Monday, March 25, 2013

US shale gas to heat British homes within five years

The announcement that the U.K. will be getting natural gas from the U.S. is the latest indication that North America will cease to be a captive island for it's natural gas supply - and therefore a harbinger of pricing in North America moving towards world pricing levels.

US shale gas to heat British homes within five years | Environment |
Nearly 2m homes in the UK will be heated by shale gas from the US within five years, under a deal agreed on Monday that is likely to be the first time major exports of the controversial energy source are used in the UK.
The US government has kept a tight rein on exports since the shale gas boom started more than five years ago. But the deal struck by energy company Centrica marks the start of a new era in gas use in the UK, because it opens up the market to cheap supplies from the US, as North Sea gas fields run out and pipelines to Europe remain expensive.
Shale gas exploitation has been blamed for environmental problems in the US, including water, ground and air pollution and leaks of methane.
Under the deal, Centrica will pay £10bn over 20 years for 89bn cubic feet of gas annually – enough to heat 1.8m homes – from Cheniere, one of the first US companies to receive clearance from the federal government to export shale gas in the form of LNG (liquefied natural gas). The first deliveries, by tanker, are expected in 2018.
The entire article can be read at

The Financial Times (subscription) has details on this deal, and information on other deals.

Centrica strikes deal for US shale gas | Financial Times
The gas supplied under the deal, which remains subject to US regulatory approval, will be, in part, pegged to the Henry Hub natural gas price by which gas in North America is typically traded.
Under the terms of the agreement, Centrica will pay Cheniere a fixed fee of $3 per million British thermal units – the standard trading unit for natural gas – plus a commodity fee of 115 per cent of the prevailing Henry Hub price for the procurement and liquefaction of the gas.
Centrica becomes the latest of six customers signed up by Cheniere for LNG exports from Sabine Pass. Those already signed up are fellow FTSE 100 gas supplier BG Group, Total of France, KOGAS of Korea, Gas Natural Fenosa of Spain and Gail of India – all of which intend to export more per year from the US than agreed in the deal with Centrica announced on Monday.
The entire article can be read at the Financial Times (subscription)

On a smaller scale, Shell recently announced plans in both Louisiana and Sarnia, Ontario for smaller scale projects related to converting natural gas into a transportation fuel.

Shell to make “fuel of the future” at Sarnia | Sarnia This Week
SARNIA - Shell Canada is moving ahead with plans to build a natural gas unit in Sarnia, hoping to change the fuel transports, rail locomotives and ships use.
In June, Shell revealed it was considering the move as the price of gasoline continued to climb. With diesel fuel costing between $1.25 and $1.30 per litre, Shell says there are significant savings to be had using 70 cent a litre natural gas.
The conversion of transports and marine ships would also have an environmental impact, reducing their air emissions by 20 percent.
The company recently announced it will build two units – one in Sarnia, one in Louisiana – to created liquefied natural gas. The plants will take natural gas and turn them into a fuel which can be used for transports or ships.
The Sarnia project is a much smaller undertaking than the gas-to-liquids (GTL) Pearl plant.  
Forbes recently predicted the smaller projects may increasingly be constructed the technology matures, we can expect to see more GTL plants pop up, particularly the smaller ones costing in the hundreds of millions rather than tens of billions. Just how successful this technological approach will become remains to be seen. However, Oxford Catalysts’ Lipski estimates sufficient economic feedstock around the world to make 25 mn bpd – nearly as much fuel as Opec produces.
Lipski noted in an email exchange “Our ambition is to enable a new segment within the energy industry. We have made great progress in the past two years and we see two primary inflection points on our path. The first is securing the investment commitment for the initial GTL facilities. The second is achieving the successful start-up of a facility and having a commercial reference plant.“
Considering the opportunities to treat gas that would otherwise be flared, to unlock otherwise uneconomic shale and conventional gas fields, and increasing opportunities for biomass, waste and coal conversion, small-scale GTL may well have a significant niche to fill in our emerging energy picture.
That flaring is substantial

Nearly one-third of the raw gas that is pumped out of the Bakken shale formation in North Dakota — a prime target of the new hydrofracturing and horizontal drilling technologies — is burned in situ.
Image from AEI site
At a conservative estimate, this North Dakota flaring meant some 3.9 million tonnes of carbon dioxide were emitted last year, the equivalent of the annual emissions from 750,000 vehicles. Worse, research into flaring has begun to find evidence of potentially widespread methane leakage from shale operations, if not outright venting of the gas (see page 290). Methane is a powerful greenhouse gas, so the environmental price is likely to be even higher.

Recent satellite images showed both the Bakken and Eagle Ford shales lit up like new cities due to the flaring.

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