## The Absurdity of US Natural Gas Exports

Quiz:

1. How much natural gas is the United States currently extracting?

(a) Barely enough to meet its own needs
(b) Enough to allow lots of exports
(c) Enough to allow a bit of exports
(d) The United States is a natural gas importer

Answer: (d) The United States is a natural gas importer, and has been for many years. The EIA is forecasting that by 2017, we will finally be able to meet our own natural gas needs.

Figure 1. US Natural Gas recent history and forecast, based on EIA’s Annual Energy Outlook 2014 Early Release Overview

In fact, this last year, with a cold winter, we have had a problem with excessively drawing down amounts in storage.

Figure 2. US EIA’s chart showing natural gas in storage, compared to the five year average, from Weekly Natural Gas Storage Report.

There is even discussion that at the low level in storage and current rates of production, it may not be possible to fully replace the natural gas in storage before next fall.

2. How much natural gas is the United States talking about exporting?

(a) A tiny amount, less than 5% of what it is currently producing.
(b) About 20% of what it is currently producing.
(c) About 40% of what it is currently producing.
(d) Over 60% of what it is currently producing.

The correct answer is (d) Over 60% what it is currently producing. If we look at the applications for natural gas exports found on the Energy.Gov website, we find that applications for exports total 42 billion cubic feet a day, most of which has already been approved.* This compares to US 2013 natural gas production of 67 billion cubic feet a day. In fact, if companies applying for exports build the facilities in, say, 3 years, and little additional natural gas production is ramped up, we could be left with less than half of current natural gas production for our own use.

*This is my calculation of the sum, equal to 38.51 billion cubic feet a day for Free Trade Association applications (and combined applications), and 3.25 for Non-Free Trade applications.

3. How much are the United States’ own natural gas needs projected to grow by 2030?

a. No growth
b. 12%
c. 50%
d. 150%

If we believe the US Energy Information Administration, US natural gas needs are expected to grow by only 12% between 2013 and 2030 (answer (b)). By 2040, natural gas consumption is expected to be 23% higher than in 2013. This is a little surprising for several reasons. For one, we are talking about scaling back coal use for making electricity, and we use almost as much coal as natural gas. Natural gas is an alternative to coal for this purpose.

Furthermore, the EIA expects US oil production to start dropping by 2020 (Figure 3, below), so logically we might want to use natural gas as a transportation fuel too.

Figure 3. US Annual Energy Outlook 2014 Early Release Oil Forecast for the United States.

We currently use more oil than natural gas, so this change could in theory lead to a 100% or more increase in natural gas use.

Many nuclear plants we now have in service will need to be replaced in the next 20 years. If we substitute natural gas in this area as well, it would further send US natural gas usage up. So the EIA’s forecast of US natural gas needs definitely seem on the “light” side.

4. How does natural gas’s production growth fit in with the growth of other US fuels according to the EIA?

(a) Natural gas is the only fuel showing much growth
(b) Renewables grow by a lot more than natural gas
(c) All fuels are growing

The answer is (a). Natural gas is the only fuel showing much growth in production between now and 2040.

Figure 4 below shows the EIA’s figure from its Annual Energy Outlook 2014 Early Release showing expected production of all types of fuels.

Figure 4. Forecast US Energy Production by source, from US EIA’s Annual Energy Outlook 2014 Early Release.

Natural gas is pretty much the only growth area, growing from 31% of total energy production in 2012 to 38% of total US energy production in 2040. Renewables are expected to grow from 11% to 12% of total US energy production (probably because the majority is hydroelectric, and this doesn’t grow much). All of the others fuels, including oil, are expected to shrink as percentages of total energy production between 2012 and 2040.

5. What is the projected path of natural gas prices:

(a) Growing slowly
(b) Ramping up quickly
(c) It depends on who you ask

It depends on who you ask: Answer (c). According to the EIA, natural gas prices are expected to remain quite low. The EIA provides a forecast of natural gas prices for electricity producers, from which we can estimate expected wellhead prices (Figure 5).

Figure 5. EIA Forecast of Natural Gas prices for electricity use from AEO 2014 Advance Release, together with my forecast of corresponding wellhead prices. (2011 and 2012 are actual amounts, not forecasts.)

In this forecast, wellhead prices remain below \$5.00 until 2028. Electricity companies look at these low price forecasts and assume that they should plan on ramping up electricity production from natural gas.

The catch–and the reason for all of the natural gas exports–is that most shale gas producers cannot produce natural gas at recent price levels. They need much higher price levels in order to make money on natural gas. We see one article after another on this subject: From Oil and Gas Journal; from Bloomberg; from the Financial Times. The Wall Street Journal quoted Exxon’s Rex Tillerson as saying, “We are all losing our shirts today. We’re making no money. It’s all in the red.”

Why all of the natural gas exports, if we don’t have very much natural gas, and the shale gas portion (which is the only portion with much potential for growth) is so unprofitable? The reason for all of the exports is too pump up the prices shale gas producers can get for their gas. This comes partly by engineering higher US prices (by shipping an excessive portion overseas) and partly by trying to take advantage of higher prices in Europe and Japan.

Figure 6. Comparison of natural gas prices based on World Bank “Pink Sheet” data. Also includes Pink Sheet world oil price on similar basis.

There are several catches in all of this. Dumping huge amounts of natural gas on world export markets is likely to sink the selling price of natural gas overseas, just as dumping shale gas on US markets sank US natural gas prices here (and misled some people, by making it look as if shale gas production is cheap). The amount of natural gas export capacity that is in the approval process is huge: 42 billion cubic feet per day. The European Union imports only about 30 billion cubic feet a day from all sources. This amount hasn’t increased since 2005, even though EU natural gas production has dropped. Japan’s imports amounted to 12 billion cubic feet of natural gas a day in 2012; China’s amounted to about 4 billion cubic feet. So in theory, if we try hard enough, there might be a place for the 42 billion cubic feet per day of natural gas to go–but it would take a huge amount of effort.

There are other issues involved, as well. The countries that are importing huge amounts of high-priced natural gas are not doing well financially. They aren’t going to be able to afford to import a whole lot more high-priced natural gas. In fact, a big part of the reason that they are not doing well financially is because they are paying so much for imported natural gas (and oil).

If the US has to pay these high prices for natural gas (even if we produce it ourselves), we won’t be doing very well financially either. In particular, companies who manufacture goods with electricity from high-priced natural gas will find that the goods they make are not competitive with goods made with cheaper fuels (coal, nuclear, or hydroelectric) in the world marketplace. This is a problem, whether the country produces the high-priced natural gas itself or imports it. So the issue is not an imported fuel problem; it is a high-priced fuel problem.

Another issue is that with shale gas, we are the high cost producer. There is a lot of natural gas production around the world, particularly in the Middle East, that is cheaper. If we add our high cost of shale gas to the high cost of shipping LNG long-distance across the Atlantic or Pacific, we will most definitely be the high cost producer. Other producers with lower costs (even local shale gas producers) can undercut our prices. So at best those shipping LNG overseas are likely to make mediocre profits.

