View from Louisiana
-
Upload
global-interdependence-center -
Category
Documents
-
view
215 -
download
0
description
Transcript of View from Louisiana
![Page 1: View from Louisiana](https://reader034.fdocuments.us/reader034/viewer/2022051423/568c4b011a28ab49169a800b/html5/thumbnails/1.jpg)
July 27, 2012
Dr. Loren C. Scott
Loren C. Scott & Associates, Inc.
www.lorencscottassociates.com
![Page 2: View from Louisiana](https://reader034.fdocuments.us/reader034/viewer/2022051423/568c4b011a28ab49169a800b/html5/thumbnails/2.jpg)
Natural Gas
An economic civil war
underway
![Page 3: View from Louisiana](https://reader034.fdocuments.us/reader034/viewer/2022051423/568c4b011a28ab49169a800b/html5/thumbnails/3.jpg)
0
2
4
6
8
10
75 80 85 90 95 00 05 10
PGA PGAL PGAH
Figure 11: Price of Natural Gas
Pe
r M
MB
TU
2012 2013
PGA $2.00 $2.00
Low $1.50 $1.50
High $2.30 $2.30
![Page 4: View from Louisiana](https://reader034.fdocuments.us/reader034/viewer/2022051423/568c4b011a28ab49169a800b/html5/thumbnails/4.jpg)
![Page 5: View from Louisiana](https://reader034.fdocuments.us/reader034/viewer/2022051423/568c4b011a28ab49169a800b/html5/thumbnails/5.jpg)
Logistical Issues
• Each hydraulic fracking stage requires:
– 300,000 gallons of water
– 200 tons of sand
• 20-40% of fluid solids used in fracking flow back to the surface as hazardous waste and require transportation to other well sites or treatment and/or disposal sites
![Page 6: View from Louisiana](https://reader034.fdocuments.us/reader034/viewer/2022051423/568c4b011a28ab49169a800b/html5/thumbnails/6.jpg)
Michael Economides in Offshore
Engineer 11/11
• 2011:
– 35,000 wells drilled in U.S.
– 120,000 hydraulic fracturing treatments executed; 4
stages per well on average
– Zero cases of drinking water contamination
• 60 years of fracturing
– 1.2 million wells
– No scientific cases of drinking water contamination
![Page 7: View from Louisiana](https://reader034.fdocuments.us/reader034/viewer/2022051423/568c4b011a28ab49169a800b/html5/thumbnails/7.jpg)
John Deutch, Former CIA Chief,
Chair of President Obama’s Panel
on Hydraulic Fracturing
“…economic benefits of natural gas production massively outweigh
environmental and public health concerns.”
![Page 8: View from Louisiana](https://reader034.fdocuments.us/reader034/viewer/2022051423/568c4b011a28ab49169a800b/html5/thumbnails/8.jpg)
![Page 9: View from Louisiana](https://reader034.fdocuments.us/reader034/viewer/2022051423/568c4b011a28ab49169a800b/html5/thumbnails/9.jpg)
Manufacturers (especially
chemicals) and power plants very
happy
![Page 10: View from Louisiana](https://reader034.fdocuments.us/reader034/viewer/2022051423/568c4b011a28ab49169a800b/html5/thumbnails/10.jpg)
Industrial Uses Of Natural Gas
• Ammonia fertilizer
• From natural gas liquids like ethane we get ethylene which is the foundation of
– Food packaging, toys, house wares
– Swimming pool liners, vinyl pipes
– Pantyhose, clothing, carpets
– Bottles, cups
– Tires, foot ware, auto antifreeze
• Clean burning boiler fuel
![Page 11: View from Louisiana](https://reader034.fdocuments.us/reader034/viewer/2022051423/568c4b011a28ab49169a800b/html5/thumbnails/11.jpg)
Two Major Benefits to
Chemical Producers
![Page 12: View from Louisiana](https://reader034.fdocuments.us/reader034/viewer/2022051423/568c4b011a28ab49169a800b/html5/thumbnails/12.jpg)
![Page 13: View from Louisiana](https://reader034.fdocuments.us/reader034/viewer/2022051423/568c4b011a28ab49169a800b/html5/thumbnails/13.jpg)
Plus: Naphtha v. Ethane
• Ethylene made of
– In Europe:
• naphtha derived from oil
• Oil @ $100 $1,400 to make ton of ethylene
– In U.S.
