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The Obama administration is telling Japan and other allied countries they must wait (past the...
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Wednesday, May 30, 2012, 6:35 PM ETThe Obama administration is telling Japan and other allied countries they must wait (past the election?) before moving forward on plans to buy U.S. natural gas. Several companies are seeking permits to export gas to countries lacking free-trade deals with the U.S., but LNG exports have become a hot-button topic for some lawmakers and environmentalists. (earlier)
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This news story has 46 comments:
Gotta love it.
The 535 are not in the White House. They make up the legislative branch of government.
1, nat. gas production falls when its price is lower than other fuels. We've seen dramatic declines in operating wells now, with a 10 year low: http://bit.ly/Kz6pf3. Exploration and production interest shifts to higher margin fuels, plain and simple. Price will rise and will reach stasis to oil.
2, nat. gas demand rises as its low cost appeals, albeit slowly. Peculiar to this is our current lack of infrastructure to use all this gas. That is temporary and dollars are chasing the build out. Check here, http://bit.ly/Jvu77M, tick "total consumption." Hardly any movement in 10 years.
So stranding the gas will not lead to lower prices. Production will simply continue to remain low until prices recover. Prices will not stay low. Producers will not produce at this level, period.
**If we had laws stranding the gas in the first place, we never would have seen these low prices to begin with. In which case we'd never have had the stimulation to convert some infrastructure to use it.**
So there are two scenarios, long term.
1, we leave the gas in the ground by stranding it and pay the same for nat. gas as oil, and kill the desire to convert to nat. gas since producers will lose interest.
2, we extract it and sell some, in which case it will still cost the same as oil, and stimulate nat. gas demand and production as belief in its potential gets attention. It is only for a disruptive early period (like now) where the demand side interest will lead to expensive infrastructure build out.
Same energy cost in total, but option 2 sees fewer net dollars out flowing.
More bad leadership from the pathetic campaigner-in-chief. Sad :/
Does your White House team ever make a bad call?
Obama will get re-elected and will do a great job.
And he's going to need a miracle to get re-elected.
Ecologists? What a bunch of fraudsters.
All one has to do is take a gander at Argentina, right now, to disprove that thesis. If companies are prevented from handling their production as they see best and to generate the highest returns, simply because some government wishes to pander to its electorate or special interests, then, they simply stop producing the asset, preferring to wait, instead, for more amenable conditions.
In Argentina, the near-communist Kirchner government, which imposed price controls (similar to saying one cannot sell one's production, caused the largest oil company, YPF, to refrain from new exploration and research, so Kirchner simply expropriated the company in a confiscatory nationalization, a la Hugo Chavez. Hopefully, we're not headed the same way, but with the policies of this left-leaning administration, one never knows.
Exactly! Economics 101.
What I am telling you is that companies, if told they cannot market their products, stop producing those products, which creates shortages. In Argentina, they did that by establishing price controls that made production unrewarding, so the oil company stopped development. Here, Obama just says stop, much simpler, but with the same effect.
In Argentina, what occurred is that because YPF saw no incentive to produce at sub-market prices, Argentina incurred oil shortages and had to ramp up imports, costing them precious foreign exchange. Since, President Kirchner didn't like the logical way the laws of economics work, she nationalized YPF. Now, she won't be able to blame either supply shortages or price increases on "evil" YPF. It will be her own baby.
If natural gas companies cannot sell and ship their product, they'll, likewise, simply stop production, reducing supplies and ensuring that there is no cheap gas. That's the way economics work.
We need a long term understanding of production and prices to give any incentive for the demand side to change. But in your world of apparently a command economy, none of these pesky market issues need matter.
"Stranded assets": Ok, so you're hijacking terms now to apply an argument where it doesn't apply.
"Ten years": How recent is the shale boom? Ten years? I don't think so. The increases in natgas use are recent and they're during an economic down time. The EIA figures show increased natgas use for electricity generation over the past year. Dow has invented and is ramping up processes for using natgas to produce plastics. Fertilizer companies are developing methods to switch from oil to natgas feedstock. The use of natgas as a transportation fuel is rising and will continue to rise further. If you don't believe natgas will replace oil domestically until costs equalize, then you don't believe in the power of supply and demand.
--I still don't get your point about "stranded asset." It's an accounting term that is casually applied in the commodity markets to goods that can't be shipped from field to market. The literal and figurative analogy is perfect, hence its common usage. What's the problem?
--I used 10 years since the EIA data is easily found for 10 years and shows in context how demand changes little whether prices are high or low. We've had both extremes in that window. No other reason. The demand is inelastic until the infrastructure can catch up. Lead times are enormous.
