How does Spectra’s northern cold snap excuse for fracked gas apply to Florida, the target for the Sabal Trail, Hillabee, and Florida Southeast Connection methane pipelines? And if Spectra CEO Greg Ebel gets his wish to export gas, which T. Boone Pickens already explained will drive up domestic prices, how will higher gas prices help northern cities? Maybe Spectra’s pipelines aren’t for warming up cold houses; maybe they’re for corporate profit at the expense of landowners, taxpayers, ratepayers, and all those “natural” gas bus riders who will be surprised when their fares go up. Maybe we should stop the Sabal Trail pipeline and see if the fracking house of cards falls apart.
Jonathan Fahey wrote for AP 10 March 2014, Natural gas industry struggles to keep promises,
There’s plenty of natural gas in the ground, everyone seems to agree. But the harsh weather this winter shows there are obstacles to producing it, and more pipelines have to be built.
The bitter temperatures boosted demand for natural gas to heat homes and businesses. But wells in some places literally froze, making it difficult for some drillers to keep gas flowing. And the high demand clogged pipelines, so even when there was enough production, the gas couldn’t get where it needed to go.
Shortages cropped up, and prices in some places soared to record levels. Californians and Texans were asked to reduce their power consumption because utilities were running low on gas to run power plants. Montana State University in Billings had to cancel classes for a day because of a natural gas shortage.
Jim Fuquay amplified that chilly northern point for the Fort Worth Star-Telegram 11 March 2014:
Prices in New England briefly spiked to record levels. Californians were asked to reduce their power consumption because utilities were running low on gas to run power plants.
If the problem is cold weather in the north, why does Spectra want to build a pipeline to sunny Florida?
Curiously, the Star-Telegram omitted this point from the AP story; I’ve emphasized the redacted point:
Based on that promise of ample supplies and stable prices, the nation has geared up to use more and more natural gas. Utilities are abandoning coal and nuclear power for gas, chemical companies that use natural gas as a feedstock have re-opened old plants and are planning new ones, export facilities are being built, and trucks and locomotives are even beginning to switch to natural gas….
The industry is planning several terminals to export natural gas to customers in Asia and Europe, where gas remains much more expensive than in the U.S. The terminals will be built where pipeline constraints are not a problem, but the terminals approved by the Energy Department so far would increase demand by 13 percent.
AP quoted this guy after their Montana paragraph, but his title (I’ve emphasized it) makes his quote more appropriate about the export market:
“We struggled to get the supply there as quickly as we needed,” said Colin Parfitt, who runs Chevron’s global trading operations, at an industry conference here last week. “It’s a reminder there will be volatility in our market.”
Look at this point from the panel both Parfitt and Spectra CEO Greg Ebel were on:
- LNG exports: why are the US terminals winning the battle against the Canadian projects?
The Star-Telegram may have noticed that inadvertent allusion to the real profit target for fracked gas: exports. The Star-Telegram replaced that paragraph with one quoting a domestic executive:
“We know the resource base is there, but you don’t burn the resource base. You burn production” that makes it to consumers, Bob Ineson, managing director for North American gas at IHS, said at last week’s CERAWeek energy conference in Houston.
The Star-Telegram left in a version of this AP paragraph, though:
Anthony Yuen, a natural gas analyst at Citi, predicts demand will “mushroom” staring next year and grow 33 percent by 2020 from last year’s 73 billion cubic feet a day.
Where’s all that demand supposed to come from? The U.S. population isn’t growing anywhere near that fast, nor is U.S. industry. Could it be exports to India and China? Like Spectra’s hometown House member Ted Poe (R TX-02) has spelled out in two of his subcommittee hearings he wants? Like FERC Commissioner Tony Clark said to FERC’s own House oversight subcommitee? Like the Department of Energy has changed the rules to expedite?
Let’s look at the bottom line here:
The problems came as a shock because the natural gas market was thought to have escaped from the volatility of the past — drillers have discovered enormous amounts of natural gas, production is at record levels and prices had been relatively steady.
But now there is concern about whether the natural gas industry can produce all of the gas their old and new customers need, and deliver it to them through a pipeline system that hasn’t been able to keep up with the new demand.
Pipelines take years to plan, negotiate, permit, and build. Meanwhile even big solar plants take only months from planning to delivering power, and solar learns faster than any other power source, according to Citi GPS.
And think what happens without the pipelines:
Drillers have suffered significant losses in recent years because of persistently low prices. In 2012, natural gas fell below $2 for the first time in a decade. Many companies curtailed gas production and switched to drilling for oil, which is more profitable because of high prices. Natural gas production rose just 1.5 percent last year, while oil production in the U.S. rose 15 percent to 7.4 million barrels a day.
And neither the AP nor the Star-Telegram says, but U.S. solar power generation increased 41% in 2013.
As former FERC Chair Jon Wellinghoff said last year, solar power will overtake every other U.S. power source within a decade.
That’s going to happen because solar PV prices per watt keep falling every year. Which is the opposite of methane prices:
So far this year, the natural gas futures price has averaged $4.82 per 1,000 cubic feet. That’s 20 percent higher than last year’s average and 70 percent higher than 2012.
Retail prices are still far below where they were in the early and middle 2000s. But the average residential price is expected to rise 12 percent this year to $11.56 per 1,000 cubic feet, according to the Energy Department. It would be the first increase in residential prices since 2008.
And the fossil fuel industry wants methane prices to rise:
Citi’s Yuen predicts that because increased demand and continued modest production growth, prices will rise another 15 percent at least. Toward the end of the decade, prices will average around $5.50, a level drillers would be more comfortable with.
This is the same Anthony Yuen who is a coauthor on the Citi report that says solar learns far faster than any other power source.
Once again, where do the methane pushers hope to get that demand?
The Star-Telegram, while mostly avoiding the export topic, inadvertently referred to it:
Bill Maloney, executive vice president of development and production in North America for Statoil, said it’s clear to him that the industry can produce “far more natural gas” than at present. It’s more a matter, he said, of whether there is “enough demand to lead to sustained higher prices.”
Tell us more, Statoil. Bloomberg TV, 5 March 2014, U.S. Should Consider LNG Exports, Statoil Says.
March 5 (Bloomberg) — Statoil ASA Chief Financial Officer Torgrim Reitan talks about the company’s U.S. operations, liquefied natural gas exports and geopolitical risks in Algeria. He speaks with Francine Lacqua, Manus Cranny and Brian Swint on Bloomberg Television’s “The Pulse.” (Source: Bloomberg)
Which energy source do you think is going to win in the long run? The one that keeps going down in price year after year? Or the one whose prices are already going up and that will spike if LNG exports take off?
What’s the key to this very literal power shift?
“It’s a question of getting to market,” said Greg Ebel, CEO of Spectra Energy, a pipeline company that moves one-fifth of the gas used in the U.S. every day. “How are we going to actually deliver the supply needed, that’s a real challenge for us.”
And Greg Ebel already said he expects to export.
Without lots of new pipelines pretty quickly for export, the fracking craze will end.
Solar power will win, especially in the Sunshine State and in the rest of the sunny south.