchi prefecture. An Iida victory or close finish would add to Noda’s woes.”

Solar power deal means 800 jobs in San Antonio

At least five solar plants are expected to be built across Texas

According to the Associated Press, a solar energy deal has been announced for the San Antonio area in a project that backers say should create about 800 jobs.

“Leaders of CPS Energy and OCI Solar Power LLC signed the manufacturing-to-generation agreement Monday. The 25-year contract is for solar power purchase and other economic development.

“Officials say several manufacturing facilities will be established to create solar panel components, including a San Antonio unit to be built by Nexolon America LLC.”

RRB Energy targets African market with smaller wind turbines

The machine was originally designed by Vestas, the world’s biggest wind-turbine maker

RRB Energy Ltd., Vestas Wind Systems A/S (VWS)’s former joint-venture partner in India, expects as much as 25 percent of sales next year to come from exports of smaller turbines toemerging markets led by Africa, according to Natalie Obiko Pearson of Bloomberg.

“The New Delhi-registered manufacturer, one of the earliest to enter India’s wind power market in 1987, says it’s bucking an industry trend toward larger turbines and has restarted production of a 225-kilowatt machine discontinued in 2005.

“’There’s a lot of potential in emerging markets where so far there’s been no development of wind power like Africa,’ Deputy Managing Director Sarvesh Kumar said in a phone interview yesterday. They can’t simply start with megawatt-class machines,’” the article said.

“Wind-turbine makers are seeking to diversify as they struggle with overcapacity and declining demand in traditional markets. Growth is set to slow in China, the world’s biggest wind market, for the first time this year, while governments in the U.S. and Europe are rolling back clean-energy subsidies.

“Closely-held RRB, which sells more than 95 percent of its turbines in India and has annual sales of about $200 million, plans to approach power utilities in Ghana and Nigeria. It has also already exported two 225-kilowatt turbines to farmers in the U.K. and expects to sell nine more.”

Treasury messing with UK clean energy policy, say MPs

Major energy investments were ‘hanging on critical decisions’ that the government had to take

BBC News environment analyst Roger Harrabin reports that United Kingdom MPs have accused the Treasury of making the government’s clean energy revolution unworkable and creating the risk of higher household bills.

“They said Treasury changes to the draft Energy Bill will increase the risk of borrowing for investors.

“They added that it would put up the cost of renewable and nuclear power, with customers bearing the extra cost.

“A Treasury spokesman said the aim was to achieve government goals while protecting businesses and consumers,” according to Harrabin.

“Tim Yeo, chairman of the energy and climate change select committee, said: ‘The Treasury has clearly intervened in the draft bill in a way that will put up bills to consumers and put off investors by increasing their risks.

“‘This is exactly the opposite of what the Treasury says it wants,’ he told BBC News.”

“The MPs wanted Treasury ministers to answer questions about their influence on energy strategy, but they declined. [...]

“The committee has two major worries about the finance department’s impact on the draft bill.

“The first is about the long-term contracts for developers who are being asked by the government to plough billions in the UK’s low-carbon infrastructure. [...]

“The MPs’ second worry is over the ongoing consumer subsidy to renewable and nuclear power generators, which are needed for the UK to meet its legally binding targets.

“The Treasury says the subsidy will be limited to hold down the cost to consumers – but it won’t reveal the size of the future cap.”

Report: Coal exports in U.S. rise through first quarter

U.S. coal production to-date this year has fallen 5.7 percent, but total coal exports have risen 7.6 percent, Platts said

From PennEnergy: “A new report released this week by U.S. Representative Ed Markey shows that the country’s coal industry increased its exports in the first quarter of 2012, according to Platts.

“Markey released the report, entitled ‘Our Pain, Their Gain: Mountains Destroyed for Coal Shipped Overseas,’ in his role as the lead Democrat on the House Natural Resources Committee in an effort to highlight the environmental impact of the coal industry.

“The report analyzes data from the U.S. Energy Information Administration and finds that even as coal-fired generation has declined in the country, coal exports have begun rising in response.”

