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Cheap Mediterranean Natural Gas Could Spell the End for the NATO Alliance

Turkey NATO Natural Gas Feature photo

Cheap Mediterranean Natural Gas Could Spell the End for the NATO Alliance

It’s a strange and unprecedented spectacle when countries like Israel, Greece, Egypt, Libya, Turkey, and others lay claims over the Mediterranean, while NATO scrambles to stave off an outright war, among its own members.

To Many’s Dismay, Permian Produces More Gas and Condensate Instead of Oil and Profits

To Many’s Dismay, Permian Produces More Gas and Condensate Instead of Oil and Profits

aerial view of West Texas oil fields

As oil prices plummet, oil bankruptcies mount, and investors shun the shale industry, America’s top oil field — the Permian shale that straddles Texas and New Mexico — faces many new challenges that make profits appear more elusive than ever for the financially failing shale oil industry.

Many of those problems can be traced to two issues for the Permian Basin: The quality of its oil and the sheer volume of natural gas coming from its oil wells.

The latter issue comes as natural gas fetches record low prices in both U.S. and global markets. Prices for natural gas in Texas are often negative — meaning oil producers have to pay someone to take their natural gas, or, without any infrastructure to capture and process it, they burn (flare) or vent (directly release) the gas.

As DeSmog has detailed, much of the best oil-producing shale in the Permian already has been drilled and fracked over the past decade. And so operators have moved on to drill in less productive areas, one of which is the Delaware sub-basin of the Permian. Taking a close look at the Delaware Basin highlights many of the current challenges facing Permian oil producers.

Delaware Basin Producing More Gas Along With the Oil

The Delaware Basin is where most of the new oil production is coming out of the Permian. As a Bloomberg Wire story reported in December, “in recent years investments have shifted to the Delaware, where output is much gassier than in the historic Midland portion of the Permian.”

The last thing a Permian oil producer wants is to have natural gas coming out of the ground with the oil because, as Bloomberg notes, this persistent “nuisance” is “undercutting profits for explorers.” That’s a generous assessment because many explorers have no profits to undercut, only losses to grow.

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Permafrost will limit natural gas, oil, and coal extraction

Permafrost will limit natural gas, oil, and coal extraction

Preface. For many people, it’s comforting to know that about 25% of remaining oil and gas reserves (we have the know-how and economics to get it) and resources (beyond our technical and monetary capability) are in the arctic. They assume we’ll get this oil and gas when we need to, and delay oil shortages for a decade or more.

But  they haven’t considered the difficulties of trying to drill for oil and gas or mine coal in permafrost.  It buckles roads, airports, buildings, pipelines, and any other structures placed on top.

A Greenpeace report published in 2009 said thawing soil in Russia’s permafrost zones caused buildings, bridges and pipelines to deform and collapse, costing up to 1.3 billion euros (nearly $1.5 billion) a year in repairs in western Siberia.

Although there are ways to build roads that can withstand melting and freezing permafrost for a while, it is terribly expensive, and it is why we haven’t developed much oil or natural gas in Alaska besides Prudhoe Bay, as far north as you can get, with fewer permafrost issues.

The cost and energy of production in permafrost may mean that reserves are much less than estimated.  Especially if they are developed when oil production begins to decline, since the price and declining availability of oil will mean there’s less energy to build roads, towns, platforms for drilling rigs and oil pipelines. And for agriculture, transportation supply chains, and all the other myriad ways oil and gas keep us alive.

As it is, climate change continues to exceed past engineering standards, and every year Alaska and Canada spend millions of dollars trying to fix roads, bridges, and other infrastructure.

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Burn, Pay, Or Shut It Down: Three Evils For Permian Drillers

Burn, Pay, Or Shut It Down: Three Evils For Permian Drillers

Evil Permian Drillers

There was a time when natural gas was a welcomed byproduct of crude oil drilling, and drillers in the prolific Permian basin enjoyed this consolation prize–at least when natural gas prices were on the rise. All good things come to an end, though, and the amount of natural gas now exceeds the capacity to get rid of it.

