Tuesday, January 13, 2009

P16. Pick Points

Half-a-dozen or so stories of interest.

Well, although the Russian Gazprom has claimed it has opened the taps to let gas flow to Europe, then nothing continued to come out of the other end. And both sides blame the other. Ukraine complains that to ship gas from the entry point supplied they would have to cut off domestic supply lines, since there is no direct export line to Bulgaria from the entry (at Sudzha) and that the gas was being supplied at too low a pressure. While EU monitors are now present, they aren’t allowed to see everything. The Russians now blame Ukraine (and the US), and says that Ukraine wanted gas to be supplied to three inlet points, rather than just the one that Russia serviced. The Bulgarian Prime Minister has gone to Moscow, but it promises to be another cold week in Bulgaria and Slovakia.

In perhaps a marker of things to come, Pakistan is giving more thought to coal-fired power plants as their gas supplies remain inadequate, and the country is some 4,500 MW short of electricity supply. The gas and power shortage has led to shortages of fertilizer and is anticipated to last at least three years while what is being supplied is at a price (from Iran) that Pakistan will struggle to pay.

Meanwhile, over in Iraq the different factions are perhaps pulling the industry apart. China has now arrived to start work on a project for which the initial documents were signed in 1997, and Shell has had an agreement that appears to inhibit the production of fertilizers, while allowing them control of all the natural gas produced in South Iraq. Iraq averaged 2.28 mbd of production, and exported 1.85 mbd in 2008, and has 11 new fields to develop. But the inspector general’s report is not promising, noting, among other things, that the rotors for the gas compressors on the pipelines in southern Iraq have not been installed.

Hmm! Having commented that Mexico was only producing 3 mbd earlier this week, the November report is now out and that number has fallen to 2.71 mbd, which is already below Mexico’s target of 2.75 mbd for the year. However some of the problem was related to port and shipping issues, and so the numbers may rise again, though two ports were closed again because of the weather this week. The big questions of how much Cantarell will decline this year, and what can be done to replace it remain. Replacement fields that Mexico talk about won’t come on stream until 2011 at the earliest.

China has no intention of cutting their gas price, which they just dropped (before adding an additional tax on January 1). Natural gas prices in contrast are slated to increase in a move to make the industry more profitable, since the current price is about a third of that of crude oil. They produced 2.1 trillion cubic feet in 2008. And the idea of increasing gas taxes is not confined to Asia. Massachusetts is considering doing the same thing and they may not be the only state who is thinking about it, they all need the money.

In his remarks (which I will expound on again later) to the Senate today, Dr Chu the Energy Secretary designate, talked about encouraging the plug-in hybrid, though Robert Rapier has picked up on the moves toward a total electric vehicle. However the current problems in Nepal, suggest that this step alone won’t be enough since Nepalese drivers are currently demonstrating because they are quite vulnerable to load shedding, which has been going on excessively in that country. Yet one of the comments Dr Chu made today was that the rest of the country is going to have to adopt the load shedding and power demand shifting that has become commonplace in California. Hope it works out better here!

For more information and other coverage check with The Energy Bulletin and Drumbeat at The Oil Drum.

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