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PetroDevelopment and Provincial [/State] Governments

KenS
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V


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KenS
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I want to discuss the effect on opposition parties [governments in waiting] as well.

Even though this is about politics in Canada, the experience with some of the US state governments are also instructive.

It is obvious that petrodevelopment has enormous pull on governemnts and governments-in-waiting of all persuasions. This is capitalism.

My interest is in discussing what to do about it. Again, beyond the obvious: holler, be witnesses, etc.

That in turn means discussing the details, the 'mechanics' if you like, of how the politics and public policy works. We know petrocapitalism throws its weight around. End result horror stories of them achieving that, we dont lack.


KenS
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I will make some general observations about shale gas fracking around the continent.

Fracking starts first in Texas and the western States where there is an existing petro industry juggernaut. They came into that well used to flattening opposition voices in and out of government, and with the regulatory agencies already quite captive.

Then it was Pennsylvannia- with its long experience in coal mining in depressed regions. From what I can see, the overwhelming of opposition there also has a lot to do with people not realizing the scale and intensity of shale gas fracking as an industrial infrastructure decending upon you... not realizing until after you are in the middle of it. By that time, the industry has a lot of people hooked into the gravy train.

The result is that state governments are captive, and the protesting locals do that from very divided communities. IE, it isnt us against them being just the oil companies and state governments. It is your neighbours too.


KenS
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The stories in New York, Quebec, and the Maritime provinces have been different.

Before full scale development is upon us, people have at least some diea what it looks like. The opposition is galvanized, and the public in general is not complacently sanguine. Unless you have some active interest/stake- fracking doesnt look pretty.

But with the only recently exception of the PQ government, all of these governments have openly [New Brunswick], or behind the scenes [New York and Nova Scotia] tried to keep future shale gas development alive in spite of the pretty solid unpopularity of it. Without the industry already having the foot in the door, the voices for fracking ALL come from the elites.

In the case of the Cuomo government in New York, and very quietly the Dexter government in Nova Scotia, the administrations have political bases that are highly opposed to the prospect of shale gas fracking. But they still try to pave the way for development.

Then there is BC- which has similarities to both the Western states [an existing petro industry], and to the places like the Maritime provinces and Quebec where people know something about fracking before it descends upon them. And we get the NDP government-in-waiting totally opposed to the big bad tar sands pipelines, but pretty much lock stock and barrel bought into more shale gas development and pipelines to LNG export plants to make that possible. It happens that very, very few people live where the development takes place. As is the case everywhere else, the climate change effects of shale gas are ignored, replaced with the convenient propaganda that the supposedly clean gas will replace burning coal in China.


KenS
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Then there is Quebec.

How is it that even the elite of the PQ- not just the base- is strongly disinclined to shale gas development?

Will it last?

Whatever the answers people think liekly, what can the rest of us learn from what is unfolding in Quebec?

=====================

Then there is also of course the national NDP. Critical of the pace of tar sands development and pipe lines to to the west, but pipelines to the East is cool.

And while Mulcair has lent strong support to fracktivists in New Brunswick, will he ever say anything in Nova Scotia? Or include Nov Scotia even very generally in comments about shale gas out here?


epaulo13
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..thanks for the thread ken. after email exchanges with my ndp mla, just a couple months ago, they have come out against the northern gateway project but not the twining of the kinder morgan pipeline. this will potentially bring 300 tankers into vancouver annually looking to transport the bitumen.

quote email:

Regarding the Kinder Morgan Pipeline project, as you know, there is widespread public concern about the proposal. We in the Opposition Caucus are not taking a formal position at this time, as there is no formal application to construct the project. Once there is an application, we will do our own assessment of the specifics, and then take a position.

