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Countdown to $100 oil (23) - Running out of natural gas in North America

by Jerome a Paris Fri Mar 24th, 2006 at 06:53:55 PM EST

Okay, natural gas prices are waaay down from their highs, so all's fine, right? It doesn't matter than these prices are still double the highest power plant developers expected only a couple years back, they are down. Alert over.

Hah! Let me show you just one new graph below the fold.


This is a simple compilation of the prognoses made each year by the US government, through the Energy Information Agency of the DoE, for expected future production in North America.

The top line was the prediction made in 2002 for future years. The next line the prediction made in 2003, etc...

Notice something? The predictions have been going down every single year... and so has production, in recent years.

As I posted a while ago, the problem is that more and more wells are being drilled, but they run out quicker and quicker.

This graph shows the rates of decline depending on the year the field was put in production: the slopes are getting steeper and steeper, i.e. new production is declining really quickly, and thus total production is going down.

This prediction, made in 2003 by the National Petroleum Council (pdf - see p.11), shows where the gas was expected to come from back in 2003: a good chunk of it is expected to come from Alaska or Artic Canada, and lower 48s was supposed to remain stable. This seems increasingly unlikely.

The ONLY solution will be to bring in more LNG, but guess what: - all the expected import terminals are expected to be built right on Hurricane Lane:

If there's any problem with import terminals, or any other supply problem of any kind, you get a tight supply-demand balance and what happens is what we saw in the UK last week when a cold snap happened at the same time as an accident on a storage facility: prices quadrupling overnight...

What the first graph above means is that the decline in production is much faster than was expected only a few years ago, which means that, like in the UK, the facilities that have been planned to replace that production will be available too late and, in the meantime, the system will be highly vulnerable to any incident.

Earlier "Countdown Diaries":
Countdown to 100$ oil (22) - gas shortages in the UK - 240$/boe
Countdown to 100$ oil (21bis) - long term vs short term worries
Countdown to 100$ oil (21) - 8-page extravaganza in the Independent: 'we're doomed'
Countdown to 100$ oil (20) - Meteor Blades is Da Man in 2005
Countdown to 100$ oil (19) - Your bets for 2006
Countdown to 100$ oil (18) - OPEC happy with oil above 50$
Countdown to 100$ oil (17) - Does it matter politically? A naked appeal for your support
Countdown to 100$ oil (16) - We'll know on Monday
Countdown to 100$ oil (15) - the impact on your electricity bill
Countdown to 100$ oil (14) - Greenspan acknoweldges peak oil
Countdown to 100$ oil (13) - Katrina strikes / refinery crisis
Countdown to 100$ oil (12) - Al-Qaeda, oil and Asian financial centers
Countdown to 100$ oil (11) - it's Greenspan's fault!
Countdown to 100$ oil (10) - Simmons says 300$ soon - and more
Countdown to 100$ oil (9) - I am taking bets
Countdown to 100$ oil (8) - just raw data
Countdown to 100$ oil (7) - a smart solution: the bike
Countdown to 100$ oil (6) - and the loser is ... Africa
Countdown to 100$ oil (5) - OPEC inexorably raises floor price
Countdown to 100$ oil (4) - WSJ wingnuts vs China
Countdown to 100$ oil (3) - industry is beginning to suffer
Countdown to 100$ oil (2) - the views of the elites on peak oil
Countdown to 100$ oil (1)

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It's crossposted on dKos, as usual - http://www.dailykos.com/story/2006/3/24/184733/170

In the long run, we're all dead. John Maynard Keynes

by Jerome a Paris (etg@eurotrib.com) on Fri Mar 24th, 2006 at 07:16:20 PM EST
It has gone on for quite a while.  and does perhaps have a disadvantage that in a sense, it has to hit 100 someday.  So maybe it's lost some excitement.

Maybe there should be competitive countdowns--like when will the Dow set a new all time high, or will it?  It's at just under 11,300, and I know many on the site are expecting a catastrophe.  So we could be positive and have a countdown to 12,000 or higher,,,,,or we could predict American disaster and countdown to,,what?,,,8000?  That might add some excitement in the sense of which one would be achieved first--oil at $100 or Dow at 12000, for example.

Or maybe we should countdown the CAC 40 or Footsie 100.  I guess the advantage of the Dow is that's it's likely the most recognized financial index in the world.

by wchurchill on Fri Mar 24th, 2006 at 08:59:58 PM EST
[ Parent ]
These are great factual diaries.  strung together they constitute a sobering, analytical journey through one of the great practical problems the world faces by someone who is a professional in the field.

These diaries have more than a value for shaping political opinions, a wise person who is shopping for a residence or business location would be very wise to consider all the passive heating/cooling measures available.  What looks a little expensive now may be very economical if the price of energy skyrockets.  In historical terms we have had amazing access to vast cheap stores of energy over the last century.  When its price reflects its long-range value we will need to tighten our belts.

Please keep up the diaries, it is an interesting tale told well.

"I said, 'Wait a minute, Chester, You know I'm a peaceful man...'" Robbie Robertson

by NearlyNormal on Fri Mar 24th, 2006 at 10:13:47 PM EST
[ Parent ]
Yes. These diaries present scarce and important information that has changed my thinking.

Words and ideas I offer here may be used freely and without attribution.
by technopolitical on Sat Mar 25th, 2006 at 08:22:48 PM EST
[ Parent ]
What do you suggest? Should we all move to the tropics where we won't need natural gas to heat our homes?

Between the gas increase and the sea level rise I guess I can look forward to living underwater in a cold house soon.

Lookup the height above sea level of Long Island NY if you want to see what I'm talking about...

Policies not Politics
---- Daily Landscape

by rdf (robert.feinman@gmail.com) on Fri Mar 24th, 2006 at 07:39:42 PM EST
Well, this is the logical outcome of the theory of competitive advantage. Why should it be economic for anyone to live outside the most temperate areas? They will always have an advantage.
by Metatone (metatone [a|t] gmail (dot) com) on Sat Mar 25th, 2006 at 02:44:49 AM EST
[ Parent ]
Of course you can use isolation instead of heating. There are some houses built in Sweden that does not require heating at all. They get enough from body heat and excess heat from appliances.

Still I guess it would be better to live were neither heating nor isolation is required, from a strictly economic wievpoint. But then you can not enjoy a winter day with beuatiful snow everywere. Guess I should head out and enjoy it instead of commenting about it. :)

A vote for PES is a vote for EPP! A vote for EPP is a vote for PES! Support the coalition, vote EPP-PES in 2009!

by A swedish kind of death on Sat Mar 25th, 2006 at 10:09:46 AM EST
[ Parent ]
This month's English version of Le Monde Diplomatique has "Saudi Arabia: the sands run out". You may have covered this already, but in this article Michael Klare, the author, points out that DOE's predictions for Saudi production have also begun to diminish.
The most striking indication of this change in outlook is the new assessment in the DoE's International Energy Outlook 2005, released last July. The 2004 edition gave that Saudi 12.3mbd increase we mentioned, but the new edition projected an increase of only 6.1mbd by 2025, less than half as much. No explanation was provided for this turnaround, but it can only be assumed that the analysis of... sceptics has begun to influence official thinking in Washington.

 

by aden on Fri Mar 24th, 2006 at 09:17:12 PM EST
An Iowa corn refinery, open since December, uses 300 tons of coal a day to make ethanol. So just how green can it be?

Full Story:

A Carbon Cloud Hangs Over Green Fuel

Policies not Politics
---- Daily Landscape

by rdf (robert.feinman@gmail.com) on Sat Mar 25th, 2006 at 09:36:32 AM EST


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