And there would seem to be great temptation to stir up trouble, to encourage Europe to buy our natural gas exports, rather than Russia’s. Of course, our ability to provide this natural gas is not entirely clear. It makes a good story, with lots of “ifs” involved: “If we can really extract this natural gas. If the price can really go up and stay up. If you can wait long enough.” The story makes the US look more rich and powerful than it really is. We can even pretend to offer help to the Ukraine.

Perhaps the best outcome would be if virtually none of this natural gas export capacity ever gets built–approval or no approval. If it is really possible to get the natural gas out, we need it here instead. Or leave it in the ground.

My name is Gail Tverberg. I am an actuary interested in finite world issues - oil depletion, natural gas depletion, water shortages, and climate change. Oil limits look very different from what most expect, with high prices leading to recession, and low prices leading to inadequate supply.
This entry was posted in Alternatives to Oil, Financial Implications and tagged , , . Bookmark the permalink.

### 581 Responses to The Absurdity of US Natural Gas Exports

1. Tim Olsen says:

The absurdity or the brilliance? It depends on your perspective. Super-cheap US natural gas does not accurately reflect the inherent VALUE and COSTS of the resource, and thus causes warped market behavior like abandoning renewable energy and efficiency. The sooner we jack up that price the sooner the world gets a little smarter.

• A big part of the “smarter” needs to be fewer children. No one will mention this issue, however.

• Circa 1955 I was involved with attempts to lower the threshold for offering postpartum sterilization to grand multips at Jefferson Davis Charity Hospital in Houston. Have been speaking and writing about resources and “fewer children” since the early 60’s. Was once an officer in a local chapter of the Paul Ehrlich organization, ZPG. I attended Garrett Hardin’s 1969 abortion conference in Santa Barbara. Have published articles and letters in major medical journals and elsewhere. Have continued addressing this subject for 50 or so years. I had a vasectomy in 1970. Unfortunately I never had the discipline, dedication or powerful writing ability of a Garrett Hardin or a Gail Tverberg.

• Thanks for your work in this area. We each have our own set of skills.

• Paul says:
2. Fred ohr says:

Dear Gail,
No need to be alarmed over US nat gas exports. As u stated, market price is too low to sustain current production levels. Price in US will rise, with or without exports. But, let the marketplace work. If exports help balance S/D, let ’em rip. Nat gas prices are very cyclical. Market clearing price is where US wealth is maximized. If some exports end up in the equation, fine. If a bunch of export terminals are built and the world price croaks, well, that’s a risk the market will deal with. I say the country is better off at the market clearing price with or without exports. I just wish I knew what that price was. (I think it is about 30% above current levels).

• The price of coal provides a partial cap for oil prices, under normal circumstances. In fact, electricity production from natural gas is already down in the US because coal is currently cheaper than natural gas-based electricity for many utilities. Europe and Japan don’t have coal acting as a built-in cap to the same extent.

Prices of gas are very volatile because pipelines and storage caverns give very little flexibility for quantities. If it is a cold winter, prices temporarily spike. If producers add a little too much natural gas to the system, prices “tank.” The situation is very different from producing oil, coal, wood, copper, or iron, where unused amounts can be stored quite easily. Natural gas prices tend to be far more volatile, because of the inflexibility of the situation. I don’t think gas stays at one price very long, unless long-term contracts are used (a good idea in my opinion).

3. anon says:

I believe you have a typo in your great article… Shoulbe (b)?

a. No growth
b. 12%
c. 50%
d. 150%

If we believe the US Energy Information Administration, US natural gas needs are expected to grow by only 12% between 2013 and 2030 (answer (a)).

4. Pingback: RedTrack.ME

5. tmsr says:

Gail, thanks for this article. It is very helpful to see all this information in one place.

Here in New York State we are shutting down coal and the five nuclear electric plants as fast as possible to be replaced with natural gas. The states energy plan is ever increasing use of natural gas out to 2030 (the planning horizon).

There is a move to re-fire coal plants with natural gas. Unfortunately, they will not be upgrading the turbines in the process so we will have low efficiency natural gas plants. Which suits the need of those who see electric generators as consumers of fuel as opposed to producers of electricity.

In New York it is all about the financial structuring that allows a quick profit for insiders like the Blackstone Group of Manhattan.

• Thanks for your observation regarding what is going on in New York.

There is an outfit that sends me e-mail ads more or less daily for a conference called Natural Gas Power Generation USA | 2014. The leader at the top says, “Successfully Plan, Construct, Upgrade and Operate a Utility-Scale Gas fired Generation Facility.” I sent them an e-mail with a link to my article and an offer to speak at their conference. I don’t think I provide the message they want to get across.

6. Gail, this is a wonderfully clear article. I love the multiple choice question-and-answer style. It really engages the reader. The article will help destroy false complacency with natural gas. Try to get a (shorter) version published more widely.

• Thanks for the vote of confidence and idea.

7. B9K9 says:

It may also be instructive to consider what is meant by my statement “the reward for intelligence is the booby prize”. For example, Gail analyzes available data and comes to the conclusion that, guess what, we’re still net importers. Therefore, any talk of building LPG facilities and shipping finished product to Europe is pure, unadulterated fantasy.

Ah, but wait, that type of (fact based) opinion is all fine & dandy in an open society still operating under some semblance of constitutional rights. But what happens when the US continues to pursue the logical end-game of global resource war? That is, I think most are under some kind of impression that the current brouhaha in Ukraine will eventually blow over and resolve itself.

But what if it doesn’t just “go away”? What if, it’s the actual start to a real, honest-to-goodness, low intensity war operating under traditional domestic censorship rules? Sort of like this one: http://en.wikipedia.org/wiki/Sedition_Act_of_1918

Under those kinds of guidelines, nice, honest people like Gail, and all the other bloggers and posters (myself included) discussing these issues would not be viewed with particular kindness. After all, anyone pointing out the ludicrous fantasy of exporting LPG could be immediately categorized as conducting “a broad(er) range of offenses, notably speech and the expression of opinion that cast the government or the war effort in a negative light or interfered with the sale of government bonds.”

So, yeah, smarty pants, the reward for being intelligent is a big, fat booby prize. But wait, it actually gets better than that, because while back in 1918 you could still be prosecuted via normal channels, today is so very much more interesting:

http://www.truthdig.com/report/item/fighting_the_militarized_state_20140330
“There was no law at the time that permitted the government, because of my work as a reporter, to order the military to seize and detain me. Now there is. This law (NDAA), if it is not struck down, will essentially replace our civilian judiciary with a military one. Those targeted under this law will not be warned beforehand that they will be arrested. They will not have a chance to get a lawyer. They will not see the inside of a courtroom. They will simply vanish.”

Get it? It’s all fun right now to discuss with other like-minded individuals about what’s coming down the pike, but don’t underestimate the seriousness by which the state will conduct its affairs. This isn’t some f*cking game.

• yt75 says:

“But what happens when the US continues to pursue the logical end-game of global resource war? That is, I think most are under some kind of impression that the current brouhaha in Ukraine will eventually blow over and resolve itself.”