• Ethane, derived from natural gas
• $730 to make ton of ethylene
![Page 14: View from Louisiana](https://reader034.fdocuments.us/reader034/viewer/2022051423/568c4b011a28ab49169a800b/html5/thumbnails/14.jpg)
Potential Problem:
European Shale Gas Plays
• Cuadrilla Resources: September 2011
– Bowland Shale
– 200 TCF play in northwest England
• Potential salvation:
– Extreme greens in Europe
– Environmental group WWF has called for moratorium on shale gas exploration in the UK, with more focus on renewable energy.
– UK parliamentary committee has investigated & will not introduce restrictions
![Page 15: View from Louisiana](https://reader034.fdocuments.us/reader034/viewer/2022051423/568c4b011a28ab49169a800b/html5/thumbnails/15.jpg)
Thank God for France!
• May 11, 2011 National Assembly voted to
prohibit hydraulic fracing in the country
• France now imports 98% of its natural
gas
• Ranks 2nd among European states in
shale-gas potential according to the EIA.
• Bulgaria recently disallowed as well
![Page 16: View from Louisiana](https://reader034.fdocuments.us/reader034/viewer/2022051423/568c4b011a28ab49169a800b/html5/thumbnails/16.jpg)
Power producers happy as well
EPA attacks on coal-fired power
plants: an alternative low cost fuel
is great
![Page 17: View from Louisiana](https://reader034.fdocuments.us/reader034/viewer/2022051423/568c4b011a28ab49169a800b/html5/thumbnails/17.jpg)
Power Use of Natural Gas
• Next 2-3 years little change
• After that, between 35-75 gigawatts of
coal-fired power plants will be shut down
• Amount depends on how rapidly EPA
regulations on cross-state pollution &
mercury emissions are implemented
• 60 gigawatts will power 35 mm homes
![Page 18: View from Louisiana](https://reader034.fdocuments.us/reader034/viewer/2022051423/568c4b011a28ab49169a800b/html5/thumbnails/18.jpg)
One estimate:
Industrial & Power needs will
increase demand by 2-3 TCF a
year
Presently: 22 TCF per year total
![Page 19: View from Louisiana](https://reader034.fdocuments.us/reader034/viewer/2022051423/568c4b011a28ab49169a800b/html5/thumbnails/19.jpg)
So where’s the
“economic civil war”
The producers are not happy.
They want more demand
Guess where they are looking?
![Page 20: View from Louisiana](https://reader034.fdocuments.us/reader034/viewer/2022051423/568c4b011a28ab49169a800b/html5/thumbnails/20.jpg)
![Page 21: View from Louisiana](https://reader034.fdocuments.us/reader034/viewer/2022051423/568c4b011a28ab49169a800b/html5/thumbnails/21.jpg)
LNG Retrofit
• Re-Build for Export Terminal: Cheniere Energy
– Sabine Pass LNG: $4.5-$5 billion project – convert import/export terminal (7/11); start construction II-12; Done 2016. $4.5 -$5 billion to build first 2 of 4 trains
– Approval from DOE given to export LNG (5/11) to non free trade partners of U.S. (valuable asset); Japan & Spain not free trade partners & import 4.12 tcf per year.
– Got FERC approval 4/12.