Duke Energy tried to stop merger, former Progress chief says

State law allows the commission to modify or rescind its approval of the merger

Is Duke Energy trying to backpedal after its disaster roll-out of the merger with Progressive Energy earlier this month? On July 12 we noted there might be some regulatory reckoning between Duke Energy and North Carolina.

Today, The New York Times reports that in testimony on Thursday, the combined company’s ousted chief said Duke Energy tried to back out of a deal to buy Progress Energy as it faced increasing regulatory hurdles.

“At a hearing before North Carolina’s utilities commission, the former executive, William D. Johnson, indicated that the relationship between the companies soured as a result, dooming his tenure as chief of the newly merged utility.

“’They wanted the merger. Then they didn’t. Then they couldn’t get out of it, and they didn’t want to be stuck with me, as the person who dragged them into it,’ Mr. Johnson said.

“He is the latest person to testify about the boardroom coup at Duke.

“When the deal was struck in January 2011, Mr. Johnson, then the chief executive of Progress, was slated to become to head of the newly combined company. James E. Rogers, then the C.E.O. of Duke, would step into the role of executive chairman. But just hours after the $32 billion merger closed this July, the board fired Mr. Johnson and put Mr. Rogers in charge.

“The board’s actions have ignited fierce criticism that the company misled regulators. Officials in North Carolina are now looking for answers, providing a rare glimpse into the inner workings of the boardroom.

“While the newly merged company has seven million customers across six states, North Carolina, where it has its headquarters, is its largest market. The deal will result in the loss of about 1,000 jobs in Raleigh, the state’s capital,” the Times story said.

“The controversy has weighed on the stock. Shares of Duke are down about 6 percent since Mr. Johnson was forced out. Some analysts are worried that the tumult could hurt the company’s relationship with regulators.

“At a hearing last week, Mr. Rogers said that Duke’s board had pushed out Mr. Johnson over concerns about his autocratic management style and a lack of transparency about problems with Progress’s nuclear power plants.”

More on the uproar over the Duke Energy and Progressive Energy uproar from our archives here.

China to probe solar panel products from U.S. and S. Korea

The U.S. claims Chinese companies flood the American market with government-subsidised products

In May we reported that China and the U.S. were entering a tariff war over solar panel production and other clean energy issues.

Yesterday, China’s trade ministry said it will launch an investigation into what it says are unfair import prices of U.S. and South Korean polysilicon, used in solar panels, according to the BBC.

“The probe relates to anti-subsidy and anti-dumping regulations, the ministry said.

“China claims local manufacturers of polysilicon are being driven out of business. This is the latest escalation in a trade dispute between China and the U.S.

Via EnergyDigger

Chinese nuclear projects ready to power ahead

Future growth in the nuclear industry will mainly come from Asia, especially from China, which will build 40 per cent of the world’s new reactors: Report

The Asia New Network has a story from Liu Yiyu of the China Daily which says China is expected to resume the expansion of its nuclear power sector next month, with many plans reaching the final approval stage.

According to Xu Yuming, deputy secretary-general of the China Nuclear Energy Association, the new approvals, will move much more slowly because of the Fukushima nuclear crisis last year.

“China suspended new nuclear projects after last year’s earthquake and tsunami in Japan crippled the Fukushima Daiichi plant and prompted a global review of atomic energy plants.

“China approved eight to 10 reactors each year between 2008 and 2010,” the article said.

“China had spent as much as 30 billion yuan (US$4.7 billion) in upgrading its nuclear industry, including the manufacturing end, before the Japanese accident.

“But over the past 14 months, no new projects have been approved or started construction.

“However, by the end of this year, two new reactors — one in Hongyanhe, Liaoning province and one in Ningde, Fujian province — will go into operation, Xu said.

“On March 16 last year, after the accident in Japan, the State Council announced that it would suspend approval of nuclear plant construction and ordered safety inspections at all plants.

“China had 11.3 gigawatts of nuclear capacity at the end of 2011, with another 26 reactors, or 29 gW, under construction.

