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SG-W:/ Fw: [energyresources] USA Today on natural gas

  This is another ominous article about natural gas that needs to be
printed. Urban Sprawl is something we can't afford There is a direct
connection between all of those large houses and gas consumption.

Kermit Schlansker
-----Original Message-----
From: richardgilbert1 <richardgilbert1@csi.com>
To: energyresources@yahoogroups.com <energyresources@yahoogroups.com>
Date: Monday, June 03, 2002 8:02 AM
Subject: [energyresources] USA Today on natural gas

>Last Friday's USA Today (Money section, May 31, 20002)had an
>interesting piece on natural gas, below and at
>There was a companion piece on liquefied natural gas, also below, and
>Richard Gilbert
>Crisis looms as demand booms for natural gas Production falls as it
>gets hard to get popular fuel
>By George Hager
>LYSITE, Wyo. -- What looks odd in this tiny town in the middle of
>Wyoming's vast Wind River Basin is all the windsocks. There's no
>operating airport here, so why all the fluorescent orange wind-
>direction indicators?
>It turns out that Burlington Resources wants you to know where upwind
>is at any given moment, because that's where you need to go -- and
>fast -- if there's a hydrogen sulfide leak from any of the six
>ultradeep natural gas wells Burlington and others have drilled near
>here into the nearly 5-mile-deep bedrock that holds one of the most
>prolific gas fields in the USA.
>Along with prodigious quantities of natural gas, what boils up out of
>the wells' specially made, high-alloy tubing is 126,000 parts per
>million of hydrogen sulfide, which can quickly kill you in
>concentrations of as little as 500-1,000 parts per million. Each
>visitor gets a mandatory safety lecture and a portable tank of
>emergency air.
>With U.S. production in inexorable decline, producers are
>increasingly turning to exotic wells like this one to try to keep up
>with Americans' burgeoning demand for natural gas. Gas burns much
>more cleanly than coal and, after any hydrogen sulfide has been
>stripped out of deep-well gas and turned into sulfur, it carries few
>of the safety worries that come with nuclear power.
>That makes it a premium, environmentally benign and increasingly
>popular fuel for homes, factories and electric utilities. Most new
>electrical generating plants are designed to burn gas, and 55% of
>American homes use it for heating or cooking, according to the
>American Gas Association.
>But while public worry tends to focus on supplies of crude oil and
>pump prices at gasoline stations, the real gas problem could be
>brewing in natural gas. Experts say falling U.S. production and the
>difficulties involved in getting new supplies from North America or
>abroad could make for a severe supply crunch at worst or highly
>volatile prices at best for the next several years.
>The chief trouble with natural gas is getting it. All but a tiny
>fraction of the gas that's used here has to come by pipeline from
>U.S. or Canadian wells. While more than half of U.S. oil comes in
>ships from foreign producers such as Saudi Arabia and Russia, it's
>much tougher to import natural gas, which has to be cooled to minus-
>260 degrees Fahrenheit and transported in special tankers to a
>handful of special terminals.
>''Here's the problem with natural gas,'' says Bill O'Grady, an energy
>futures analyst with A.G. Edwards in St. Louis. ''There's lots of
>natural gas in the world, but there are no pipelines running from
>Kazakhstan to Los Angeles.''
>That makes U.S. gas consumers critically dependent on U.S.
>production, and U.S. production is in a long-term decline that
>experts don't think will reverse. ''We've been poking holes in the
>lower 48 since the 1920s,'' explains O'Grady, who notes that all the
>relatively easy gas-producing areas have long been picked over. Most
>of what's left are tough and expensive fields like the deep gas zone
>Long-term plans call for more gas from huge fields in remote parts of
>Canada or from Alaska's distant North Slope, but the pipeline that
>can bring that gas to the lower 48 -- presuming it's ever built -- is
>still seven to 10 years away. Another likely source is more imports
>of liquefied natural gas (LNG), which currently account for a little
>more than 1% of U.S. needs. But that means building or reactivating
>special LNG terminals, which will also take several years and could
>hit not-in-my-backyard resistance from surrounding communities.
>Worth the investment
>In Wyoming's Wind River Basin, where the prairie stretches in 50-mile
>vistas to the snow-covered Wind River Mountains, everything about the
>drilling and production operation is bigger than normal.
>A typical gas well goes about 11,000 feet deep and costs about
>$500,000 to $750,000 to drill, but Burlington Resources' just-drilled
>Bighorn 8-35 here went to 25,018 feet and will cost about $35 million
>before it's ready to produce gas, says Arnold Nall, Burlington's
>general manager for drilling.
>Drill bits alone run anywhere from $45,000 to $100,000 each, and some
>last barely a day or two as they grind through deep rock at a rate of
>as little as 1 or 2 feet an hour. At those prices, says Nall, ''It's
>like putting a luxury car into the ground'' every time the rig's
>roughnecks change a bit -- a procedure that can take a day or more as
>the crew pulls 4 or 5 miles of drill pipe out of the hole, changes
>the bit and puts it all back in. It takes 50 to 55 bits to complete
>the hole.
>It took the crew about 300 days to drill the Bighorn 8-35, and it
>took the largest operating land-drilling rig in the USA -- the
>mammoth, 200-foot-tall, 7,200-horsepower Grey Wolf 558 -- to make the
>hole. The gas from the deep wells here contains about 12.5% hydrogen
>sulfide, and Burlington and its partners built a $480 million
>processing plant to strip out the hydrogen sulfide and carbon dioxide
>before sending the gas out to transmission pipelines.
>It's worth all the money and trouble. Though the Madden Field has
>just five producing wells out of the tens of thousands of gas wells
>in the USA, it produces almost 0.5% of the entire U.S. gas output.