In the meantime, we share the public concern, including:

o    the increased environmental risks from leaks that would come from more than doubling the amount of bitumen being transported by the twinned pipeline which will cross numerous salmon-bearing rivers and streams

o    the increased environmental risks from spills that would come from expanded tanker traffic through the Georgia and Juan de Fuca Straits

o    the responsibility Kinder Morgan has to consult and address the rights of First Nations whose traditional territories would be impacted

o    the responsibility Kinder Morgan has to consult with other communities along the route

Kinder Morgan must recognize that this is a controversial project because of the increased environmental risks and therefore must listen to the people and communities along the pipeline and tanker routes before they file any application for approvals. New Democrat Opposition Leader Adrian Dix has been clear that any application by Kinder Morgan will be reviewed by a strong, made in BC assessment process – not just by a federal review set up by the Harper government.

An NDP government will give Ottawa notice that the Equivalency Agreement will be terminated. The termination of that agreement means any application by Kinder Morgan will be subject to a vigorous, made in BC review, just like Enbridge’s Northern Gateway Project. We will ensure that British Columbia’s interests are fully represented and protected. These projects are too sensitive and too important for BC to be left with only Stephen Harper making the decisions.

I hope that clarifies where we’re at with this important issue. We will be monitoring the situation closely and we appreciate hearing from members of the public with their thoughts and concerns. Thanks for taking the time to write.


Unionist
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Joined: Dec 11 2005

Great thread, Ken - though given my ignorance of the subject (other than knowing a little about the movement in Québec and Québec solidaire's role in it), I plan to do much more reading that writing!

KenS wrote:

Then it was Pennsylvannia- with its long experience in coal mining in depressed regions. From what I can see, the overwhelming of opposition there also has a lot to do with people not realizing the scale and intensity of shale gas fracking as an industrial infrastructure decending upon you... not realizing until after you are in the middle of it. By that time, the industry has a lot of people hooked into the gravy train.

Dumb question perhaps, but which non-elites get hooked into the gravy train and how? Workers, small business serving the industry? How big is the employment/commercial spinoff? If you know.


Boom Boom
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Joined: Dec 29 2004

I think I posted this in another thread: the UK has overturned their opposition to fracking.


Centrist
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KenS wrote:
Then there is BC- which has similarities to both the Western states [an existing petro industry]

My contrarian observations, BC and Alberta have been fraccing in their respective tight gas/shale natural gas basins for an extensive period of time. These areas are the proverbial "ground-zero" for Canadian fraccing operations. Not much, if any, political opposition out here.

In addition, fraccing technology evolves and improves constantly and although some of these concerns may have been an issue 5 years ago, fraccing today has been "de-risked" considerably. As an example, the solutions or "chemicals" utilized in the fraccing process by companies such as Gas Frac Energy Services are now non-toxic and are ~100% recoverable posing no risk to groundwater.

http://www.gasfrac.com

And other companies such as Trican Well Drilling utilizes "Eco-Clean", an environmentally-friendly and non-toxic fluid in the fraccing process.

http://www.trican.ca/Services/technologyfracturing_ecoclean.aspx

Furthermore, the shale gas being fracced is 2 - 3 km below surface level in BC/AB and the drilling operations have steel/concrete casing penetrating the much shallower ground-water sources preventing any leakage to ground-water sources.

Unfortunately, the environmental arguments by many have not caught up to recent fraccing technology and, in many instances, have become more political and less technical/factual.


Centrist
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And when we look at the proposed west coast BC lng terminals likely to proceed and be completed by the end of this decade in Prince Rupert/Kitimat:

1. Chevron/Apache - 10 million ton/ annum facility;

2. Shell/Mitsubishi/Korea Gas/Petro China - 24 million ton/annum facility;

3. Petronas/Progress - 18 million ton/annum facility;

4. British Gas (BG) Group - 18 million ton/annum facility;

5. ExxonMobil - 24 million ton/annum facility;

That totals 94 million tons/annum. To put things into perspective Qatar, the world's leading lng exporter, produces 77 tons/annum. Others such as CNOOC/Nexen/Japanese Inpex as well as Australia's lng major Woodside and an Indian conglomerate are also scouting westcoast BC sites for future lng operations.