Yes, could be the case indeed, even if in a mode “let’s topple Putin, put a comprehensive guy in Russia and a few Nato bases, and open the gates for Exxon Chevron or others”(even if in fact there is already plenty of joint ventures with western majors operating in Russia), but for sure Baku oil was a major hitler objective, and not the other way around … (sorry for the godwin point)
And the propaganda against Russia/Putin these days is getting really kind of amazing, for instance today a bunch of articles about Russia raising the price of gas for Ukraine, in the sense “look at that atrocious monster”, when this is just more or less aligning the price on the one for Poland or Germany …

• People don’t realize that when natural gas prices were very low, the Ukraine’s natural gas imports were very high–nearly up with Germany’s in 2005. With the high price of putting in pipeline and the long distance natural gas is now being shipped, it is not clear to me that Russia can afford to give Ukraine big discounts any longer. Their imports are now less than half of what they were in 2005–about the level of Spain’s imports.

• xabier says:

B9 K9

Yes, the bit about the Emperor’s New Clothes where the kid gets beheaded is usually left off for some reason……..

• Steve Rodriguez says:

The role of Information in warfare is often under appreciated. Intelligence they call it. How good is your information? It is an important if not the only weapon used to win wars and for survival. ALL of humanity’s problem could be attributed to poor communication, a reluctance to share Information, and the inability to misinterpret the information that is freely available.

• dolph says:

B9K9:
You make some interesting points.

More broadly speaking, what is celebrated by America and now the globe as the open, democratic, capitalist society is perhaps itself only viable with energy surplus, and new frontiers to conquer, and new markets to open.

The last people to come to this game in size were the Chinese. Now that they have, there is nowhere else for the system to go. The rest of the third world is too fractured and exploited to fully participate, as the system is dependent on keeping the price of the commodities that they produce low.

So we approach the end game as the system does everything it can to preserve itself. We approach a more closed and poorer world. The good times will be forgotten.

I think most people who stay out of the way will be alright. In other words, don’t act directly against the system, and you won’t be considered a threat. Keep one foot in and one foot out.

• Paul says:

I was very perplexed and saddened when Hedges lost his battle against the Obama administration on this issue — he is correct — the mechanisms for all encompassing totalitarian rule are now in place — all that is left is for things to reach a point where the beast (which currently remains hidden behind the curtain) to show its true self — to bear its fangs — and by then it will be too late to do anything.

The NSA has the goods on EVERYONE.

Let’s say Gail is informed by the FBI that this blog is a threat to the American economy and she is told to stop publishing.

Gail refuses.

All the FBI would need to do is ask the NSA to review Gail’s communication history — ah what do we have here —- Gail said something nasty about a client …. about her boss… oh look here she’s said something not so nice about a daughter in law — etc etc…

No Gail has not committed a crime — but like all of us she has communicated things that she absolutely wants to remain private — that would be damaging if they were released.

The FBI knows this – the NSA knows this — and most importantly, the Deep State — which runs the show knows this.

They know how to control Gail — they could quickly put Obama in line if he opposed them — they could take anyone down if they felt a reason that they had to.

Make no mistake about it – every single one of us is compromised and owned by the NSA and their evil overlords.

Get just a little out of line and you’d quickly find that out – when the beast is unleashed journalists like Hedges, Jeremy Scahill, and Glenn Greenwald will be at the top of the hit list… anyone protesting things like pipelines, fracking, monsanto etc… – they are likely to be silenced using these very powerful methods.

Recall that J Edgar hoover had a file on many politicians – and used that info to control them … so to believe the NSA is not already doing the same is naive.

I always wondered why Colin Powell gave that ridiculous speech prior to the Iraq invasion….

• xabier says:

Having lots of dirty info on people was one of Berlusconi’s tools in Italian politics – beware of politicians inviting you to parties……. I suspect that given the psychological profile of most who go into national politics, they are more likely than most to provide the means of blackmail to their enemies.

Freedom of speech, and hence of association, is dead in the West.

If we had our insurance numbers and internet passwords tattooed on our arms more of us might realise that fact, although a significant % undoubtedly wouldn’t care at all. Numbered, tagged and monitored.

• Paul says:

Speaking of Berlusconi — recall how easily he was forced out of office a few years ago when he went against the wishes of the central bankers?

Basically overnight he was gone. This guy is a billionaire mafia king — and he stepped down without a whimper….

Hmmmm…. someone would have to have a hell of a lot of power to do that…. I smell NSA….

• Jan Steinman says:

I think you’re a little paranoid, Paul.

TPTB are not interested in Gail. They control the mainstream media; why should they care about some blog? They can hire or promote hundreds of rebuttal blogs!

I don’t think information suppression is really necessary for large, capitalist countries. They can swamp it with re-runs and Superbowls and Olympics and what-have-you. Why suppress when you can overwhelm?

At some point, information suppression may come back into vogue, but not until the Internet dies.

• Paul says:

Actually I was just using Gail as an example of how the NSA has the power to control every single person on the planet (other than those living ‘off the grid’).

They can get to anyone — just a matter of giving them a reason. I don’t think this blog gets onto their radar as it is not a threat to the Deep State.

I think that Paul was just using Gail as an example, not actually suggesting that this blog is a possible target.

8. B9K9 says:

I become somewhat bored with discussions of technical feasibility studies and expected outcome projections. Not because of the nature of the subject matter – after all, I’m an analyst – but it appears to miss the real game being played.

Paul is spot on when he simply states “where’s the beef?” That is, why aren’t \$trillions of freshly printed QE being spent on alternative energy projects? And the answer of course, to quote Gertrude Stein, is because there is “no there, there”.

Ok, so let’s step back and review this observation with my initial comment regarding the futility of detailed analysis without recognizing the contextual environment in which it’s being performed. Or, where **IS** QE being spent and why ie to what purpose?

Within this context, I think we can generally categorize QE into two primary sectors, with each being further comprised of two more detailed ares of focus, but noting that all are devoted to maintaining the status quo for as long as it can be reasonably sustained:
A. Illusion
1. Bread – social services, public works projects, etc
2. Circus (entertainment) – (goosed) financial markets, FB, etc
B. Maintenance
1. Military – global security of sea lanes, pipelines & ground transport routes
2. Exploration, development & delivery – core production, whether conventional or advanced tech

Using the framework above, I think we could generally trace out any volume of QE as being 1/2 devoted towards placating & entertaining the masses, with the other 1/2 spent on maintaining the core underlying system.

This model is also useful in understanding the fundamental fact that no investments, virtual or real, are being directed towards anything remotely approaching a sustainable arrangement for earth’s inhabitants. Rather, it positively shouts that traditional economic cost-benefit has no place when the return period (time itself, not \$) is no longer guaranteed.

To conclude, this why there are numerous large freeway infrastructure projects underway in SoCal. The money is essentially free (in that it will never be repaid), so why not keep people busy? It’s also why \$trillions can (and most likely, will) be spent on all manner of FF extraction, processing and shipping (LPG, etc) facilities, with absolutely no measure of economic benefit.