With pipeline capacity fully exploited and natural gas prices squarely in the red, Permian drillers today are faced with three lousy choices: burn off the natural gas, pay to have the gas removed, or slow oil drilling activities to staunch the flow of natural gas.

Crude oil and natural gas are like two peas in a pod: when you find oil, you often find gas. 

Crude oil is pumped out of the well, and a small amount of natural gas comes almost inevitably comes with it. 

But over time, this ratio changes: less oil, more natural gas. 

Now, there is simply too much natural gas, and drillers in the American shale patch must face the not-so-pleasant music, with only one question remaining: which shale drillers can hold on until more pipeline capacity comes online?

Burn, Baby, Burn

The first option for drillers trying to weather the natural gas storm is to burn it off. 

This is flaring–and it’s a rather unpopular method, publicly speaking, due to the negative impact on the environment. For drillers, though, it’s a cost-effective way of dealing with the glut, and since they all must answer to shareholders and lenders, flaring is the first choice when it comes to watching the bottom line. 

Flaring has increased exponentially in recent years as the discrepancy between natural gas and pipeline capacity increased, creating unfavorable market conditions and leaving drillers holding a bag of unwanted natural gas. 

…click on the above link to read the rest of the article…

“No More Transit Risk”: Ukraine & Russia Ink Landmark Gas Transit Deal, Hammering European Gas Prices

“No More Transit Risk”: Ukraine & Russia Ink Landmark Gas Transit Deal, Hammering European Gas Prices

Ukrainian President Volodymyr Zelensky has hailed the completion of an against all odds landmark deal with Russia’s Gazprom as ensuring “energy security and prosperity for Ukrainians.” 

It will keep natural gas flowing to Western Europe via Ukraine for the next five years, which is estimated to net Ukraine $7 billion (€6.25 billion) in gas transit fees by 2024

After a series of compromise breakthroughs over the past weeks, including Gazprom paying out $2.9 billion legal settlement to Naftogaz and Kiev in turn agreeing to wave a separate legal claim, the two sides finally inked the historic deal on Monday, which signals a broader thawing in tensions and dramatic deescalation after Moscow and Kiev have for years stood on the brink of open war. 

Per Gazprom Chairman Alexey Miller, the accord has already gone into effect as of Tuesday: “After five days of uninterrupted negotiations in Vienna, definitive decisions have been made and final deals have been reached,” he said in a statement.

And Zelenskiy further presented it as an ‘everyone wins’ breakthrough: “Europe knows that we will not fail when it comes to energy security,” he said. Indeed European gas markets immediately felt the effects:

European gas and power prices extended declines after a last-gasp accord between Russia and Ukraine on natural gas flows averted a winter supply crisis.

According to Bloomberg’s analysis:

“There’s no more transit risk,” said Thierry Bros, an associate at Harvard University’s Davis Center for Russian & Eurasian Studies. “We are in a world with a lot of LNG and piped gas and the Russians want to keep their market share in Europe.”

Benchmark Dutch gas prices dropped 0.7%, taking their record annual plunge to 44%. German power traded at its lowest level since May 2018.

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There’s No Stopping The World’s Most Politically Charged Pipeline

There’s No Stopping The World’s Most Politically Charged Pipeline

Putin

This week, Denmark granted Gazprom approval for its Nord Stream 2 gas pipeline project, a project that is set to bring 55 billion cubic meters of Russian gas into Europe annually. It is one of the most controversial pipeline projects in the world and is now moving ahead despite strong opposition from multiple EU members and the United States.

The geopolitical tensions surrounding the development of Nord Stream 2 are unprecedented. To begin with, Russia has very poor relations with the Baltic states and Poland, nations who will almost always fight against anything they see as empowering Russia geopolitically. Then there is Ukraine, a nation that is strongly against the pipeline due to its fear of losing the transit fees that it currently charges Russia for exporting gas to Europe. Finally, and perhaps most importantly, the United States sees this pipeline as a direct threat to its soft power in Europe as well as a threat to its growing LNG exports.