Based upon capital expenditures of $1 billion to $3 billion (Australia) per metric ton of lng export terminal capacity, the 5 aforementioned BC lng plants would involve capital expenditures of between $94 billion and $270 billion. Very capital intensive and the Conference Board of Canada last week stated that westcoast lng development will eventually rival the AB oils sands.

First Nations such as the Haisla are also partnering with some of the lng companies, the same Haisla that feverishly opposes the Northern Gateway pipeline for bitumen.

And then additional $10s billions are required for numerous natural gas pipelines to the west coast from NE BC. And the feedstock for the lng terminals will require additional $10's billions in development of the tight gas/shale plays in NE BC's massive Montney, Horn River, and Liard basins. Again, the natural gas sector invested ~$7 billion in NE BC last year and BC currently produces 3 billion cubic feet/day. An additional ~12 billion cubic feet will be required for the westcoast lng terminals alone.

And not much, if any, opposition to the proposed lng terminals either. BC NDP energy critic John Horgan basically supports fraccing and the westcoast lng terminals so not much of a political wedge issue there either.

 

 

 


JKR
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Joined: Jan 15 2005

The global shale revolution may be the most important event of the year:

The Shale Revolution's Shifting Geopolitics

High Energy Costs Plaguing Europe

Energy-hungry China seeks shale gas supremacy

Quote:

China is estimated to hold the world's biggest reserves of shale gas, enough to support the country's gas consumption for nearly 200 years, Moody's said in March.

The shale gas/oil boom has greatly increased the threat from global climate change. The only real solution is an effective global climate treaty that includes all of the world's major producers and consumers.

The shale boom also has major implications for Canada. If the North American price of oil and gas continues to go down, Alberta and Saskatchewan may be in for another bust period. This is why Alberta is desperately trying to get their product outside of North America where prices are higher and firmer, but if China joins in on the shale boom, even this alternative may not be sufficient.


JKR
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KenS wrote:

My interest is in discussing what to do about it. Again, beyond the obvious: holler, be witnesses, etc.

Canada's ability to resist participation in the global shale boom will greatly depend on what happens to the price of oil and gas. If the price continues to go down. especially the North American price, it will be much easier for Canadian provincial governments to put environmental considerations ahead of short term economic gains and forgo the economic lure of the shale boom.

So a good strategy for the left and environmental movements might be to stall the process as much as possible until prices go down and always stress the need to protect of the environment as much as possible.


KenS
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We are either at or close enough to the floor of the continental price for gas. Even if you take the usual overhyped industry boosterism with a huge grain of salt, those LNG export plants for both coasts of Canada, and the US Gulf, are not just talk.

I used to think we had indefinite years of grace in the Maritimes before the industry would want to do anything here, even given a full green light. Even having zero confidence in our NDP government, with no money and jobs cornucopia appearing to be on the horizon, I did not think the Dexter crowd would have enough of a stake to take on fracking development as yet another project that draws major opposition, especially within their base. But even a proposed LNG export plant [2 to 3 for the region actually] substantially shortens the time frame for wide scale fracking development to be economical here.

Centrist wrote:

Unfortunately, the environmental arguments by many have not caught up to recent fraccing technology and, in many instances, have become more political and less technical/factual.

I'm very up to date in changes in fracking technology, thank you very much. And acknowledged as such by proponents here as well. This is one of the heart warming talking points of the industry, crowning your list of quasi-technical homilies. I generally have to engage in debate with that, but I see no reason to here. Suffice to say that there are plenty of technical and 'science-based' contrary arguments to all of said homilies.


KenS
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Unionist wrote:

Great thread, Ken - though given my ignorance of the subject (other than knowing a little about the movement in Québec and Québec solidaire's role in it), I plan to do much more reading that writing!

Funny, I want to do more reading than writing too.

I know a lot about fracking. And I know a lot about the government processes, including behind the scenes, in Nova Scotia, New Brunswick and New York.

But my wish list would be someone who knows more about the government processes [generally, and/or in more jurisdictions] who would write an article or blog for Rabble... or an extended discussion on Babble.