In fact, they can be humungous failures by any economic measure, and it will still be double-plus good. To wit, it simply does not matter if it’s a “good idea” in the traditional sense. Every extra day that the world operates as usual is in itself a “win”. And that’s the point I believe Paul is making – the absence of, and those actually performed, actions being undertaken are essentially shouting all anyone needs to know if they are possess even 1/2 a clue.

• Thanks for your interesting analysis. I think you are probably right–the main goal is keeping BAU for a bit longer. Traditional cost/benefit analyses don’t make any sense, especially when you may never have to pay back borrowed money.

• edpell says:

I agree BAU analysis no longer makes sense. This is the point I have tried to make about Germany’s investment in solar. From a BAU analysis it is over priced and a waste of money. From a nationalistic analysis when the day comes that all of Europe is sitting in the cold and dark while Germany has some level of power and industry, Germany will rule Europe. Whether a solar economy will be able to replace the PV that was produced by oil remains to be seen but at least for 20 years Germany will be in charge in Europe.

As I have said before the US military continues it push into solar for its own use.

The KSA is building 16 nuclear power plants at a cost of 112 billion dollars. It will not save the mass of residence but it will keep the lights and air conditioning on for the ruling class for some years to come.

• Steve Rodriguez says:

It will keep the military at an interim state of readiness to maintain order. Who do yo think will be driving the combines on the seized midwestern farms, distributing the grain to LA and NY refugee camps? that is the only plan B that I can imagine…

• I am not convinced that the solar will allow Germany to continue to rule Europe. Germany, like the rest of Europe, will need a much cheaper government. If it is going to keep electricity going, it will need a way to maintain the electric power lines. This depends on oil today. They will also need replacement parts for many parts of the system–inverters, natural gas and coal back up, wind, etc. The electric output of solar panels by itself doesn’t give much of an advantage, if they only operate as part of the grid, and the grid doesn’t work.

Aren’t you being a bit Naive? Do you think any of the money prior to WW2 was ever paid back? Do you think Japan “paid back” or Germany “paid back” ….You are trying to conceptualize a system that you have no idea how it works. If your theory or idea was correct we would have already had our collapse. This could go on for another 10 years or more and you will be left with sitting on the edge of your seat for a very, very long time. But hey who am I to tell you how to “waste your precious time” you may be dead tomorrow! I come to blogs to find ideas and new ways of thinking….not hand wringing are crying about the future….. Yes, Yes we all know that BAU is not going to continue…tell us something we don’t already know….

9. Tweet from Nick Grealy ‏@ShaleGasExpert 43m
#peakoil isn’t dead. Still occasionally wakes up and screams as a stalwart from the dead Oil Drum proves http://ourfiniteworld.com/2014/03/31/the-absurdity-of-us-natural-gas-exports/

10. yt75 says:

Nice one ! :)

And you shouldn’t stop there. According to Condoleeza Rice (who for sure knows a thing or two about the subject), you will also flood the world with oil!
“Soon, North America’s bounty of oil and gas will swamp Moscow’s capacity.
Authorizing the Keystone XL pipeline and championing natural gas exports
would signal that we intend to do precisely that. ”

Ok, North America and not America, but still …

• yt75 says:

Byt the way about gas, and according to Laherrère latest projections, natural gas will never provide the energy currently provided by oil (so even less compared to oil+gas today..)

Note : would have to check if shale gas outside the US is included in this one, forgot, but US shale is I think.

• Of course, it is necessary to keep the financial system and government systems together, so Laherrere’s projections provide a “best case” projection. Today, worldwide, oil is first, coal is virtually tied with oil, and natural gas is third.

• yt75 says:

Yes for sure the “best case” only, and the way down might be very different (if not already started yet), but on the way up, important with respect to all the declarations “we will transition to gas” (same thing considered on the US perimeter as shown in your post in fact).

• There are lots of amazing stories out there!

• timl2k11 says:

From the article (Rice’s words): “knowledge based economy”. What the f is that?
Sounds like an economy based on B.S. That seems to be what we have, or all Rice and her ilk has… B.S.
I wish I had been warned (perhaps I should have known) article contained such horseshit terminology.

• yt75 says:

On this I think she is kind of right : Intellectual property plays a major role in today’s economy, through patents, copyrights on books or other contents, and all that. It is also what made the “technology boom” since the industrial revolution possible for a major part.
But now also taken to the extreme in different ways :
– patents on almost “stupid” things : shape of a phone or buttons, or Amazon having patented the “one click buying” concept for instance. (with the army of lawyers needed to enforce them).
– Monsanto pushing licence based seeds, so that farmers are obliged to buy them every year (even if seeds from previous year are “working”)
– All the derived products from movies and all that becoming more important in revenues that the movie itself.

But on the other end, I think that the dogma “everything free and ad based for revenues” for web contents for instance, results in shutting off a lot of contents that could exist.
And also lead to the “fierce profiling activity” of web giants, as the business model is basically “the customers are the announcers(ad buyers), the product the ability to push the right ad on the right individual/brain though the profiling achieved”
Besides, it re-enforces the mindset that only “material” things have values. (and also makes the whole web sites and stuff more energy hungry for all the ads pushing and all that)

But then one could also have preferred that the industrial revolution never had happened, sometimes (or often) …

• It sounds like it was written as a propaganda piece–US good; Russia bad, etc.

• ordinaryjoe says:

Nasty klingons always trying to get all the dilithium crystals, luckily the vulcan leader merkel is supporting the federation in its efforts to ensure peace, prosperity, and free trade.

• Paul says:

knowledge based economy = encouraging the best and brightest to pursue jobs in the casino — ahem — financial world — where they use their smarts to create new casino games — ahem — financial products —- that have no purpose other than to generate commissions for the banks and bonuses for the employees.

As opposed to an economy where the best and the brightest actually did something productive.

In any event, all moot because the industrial economy has been a passing fad that was predicated on cheap oil

• ordinaryjoe says:

Good analysis. I am sympathetic to your sentiments however as the oil ends many “productive” careers are worthless. Compare a engineer and a psychologist. Engineer; As oil ends the materials that required oil are no longer available nor is the apparatus to create them in the fashion of his/her design. Psychologist; No change, other than the economic changes that may very well render his/her training of much less value. “Productive” in most instances is growth . “Productive” in most cases is a large consumption of resources. We are programmed that growth is good, that to consume in the name of creativity, and ingenuity is a different sort of consumption than hedonistic consumption. Some kneel before the altar of hedonistic consumption, others kneel before the alter of productive consumption. They are both coming to a end.

• Jan Steinman says:

“as the oil ends many “productive” careers are worthless.”

Personally, I limit the use of the word “productive” to the biological sense, meaning those who increase primary productivity — food.

The survivors will be living much lower on Maslow’s hierarchy.

• As an actuary, I can’t complain. Actuaries have been beneficiaries of this system. I know when the first ranking of best jobs came out years ago, Actuaries came out # 1. Even now, the actuarial profession advertises that its jobs usually rank very well. http://www.beanactuary.org/why/?fa=a-top-ranked-job

It is even possible to retire early and do this instead of working for a consulting firm or insurance company.

