Another energy revolution in the offing


 

 

            As the shale gas revolution begins to ripple through reordering the world economy, another fossil fuel revolution is in the offing which will again torpedo most conventional wisdom concerning energy. So-called “peak oil”, the end of petroleum exhausted by expanding consumption and diminishing discoveries, the love story of environmental fanatics, has now gone a glimmering.

Projections of petroleum and world energy have been notoriously inaccurate in the past, of course. But already the prospect of skyrocketing U.S. production and still expanding estimates of shale gas and oil around the world is leading to dramatic changes not only in caculating fossil fuel and energy economics but in geopolitics:

·        The U.S. with its monopoly on shale technology  is likely to become not only self-sufficient in energy before the end of the decade – current estimates are that within five years it will be producing more than half of the world’s additional fossil fuel – but it will become a net gas exporter.

·        Short term, and possibly even longer, world real energy prices are likely to decline under the impact of these additional fuel resources as a slow US recovery and a world economy now beset by a wilting China and India and a Europe still unable to cope with its crisis.

·        The Middle East producers, especially Saudi Arabia, but also Iraq straining to significantly boost production from the world’s second or third largest reserves and the partially bottled-up sanctioned huge resources of Iran, are increasingly loosing their grip on world oil and gas prices.

·        Indeed, the Persian Gulf producers may make a concomitant contribution to a dramatic decrease in real energy prices because of their mismanaged economies, with even the threat of financial disaster on Western markets through highly leveraged investments based on earlier export price assumptions.

·        Individual countries – that could include China, Germany, France, Israel – will see their economies restructured through the development of shale gas and oil resources, despite the noisy campaign by environmentalists to restrain exploitation with horror stories of water contamination – an impediment still to be proved in any current production.

·        Old established trade relationships, often problematical, may be dramatically impacted; e.g., the U.S.’ continued trade imbalance with Japan – and perhaps with China — could be dramatically readjusted by exports of LNG [liquid natural gas] from Continental U.S. and even larger prospects for gas in Alaska.

You get some idea of the complexities of the new worldwide energy picture and its rmifications not only from these broad developments, but also from tangential political repercussions. Israel, already turning to gas exports from its conventional deep water strike just a few miles offshore from Haifa, is welcoming new shale gas prospecting by an American-Israeli company including investors Rupert Murdoch, Dick Cheney and the Rothschilds in – of all places – the Golan Heights fronting on Syria. Qatar’s eccentric royal dictator Sheikh Khalid bin Khalifa al-Tha who has thrown $30 billion from the world’s largest LNG exports at al Jazeera, the international radio network once the voice of supreme terrorist Osama Bin Ladin and who still funds Moslem Brotherhood jihadists in Egypt and among Syria’s armed opposition, might just have to pull in his horns.

Yet even as the world begins to digest these economic developments with their unforeseen political consequences, another cataclysmic energy development is coming on stage.

Commercial development of “fire ice”  – the vast quantities of what is so new to the layman’s energy lexicon that it is variously  known as methane clathrate,methane hydrate, hydromethane,etc. – is now foreseeable. These are huge deposits of methane gas outcroppings on the ocean floor trapped at great depths in ice crystals. In some areas gas bubbling up from the earth’s interior produces a carpet of slush containing gas. Already located by intrepid prospectors in a number of environments around the world, fire ice not only has the advantage of producing less carbon emissions when burned, but methane hydrate contains a higher caloric value than other forms of fossil fuel

The big news is that this spring Japanese researchers successfully extracted and burned natural gas from methane hydrate drawn from a depth of a thousand feet 30 miles from central Japan in the Nankai Trough, a 600-mile-long trench lying off HonshuIsland. This gash in the ocean’s surface is produced by the colliding geological plates which make Japan so earthquake prone. It’s estimated that in that deep gulley alone there is enough methane to meet Tokyo’s needs for more than ten years. In addition, there are other deposits in the seas surrounding Japan.

The Japanese gambit has not gone unnoticed. U.S. Department of Energy researchers have also been working at methane hydrate research, and, in fact, earlier on suggested the possibility of commercial exploitation within 15 years. Despite the fact timid bureaucrats in the now highly politicized Obama Energy Department refuse to respond to enquiries about what Tokyo’s sponsorship has done for fire ice commercial development prospects, they were on the scene to observe the Japanese. There are hints their present reluctance to talk about commercialization may have to do with the Administration’s policy of attempting to boost energy costs to force the economy into what have been its disastrous and often corrupt “green energy” investments.

Still, the Obama war on fossil fuels has been highly unsuccessful because of the shale technological breakthrough, luckily for the country and the world mostly on private U.S.land. The Administration has virtually shut down new development on government land, granting ne exploratory rights on reluctantly under great pressure from state governments who desperately need the tax revenues.

American scientists last year did experiment on the North Slope of Alaska with injecting a mixture of carbon dioxide and nitrogen into underwater gas crystals to promote release of natural gas. This follows on estimates of enormous deposits of fire ice in the Arctic region. Furthermore,  a U.S. expedition in 2009 estimated there was around 6,700 trillion cubic feet of gas trapped in gas hydrates in two sites in the northern end of the Gulf of Mexico. [A measure: the U.S consumed 25 million cubic feet of natural gas in 2012.] In fact, an estimate of 700,000 trillion cubic feet of methane trapped in methane hydrates worldwide is staggering since it would top all the combined estimates of all worldwide fossil fuel reserves – including coal.

The busy and as always methodical Japanese now believe they can bring fire ice into commercial production in six years. That promises the same sort of technological and economic breakthrough which was largely unanticipated by even the most astute energy observers about shale gas only a decade ago. Tokyo’s government-backed research and production team has every reason to push the fire ice development: Japan’s reliance on foreign gas imports has peaked since the 2011 Fukushima Daiichi tsunami nuclear disaster producing an ambiguous strategy concerning its 54 nuclear power plants that once provided 30 percent of Japan’s energy.

It remains to be seen how fast the major oil producers will move on the fire ice development. They are obviously going to get no help from an Obama Administration which is still diddling on the issue of transporting Canadian tar sands [and incidentally picking up enroute North Dakota and Montana shale] oil to Texas refineries The economics would produce, in part, new exports to now energy hungry east Asia. Private industry is moving ahead to invert former liquefied petroleum and LNG terminals only a few years ago destined for imports into exporting operations.

Although local resistance from environmentally conscious state governments has virtually disappeared ion the tar sands route and Obama is feeling the heat from his own trade union supporters over loss of jobs, the White House is still resisting Congressional pressure – including from some leading Democratic Senators – to okay the Keystone XL Pipeline down from Canada. But as the U.S. resumes its former traditional role as an energy exporter, it will become more and more difficult willy- nilly to make any economic or political argument for the Obama policies.

In the end, commonsense tells us that investments for expensive environmental considerations – if they are to be implemented – are going to require a healthy, growing economy to foot the enormous and growing bill. And that now, as in the American past, depends on cheap energy which the Obama Administration is ideologically deadset against. It remains to be seen how long it will take for logic to carry the day in the U.S. political process. Ironically, as is their custom, Obama Administration spokesmen are already claiming credit for the.shale gas revolution even though their policies would have blocked it had the irony of fate not put the ball in the private sector’s court.

Meanwhile, melting fire ice is likely to again blow apart all the conventional wisdom on energy as it unplugs a new avenue for eventual additional resources to re-energize the world economy.

sws-05-26-13

 

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