But for all the politics and attention that this pipeline is attracting, the simple truth of the matter is that Europe, and more specifically Germany, needs this natural gas. Germany plans to shut down all its nuclear reactors by 2022. Many have questioned the wisdom—and some even the sanity—of that decision, but it remains government policy. The generation capacity the is being lost in that sector will need to be replaced, in the short term at least, by natural gas.

Despite its green reputation, Germany is a country that generates a surprisingly large portion of its total energy from coal. Its total installed coal-fired capacity is close to its solar capacity, at 44.9 GW, versus 47.9 GW for solar. At today’s growth rates, it’s current solar and wind capacity will not be enough to replace the retired nuclear plants.

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‘I Want Them to Have Justice’: Inside the Fight to Save the Shubenacadie River

‘I Want Them to Have Justice’: Inside the Fight to Save the Shubenacadie River

In Nova Scotia, water protectors have fiercely opposed a gas company’s plans for a decade, helped by a celebrity supporter.

Dale-Poulette-final2.jpg
Can ‘water protectors’ like Dale Poulette (seen above) and his partner Rachael Greenland-Smith win a war against governments and a resource company over the future of a grand river and the people it helps to sustain? Still from There’s Something in the Water.

It is so quiet on the banks of the Shubenacadie you can almost hear the river breathe.

Standing by the Treaty Truckhouse with Rachael Greenland-Smith and Dale Poulette, the instinct is to fall silent. The landscape draws you in with elemental power — an Alex Colville painting come to life.

Blue sky above, tawny long grass below, all of it bisected by the reddish tidal waters of the Shubenacadie. The only sound is the flapping of the Indigenous Unity flag when the wind picks up from the river.

The RCMP didn’t want any flags flying on nearby Treaty Island, but Mi’kmaq water protectors felt they had no choice. They believed that the Alton Gas company’s storage project, which would dump huge amounts of brine into the Shubenacadie, would endanger the river.

The company wants to build massive underground caverns to store natural gas. It would use river water to flush out salt deposits at a site 12 kilometres away, creating the caverns. The salty water would then be pumped back into the river over a few years.

582px version of Shubenacadie-River.jpg
The reddish tidal waters of the Shubenacadie. Photo by Michael Harris.

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BC Government Frets Over Climate Change While Heavily Subsidizing Fracking Companies

BC Government Frets Over Climate Change While Heavily Subsidizing Fracking Companies

Worse, the giveaway probably isn’t needed, with the global industry desperate for new gas fields.

Fracking-Pipes.jpg
Fracking does not need subsidies to be profitable. But we still hand ’em out. Photo via Shutterstock.

We’re in a climate crisis. So why did the B.C. government give oil and gas companies $663 million in subsidies last year so they would produce more fracked natural gas?

The NDP government hasn’t declared a climate emergency. But it commissioned a report that warns of more severe wildfire seasons, water shortages, heat waves, landslides and more.

Despite that, the government handed almost two-thirds of a billion dollars to fossil fuel companies — $130 per person in the province — so they’ll extract more methane, more quickly. (The numbers are all from the always-interesting Public Accounts released last month by the province’s auditor general.)

Which is perverse in a time when we’re warned of climate disaster.

British Columbians own the oil and gas under the ground. Companies pay royalties to the government for the right to extract and sell it

Since 2003, the B.C. government has been putting natural gas on sale. It has cut royalties to subsidize the industry’s road construction and reward any operators who drilled in the summer.

And most significantly, it started offering the gas at a deep discount for companies that drilled “deep wells.” The industry argument was that they were riskier and more expensive; the government had to sell the gas more cheaply to encourage companies to drill. It increased the discounts in 2009 and 2014, giving even bigger breaks to the fossil fuel companies. (Who were also big BC Liberal donors.)