• Peter S says:

I’ve talked with economics students who use vocabulary like that, and have little or no idea how money or economies work. They completely miss how vital energy is.

11. “…Perhaps the best outcome would be if virtually none of this natural gas export capacity ever gets built–approval or no approval. If it is really possible to get the natural gas out, we need it here instead. Or leave it in the ground.”
I couldn’t agree more and it is what I have been saying with regard to Canadian bitumen as well. We (or is it really the multinational corporations and their political lackeys?) seem intent on expediting the exploitation of our final reserves, removing the ‘options’ from future generations. Lemmings following the herd over the cliff…

• Texas Engineer says:

But that would go against the basic energy policy of the business media which is “Drain America First!”.

• Interguru says:

Even if Canadian production is declining, they can build LNG terminals and import from the US if needed. The real question, unanswerable right now, is whether LNG terminal makes economic sense.

• edpell says:

We see the shift from the American nationalism of the 50s and 60s to pure capitalism with no ties to people or place. The only value America has to the owning class is how can it be used to fill my Swiss bank account. At least it will all be gone in my life time and I can see what America as a self supporting nation looks like again. Except maybe for Alaska coal.

12. Leo Smith says:

I wish I had run a spell checker over that first…

• timl2k11 says:

Or gotten some sleep?

• Lizzy says:

Ha! I love it!

13. Leo Smith says:

Of course teher is another factor in play oin world gas markets, or wto things.

‘rebneable energy’ depned son gas. Itds the only technology apart frm hydro, which is effectibeve in balancing te massive output swings from it to ensurte a mire or less steday (if massively overpriced) energy supply,
.

And the ‘Fukushima effect’; that as seen the gas players playing the ‘disaster’ card massively to shut down nuclear power world wide, has also pushed gas prices up as demand grows.

Especially in Japan and Germany.

http://www.nationalreview.com/planet-gore/15774/al-gores-inconvenient-enron/chris-horner

You may choose to believe it or not, but gas and renewables lead the charge against coal and nuclear power, for resins totally unconnected with climate change. Renewable energy they dont mind because they already know it depends utterly on gas anyway, and wont dent their margins, Indeed by pushing energy prices up, it allows them to look cheap by comparison…

• Jan Steinman says:

“‘rebneable energy’ depned son gas. Itds the only technology apart frm hydro, which is effectibeve in balancing te massive output swings from it to ensurte a mire or less steday”

I’ll have some of what he’s smoking!

• Not sure I understand that all, but I agree, renewables like high natural gas prices. It makes them look good in comparison.

• timl2k11 says:

Don’t drink and surf!

• xabier says:

tim

Can one possibly contemplate any of this without a drink?

But yes, don’t drink and type……

• Quitollis says:

One could spill it.

14. Leo Smith says:

Too simplistic Gail.

You cannot make sense of this by simply considering the United States as a monolithic bloc within which free supplies of gas are uniformly and infinitely available.

All nations import and export the same goods to some extent. In transport terms for example, the cost of sending a coal carrying cargo ship from Australia to California is probably less than sending a train full of coal wagons from the east coast to the west.

The gas disjunct is massively emphasised by comparing European and US gas prices: they are simply not the same because the US lacks any export facilities as yet.

I may buy a billion cubic feet of gas in Louisiana at rock bottom prices, but I cant deliver it to customers in Germany at all. Its a waste of time.

Low value high bulk goods are critically dependent on cost of transportation .

I have seen estimates on the details of shipping costs, but did not have time to research these much. For example, this article from 2008 gives some cost estimates, and this research article from 2003 is quite extensive, but out of date. The cost of transport is probably somewhere in the \$4 per mcf range. Because of natural gas burning off, I would expect the cost to be higher with longer distance.

I know back a few years ago that there was discussion about drilling Alaskan natural gas and piping it down to the US 48 states, the discussion then was that the cost of piping it down to the US was at that time \$2 per mcf. At a cost of extraction of \$2+ per mcf of extraction, it was hard to make such natural gas competitive with lower 48 states natural gas that was selling for \$4 per mcf.

15. Very nice Q&A format!

In Australia, massive exports of coal seam gas via LNG terminals will even lead to local shortages on the East coast due to lack of policy to secure local gas supplies. Gas prices are set to go up towards higher export price levels.

9/5/2012
Queensland plans to export more than 10 times the gas NSW needs (part 3)
http://crudeoilpeak.info/queensland-plans-to-export-more-than-10-times-the-gas-nsw-needs-part-3

13/10/2011
NSW gas as transport fuel. Where are the plans?
http://crudeoilpeak.info/nsw-gas-as-transport-fuel-where-are-the-plans

More than 2 years later and nothing has been done on a transition to gas as transport fuel, thanks to US shale oil.

In Western Australia:
http://www.domgas.com.au/

• Thanks for the links. After seeing discussions regarding the natural as export situation in Australia, I thought maybe I should add up the US proposed natural gas export amounts shown on the Energy.gov website for myself.

16. VPK says:

Thank you again, Gail, for clearly stating the real deal.
I’m beginning to feel a chill in the room.
The funny thing is the mainstream media and industry “infocommercials”, have the public think otherwise.

• I was thinking as I was putting the numbers together that the arithmetic is not all that difficult. A person needs to simply take numbers from one report and convert them to the basis used in other reports, and line them up side-by-side. I was teaching my daughter to do that in eighth grade.

Natural gas is a little more difficult than oil, because there are more losses along the way. Even without making natural gas into LNG, a little over 8% of US natural gas is used up in processing and getting it to customers. Making it into LNG, traveling across the ocean (while some burns off), and re-gasifying it will use up even more of the natural gas.

17. Jan Steinman says:

“we are the high cost producer. There is a lot of natural gas production around the world, particularly in the Middle East, that is cheaper.”

Is the high price in certain markets then because Middle Eastern suppliers are not exporting? If so, why will they suddenly start exporting if the US does?

It would seem that with their lax labour and environmental controls — and with lots of capital to invest — the Middle Eastern producers should be exporting like mad.

Gail points out that, largely due to transport issues, natgas is not fungible, and so results in “stranded asset pricing.” So I don’t understand how that will change if the US begins exporting.

Do bear in mind that counties receiving LNG need degasification infrastructure; also those with sea ports are better able to take shipments than by onward forwarding on truck or rail. Much of Europe (not so much the UK) relies on piped NG.

Apols – two typos.
S.b.: De-liquifying (gasification) infrastructure;
and: Countries.

• You are right. These re-gasification plants are expensive as well, and need pipelines to existing pipelines.

• Pipelines are one big problem area. Even if natural gas seems to be available, if there are not enough pipelines (or LNG capacity), exporting the gas will not actually happen. Iran is a country with big natural gas capabilities. Needless to say, the US hasn’t been going out of its way to help them out. Several of the big oil producing countries have tended to use natural gas for their own electricity production, rather than export it. It is less valuable than oil, especially when one factors in the high transport costs.

There have been a number of recent announcements from the Middle East about recent natural gas finds. I know Israel is talking about some gas offshore. Cyprus is talking about natural gas resources as well. I don’t know quantities or timing, but a reasonable guess is that the timing might be similar to that of early US natural gas exports.

