Why Micro CHP is short sighted [RE-wrenches]

Tue Nov 1 08:16:14 PST 2005

This is a rather concise article on the U.S. domestic natural gas situation.
Peak natural gas appears to be closer than peak oil
I find it an interesting counterpoint to the optimism displayed by those
finding new (worthwhile) uses for Natural Gas.
Wallace Stahle
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The Natural Gas Cliff

Dale Allen Pfeiffer in Dale Pfeiffer's Blog Wednesday 26 of October, 2005
http://www.lulu.com/allenadale

The situation for natural gas differs from the situation for oil, but it is
not any brighter. While pumping oil from the ground is somewhat like drawing
syrup through a slushy, pumping natural gas is more like poking a hole in a
car tire. This is due to the fact that oil is a liquid and natural gas is a
gas. When you poke a hole in a car tire the air will escape for some time,
flowing freely outward until pressure is equalized between the outside
atmosphere and the interior of the tire. To extract the remaining air from
the tire, you must attach it to a vacuum pump, or squeeze the inner tube.

Tapping into a body of natural gas is generally less costly than tapping
into an oil field. Once the wells are drilled, you simply have to hook them
to a pipeline. Natural gas production increases rapidly from the time a
field is first put into production. Production will rise until the field is
fully covered with producing wells. Then production will flatten out and
continue for some length of time. Once the production of a field has
flattened out, it is difficult to increase it further. If you wish to
increase production, you must find another field. At some unknown point,
production in the field will fall into a marked decline. The decline rate
for natural gas fields is much higher than the decline rate for oil fields;
somewhere in the neighborhood of 5 to 10%, compared to oil's 2 or 3%.

Because the decline is so steep, it is known as the natural gas cliff.

There is little warning of the cliff in the production of the field. The
last square foot of gas to be extracted from a field before production falls
off of the cliff will require no more effort than the first square foot
extracted from the field.

Because we are dealing with a gas here, measurements are different than
those we use for oil. Oil is measured in barrels or metric tones. Natural
gas is measured in cubic feet, most commonly in billions of cubic feet
(Bcf), or trillions of cubic feet (Tcf). A trillion cubic feet may sound
like a lot, but we must remember that gas is less dense than oil so it holds
less energy. U.S. demand for natural gas is expected to rise to 30 Tcf per
year by 2010. At one time, it was believed that most of this would come from
the Gulf of Mexico, but the US Minerals Management Service expected gulf
production to begin declining this year, from a peak of 6.1 Tcf per year.

The North American outlook for natural gas production is not good. Mexican
production has been in decline since 1999. U.S. production has been in a
plateau for some time. All the big finds have been tapped and are in
decline. Currently, we are bringing new wells online at a maddening pace
just to keep our domestic production flat. And the new wells are declining
at rates as high as 80% in the first year. The size of the new finds is also
diminishing. Over the past decade, the amount of gas found per foot drilled
has declined by 50%.

The United States turns to Canada to make up the difference between its own
flattened production and rising demand. Canada currently supplies at least
13% of the U.S. gas demand. Yet Canada's large fields have flattened out in
production, and it is likely that Canadian production will fall off the
cliff within the next several years.

Worldwide, natural gas production will not begin to decline for at least
another decade, and by some estimates not for twenty to thirty years.

However, because we are talking about a gas, world production is not as
important as regional production. We must look to North American natural gas
production to meet the lion's share of our needs. Natural gas is most easily
transported in pipelines; it is very difficult to transport overseas. The
only effective way to ship it is to liquefy it, transport it in specially
designed refrigerated tankers, and then unload it at specially designed
facilities which will thaw it back to the gaseous state. All of this is done
at an estimated 15 to 30% energy loss.

Currently, there are only four Liquid Natural Gas (LNG) offloading
facilities in the country, located in Louisiana, Georgia, Maryland and
Massachusetts. In 2003, we imported an average of 1.5 Bcf per day (Bcf/day).
This amounted to 2% of our natural gas demand of 67 Bcf/day. By the end of
2006, we are hoping to add another 3 Bcf/day of LNG imports. But by the end
of the decade, demand is expected to rise to 77 Bcf/day.

Today the global fleet of LNG tankers numbers 140, with a capacity of 14.5
Bcf/day. By the end of the decade, the U.S. will require the equivalent of
this entire fleet just to service our needs. LNG tankers cost an average

$155 million per ship to build. So the tanker fleet alone will require an
investment of $13 billion. Add to this the expense of building over 30 new
LNG projects and the associated pipelines, and the necessary investment
quickly climbs over $100 billion. Considering our current budget deficit and
the precarious state of the U.S. economy, this sort of investment is
unlikely.

This is why politicians and the corporations who pay them are clamoring to
open currently restricted areas of Alaska, the Canadian Arctic, the U.S.

Rocky Mountains, and the deep ocean to natural gas development. Yet, the
eventual investment in pipelines and drilling rigs to tap these sources
would be even higher than the cost of LNG development: an estimated $120
billion in infrastructure. And from the time construction begins on this
infrastructure, it will take 5 to 7 years before any of this gas begins to
flow. In total, we are talking about less than a decade worth of natural gas
here, at our current rate of demand.

In the United States, 60% of all homes are heated with natural gas, and this
percentage is increasing as over 70% of new homes utilize natural gas for
heating. Because natural gas burns cleaner than coal or oil, electric
generating plants are turning to natural gas to meet stricter environmental
standards. By 2002, 90% of all new power plants were gas-fired. Natural gas
also has many other important uses; most notably, it provides the feedstock
for our fertilizer industry.

The North American natural gas cliff is the other side of the approaching
energy crisis. Our economy, and our very lifestyle, is caught between the
gas cliff and the oil peak. Between them, they are going to make life very
difficult in the years to come.

Posted on Wednesday 26 of October, 2005

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