Unionist wrote:

Dumb question perhaps, but which non-elites get hooked into the gravy train and how? Workers, small business serving the industry? How big is the employment/commercial spinoff? If you know.

Good questions.

The short answer is that the benefits of the gravy train are vastly overhyped. The amount of economic spin-offs and the number of jobs is always a pale shadow of the sugar plum visions. [And the much balyhooed royalties are a particularly sick joke. For shale gas fracking there is virtually none, and that will change little when/if gas prices go up, because of the royalty holidays coupling to the very rapid depletion rates of each well. The government revenue gains are all in conventional taxing of economic activity, and even that is attenuated by further tax benefits and accounting practices.]

That said, there are no small number of jobs. There are a shit load of trucks driving around [breaking up roads in the eastern climates]. And other jobs. In depressed areas people arent picky. And they get snarly about people getting between them and the gravy train. In the US at least, that is enough of a genuine 'popular constituency' of the industry to have divided communities. I expect the same here, if they get the green light

That is what seems to be the norm once the industry gets their foot in the door. Before the gravy train actually gets here, in my experience it is a minority who speak up for wanting it.


KenS
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Economically speaking, fracking for oil or gas is very comparable to tar sands development: we are going after the dregs, which takes more energy to get the energy, and intensifies the rate of GHG emissions for the same amount of energy gain.

They are intensive development in both capital and labour, compared to conventional oil and gas development.

The amount of capital deployed in the tar sands dwarfs building the fracking industrial infrastructure. But the latter still dwarfs the infrastructure required to get the same amount of conventional oil and gas.

[The other basic difference with the tar sands being that the engineering is constantaly changing- necessarily and fundamentally from place to place, as well as the more obvious / typical technological change across time.]


Centrist
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JKR wrote:
China is estimated to hold the world's biggest reserves of shale gas, enough to support the country's gas consumption for nearly 200 years, Moody's said in March.

It's not as easy as that though and China currently produces negligible amounts. Have you read the article that you linked to? The difficulty is the enormous cost in retrieving same due to geological issues, water issues, etc., which represents enormous challenges: 

1. Fraccing requires ENORMOUS volumes of water and more than 2/3's of China's cities already suffer water shortages. China only has 2,100 cubic metres of water/person compared to 17,000 cubic metres of water/person in the U.S.;

2. Drilling a fracced well in China could consume as much as 13 million gallons of water compared to as low as 8 million gallons in the U.S; 

3 China's renowned lack of environmental controls could indeed contaminate scarce ground water supplies there;

4. Chinese natural gas shales have a high kerogen and clay content making them less brittle, which makes fraccing these deposits very tough. It's akin to taking a fresh box of play-dough and trying to frac it.;

5. Chinese shale deposits are located in mountainous terrain and are very deep compared to much shallower wells and flat terrain here in North America;

6. While drilling in NC BC is at between 2 - 3 km and is considered very deep, Chinese wells will need to be drilled as deep as 6 km with an additional 7 km of horizontal drilling - there are very few land-based rigs that can drill that deep, that far. And that equipment currently does not exist in China.

7. A single Chinese well may cost up to $30 million to develop compared to $6 million in the U.S.;

So fraccing in China is not like in North America with it's advanced technology, etc.

And that's why Petro China has an interest in undeveloped NE BC gas fields and is a junior partner in Shell's proposed Kitimat lng facility. And that's why Petro China also purchased a 49% in Encana's undeveloped Duvernay basin acreage for $1.2 billion a few weeks ago. Encana will remain the developer of the fields. Petro China's interest will be utilized as additional feedstock for the Shell lng facility to be shipped to China as lng.

As for North American Henry Hub gas prices, they dipped to ~$2 MMBtu in April of this year and have since rebounded to ~$4 MMBtu. Remember,  unconventional ng wells have high depletion rates. IOW, they have a life that may only last 1 - 2 years. OTOH, NE BC flow rates are greater and have much longer depletion rates.