>Each well can flow a net of about 30 million cubic feet of gas a day.
>At the mid-May price of about $3.60 per thousand cubic feet (Mcf),
>that's worth roughly $108,000 a day, or about $3.2 million a month.
>Each well is expected to last 25-30 years.
>Some analysts worry that U.S. gas consumers could be in for a rough
>ride as diminishing production and an increasingly volatile market
>make supplies dangerously tight or prices punishingly high -- or both.
>Worries for consumers
>The best evidence for this is what happened during the winter of 2000-
>01, when short supplies drove prices up from their long-term average
>of about $2.25 per Mcf to more than $10 per Mcf at one point in
>January 2001. Driven by those extraordinary prices, drilling surged:
>According to oil-field supply company Baker Hughes, the number of
>rigs drilling for gas nearly tripled from a low of 362 in April 1999
>to a peak of 1,068 in July 2001.
>''The entire industry knew: I drill gas wells, I get rich,'' says
>Mark Papa, chairman of EOG Resources, a large independent gas
>producer. ''A huge effort was put in place to drill gas wells.''
>But despite that effort, gas production barely budged. From 18.8
>trillion cubic feet (Tcf) in 1999, domestic gas production crept up
>to 19.4 Tcf in 2001 -- a 3% increase.
>''What in the world explains why you had to double gas well
>completions just to stay flat?'' asks Matthew Simmons, chairman of
>energy investment bank Simmons & Co. ''I think we're in very scary
>Analysts are alarmed by the fact that gas wells peter out much more
>quickly now than they used to, thanks to technology that lets
>producers drain reservoirs more quickly and the fact that reservoirs
>tend to be smaller.
>Even Federal Reserve Chairman Alan Greenspan fretted about this
>phenomenon in a November 2001 speech, noting that new wells now give
>up 50% of their recoverable reserves in the first year of operation
>vs. 25% in the 1980s. As the economy recovers, Greenspan said,
>burgeoning gas demand ''will be putting significant pressure on the
>reserve base.''
>Supply crunch coming
>Some analysts say U.S. natural gas output is simply repeating the
>precipitous decline of lower 48 U.S. crude oil production, which
>peaked in 1969 at more than 9 million barrels a day has now fallen to
>less than 4 million barrels a day, forcing the USA to import more of
>its crude.
>Add a recovering economy, the chance of a hot summer or a cold
>winter, and the fact that strapped electrical utilities have turned
>to gas-fired plants to add enormous generating capacity that will
>compete for gas supplies, and pessimists see a serious gas crunch
>Papa says forecasts show U.S. gas production falling 4% this year and
>demand whittling down the record amounts of gas in underground
>storage by the beginning of the heating season Nov. 1. That could
>lead to a supply crunch in both the USA and Canada by next year, he
>Simmons says the crunch could show up even sooner. ''You have this
>unbelievable mountain of new power plants that assumed there would be
>plentiful natural gas,'' he says. But when prices fell back from $10
>per Mcf in January 2001 to $2-$3 per Mcf last summer, drilling
>collapsed. ''We're going to pay a painful price for that by the third
>or fourth quarter.''
>Others insist the situation isn't quite as grim. ''Some of the market
>will tune out if the price is too high,'' says Paul Ziff, CEO of
>energy consulting company Ziff Energy Group. Industrial users that
>can switch to oil will do so, and if that's not an option, some high-
>cost producers will simply shut down and ride out the price spike, as
>some aluminum producers did when prices hit $10 per Mcf. That would
>lower demand and help bring prices back down.
>Even so, Ziff says, the prospects for gas consumers are not without
>problems. ''Our outlook is a lot of price volatility (for) the next
>several years,'' he says.
>Risks of liquefied natural gas minimal
>By George Hager
>LUSBY, Md. -- About 1,600 miles to the east of Wyoming's Wind River
>Basin, energy company Williams is pursuing another part of the gas
>hunt. It's reactivating a long-dormant terminal here on the
>Chesapeake Bay it hopes to begin using next spring to import tanker-
>loads of liquefied natural gas (LNG).
>There are just three active LNG import terminals now in the USA --
>one in Boston, one near Savannah, Ga., and one near Lake Charles, La.
>The Cove Point terminal here was built in the 1970s and was used by a
>predecessor company to import LNG until Algerian suppliers raised the
>price so high the terminal was mothballed.
>Williams bought the facility and has used it since 1994 to liquefy
>domestic pipeline gas and store it for use when demand spikes, but
>there hasn't been an LNG tanker here in 22 years. Now, with gas
>prices rising and U.S. production falling, Williams hopes to have the
>idle offshore pier approved by regulators, renovated and ready to
>handle a ship again by April 2003.
>The technology isn't complicated. Williams operations director Jim
>Shannon says the commonly used process that chills natural gas to
>minus-260 degrees Fahrenheit and turns it into a liquid
>is ''essentially an industrial air conditioner.'' And storing it is
>likewise low-tech. A possible restraint on increased LNG use is a
>fear of its destructive force. Cove Pont sits 3.5 miles from the
>Calvert Cliffs nuclear power plant. Anxiety about LNG accidents or
>terrorist attacks could affect any existing or new terminals.
>Shannon and Cove Point district manager Michael Gardner downplay the
>risks. They note there has been no accident at an LNG facility that
>affected the public since a 1944 Cleveland incident in which LNG
>tanks ruptured and poured liquefied gas into a nearby sewage system,
>where it collected, vaporized and ignited.
>Shannon says exhaustive tests have shown that even if a tank at Cove
>Point ruptured, dikes would contain the gas, and if the gas ignited,
>the effects would be confined to the plant grounds. ''A home a half-
>mile away would be able to feel heat, but the fire would be contained
>in the plant,'' he says.
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