The discounts — subsidies from taxpayers who have to pay more to make up for the lost revenue — have enriched fossil fuel companies for more than a decade.

 …click on the above link to read the rest of the article…

Shale oil and gas: Destroying capital one well at a time

Shale oil and gas: Destroying capital one well at a time

Recently, the former CEO of the largest shale gas producer in the United States told a roomful of conference goers what any competent financial analysis would have revealed many years ago: the shale oil and gas industry as a whole has been destroying capital since its inception.

“The fact is that every time they put the drill bit to the ground, they erode the value of the billions of dollars of previous investments they have made,” said Steve Schlotterbeck, former head of natural gas behemoth EQT, at a petrochemical industry conference. “It’s frankly no wonder that their equity valuations continue to fall dramatically.”

But, the real news here is not that the shale oil and gas industry has from its beginning been destroying capital one well at a time. It’s that a major industry insider freed from the constraints of his former job has admitted it.

Schlotterbeck calculates that the industry as a whole has destroyed 80 percent of its value since 2008. It turns out that the so-called shale revolution is a revolution as much in investor stupidity as it is in technology, a technology that can’t seem to produce actual industry profits. The former CEO added that there have been 172 bankruptcies among exploration and production companies engaged in the shale oil and gas business just since 2015.

Now the significance of this message is as much where it was said as who said it. Schlotterbeck was addressing attendees of the Northeast Petrochemical Exhibition & Conference in Pittsburgh in mid-June. The predominant buzz at the conference was a plan to turn Pennsylvania and Ohio, which sit above large shale gas resources, into a petrochemical and plastics center similar that which exists on the U.S. Gulf Coast.

 …click on the above link to read the rest of the article…

Former Shale Gas CEO Says Fracking Revolution Has Been ‘A Disaster’ For Drillers, Investors

Former Shale Gas CEO Says Fracking Revolution Has Been ‘A Disaster’ For Drillers, Investors

Steve Schlotterbeck, who led drilling company EQT as it expanded to become the nation’s largest producer of natural gas in 2017, arrived at a petrochemical industry conference in Pittsburgh Friday morning with a blunt message about shale gas drilling and fracking.

“The shale gas revolution has frankly been an unmitigated disaster for any buy-and-hold investor in the shale gas industry with very few limited exceptions,” Schlotterbeck, who left the helm of EQT last year, continued. “In fact, I’m not aware of another case of a disruptive technological change that has done so much harm to the industry that created the change.”

“While hundreds of billions of dollars of benefits have accrued to hundreds of millions of people, the amount of shareholder value destruction registers in the hundreds of billions of dollars,” he said. “The industry is self-destructive.”

Schlotterbeck is not the first industry insider to ring alarm bells about the shale industry’s record of producing vast amounts of gas while burning through far more cash than it can earn by selling that gas. And drillers’ own numbers speak for themselves. Reported spending outweighed income for a group of 29 large public shale gas companies by $6.7 billion in 2018, bringing the group’s 2010 to 2018 cash flow to a total of negative $181 billion, according to a March 2019 report by the Institute for Energy Economics and Financial Analysis.

But Schlotterbeck’s remarks, delivered to petrochemical and gas industry executives at the David L. Lawrence Convention Center in Pittsburgh, come from an individual uniquely positioned to understand how major Marcellus drillers make financial decisions — because he so recently ran a major shale gas drilling firm. Schlotterbeck now serves as a member of the board of directors at the Energy Innovation Center Institute, a nonprofit that offers energy industry training programs.

 …click on the above link to read the rest of the article…

The Easy Money In European Natural Gas Is Gone

The Easy Money In European Natural Gas Is Gone

Gas Storage

At the end of last winter’s heating season, it was an unusually cold spell that upended European natural gas markets, with storage levels falling below average and prices firming up as demand shot up.

At the end of this winter’s heating season, it is the unusually mild weather in most of Western Europe for most of the winter that has driven natural gas prices down and left supplies higher than the seasonal average.