I agree though that natural gas is very often a stranded asset. For a long time, pipelines were the only transport approach. They locked in relationships, until the gas supply began to fail. Now LNG is at least temporarily the new preferred method of distribution. This sort of works, when there is very cheap supply (as in Qatar) traveling not too far, as in to the UK, and prices are quite high. But the farther natural gas goes, the more that burns off along the way (adding to climate change gasses), and the more it costs.

18. Stilgar Wilcox says:

I can see it now: Our government in a desperate effort to reduce perception of Russian power via their FF, will offer the EU a cut rate price on exported US NG by subsidizing it with US tax money. That way the American taxpayer will get swindled thricely; 1. from higher priced NG, 2. tax money going for EU NG and 3. reduced long term domestic NG energy supplies. Meanwhile Russia will pipeline their NG East to China, increasing bonds between those two superpowers.

Right now NG from fracking is like money in a kid’s pocket at a candy store. There just isn’t enough ways to spend it fast enough, and after all that chocolate is gobbled up, all there will be are empty wrappers. Why is human nature predisposed to do things so fast! We can’t even slow ourselves down from burning FF when we know we are in an overall net energy decline and it causes AGW.

• xabier says:

Not just humans: ever seen a dog leave half the biscuits in the bowl and hold them over for another time?

Or say (as it were!) ‘No thanks, not just now I’m not hungry’?

• Interguru says:

My cat controls her eating

• timl2k11 says:

Cats > Dogs > Humans

• Jarle B says:

Cats do this – what a wonderful world it would be if humans could …

• edpell says:

My dog is a vacuum cleaner. Food is gone in the blink of an eye. I am curious what would happen if I just kept filling the bowl. My guess is he would eat until he throws up and then he would continue to eat.

• xabier says:

edpell

Tried it. Proved it. Cleaned up after.

• I think the answer to why we can’t slow ourselves down in “Power, and the appearance of power.” With energy comes power, and the ability to win in the world arena. No one can admit how bad things really are, so we make up stories.

• edpell says:

This never occurred to me but you are right. As an engineer I think in terms of solving the problem. Politicians are sales people they think in terms of image.

• xabier says:

Well, we still live in a world of power blocs jostling for advantage, as the Ukraine crisis has amply illustrated in a text book fashion.

• icarus62 says:

I’ve been reading about resource limits for a few years, and increasingly thinking about how to ‘power down’ and be more resilient, more self-sufficient. It’s an attractive idea but the problem is precisely what you state above – “With energy comes power, and the ability to win…”. We can imagine transitioning to some kind of idyllic, low energy, low impact sustainable existence, leaving remaining fossil fuels in the ground etc., but that then makes us vulnerable to being walked all over by someone else who’s happy to keep chewing through the Earth’s finite resources as fast as they can. In an argument between ‘primitive’ tribes living a sustainable existence and people with guns who want their land / timber / oil / whatever, it’s generally the latter who win.

• You are right. Even using high priced energy, when others use low priced (often polluting) energy puts us at a disadvantage in the world economy.

19. According to our Energy Industry Fracking Shill on the Diner MKing, the FSoA is rolling in NG for the next 20-30 years, and not only that will be producing Liquid Fuels from said NG in copious quantities so Energy Deficit is a big Myth. Needless to say, nobody on the Diner buys this propaganda.

I dropped on today a report from the WSJ showing that in fact most of the companies doing the fracking are in debt up to their eyeballs and liquidity is drying up.

Fracker Credit Card Running Dry
Also, I just dropped on my latest Frostbite Falls Daily Rant, GOLD BITCHEZ!, examining the likelihood of retruning to a PM based monetary system to replace the failing Fiat one.
WARNING: Gold Bugs will NOT like this rant.
RE

• dolph says:

That was a good rant. But gold is a bit funny. I wouldn’t write it off just yet.

Apart from very limited applications, gold’s value as a store of wealth is either zero or high…very high. This comes from gold’s unique properties which make it an ideal store of wealth, particularly its high stock to flow ratio. Gold simply accumulates and accumulates and changes hands every now and then.

Therefore the value of gold is not in the moment of collapse anymore than having a rare diamond or painting will help you. The value comes in the period to follow, when the central banks come together to rework the system out of sheer necessity. So you may actually have to hold your gold for some time.

Gold does work for international trade settlement. It’s function is simply to move out of deficit zones and into surplus zones. There is nothing particularly mysterious about this.

It also doesn’t have to be fair. Right now, in the world today, a super rich person will gladly spend 100 million dollars for a rare piece of art at an auction, even as the vast, vast majority of working people in this world, many who are quite well off, would never dream of even accumulating that amount. There is nothing fair about this, it’s just the way our system works.

It will be the same on the other end. It may not be fair for the gold people to have a small lottery, but that very well may happen.

• Thanks D
.
I don’t write off Gold COMPLETELY, much depends on the nature of the collapse, speed, geopolitics etc. There is a decent chance Gold could be a player for part of the time in some locations. if you have surplus to load up on some and are otherwise well prepped, go for it!

Here’s a good one for you though as Canary in the Coal Mine. The Greeks are basically cutoff from Euro Credit, are Gold or even Silver coins of any sort starting to circulate in their economy? Insofar as I know, no, not even on the Black Market.

For PMs to start circulating as alternative money, enough people have to have possession of them. VERY few people do in just about all economies. I’d bet on the Dollar in the near to medium term here, CASH as King.

RE

Central banks can demonetise and withdraw currencies. A crisis might very well provoke this – take all your cash to the bank before next month, and receive 1 for 10 ‘New Dollars’ in return. And, btw, you may only withdraw x amount in cash…

PMs on the other hand cannot be spirited up from nowhere by the bank. A Gold coin has the double advantage of its high density (only Tungsten and Rhenium amongst the non-noble, non-radioactive, metals are denser) and its struck impression, making it almost impossible to fake.

US Gold Dollars do not devalue with age.

• Bah. Metal Coinage is very easy to both counterfeit and debase. Just look at the Roman Empire for this. Much harder actually to counterfeit an FRN, what with the special paper, special ink etc. Of course, MOST dollars in existence have no Paper representation, they are digibits and VERY easy to Counterfeit. Yellin Janet can do it anytime from her Laptop.

RE

• xabier says:

In crashed economies, the usual procedure is to exchange small quantities of gold (chopped up jewellery, etc) for cash to convert immediately into drugs, food, etc.

Not to pay with gold coins. They have no function on a day to day basis as far as I know.

As a store through crisis times, maybe, but I wouldn’t put my shirt on it. In fact, I’d rather have a stock of good shirts.

In crashed economies, cash or barter are king. Changing up gold coins could be very dangerous indeed to the individual.

• Harry says:

Yup, bars of soap, lighters, socks – these are the currency of the future.

• VPK says:

One story I will NEVER forget about a nice man I use to visit in his coin shop. He and his family were from Poland and as a small child, Germany invaded his country. Well, I need not tell you what happened next, for he was Jewish. So, they made there way out and the ONLY thing that saved them was their GOLD. People helped them when they saw the Gold.
Be as it may, that is how the world works. I’m not saying tuna cans will not work, but it would be wish to have a stash of gold and silver, just in case.