And the excess gas that was created by the U.S. fraccing boom is now being mopped up as a cheap input in the U.S. petrochemical industry and as feedstock for converted coal and new natural gas generating facilities. So the N.A. price has definiely bottomed out as a result of these and other factors.

 

 


Centrist
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KenS wrote:
those LNG export plants for both coasts of Canada, and the US Gulf, are not just talk.

I'm quite familiar with the global lng industry. Qatar is the world's largest producer but has now put a moratorium of lng development. Australia has an lng building boom going on but new projects on its northwest shelf are experiencing major cost blow-outs, critical shortages of skilled workers, environmental protests, etc., which make any future Australian lng projects debatable.

And only the world's major energy giants are able to pull these projects off such as ExxonMobil, Shell, Chevron, Petronas, BC Group, TOTAL etc. Why?

1. They have very, very deep financial pockets and access to cheap capital - an lng terminal and upstream pipeline/field development will run ino the $10's billions of dollars;

2. They own assets along the entire lng value chain - from upstream natural gas fields, to lng terminals, to lng carriers;

3. They have previous expertise in developing/owning lng terminals;

4. They have close relationships, in terms of their respective marketing arms, with end-users such as those in Japan, South Korea, etc.  (Apache's proposed Kitimat facility was not able to sign any long-term off-take contracts because it did not have any previous experience in lng terminal construction/operation, end-buyers were risk averse to that situation, etc. even though they had substantial upstream ng assets. That is, until Chevron stepped in last week to take a 50% position and become terminal operator)

With that as a background, none of the proposed U.S. lng facilities on the Gulf Coast are proposed by the global lng energy giants. And that's an important fact not to be overlooked. Except for one import terminal proposed to be converted to export with ExxonMobil holding a 30% interest. And that project is No. 15 on the DOE's eventual review list.

And furthermore, even with the somewhat positive lng report released by the DOE in December, any future U.S. lng facility faces:

1. DOE approval (and that's only to FTA countries not including Japan);

2. The more important FERC approval;

3. Political opposition from environment groups such as the SierraClub and local county/community groups;

4. The new chair of the powerful U.S. Senate Energy Committee is Oregon Senator Ron Widen and he's a staunch opponent of U.S. lng export;

Add that all up and alot of political foot-dragging is apparent before any approval of any new lng terminal will be forthcoming.

Also remember the lengthy travel time and cost of lng transport to Asia from the U.S. Gulf Coast will include a substantial tariff through the upgraded Panama Canal. Lng transport from BC's Kitimat to Japan is virtually the same shipping time as from Western Australia. OTOH, the Gulf Coast adds another 8? days as well as ~$2MMBtu in additional transport costs.

Quote:
But even a proposed LNG export plant [2 to 3 for the region actually] changes that.

I assume that you are referring to the recently proposed $5 billion Goldboro lng terminal by Pieridae Energy in Nova Scotia? That's dead in the water from the get go. Do you know the background of the promoter behind this pipe-dream? He's the same guy who initially proposed the BC Kitimat lng terminal as an import terminal wayyy back in ~2007. He optioned/purchased some cheap land, underwent engineering studies, environmental assessment and almost lost his investor's ~$30 million in funds regarding same. He finally conned Houston-based Apache to take it off his hands for $100 million as an export facility for Apache's NE BC natural gas assets.

Apache brought in Encana and EOG Resources as partners with their combined NE BC natural gas assets. But that hasn't gone anywhere as they could not sign any long-term contracts. No experience in lng facility construction/operation, no relationships with end-buyers.  Until Chevron stepped in last week to take a 50% position, it was questionable if it ever would go ahead.

Again, Goldboro lng is as good as dead in the water and it doesn't even have any upstream ng assets to draw from. It proposes to use some unnamed U.S. ng feedstock but NAFTA rules stipulate that ng can only be sold within Canada/U.S/Mexico - not for export through another NAFTA nation. That requires a special NAFTA exemption clause, which is extremely tough to get, if ever.

Goldboro lng is simply some promoter's pipe-dream who will be attempting to sell the unbuilt project to some global energy giant for a quick buck. Never gonna happen either though. 