The summer gas futures at the Dutch TTF hub have declined by 16 percent so far this year and have been trading lately around the lowest in 10 months. The winter gas futures contract, however, has dropped by just one third of the decline in the summer contract, according to data from ICE Endex compiled by Bloomberg.  

So the discount of the Dutch summer natural gas futures to the winter contract widened to the biggest since 2011 as of early March. Typically, such a wide spread would mean that one of the most common European gas trades—buying cheaper gas futures in the summer to sell in the winter—would be the most profitable in eight years.

However, traders are unable to take full advantage of the wide winter-summer spread because several factors have combined this winter season to create a perfect storm in the European natural gas markets. These factors are higher stockpiles than usual, limited available storage capacity as most of it is booked out amid declining overall capacity, and increased liquefied natural gas (LNG) shipments to Europe as Asian LNG spot prices continue to tumble.

First, unlike last year’s winter, this winter has been unusually mild in many parts in Western Europe. This has led to lower natural gas demand and lower withdrawal from storage—a stark contrast compared to the 2018 winter.

 …click on the above link to read the rest of the article…

Bethany McLean: Saudi America

Bethany McLean: Saudi America

The truth about fracking & how it’s changing the world by Adam TaggartFriday, March 1, 2019, 3:37 PM

For years now we’ve been covering the false promise of the American shale oil “miracle”.

Yes, it has extracted a lot more oil out of American soil that most thought possible. But at an economic loss. And at great environmental cost.

If the shale drilling companies can’t make any profit, either when oil prices are high or low — why are we still pursuing shale deposits so aggressively?

To shed further light on this paradox, this week we welcome journalist Bethany McLean to the program. McLean is editor-at-large at Fortune Magazine and a contributing editor for Vanity Fair and Slate magazines. She is also author of the excellent book: Saudi America: The Truth About Fracking And How It’s Changing The World.

McLean warns that the hype, the hucksterism, and the geological shortcomings of the deposits themselves, are setting up both investors and American society for tremendous disappointment:

The real catalyst of the shale revolution was the Great Financial Crisis and the era of unprecedentedly-low interest rates that followed.

And that had two effects. One was that it made debt cheap. So these companies that are heavily dependent on being able to raise capital could raise debt at low prices. And without that, I’m not sure there would’ve been a shale revolution because they needed such immense amounts of capital to fund their drilling.

But it had a second impact, which is that when pension funds were no longer able to earn a return in traditional fixed income markets, they’ve increasingly put their money into riskier assets like hedge funds that invest in credit and private equity firms. Those entities, in turn, have increasingly invested in shale.

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This Is Just The Beginning Of Europe’s Gas War

This Is Just The Beginning Of Europe’s Gas War

Globe

In a move that should not surprise energy pundits nor even those that follow geopolitical news in Europe, on Thursday Russian gas giant Gazprom said it’s looking to gain an even larger gas market share in Europe following record-high 2018 exports, as it expects a decline in Europe’s gas output combined with rising demand. Last year Gazprom sold more than 200 billion cubic meters (bcm) of natural gas to Europe, including Turkey, while its gas market share in the region rose to more than a third, Reuters said in a report on the matter.

Elena Burmistrova, in charge of the Gazprom’s exports, said the company would be able to offset a production decline in the EU, mainly at the Netherlands’ Groningen, once Europe’s largest natural gas field. “North Sea production is also gradually declining … So, the space for Russian gas is being freed up,” she said on the sidelines of the European Gas conference in Vienna.

Future gas wars

Gazprom’s statement comes as EU gas production is projected to spiral downward over the next 12 years. Regardless of possible development of non-traditional gas resources, production will decline by 43% against the 2013 level, Russia’s National Energy Security Fund (NESF) said recently.  Moreover, the Paris-based International Energy Agency (IEA) forecasts that EU gas production will halve by 2040.