“The government passed the National Nuclear Contingency Plan in April, an indication that it is getting closer to resume new project approval.”

Plan to heat Manchester homes with a geothermal spring

There are 210 similar projects in operation across Europe, with 4,000 more in the planning

The BBC reports on the effort to place a geothermal plant in Manchester, England. The plan is to drill boreholes in Manchester city centre to extract underground heat for 6,000 homes and businesses.

“Two rigs in the Ardwick area would drill down 3km (2 miles) to a thermal spring in the multi-million pound plan. A network of underground pipes would take the heat to homes in the Ardwick and Oxford Road Corridor areas. Developer GT Energy says accessing the renewable heat source will reduce energy costs for residents,” according to the BBC.

“Energy Minister Greg Barker said it would be one of the largest geothermal projects in the country.

“Drilling rigs are 40m (130ft) high, the plant would take 12 months to build and take up an acre during that time and half an acre after.

“The water temperature underground, in the ancient Cheshire Basin reservoir, is about 100C (212F). [...]

“One geothermal plant is already in operation in Southampton, and another is in development in Newcastle.”

South Dakota oil potential dampened by North Dakota’s record bonanza

Oil producers first tapped into the Dakotas in the 1950s

The Bismarck Tribune runs an Associated Press story by James MacPherson about the sibling rivalry between North Dakota and South Dakota, and how the shale gas boom is sparking jealousy.

“Despite speculation, widespread hope and some worry that North Dakota’s oil rush may balloon across the border, experts say it’s doubtful South Dakota will experience anything remotely close.

“Case in point: South Dakota has produced about 1.6 million barrels of oil annually for the past four years, an official with the Department of Environment and Natural Resources said. North Dakota pumps that amount in just more than two days.

“On Thursday, North Dakota had 210 rigs drilling. South Dakota had a single rig piercing the prairie.

“Geology is the difference. The rich Bakken shale formation, where oil-producing rock is sandwiched between layers of shale nearly two miles underground in western North Dakota, is not present in South Dakota.

“The Three Forks formation below the Bakken in North Dakota does reach into South Dakota, but has gone largely unexplored. Geologists and oil companies are split over whether it’s a separate oil-producing reservoir or if it simply catches oil leaking from the Bakken above.

“For drillers in North Dakota’s Bakken region, dry holes are a rarity. State and industry officials say 99 percent of drill rigs hit oil and nine out of 10 wells make money. Since drillers are virtually assured of a profitable well there, they have little time to bother with unknown prospects across the border, Iles said.

Via Carpe Diem

Brazil says Chevron oil leak larger than estimated

The San Ramon, Calif.-based company said it underestimated the pressure in an underwater reservoir, so crude rushed up a bore hole and eventually escaped into the surrounding seabed some 230 miles off the coast of Rio de Janeiro

The Associated Press reports that an investigation by regulators found that Chevron Corp. could have prevented an offshore oil leak last year and that the spill was larger than previously estimated, the head of Brazil’s National Petroleum Agency said Thursday.

“Magda Chambriard, who runs the agency known as ANP, said at a news conference that about 155,000 gallons seeped into the ocean from cracks in the seabed floor near a Chevron well in the Frade field. Previous estimates put the leak at about 110,000 gallons, which a Chevron statement said is the figure it sticks by.

“The ANP’s full report will be released Friday. It will show “the accident could have been avoided if Chevron had conducted its operations while fully adhering to the regulations of the ANP and industrywide best practices, as well as its own procedure manual,” Chambriard said.

“She added that the agency would fine Chevron about the maximum allowed under Brazilian law, upward of $25 million. Chevron and driller Transocean Ltd. are facing an $11 billion lawsuit that a federal prosecutor filed earlier this year.

“‘We disagree with the report’s characterization of our safety culture,’ Chevron’s statement read. ‘We are confident that at all times during the Frade incident we acted appropriately and responsibly.’

“The crude began seeping from cracks in the ocean floor near a Chevron well in November. Two weeks after the leak, the ANP said the seepage was under control. But in March, oil again started leaking and Chevron voluntarily suspended production in the field.”


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