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  • musketeernumberone musketeernumberone May 22, 2012 6:01 AM Flag

    Why we dont need subsidies for CNG/LNG

    Because the market is adopting these new technologies without subsidies:

    http://www.bloomberg.com/news/2012-05-21/shale-glut-means-1-a-gallon-savings-at-the-pump.html

    WPRT, CLNE, FSYS... speculative investments that could make you a bundle.

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    • Thanks for the posts. There's a lot here for me to try and understand.

    • <<rational sounding estimate maxed U.S. total production resources at 2,170 Tcf>>


      That's the equiv of 2,170 mmmcf so /6 mcf (roughly) ===>361 mmm (or 361 billion bbl!!

      Obama must have died and thought he went to heaven!! LOL

      Please don't mistake resources for feasibly recoverable reserves ---or make inferences on future prices from that.


      excerpts:

      <<According to the EIA's latest data, in 2011 the U.S. had 60 tcf of proved reserves of shale gas.

      (There may be room for doubt even over this figure, since the SEC is investigating whether companies overstated their proved reserves.)>>


      <<New doubts seemed to emerge on January 23, when the EIA issued the "early release" of its Annual Energy Outlook. A key estimate, the amount of natural gas in "unproved reserves"—areas that have not yet been drilled—was lowered dramatically. EIA's new estimate for how much gas these areas might yield was just 482 tcf, a bit more than half the 2011 estimate of 827 tcf.>>

      What happened?

      <<The most drastic change was for the Marcellus shale formation, underlying Pennsylvania, New York, and West Virginia. The EIA used the new analysis from the U.S.

      Geological Survey (USGS), along with the known histories of production from wells in the area, to create a new estimate.

      The 2011 estimate figured "unproved reserves" in the Marcellus were 410 tcf, but the new estimate plummeted by two-thirds, to 141 tcf.>>


      http://news.nationalgeographic.com/news/energy/2012/03/120301-natural-gas-reserves-united-states/

      And I would argue the recoverable reserves from the Marcellus is only a fraction of that 141 TCF if the trends we see in the Barnet, Fayetteville etc are used as a model.

      Anyone tries to tell you the Marcellus has twice as much recoverable NG than total proven reserves in the US now, I would take with a grain of salt


      And for new undiscoverd/unproven NG resources, most will prove to be unrecoverable because many will be spread out in small and isolated regions with no water or easy access for pipelines and a number of other possible reasons.

      In todays $$, NG from the most viable of such plays might easily cost (on avg) 5 or 6 times the marginal cost of today's best plays so maybe $25-36/ mcf but that's looking out to 2020 and beyond.

      Of course, that would require higher prices in order for firms to earn a profit and my guess is that on a risk-adjusted basis, firms might want to also earn a higher margin to compensate for higher degrees of risk as drilling certainty and individual well

      EUR's became much less predictable unlike earlier plays that were relatively homogenous over large areas.

      Wins

    • So now lets overlay an increased call on daily NG supply for the following:

      1. More NG fired power plants to replace coal because they emit topo much CO2.

      2. More NG for chemicals fertilzer and industry.

      3. More NG to replace switching from diesel to CNG/LNG commercial transportation needs.

      4. More NG for switching from gasoline to CNG for passenger cars----hmmmmm

      5. more NG for LNG exports?

      Where will this additional NG supply come from if not from new giant plays like the Haynesville?

      Keep in mind, the producers in the future won't likely be in a position where they MUST drill and produce (at any price) to hold acreage.

      What might happen to marginal costs in order to coax additional gas drilling then?

      The US now uses on the order of 66 BCFD on avg now.

      Lets assume that we convert all the highway diesel trucks to CNG/LNG as per the Pickens plan.

      Last numbers I have are 36 billion gal annually or about 857 mm bbl annually or the equivalent of ~2.35 mmbd.

      Assumming 1 bbl = 6 MCF in energy equivalence, converting that volume of oil to NG would eat up an additional ~ 14.1 BCFD.

      This is a little more than the combined output of the 3 biggest shale plays (i.e. the Barnet, Haynesville, and Fayetteville put together)

      That's just for highway trucks, not trucks or other commercal vehicles that burn gasoline or farm equipment.



      Now lets convert more coal fired plants to NG in the interim...See the problem?

      Just how many more Haynesvilles and Barnets are there?

      Keep in mind these plays cover large swaths of land with some companies individually controlling hundreds of thousands of acres with some of these plays that cover large numbers of counties in some states.

      http://www.eia.gov/oil_gas/rpd/shale_gas.pdf




      We keep going at this rate and the industry will be fracking manure piles for gas before we know it.


      cont'd

    • <WPRT, CLNE, FSYS... speculative investments that could make you a bundle.>

      No doubt that they are hot stocks, and the spread between NG and oil has been a huge boon.

      However, CLNE and WPRT last I checked weren't making money, the price to book is kind of high, and I think we see a repeat of 2008 in the next 6 to 12 months.

      With the crash I think oil comes down and this huge spread between NG and oil comes down as well. I'd be cashing in the chips on the NG plays here.

    • The article mentions industry requests for subsidies and possible Obama support for same.

      So, why provide subsidies for something that is already happening because the economics work? Its just another corporate welfare scheme, a wealth transfer from the many to the few, in the guise of a public good.

      T. Boone Pickens does not need our money and neither do CMI, Royal Dutch Shell, or Flying J -- that is for sure.

      • 1 Reply to musketeernumberone
      • <<< T. Boone Pickens does not need our money and neither do CMI, Royal Dutch Shell, or Flying J -- that is for sure. >>>

        That's fine musk, but what about what's good for the consumers wallets.
        CNG would be half the price of buying gasoline. How about what's better for the environment ? A solid case can be made for CNG over gasoline. But CNG is not happening musk, not nearly fast enough. I guarantee you more than 95% of the people here have never even heard of CNG vehicles. The production vehicles available to purchase are one... let me say that again... one vehicle currently. What kind of choice is that ?
        Not many people are going to fork up $10K for a conversion.

        It's not about giving incentives to give big business more money, it's about what's good for the American people and the economy. If the gov can give incentives to buying electric, why not CNG... that's all I'm saying.

        Big OIL will be the looser, not the winner. I tell ya right now, the oil companies don't wanna see CNG come to market.

 
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