– Now has three 20-year contracts for 10.5 bcf annually. (1/12); BG Group – Britain; Gas Natural Fenosa – Spain; GAIL – India
– Received $2 billion from Blackstone Group 2/26/12
![Page 22: View from Louisiana](https://reader034.fdocuments.us/reader034/viewer/2022051423/568c4b011a28ab49169a800b/html5/thumbnails/22.jpg)
LNG Retrofit • Re-Build for Export Terminal
– Cameron LNG (Sempra) asked FERC for 2-year authority
to re-export; Inked deals w Mitsubishi and Mitsui Corps to
work together in exchange for 1.7 bcfd (620 bcf annually)
of export capacity to Japan. Plus GDF Suez of France
agreed to about 0.4 bcfd im 5/12. Start construction late
2013; operate 2016. $6 billion project; 130 jobs(4/12)
– Lake Charles Exports, LLC (Trunkline)
• Received DOE permission to export domestic gas from its terminal
7/11; 2 bcfd for 25 years (8/11)
• Applied to FERC to start construction by 2014; ship by 2018 (4/12)
• Financial support from BG Group & Southern Union
• All 3: about 2 tcf per year (+10%)
• Note: LNG export price - $18 mmbtu
![Page 23: View from Louisiana](https://reader034.fdocuments.us/reader034/viewer/2022051423/568c4b011a28ab49169a800b/html5/thumbnails/23.jpg)
Oil: Lots of potential
Watch the Gulf & the shale
plays
![Page 24: View from Louisiana](https://reader034.fdocuments.us/reader034/viewer/2022051423/568c4b011a28ab49169a800b/html5/thumbnails/24.jpg)
0
20
40
60
80
100
120
90 92 94 96 98 00 02 04 06 08 10 12
Fig. 7: Oil PricesP
ric
e p
er
Ba
rre
l
2011 2012 2013
Average $100 $90 $85
Low $70 $70
High $110 $110
![Page 25: View from Louisiana](https://reader034.fdocuments.us/reader034/viewer/2022051423/568c4b011a28ab49169a800b/html5/thumbnails/25.jpg)
The Permitatorium
• As of 12/1/11:
– Average approval time pre-moratorium: 61 days
– Average approval time 2011: 213 days
• Average Approval rate:
– Pre-spill: 73.4%
– Post-spill: 34%
• Permits issued for deepwater:
– 2009: 163
– 2010: 74
– 2011: 79
– 2012-I: 44 (176 annual rate)
![Page 26: View from Louisiana](https://reader034.fdocuments.us/reader034/viewer/2022051423/568c4b011a28ab49169a800b/html5/thumbnails/26.jpg)
The Permitatorium
• CFO of ATP Oil & Gas Corp: One permit that
used to take 30-40 pages took 3,600 pages.
• Pre-spill: 33 rigs in deep waters
• Post-spill: 11 rigs
• 11 deepwater drill ships left the GOM after
spill
• Good news: As of 5/12---24 rigs in deep waters
• Good news: 9 new drill ships or semi-
submersibles on way & in place by 2013-II
![Page 27: View from Louisiana](https://reader034.fdocuments.us/reader034/viewer/2022051423/568c4b011a28ab49169a800b/html5/thumbnails/27.jpg)
Benefits of the Gulf?
• Elephant finds
• Straddles world’s biggest consumer
• Politically stable area (Argentina alarm)
• Cost of taxes, royalties, and regulations
among lowest in world
• Vast network of pipelines & refineries
![Page 28: View from Louisiana](https://reader034.fdocuments.us/reader034/viewer/2022051423/568c4b011a28ab49169a800b/html5/thumbnails/28.jpg)
![Page 29: View from Louisiana](https://reader034.fdocuments.us/reader034/viewer/2022051423/568c4b011a28ab49169a800b/html5/thumbnails/29.jpg)
![Page 30: View from Louisiana](https://reader034.fdocuments.us/reader034/viewer/2022051423/568c4b011a28ab49169a800b/html5/thumbnails/30.jpg)
Closed NE Refineries
• Need to get gasoline from Gulf coast refineries
• Need 100,000 b/d over pipeline capacity---need tankers/barges
• EIA: U.S. has fewer than 40 tankers and 270 barges meeting these requirements
• American Maritime Partnership: told U.S. officials they can meet the needs
![Page 31: View from Louisiana](https://reader034.fdocuments.us/reader034/viewer/2022051423/568c4b011a28ab49169a800b/html5/thumbnails/31.jpg)
U.S. – Mexico Western Gap Treaty
![Page 32: View from Louisiana](https://reader034.fdocuments.us/reader034/viewer/2022051423/568c4b011a28ab49169a800b/html5/thumbnails/32.jpg)
Western Gap Treaty
• Needs to be ratified by legislatures in both countries
• Gap is beyond 200 nautical mile Exclusive Economic Zone that surrounds both countries