 


JKR
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Centrist wrote:

JKR wrote:
China is estimated to hold the world's biggest reserves of shale gas, enough to support the country's gas consumption for nearly 200 years, Moody's said in March.

It's not as easy as that though and China currently produces negligible amounts. Have you read the article that you linked to? The difficulty is the enormous cost in retrieving same due to geological issues, water issues, etc., which represents enormous challenges:

I think the point was that even if China produces a fraction of their reserves it will change global production and consumption and lower global prices.

Any way you look at it, the advent of new fracking technologies is raising production levels and lowering prices. This in turn is accelerating global climate change.  The only solution to this problem is political. A global treaty is what is required. Unfortunately, any government that goes ahead unilaterally ends up hurting their economy as the EU is finding out. 

Here in Canada our political structure also favours non-renewable resource extraction. Because non-renewable resources in Canada are under provincial jurisdiction, there is a strong incentive for provinces to support resource extraction as government revenues from resource extraction are not shared within the country but go mostly to the province where the resource is extracted. That royalties from non-renewable resources are not taken fully into account when calculating equalization payments, gives the provinces more incentive to support non-renewable resource extraction.

The NDP has to come up with concrete policies to manage the national and global realities that are leading us toward environmental calamity.


KenS
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JKR wrote:

Any way you look at it, the advent of new fracking technologies is raising production levels and lowering prices.  

I'm not sure where you are getting this. Possibly taking the extreme industry hype too seriously about what evolving technology can achieve.

Then there is the opposite point of view out there from extreme skeptics who feel that fracking is actually so expensive and rapidly getting more so, so that we will be seeing less of it.

Realistic assessment: the hype overstates what the industry can do [it is being pushed by people who have a financial stake in the snake oil, and media lackeys who just like the catching eyeballs value I guess]. So even just on the technological side, fracking is going to get more expensive. And environmental regulations and access to water are going to get tighter and more expensive, even without ever even minimaly saiisfying environmentalists. A LOT of fracking happens under conditions that appall everyone except the direct perpetrators.

So fracking is going to get more expensive. We're already at the point where a huge proprtion of it happened and is happening on the expectation of future profits, or outright financial shell games, or sunk costs that the financial pain to stop is worse than the financial losses of playing it out. [Each well is played out in 3 years or less, with all the sunl costs, it doesnt make sense to shut down and wait for higher prices... as has happened with a lot of conventional gas production capacity.]

So prices have to increase, which is where LNG export comes in.


KenS
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I'm interested in what Centrist is saying about LNG in post # 16. But I also would really like what others have to say about government and opposition parties in relation to petro development... mostly new development.

That said, more on LNG export and its implications:

That is your take on the initial developer of the Kitimat project, who is now turning to Goldboro, NS. What I hear, and not just from here and from his spin, is that he obviously didnt have the deep pockets to be able to pull off the Kitimat project. But thats the way the oil industry works in general- the juniors and bit players take on the more difficult prospects that nobody is doing yet, get them off the groud; and if successful, they sell out to the deep pockets who can develop production. In the Maritimes, those are the only players we get for onshore. That doesnt mean there is nothing here, it just means that there are easier plays for the deep pockets.

People wholly in the orbit of the big players always sneer at the small players... until they succeed and its time to buy them. Buddy certainly got more than $100 million for what he did in Kitimat. He did get the first licence to export. Thats scum capitalism to me. But saying it doesnt work is another matter. Capitalism is ripe for clever opportunists.

Now, when there are too many projects  trying to come onstream in BC, and producers in Pennsylvannia hungry for the next markets after they saturate the region in the near future [let alone the attraction of far higher export prices], plus belatedly increasing NS offshore gas where there would be more onstream if the price were higher, buddy promotes a project for shipping from the East coast of Canada, where environmental approvals unfortunately look like a slam dunk, to sell to the western end of the Asian market. And he has plenty of cash from Kitimat to play the early stages of the game, plus a salivating provincial government. I don't see why not to take it seriously.