I do believe use will rise but it will take time, and only if there is widespread belief that the nat. gas industry will be robust. Robustness comes from large production, which comes from producers knowing they can export. No more, no less. You have to acknowledge that.
The EIA data *clearly* show natgas switching is *already* occurring. You're simply wrong when you claim it's not. Other uses are ramping up. Domestic natgas pipelines are being laid at rapid pace. Repeating to yourself that demand is inelastic doesn't change the fact that it's not.
From the American Natural Gas Alliance, and industry consortium:
"Vast new supplies of clean, domestic natural gas has led to rapid pipeline construction, according to EIA. And dramatic growth in shale projections has driven even more pipeline projects that will come online by the end of 2011.
"This is the continuation of a trend that begin in 2008, when completions of new pipelines and expansion of existing pipelines were higher than they had been in more than a decade, increasing capacity by more than 44 billion cubic feet per day."
Source:
http://bit.ly/LQptp2
"Nat gas also is vastly underutilized in this country. According to the Congressional Research Service, natural gas combined cycle turbines (the most efficient natural gas power plants running today) are on average run at 42% of their full capacity. This means we can start immediately to transition to cleaner energy and cleaner skies."
Source:
http://bit.ly/L2fdaf
New pipeline project approved March 2012, supplying the metropolitan centers of New York and new Jersey:
http://bit.ly/LQptp3
New pipeline project linking Texas and Denver regions, expected to begin operations in 2013:
http://bit.ly/L2fdqs
New pipeline projects being mapped out from Pennsylvania, to the eastern seaboard and possibly into Canada
http://bit.ly/LQptp7
http://press.sn/L2fdqt
Already under construction:
http://bit.ly/LQpwkM
And more pipelines.
A system of natgas refueling stations for cars and trucks coming up in Georgia:
http://bit.ly/L2feec
Exxon is gearing up to use natgas as feedstock for specialty chemicals:
"The company had said as recently as last year it had no plans to expand chemical production in the United States. However, decades-low natural gas prices proved too much too resist."
Source:
http://trib.in/LQpwkO
(Can anyone say jobs, jobs, jobs?)
Dow Chemicals is doing it too:
http://bit.ly/L2fdqx
And more.
I still literally do not understand your beef about "stranded assets." Did you not notice I said "over time" in the OP? Good lord, your arguments are infantile.
Finally, if laws are passed to strand our gas, production will taper, price will rise, and all the initiatives you cited will go by the way side anyway. Why can't you understand that?
"Is the U.S. natural gas glut really that bad? Yes, it is. The EIA Monthly Update came out May 29, 2012. It stated that natural gas use for electricity was up in March by 39.6% year over year. Many people harped on this as a signal that demand was catching up with supply. Not so. This increase amounted to +0.2Bcf greater use of natural gas year over year during the month of March 2012. Some might say this is a lot. However, the data for the first two months of total U.S. natural gas production in 2012 (the third month's data doesn't come out until Thursday May 31, 2012) show that U.S. natural gas production has increased 390 Bcf over the first two months of production in 2011. If every month increased electricity generation use by the +0.2Bcf in March 2012, that would only amount to +2.4Bcf for the entire year. The increase in total U.S. production from 2010 to 2011 was approximately 1.67Tcf. Extrapolating from the first two months' data, the increase for 2012 stands to be about 2.34Tcf. This supply increase is almost three orders of magnitude more than the increase in demand from electricity generation (extrapolated from March's 40% increase for all of 2012)."
APA's announcement today of a 48 Tcf (!!!) field up in Canada just goes to show there is so much gas we are almost up to our eyeballs and will be for the rest of our lives and beyond. If you find their announcement, notice they said they were unlikely to develop it with prices being so low. Hence back to the original disagreement.
It's an exciting time for energy, and independence is a real possibility. We just need to get out of the way and let the brilliant geologists and pet engineers do their things w/o govt getting in the way, while industry figures out how to use it and majors figure out how to export it, with everyone having an incentive to do this.
Do not worry NG in all its manifestations will be exported to the world.
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The people who have commented here don't seem to realize that the Congress is in deadlock and all the politicians, left and right are already absorbed in the battle leading up to the election. Virtually nothing can be accomplished before the election because of the gridlock and because no one knows what the political landscape will look like until after the General Election in November. There will not be much legislation of any kind until the election is over. Once the election has passed there should be some political certainty in Washington.
http://on.wsj.com/NgWDxo