Tuesday, March 24, 2009

P55. Pick Points

Given the size of a couple of the stories a little less than half-a-dozen stories of interest today:

Redoubt, the volcano in Alaska that was being monitored when I flew over here has now erupted, and though it threw a plume of ash some 60,000 ft into the air, the wind was such that Anchorage, 110 miles away, was not covered. And the heavy snow falls turned into enough water that much of the ash that landed was washed away to a distance of up to 22 miles. By 4:30 am Monday there had been five eruptions, back in 1989 when it last erupted the eruptions lasted for four months. It has since erupted again, and appears now to be building a lava dome.

Source Alaska Volcano Observatory/U.S. Geological Survey

More recently the air had cleared enough to allow planes to be unwrapped and to take off again and resume service.

Source Alaska Volcano Observatory/U.S. Geological Survey

It has been postulated, by Lamb among others, that the fine dust high in the atmosphere can cause a reduction in the Earth temperature, though the effect of one volcano really depends on the size and volume of the ash generated and I suspect this is not producing enough yet to be significant.

Last year, shortly after he was inaugurated President Medvedev travelled to Kazakhstan, Turkmenistan and Uzbekistan with the President of Gazprom to lock up control of the natural gas supplies for those countries. Now the agreement may turn out to be an expensive one for Gazprom. The company has seen its own production drop 25% and so relies on the agreement, but that was at a $409/tcm, and now the price is falling to $260 per tcm.
Gazprom currently buys about 50 billion cubic meters (bcm) of Turkmen gas, 15 bcm of Kazakh gas, and 7 bcm of Uzbek gas, amounting to about 14 percent of the company’s total production in 2008, according to the Nezavisimaya Gazeta report. Rising transit costs and falling consumer demand in Europe and Russia mean that the company’s operating costs in Central Asia are becoming a big burden. The company has already scaled back development plans for the region.

Gazprom officially acknowledged in early March that gas production in 2009 may decrease by 7 percent this year. But analysts say the cut in output could likely to be much higher.
Poland meanwhile, which had an agreement with the “middleman” between Gazprom and the Ukraine (RosUkrEnergo), an entity which has supposedly been kicked out of the deal, is now negotiating directly with Gazprom. The hope is to get the agreement in place so that the Poles can fill their storage tanks before winter comes, when supply becomes more of an issue. Meanwhile Ukraine is reducing the amount of gas that it plans on buying from Gazprom by 17.5%.. However part of this is that Ukraine needs someone to invest in their infrastructure and update it, and the hope is that this will come from Europe which is not sitting too well with the Russians.

And speaking of natural gas, CERA has announced a new analysis which sensibly says:
North American natural gas is entering a new era in which supply is no longer constrained, according to a new Cambridge Energy Research Associates (CERA: undefined, undefined, undefined%) multiclient study, Rising to the Challenge: A Study of North American Gas Supply to 2018. A revolution in technology has unlocked "unconventional" gas resources, dramatically changing the prospects for the market. Demand, rather than supply, will be the challenge for the market going forward, accentuated currently by the economic crisis.
Not wishing to be argumentative, but one wonders if CERA has been monitoring the rates at which drilling rigs are being shut down?

I would normally not take up this much space in a Pick Points, but the report goes on to say
Given the increased productivity of unconventional wells, the study concludes that it is not necessary to increase drilling activity to maintain - or increase - production. After years of developing unconventional gas with its long-lived production, in the aggregate, the average decline rate will fall. This means, the study says, that a smaller quantity of new production is required to offset natural production declines. CERA does expect production to increase, with dry gas productive capacity growing from an average of 53.5 Bcf/d in 2009 to 60.6 Bcf/d in 2018 in the lower 48 United States, and from 15.8 Bcf/d in 2009 to 19.6 Bcf/d in 2018 in Canada.
Sometimes I wonder what reports they are reading, the average life of an unconventional (read gas shale) well is less than 3 years. The average well is depleting 60% in the first year. I have posted on this before and these are not my numbers. Well, as they say, the next eighteen months will see which of us is correct. And LNG imports may change the picture a little, Wood Mackenzie are expecting them to rise. On the other hand the steps by the Indiana Governor to allow synthetic natural gas from coal won’t likely make much of a difference.

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