But a more general question. It is very hard in the US to get approvals for LNG plants. So there is that standing in the way. Hence exporting through Canada. Given how desperately the whole industry is geared to bringing higher gas prices, do you really think they will just bow down before every single obstacle?

The pecularities of US governance and legal systems make LNG plants very difficult to build there. I think we have to expect they'll eventually learn how to crack that one. But nearer term: do you really think they are going to fail to get exceptions to NAFTA rules... when everybody in the industry stands to benefit from the higher prices and increased market capacity whether or not they have near term possibilities of exporting gas themselves?


Centrist
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KenS wrote:
But a more general question. It is very hard in the US to get approvals for LNG plants. So there is that standing in the way. Hence exporting through Canada. Given how desperately the whole industry is geared to bringing higher gas prices, do you really think they will just bow down before every single obstacle?

The pecularities of US governance and legal systems make LNG plants very difficult to build there. I think we have to expect they'll eventually learn how to crack that one. But nearer term: do you really think they are going to fail to get exceptions to NAFTA rules... when everybody in the industry stands to benefit from the higher prices and increased market capacity whether or not they have near term possibilities of exporting gas themselves?

In the U.S., major business lobbies from the petrochemical industry to electrical utilities to consumer groups to political groups want to keep the U.S. ng price at as low a level as possible. And they are powerful.

The problem with the proposed Goldsboro lng facility is not only its weak promoter and no real source of natural gas feedstock but if the U.S. DOE/FERC will refrain from supplying any U.S. lng facilities, they definitely will not approve supplying a Canadian lng facility. BTW, that would require a reversal of a pipeline already extant, which Goldsboro lng has no ownership/control over.

Quote:
LNG expert dismisses Goldboro export plant as long shot

But Barbara Shook, an analyst with Energy Intelligence, isn't convinced.

"No firm commitments of gas supply, no firm commitments of pipeline capacity," said Shook, who has 41 years of experience in the industry.

Shook does not believe Pieridae would be able to use shale gas from the United States under the North American Free Trade Agreement (NAFTA).

The company could import the gas into Canada, but would not be able to export it to a non-NAFTA country without a special exclusion permit, which is difficult to obtain, she said.

http://www.cbc.ca/news/canada/new-brunswick/story/2012/10/25/nb-lng-export-pieridae-canaport.html

Furthermore, Goldsboro can really only access the lower-priced European market (compared to Asia) for end buyers, which do not make the lng economics work in any event. As well, no purchaser will enter into a 20-year off-take contract unless the lng facility operator can prove that they have the exclusive resource to meet that demand. Something like 1 trillion cubic feet of ng for every million ton/annum capacity.

In a similar vein, two separate promoters also want to build Jordan Cove lng and Oregon lng in the state of Oregon. I've reviewed their websites and they claim that their natural gas feed-stock will come from NE BC and Alberta. I doubt that very much. Furthermore, they have no ownership or control of these upstream fields.

In order to export lng offshore from Canada, Chevron/Apache, Shell et al must make/have made applications to the Canadian National Energy Board and prove their natural gas reserves/resources for lng export and further show that such export will not hinder Canadian domestic consumption. The NEB will never permit Canadian gas to be exported from a U.S. lng facility.

Again, to show how capital intensive lng facilities are, the 10 million ton/annum Chevron/Kitimat facility will come in at around:

Quote:
The billion dollar question is what a 10 million tons per annum LNG facility [by Chevron] will cost at Kitimat?” Greg Pardy, an analyst with RBC Capital, said in a report. “If Australia’s experience is any guide, $2,500 to $3,000 per tpa may not be unreasonable, suggesting a $25-billion to $30-billion price tag for Kitimat

http://business.financialpost.com/2012/12/27/chevrons-move-into-canadian-lng-to-help-natural-gas-sector-compete-with-australia/

Based upon Goldsboro's lng capacity of 5 million tons/annum, that would equate to a $12 - 15 billion price-tag, not including $billions more for pipeline and field development. Again, it's a fools game whereby only the global energy giants can play in this proverbial sandbox.