• Law of Seas---if mineral deposits there, can go out 350 miles
• How to split up? Border agreement in 2001: banned drilling buffer zone of 1.4 miles from Gap
• U.S. industry and Pemex to jointly develop reservoirs straddling the gap
• BOEM says contains 172 mmb oil and 304 bcf of natural gas
![Page 33: View from Louisiana](https://reader034.fdocuments.us/reader034/viewer/2022051423/568c4b011a28ab49169a800b/html5/thumbnails/33.jpg)
“Shale Gale”
Fracking applied to oil shale
![Page 34: View from Louisiana](https://reader034.fdocuments.us/reader034/viewer/2022051423/568c4b011a28ab49169a800b/html5/thumbnails/34.jpg)
![Page 35: View from Louisiana](https://reader034.fdocuments.us/reader034/viewer/2022051423/568c4b011a28ab49169a800b/html5/thumbnails/35.jpg)
![Page 36: View from Louisiana](https://reader034.fdocuments.us/reader034/viewer/2022051423/568c4b011a28ab49169a800b/html5/thumbnails/36.jpg)
![Page 37: View from Louisiana](https://reader034.fdocuments.us/reader034/viewer/2022051423/568c4b011a28ab49169a800b/html5/thumbnails/37.jpg)
North Dakota’s Bakken Field
• 2003: 10,000 b/d produced
• 3/2012: 575,400 b/d produced---57-fold increase
• ND surpassed Alaska as 2nd largest source of
domestic oil 3/12
• Biggest Field ever in U.S.? Potential-O&G Journal
4/12:
– Prudhoe Bay: sustained a 1.5 mmbd rate for 9 years
– Bakken: May sustain 1.5 mmbd rate for 25 years
• Strange result: First time ever oil price
differentials
![Page 38: View from Louisiana](https://reader034.fdocuments.us/reader034/viewer/2022051423/568c4b011a28ab49169a800b/html5/thumbnails/38.jpg)
![Page 39: View from Louisiana](https://reader034.fdocuments.us/reader034/viewer/2022051423/568c4b011a28ab49169a800b/html5/thumbnails/39.jpg)
US-Europe Price Divergence
• Bakken is pushing large amounts of oil into Cushing Hub in Oklahoma
• Logistical constraint; Not enough pipelines flowing out to handle inflow – In 2011 only 395k of 456k bpd are moved by
pipeline; going to 1mm+ by end of 2012
– New pipelines, rail tripled shipping capacity by end of 2011.
• Cushing is settlement point for NYMEX futures contracts based on WTI-like light sweet crude
![Page 40: View from Louisiana](https://reader034.fdocuments.us/reader034/viewer/2022051423/568c4b011a28ab49169a800b/html5/thumbnails/40.jpg)
Cushing to Houston Pipeline
• Enterprise Products partners and Enbridge : 50-50 joint venture: Wrangler Pipeline
– 500-mile pipeline from Cushing to Texas Gulf Coast Refining Complex
– Ready mid-2013
– Adds south-bound capacity to largest crude oil market on Gulf Coast
• TransCanada (11/11)
– Cushing Marketlink crude pipeline to Gulf Coast
• Enterprise Products partners and Enbridge : 50-50 joint venture: (11/11)
– Reverse Seaway Pipeline;
– First shipment South 6/7/12 @150,000 bd; adding pumping capacity for 400,000 bd
– May cause Wrangler to be dropped
![Page 41: View from Louisiana](https://reader034.fdocuments.us/reader034/viewer/2022051423/568c4b011a28ab49169a800b/html5/thumbnails/41.jpg)
Pipeline Side Note
• Build natural gas pipeline – Permits from FERC; significant oversight
• Rate setting
• Barriers to entry & exit
– Negotiate with landowners with federal eminent domain powers
• Oil pipeline – No FERC regulation
– Permits from multiple state regulators
– Different states have different certificate procedures
– No federal eminent domain powers; Different states have different eminent domain procedures
![Page 42: View from Louisiana](https://reader034.fdocuments.us/reader034/viewer/2022051423/568c4b011a28ab49169a800b/html5/thumbnails/42.jpg)
Bazhenov Shale Play:
Western Siberia (6/12)
• ExxonMobil in joint agreement with
Russian-owned oil company Rosnet
• Covers area, roughly 80X massive
Bakken Play
![Page 43: View from Louisiana](https://reader034.fdocuments.us/reader034/viewer/2022051423/568c4b011a28ab49169a800b/html5/thumbnails/43.jpg)
July 27, 2012
Dr. Loren C. Scott
Loren C. Scott & Associates, Inc.
www.lorencscottassociates.com