• If you use the WSJ link, you will need to buy a subscription to read it. You can read it free on the Diner link I provided. :) I of course provide the original link on the Diner plus full attribution to the WSJ.

RE

20. MG says:

Shipping of the USA liquified shale gas to Europe is one of our current fairy tales. If there are problems with the natural gas from Russia, the building of Nabucco pipeline from the Caspian area would be the solution which is on hold now. The natural gas producers from the Middle East would be happy to have a new market in Europe.

Anyway, Russia is highly dependent on the revenues from its natural gas exports and has vast proven reserves, so I see no big change in this area on the world market.

http://en.wikipedia.org/wiki/List_of_countries_by_natural_gas_proven_reserves

Furthemore, e.g. people in my country, Slovakia, return to use of wood for heating instead of natural gas (although about 90 % of the population has access to gas networks). The similar situation with rising use of wood for heating is in the USA. My explanation is that there is ever larger group of people with low incomes who need to economize…

http://www.csmonitor.com/Environment/Energy-Voices/2012/1206/Fighting-winter-with-fire-Wood-burning-on-the-rise

That way the natural gas prices are in fact dependent on the wood prices, as regards the heating.

• Ert says:

@MG

And air-quality issues are on the rise due to the burning of wood – even in Germany. The times of heavy inner-city pollution as of coal and wood burning are almost forgotten, due to the wonders of electricity, oil and gas. We will see, how healthy it will be to live nearby the city-centers and how people will cope with payments for their heating-bill in coming times of economic stress.

As of the fairy-tale thinking – I’m currently really confused. The only reason I can think of regarding the US LNG export-terminals is to bid the price of the gas up – the export terminals are only an unproductive shell game! Burg resources for digits in a computer…

Regarding the ‘Crimea crisis’ in Europe? A strange power play, but probably more induced by the US then the EU. At least China will be very glad concerning the developments – all that is not flowing to Europe/EU will flow to China!

• xabier says:

In Greece friends tell me that the big health issue is the burning of green wood -much more smoke, and of building waste – treated woods, painted woods, etc – that are seriously harmful to health. And of course open fireplace burning, which is much less efficient than modern stoves.

• Yes, with today’s high population, we can use up wood supplies very quickly.

• ordinaryjoe says:

Where I live in the rural USA most people heat with wood and many could not afford it any other way. The better off economically insulate, the poorer burn more wood. One family I know thinks nothing of burning plywood or other laminates containing glue of some sort. Any foray into town is accompanied by scavenging any wood available laminate or not. Any suggestions I have made about the alternative of better insulation for the body or a main living room are met with derision and hostility. For that matter any topic of finite resources is met with derision and hostility. Consumption=status=ego. We will reap what we sow. Any philosophy that involves conservation is regarded with deep suspicion if not outright aggression. The entitlement to burn wood is a very very strong belief here. I have heard more radical statements about this entitlement than all others combined. When the fossil fuels end the wood consumption will too as its cutting, splitting , and transportation is largely dependent on fossil fuels. Try falling a tree, cutting it into pieces, transporting it miles to your home, and splitting it without gasoline, body insulation starts to become more attractive. The end of the practice of burning wood is a long way off however as the economy grinds to a halt the price of gasoline will lower and burning wood will become more not less prevalent, just as the trend is now.

• Calista says:

I too see that sense of entitlement. Also that sense of consumption being tied to status. I find it very interesting as the people I know who are from the projects and got out spend enormous amounts of money at the dollar store etc. to be able to constantly give gifts. Even though the gifts are useless broken within a week etc. It makes me sad to watch. I recommend masonry heaters as the more efficient method of burning less wood to cook and heat a main area of an insulated home. Significantly less stack level pollution and will meet the new EPA woodburning stove standards unlike many woodstoves currently on the market that are only using filters or what could effectively be called a catalytic converter at the end of the burn cycle.

• Europe is more likely to cooperate with Russia, because it needs its natural gas and oil exports. The US can spin fairy tales.

• xabier says:

Germany and Russia understand one another very well, I suspect: France, Italy, Spain and Britain are peripheral states once more. The map says it all.

• Ikonoclast says:

I agree about Britain. I am thoroughly sick of Britain’s arrogance. They think they are still important. They are kidding themselves. Britain is in rapid decline. It is well over its sustainability footprint. The end of North Sea oil is the end of Britain. And whilst for the time being London is still the financial capital of the world, there is no inherent reason for that other than as an historical hangover. The SCO (Shanghai Cooperation Organisation) will see that a new centre, maybe like Shanghai, will supersede London. Then Britain will have nothing and be nothing. Britain will end up about equivalent to Spain or even maybe less important.

The USA is different. Though still facing massive problems it still has a relatively rich continent to support it if one includes Canada. Canada will never be allowed to conduct trades too much to the detriment of the USA. So Britain will shrink to total insignificance. USA will shrink and collapse but might well shrink and collapse slower than China for example. In the world of the future, collapsing slower makes you relatively more powerful. The USA’s relative power could hold up and even improve because of this phenomenon.

• edpell says:

• Lizzy says:

MG,
If I may be contentious: the realistic alternatives seem to be gas from Russia or gas from Qatar. (Why were the Qataris so keen to overthrow Bashar in Syria? Makes sense to me, from what I’ve read).
Which would we prefer? To be under the thumb of Russia or Qatar? I know which one I’d choose…

• xabier says:

Maybe Russia, if one thinks the Mid -East will explode?

• Lizzy says:

Yes, that’s what I think.

• Yes, wood prices will put a lid on the amount of natural gas sold. People’s incomes don’t go up just because energy prices do. Too many people lose sight of this.

In the US, coal prices tend to put a lid on the amount of natural gas sold, because we have electric power plants that can produce electricity with coal quite cheaply. In fact, recent natural gas used for electricity production is down in the US, because prices for natural gas are not up a little. The amount by which gas prices have gone up is enough to induce switching to coal, but not enough to make very much shale gas profitable.

• Paul says:

If 7.2 billion people turn to wood to cook and keep warm – the world will be one big Haiti in perhaps a year

• Bruce the Moose says:

And an Easter island shortly thereafter

• MG says:

It is interesting how the Ukraine, with its 15.6 percent of the total land area covered by forests (http://www.fao.org/ag/agp/AGPC/doc/Counprof/Ukraine/ukraine.htm) tries to get the Russian natural gas from Europe for a lower price:

http://www.naturalgaseurope.com/ukraine-negotiate-reverse-flow-slovakia

The only thing that can prevent deforestation and keep the prices of natural gas down are in fact the strict laws regarding the forest management. On the other hand, the same laws can bring the end of using the natural gas for heating, as the prices would be too high to cover the costs of extraction, transport etc. Anyway, it seems, that we may soon hit the peak natural gas, caused also by the climate warming and consequent warm winters.

