 Thursday, May 2, 2002
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As readers of CommUnity of Minds know, one of humanity's biggest problems is our approaching depetion of the Earth's fossil fuels. Recently some have argued that even if we run out of oil, there is so much natural gas that we will be OK for a century or more. This is simply not true.
Dale Pfeiffer posted the following article at the Energy Resources Yahoo Group.
Leaping Off the Natural Gas Cliff
Dale Pfeiffer
Peculiarities of Natural Gas
Natural Gas (NG) must be considered separately from oil because its existence in the gas state at normal ambient temperature leads to different properties both in the Earth’s crust and at the Earth’s surface. Natural Gas flows more freely through pore spaces than does oil. Therefore, once a gas well is drilled, there is no Hubbert curve profile. It costs no more—either in energy or in money—to pump the last cubic foot of natural gas than it does to pump the first. The typical profile for natural gas production rises from zero, plateaus for some length of time, and then dives in a sharp cliff. The rise and plateau are a function of the size of the field and the number of wells drilled. The cliff arrives with hardly a warning and dives at a rate far in excess of a comparable oil production decline.
Natural Gas has not been as exploited worldwide as has oil. Demand has only begun to increase with the development of gas-fired electrical generation plants in response to environmental regulations. Natural Gas is cleaner than oil or coal. In North America, at least 275 gas-fired plants are planned for construction by 2006. These plants will increase gas consumption by more than 8.5 trillion cubic feet (tcf). (1)
In 2001, Simmons & Company International estimated that US NG demand for electricity was approximately 16 billion cubic feet (bcf) per day. They predict that demand will increase by 2 bcf per day for the next two years.
Many analysts point to vast unexploited reserves of NG throughout the world and state that we will have plenty of Natural Gas for many decades to come. However, these analysts do not take into account the difficulty of transporting Natural Gas. NG can only be efficiently and economically transported by pipeline. To ship NG overseas, it must first be liquefied, and then transported in specially designed refrigerated ships. Finally, it must be unloaded at specially equipped ports and reliquified. All of this results in an estimated 15% to 30% energy loss—not to mention the capital expense.
For this reason, North American NG demand will have to be met by North American production.
North American Production
Mexico gas production has been in decline since 1999. US NG imports from Mexico diminished to nothing in the year 2000. Mexico currently exports no NG and is struggling to meet its domestic demand. (2)
US gas production has been in plateau for some time. Matthew Simmons writes: "North American natural gas has no excess capacity. It disappeared several years ago. What we do have is extremely aggressive decline rates in almost every key production basin making it harder each season to keep current production flat.”
The US Energy Information Administration and the National Petroleum Council have projected that US demand for NG could rise to 30 tcf a year by 2010. The lion’s share of future US production growth is expected to come from the Gulf of Mexico. However, the US Minerals Management Service forecasts production will start to decline in 2005 from a plateau peak of 6.1 tcf per year. (3)
Presently, the US makes up for its shortfall in NG production by drawing from Canadian resources. Canada currently makes up about 13% of the US gas supply. Unfortunately, the large Canadian fields which currently supply most of their production have plateau’d and are expected to go into decline within the next few years. (4)
The Oil & Gas Journal reports that most of Canada’s gas additions will come from smaller fields. And Canada’s quoted resources of 233 tcf will never be fully tapped, because portions of this reserve are contained in small, nonproductive fields.
Only by opening up currently restricted areas of Alaska, the Canadian Arctic, the US Rocky Mountains, and deep ocean can we hope to meet future NG demand. All of this would require a large investment in drilling apparatus and gas pipelines, ultimately costing an estimated $120 billion in infrastructure. And from the time construction would begin on this infrastructure it will take approximately 5 to 7 years before any of the gas begins to flow.
So what do we do in the meantime?
The US Versus Canada
NAFTA and other free trade agreements drawn up between the US and Canada starting from the mid-1980s ceded (yielded) Canadian control over their NG resources to the US. This author expects that these agreements will cause increasing friction between the US and Canada in the years to come.
Under these agreements, the Canadian National Energy Board was stripped of its powers, and Canada gave up its requirement to maintain a 25-year surplus of natural gas. There is no legal way for Canada to ensure that it will have adequate supplies of NG in the future. However, the US still retains the right to store vast supplies of hydrocarbons for emergencies.
The all-Canadian gas distribution system was abandoned and exporters are no longer required to file an export impact assessment. Furthermore, US customers have gained a price advantage over Canadian consumers, as they do not have to pay taxes on the gas exports.
The trade agreements established a system of “proportional sharing” which guarantee US imports from Canada in perpetuity. The government of Canada relinquished the right to refuse to issue a licence or revoke or change a licence for the exportation to the United States of energy goods. US distribution companies were able to sign long-term contracts at rock-bottom prices.
During the late 1990s, when NG prices began to rise, the US dipped into its emergency reserves and brought down the price of gas for US customers. As a final irony, under NAFTA’s proportional-sharing provision, Canada must replenish even the US reserve supply—by law and in perpetuity.
Natural Gas Production Declining at Alarming Rate
A recent Oil & Gas Journal article contains distressing news. NG production is going into sequential declines which should gain momentum as the year progresses. “We continue to believe that US natural gas production could be down by as much as 5-6% this summer on a year-over-year basis…”
What the journal does not say is that this production decline signals that US NG production in about to fall over the cliff. Subsequent decline will likely have a disastrous effect on the economy, and on pocketbooks of summer air conditioning users and winter gas furnace users. As the US leans increasing on Canada to meet its NG shortfall, Canadians could find it difficult to heat their homes through the cold northern winter.
A Few Brief Words about Ethanol
There has been a lot of talk about ethanol recently. Many are touting ethanol as a clean energy alternative, others hold it up as a way to augment and extend oil supplies. Congress is debating laws requiring ethanol to be mixed with gasoline for automobile consumption. Those who extol ethanol fail to look at the energy costs of production, what certain energy analysts call the EROEI (Energy Return On Energy Invested).
Simply put, it takes more energy to produce ethanol than is produced by the combustion of ethanol. According to Cornell professor David Pimentel, an acre of corn ultimately yields 328 gallons of ethanol. This quantity of corn requires 1,000 gallons of fossil fuels to plant, grow and harvest, and costs $347 per acre. This means that the corn feedstock costs $1.05 per gallon of ethanol before it is even converted into ethanol. Additional energy costs accrue in distilling the ethanol. Adding it all up, 131,000 BTUs are needed to make 1 gallon of ethanol, with an energy value of only 77,000 BTUs. This results in an EROEI of roughly 59%. That is a 41% loss of energy. (5)
If all of the automobiles in the US ran on 100% ethanol, 97% of continental US land would be required to grow the feedstock. Forget about feeding people, let alone housing them.
Increased ethanol production can only be maintained through increased tax dollar subsidies. And the competition for ethanol feedstock will inflate the price of corn. Any possible benefits in air quality will be more than offset by the petroleum required to grow and process the corn. Likewise, the added petroleum demand for producing ethanol will contribute to rising oil imports and further diminish world oil supplies. Finally, as the price of oil goes up, the subsidy for ethanol must go up as a multiple.
Ultimately, the only ones who benefit from ethanol production are the agribus industries. This is foolishness in the extreme.
Originally posted at the Energy Resources Yahoo Group
Also see Jean Lahererre and K. Davis
