CNN Story on Natural Gas

An interesting story on the heavy duty trucking industry and natural gas:

Exporting Natural Gas - No Cheap gas Part deux

I wrote back in the beginning of November that we can expect an abundance of domestic oil and gas but not low price oil and gas.  I said this because what the candidates refused to say was that while it is abundant the fact it all can be exported means it will almost always stay around the world price for oil and gas.  My thesis was if the price in the US just became too cheap all of it would be exported.

I hate it when the facts prove this out.

Today in the Wall Street Journal there is an article titled "US Gas Exports Clear Hurdle" and it is  talking about a Government study which said was good for the economy if we "liquefied and exported" natural gas.  Voila.. your "cheap domestic source of energy" has just evaporated into a world price domestic source of energy.  So, those expecting a great amount of domestic energy and all the good things that come with this should be happy.

Those who expected "cheap" energy will be disappointed.

U.S. Overtakes Saudi Arabia in Oil Production by 2030 - IEA

This is a fascinating statement and it shows how disruptive technology (i.e, the ability to extract tight oil and shale oil / gas) will really turn the world energy markets on their head.  The International Energy Agency (IEA) has two reports out.  The first (as reported by Bloomberg) describes how the US will overtake Saudi Arabia in oil production.  Some interesting statistics:

• Last Month Saudi Arabia pumped 9.8 million barrels per day; The US 6.7 million - very close. 
• US production this year will be highest since 1991.
• 83% of the US domestic oil needs were met with domestic oil supplies in the first 6 months of 2012. 

The second report (again as reported by Bloomberg) tells us by 2030 natural gas will be the predominant source of energy in the United States as it will be plentiful and cheap.  Both of these are incredible developments given just a few years ago people were talking about "Peak Oil".

I will add a bit of commentary on sustainable practices.  I hope we as a country are wise enough to see these developments as incredible luck which gives us time to move to a more sustainable way to power our economy.  If we use this as a way to get "cheap energy": which then makes the business case for sustainable energy not economically viable then we will have squandered a huge opportunity.  

Also, as I have stated before, do not confuse "energy independence" with "cheap oil".  The oil prices will almost always be at world levels because if they are not then the energy will simply be exported rather than consumed in the US. 

The impact on transportation will be clear:

• Oil supplies abundant
• Oil prices at world levels (i.e., no "cheap oil")
• Movement to natural gas will continue. 

Getting Natural Gas Right from The EDF

The Environmental Defense Fund really puts out good science.  They are truly non partisan and report the facts as they are known.  I just read this posting called "Getting Natural Gas Right" and I was both intrigued and encouraged.  The conclusion is simple (and those who take ideological positions on science will not like it):  If large amounts of methane are released into the atmosphere due to leakage, the use of Natural Gas will be worse, not better, than what we are doing today.

However, there is great news. If prudent measures are taken to ensure the proper drilling, transportation, storage and combustion then natural gas becomes a fantastic fuel to help us move to a low carbon future.

I like science.

Natural Gas - A Different View

One of my colleagues sent me a very interesting post which was the opening statement of David L. Greene, Oak Ridge National Laboratory to a committee looking into the uses of Natural Gas.  While I am a big supporter of natural gas in transportation I think it is always good to get a balanced view to any topic.  I have a saying I live by: "Nothing is ever as good as it seems and nothing is ever as bad as it seems".  This is almost always true when there is a "gold rush" into anything.  It was true of the Internet boom in the late '90s, turned out to be true in a devastating way with real estate and now, most likely, it is true in the natural gas boom.  Here are a couple of points:

• Those who think NATGAS will remain wildly below the world price just because it is drilled here in the US may need a lesson in global economics.  Fuel / Oil is a very fungible commodity and because gas can be liquefied it can and will be exported if there is an arbitrage opportunity. 