• MG says:

It means, that the natural gas will be used for other purposes (e.g. production of fertilizers, plastics etc.). But will people be able to buy such products when their wages do not rise? Maybe some smaller group of the rich. The rest will be poor and will not be able to afford such “luxury”. Their only “luxury” will be the food based on the fertilizers. That is what is happening: oil, natural gas, coal will not be for everybody. They will become rare products.

Then, will it make any sense to convert US shale gas into LNG? I do not think so. The process of converting shale gas into LNG and vice versa will prevent achieving any significant export amounts. The target group of consumers, who will be able to afford it, will be small, anyway.

The era of natural gas production is just the end of the story of hydrocarbons production: 1. coal, 2. oil, 3. natural gas. The story of “solid”, “liquid” and “gaseous” consistences. When 1. and 2. will be mising, there will be no natural gas production. Decoupling of natural gas price from the price of oil is the sign of one thing:

1. oil prices rise
2. natural gas is loosing its attractivity (due to oil and coal based costs connected with it). You need extra facilities and devices (produced using coal and oil) to use natural gas. Safety in using natural gas is also a big issue.

• Yes, the whole system is tightly hooked together. It is hard to see how we could use natural gas without coal and oil. In fact, failure of the financial system might be enough to bring the whole system down.

Thank you , Gail, for this very relevant article on US natural gas production and proposed export.
I would imagine that bulk export facilites will not be constructed and ready to ship for another two or three years minimum – a long time compared to the rapidly evolving changes around Russia’s borders.
In the UK, our government is doing its best to push fracking for gas. Progress is slow, with only a handful of test wells anticipated before year end. There is widespread public opposition, citing heavy traffic on small roads, pollution of all sorts: noise, light, flow-back water disposal, gas leakage, etc., etc., as well as possible detrimental effects on agriculture. This will probably delay things and likely engender some hostility toward both local and national government.
I find it hard to believe that in the UK will ever see significant fracking gas production, if only for the reason that we are a densely populated country that would see too much disruption to people’s lives over too great an area. Remember too that here (hydrocarbon) leases are owned and granted by central government, not by overlying land owners, thereby tending to further distance decision making from local people.
I am not knowledgeable on fracking economics, except that it is expensive in comparison to conventional extraction. The owner of the Ineos refinery in Grangemouth recently stated a commitment to build a NG decompression and storage plant to accept US gas – again, a project of several years’ duration.
All this makes me wonder which of these seemingly competing supplies of gas will be viable. Surely a flood of cheap(er) gas entering the export market will depress prices and make UK fracking uneconomic? US fracking rig-count, 2000 odd, seems to sway between oil and gas, with fungible oil presently taking the lions share with some 1600 rigs. (From Euan Mearns.) But oil wells produce associated gas and it is this surplus gas that I presume is both depressing US NG price and also helping to drive proposed exports.
The UK is willing pay a relatively high price for imported gas, but will not subsidise, except for some tax breaks, fracking operations. We may need a plentiful supply of NG here over the coming years, owing to EU emissions requirements forcing closure of coal electricity plants. Base and peaking load is likely to be gas generated until long term alternatives such as nuclear come online in the early ’20’s.
So we seem to be facing uncertainty both right now, with question marks over Russian gas price and supply to Western Europe, and then medium term with diminishing NS production and an unknown fracking supply, Your article is timely, and I will await updates in due course.

• Thanks for your observations on the UK situation. Three reasons shale gas has been feasible in the US: (1) Landowners get a cut of the revenue stream, so are happy to vote for it, (2) Pipelines are mostly in place, so there has not been as much need for additional infrastructure at high cost and interference with existing population, (3) Creative accounting, that allowed smaller businesses that have typically engaged in shale gas drilling to record cash flow losses every year, with claimed profitability sometime in the future, assuming that the natural gas wells drilled continue to produce enough gas for long enough. Meanwhile, they need to real in more investors and borrow more each year. Big companies have bought some shale gas producers out, and discovered the profitability is what it was claimed to be. It is difficult earning an adequate profit being the highest cost natural gas producer. Also, if producers in the aggregate slightly overproduce, storage capacity is limited, so prices drop precariously.

• xabier says:

Fracking is a dead end in Britain. Large-scale destruction and disruption of rural areas will be met with substantial opposition.

• Bill Hulston says:

Xabier..we have no where near enough drill rigs to make fracking viable in the UK and for every £1.50 invested we enjoy a £1.00 return..I am not a betting man but even the the punters in the city of London would not on thatkind of bet!

• xabier says:

I agree: it probably won’t get far enough for protests to be necessary.

• Such a good analysis, Gail. Such an insightful Article.
Kudos.

22. Tom schülke says:

Thanks alot.. theese are nice informations and thoughts, especialy here in germany, where tere are lots of uninformed discussions about alternatives to russian gas exports that, in the shadow of the ukraine crisis, make up about 30 pecent in germany. Ion the official discussion theres still a total ignorance of energy and the linked economy issues. Well i, ve put a link in my usercomments at an article on the german website peak-oil.com one of the rare lights in the darkness of ignorance. Here in germany..

• Bill Hulston says:

Herr Schulke I have been closely watching Germany since discovering that soon many coal fired power station will soon be burning lignite coal (very dirty coal) whilst we in the UK are closeing our power station that burn less dirty coal,and I realy wonder what on earth is realy going on in our world?.Tante Angela and our very own boy child prime minister D Cameron seem to be to me in cahoots with a plan to debase our energy companys of leverage and threats knowing that it may well end not so good when we wish to turn on the lights.Whats your feelingsabout this in Germany?

23. What a fun quiz!

24. gerryhiles says:

A kinda parable.
Once upon a time there were far less people and all, until about 7,000 years ago, lived in tribes with cultures adapted to their environments and in equilibrium all around the world and still in some remote places.

But then some bright spark invented agriculture in the Indus Valley, around the Euphrates, Nile and wherever. So people no longer had to move around, because there was surplus production of food and eventually everything else, so more and more people came to live in fixed settlements called towns and cities where there was no chance of leading any sort of natural life.
Civilization had been born (which has NOTHING to do with being nice to each other; instead it’s solely to do with empire building and resource-grabs to provide for ever-increasing populations which had stripped their environments of forests.

Skip ahead to the ongoing rape of the Americas.

When the first European settlers arrived there were pristine forests to chop down for heating, etc. in the Northern climes in small settlements, but as these settlements grew into cities, if oil and gas had not been discovered, no city would have been viable.

Now that peak easy oil and gas are exhausted, civilization (living in cities) is no longer tenable.

We rode the wave of the Industrial Revolution for 300 years; but it is over, bar the shouting which might unleash nuclear WW3.

• It is looking more that way. The fiction that the US can ramp up natural gas production quickly and cheaply is just fiction.

• Declining Canadian production was part of the impetus for the US trying to extract shale gas.

• J2P2 says:

The WSJ article refers to Canadian decline in conventional gas only. The picture of total recoverable gas in the US compared to Canada as follows:
-Canada 2,310 Trillion Cubic Ft (CAPP)
-USA 4,040 Trillion Cubic Ft (EIA)
At 1/10 the population I don’t see Canada having to import US gas in significant volumes any time in the foreseeable future…..