This dwindling production also comes as a number of EU states are poised to break away from over-reliance on both nuclear and coal needed for power generation, leaving opportunities for renewables, particularly solar and wind power, as well as liquefied natural gas (LNG) imports. However, all of these sources will take more time and funding to develop before they can add a more significant percentage of the bloc’s energy mix going forward.

 …click on the above link to read the rest of the article…

5 Things To Watch In Natural Gas

5 Things To Watch In Natural Gas

A new report from Rystad Energy identifies five vital themes that will shape global gas markets in 2019.

Significant LNG production growth, the rise of US gas to challenge Russian dominance in Europe, insatiable demand in Asia, price pressure in selected regions, and a need for final investment decisions on planned liquefaction plants are the key market-movers identified in the report.

“The global market for liquefied natural gas (LNG) is geared for substantial supply growth this year, mirroring a major increase in US liquefaction capacity. Asia’s appetite for LNG – while vast – is not likely to consume all of the additional volumes,” said Rystad Energy head of gas market research Carlos Torres Diaz.

“With increasing export capacity, US LNG might be in a position to pose a serious challenge to Russian gas on the European market this year. Prices will come under pressure due to the healthy supply situation but the market is expected to tighten again after 2022, meaning that investment decisions for new liquefaction projects are needed this year in order to satiate future demand,” Torres-Diaz added.

Theme 1: Ramp up in US and Australian LNG production

Global LNG production is expected to rise 11% and reach 350 million tonnes per annum (tpa) this year, as fresh liquefaction capacity is added, leading to a looser market. Total liquefaction capacity is set to increase to 434 million tpa in 2019, up almost 10% from 2018.

“This is mostly driven by the commissioning of US projects. The US is expected to see capacity more than double in 2019, thereby making it the country with the third-largest exporting capacity and pushing Malaysia into fourth place. Australia could also overtake Qatar as the world’s largest LNG exporter this year,” Torres-Diaz remarked.

(Click to enlarge)

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Freezing Minnesotans Putting “Significant Strain” On Natural Gas System; Hotel Rooms Offered Amid Outage

Freezing Minnesotans Putting “Significant Strain” On Natural Gas System; Hotel Rooms Offered Amid Outage

Residents in central Minnesota braving a historic cold snap of minus 21 degree s are being urged to turn down their thermostats and reduce how much natural gas they use, according to CBS Minnesota. The announcement by Xcel Energy is due to the extreme weather conditions which have put a “significant” strain on their natural gas infrastructure. 

“We need those in Becker, Big Lake, Chisago City, Lindstrom, Princeton, and Isanti to reduce use of natural gas. Until further notice, you are urged to turn down your thermostat to 60 degrees or lower and avoid the use of other natural gas appliances including hot water,” reads a statement by the utility. 

The warning comes after a Tuesday interruption in natural gas at around 10:30 p.m. in Princeton, leaving around 290 customers without gas service. The company expects to restore service on Thursday, and has rented hotel rooms for impacted customers until then. 

View image on Twitter

View image on Twitter

6;30am Wind Chills … The scientific term for this is “AAAAAAAiiiiAIAIAII COLD!!!!” … coldest wind chills in the Twin Cities in DECADES #WeatherOnThe9s @FOX9

Xcel Energy has established a command center at AmericInn in Princeton, and will be sending licensed plumbers to protect plumbing while service is being restored, according to CBS Minnesota

Meanwhile, power was restored to over 7,000 metro-area Minnesotans after power went out Tuesday evening. The outage was blamed on equipment failures on power poles. 

Wind chills in the region will remain in the 35 to 50 below zero range Wednesday afternoon, while the air temperature is expected to drop to around 30 below overnight. According to the National Weather Service, this is a life-threatening situation for those spending any prolonged period outdoors without proper clothing. A wind chill warning remains in effect until 9 a.m. on Thursday. Of note, frostbite is possible in less than five minutes of exposure.

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Olduvai IV: Courage
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Olduvai II: Exodus
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