• In order to keep up with emissions requirements and total GHG reductions, the entire infrastructure (if built) for NATGAS would need to be dismantled by 2050.  I cannot vouch for the accuracy of this statement however it is right in line with what I have heard before which is NATGAS is somewhat of a "bridge" fuel.  It does not satisfy our overall objective to get to sustainable fuels and renewable energy.  But, and this is a big but, how long / far will the "bridge" be?  If you assume 2050 as this article does then it probably does not make sense to build it.  However, if you assume longer then it should be built.  This requires forecasting, a crystal ball and a bit of luck.  None of which I can do very well or possess. 

• The differences in energy in NATGAS v. Diesel means a wholesale transition is highly doubtful.

The conclusions of the article are right in line with what I have been advocating all along:  Conversion to alternative fuels, such as NATGAS, are engineering questions and should be dealt with in this fashion.  A shipper needs to identify specific locations, specific applications and then decide type of fuel, truck etc. etc.  

The future is going to be highly complex as there will not be a "one size fits all".  Unfortunately, that takes 10X Thinking and we, as a species, tend to see the future through a rear view mirror.  We want a new fuel source to replicate the structures of oil and that, I can forecast for sure, will not happen. 

Penn Wells Considered Safe by EPA - Fracking Politics

The politics around fracking, the way we are getting natural gas out of the ground, has been somewhat unbearable.  Here is the first time I have read good "science" behind the argument and it looks like the politics were much ado about hype than anything.

Keep an eye on this.  Natural Gas is the way our Country will get off our addiction to foreign oil.  I fully support a strict and detailed EPA enforcement to ensure we do not fix one problem and cause another.  However, I want to also ensure we use science and not politics to solve the problem.

Fuel Prices

The idea of limited oil is an idea which needs to be reevaluated.  As drilling technology gets more advanced it appears oil and natural gas reserves will continue to grow. 

So, why the fuel price increase?  It does not appear to be a result of what normal economics would drive.  It is far more about speculation and fear which is the reason fuel must be managed.  If you are unwilling to take an active role in managing fuel you will generally be subject to the "whipsaw" effect of the marketplace. 

Keep an eye on fuel drilling capacity, production capacity and the import/export imbalances to decide if there truly is a fuel shortage.  Right now the United States is exporting a lot of refined petroleum products.  I am sure this increase will cause the continued move to intermodal and rail movements.  It should not be an all or nothing move however.  A good "multi modal" strategy is one which protects capacity and allows for adaptations to the current economics. 

T. Boone Pickens Responds to President Obama's Natural Gas Plan. A "Victory Lap"

POTUS Pushes for Natural Gas Trucks

For those looking for a single solution to solve the world's problems, this will disappoint.  However, for those who understand it is the proper mix and application of multiple sources of fuel which will solve our need for energy, this will really excite you.

President Obama has made it a centerpiece of his work to incent the movement of Class VIII trucks to natural gas.  This is absolutely the right call.  It is abundant and clean.  Further, the technology is much further along than people realize.  With the announcement of multiple distribution agreements and the build out of NG fueling stations, this is an idea whose time has come.

The question of CNG (Compressed Natural Gas) or LNG (Liquified Natural Gas) is one of application.  Both have a role.  Generally speaking CNG is easier to distribute and does not require the cryogenic freezing of LNG (It is liquified by freezing the NG to -260 degrees F - Read more about LNG here).  However, LNG does allow your truck to go further.  Read:  One is probably great for short haul, out and back type of applications (CNG).  One is better for over the road (LNG).

One drawback to LNG for those who look at the entire distribution supply chain:  LNG has to get to the station via truck.  A lot of trucks on the road to distribute LNG.  So, while the end truck may be powered by clean LNG you have to ask yourself how it go to your distribution point.

CNG moves in pipelines and is compressed at point of use so this issue above does not apply.

I am personally very excited about these opportunities.  We are heading in the right direction for sure thanks to some very daring and exciting people such as T. Boone Pickens and Aubrey Mclendon.