 


KenS
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Joined: Aug 6 2001

Here's a plausible continental scenario on the amount of fracking that will be economically viable- mostly leaving asie for the purposes of discussion right now, the dynamics of environmental concerns and politics in the dynamic.

The US Energy Dept in the last couple of weeks put out a study supporting LNG exports- including to non-FTA countries. And they approved a plant on the Gulf.But I agree with Centrist, the number of obstacles to any project are still very daunting. And if any project gets close, Qatar can just decide to re-open the taps and ship more gas that costs less.

Also, the US DOE study, does not see big domestic price increases for gas as a consequence of exports. What that likely means is that a lot of shale gas production development being pushed may not be economically viable in the relevant future, even with the export plants.

For every improvement in fracking technology that means cost efficiencies, there has been and will be more difficult production conditions that eat those up. Even leaving aside environmental regulations, fracking is not going to get cheaper when the whole cycle is considered.

But with the decline in conventional gas resources, there WILL be more shale gas fracking- even if the pressures on keeping the prices lower continue to dominate. That will translate into continued pressure against tightening regulations. The major companies, their organizations and the PR outfits, will keep talking about how much better fracking CAN be. But provincial governments who want the industry have to provide a "competitive environment".


Centrist
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Since most of the new sources of land-based natural gas reserves/oil reserves will likely be unconventional, I suspect that fraccing will/has become the new norm for drilling.

Regarding unconventional natural gas fraccing, it's not just the "dry" fields - those containing just natural gas. NE BC's Montney basin and Alberta's Duvernay basin, for example, are also "liquids-rich". IOW, both natural gas AND liquids such as naphtha and condensate are concurrently produced from the same well. And these natural gas liquids are priced on the basis of a barrel of oil. The economics are such that the liquids pay for the well itself and the "dry" natural gas is just a by-product or icing on the cake.

Don't forget unconventional tight oil either, which also requires fraccing. The Bakken basin in North Dakota is a tight oil play requiring fraccing to drill. As a result, North Dakota oil production has gone from ~10,000 barrels/day in 2007 to a recent ~680,000 barrels/day and production continues to increase almost exponentially. In fact, North Dakota recently became the 2nd largest oil producing U.S. state after Texas.


Centrist
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Now let's look at the Canadian overall political landscape in terms of oil and gas development:

1. Firstly offshore oil and gas 'conventional' development:

a. Newfoundland - The Hibernia, Terra Nova, and Hebron oil fields; $1.8 billion paid to Nfld in royalities in 2010;

b. Nova Scotia - This year both BP and Shell paid $2 billion just for offshore oil and gas rights;

Seems like not much political opposition in these jurisdictions to offshore oil and natural gas development, which certainly does not involve fraccing. Furthermore, these offshore drilling platforms are affected by the remnants of hurricanes from the south and icebergs in the case of Nfld., which, for example do not affect BC's west coast. 

Yet, in just the offshore Queen Charlotte basin of NW BC, which the Geological Survey of Canada estimates to contain 9.8 billion barrels of oil and 26 cubic feet of natural gas, a drilling moratorium has been in place since 1972. That reflects different political attitudes between the east and west coasts.

2. Fraccing

NE BC, the Peace River district, which is akin to Alberta both culturally and politically, has been an oil and gas drilling haven since the early '50's. And, generally speaking, the area has been familiar and accommodative of same. IOW, fraccing, is just part of the industrial base. That doesn't mean that environmentalists in extreme SW BC don't express their concerns regarding fraccing and water withdrawals wayyyyyy up there.

OTOH, I can't foresee fraccing in environmentally sensitive Quebec - with much shallower wells, within areas of higher population and especially with no previous petro industry and serious concerns about groundwater contamination in localized populated areas. Public perception is the reality and the same public pressure against the Quebec gov't is akin to the Northern Gateway pipeline in northern BC. Too much political opposition changes the mind of the respective provincial government.

Same for public opposition for on-land fraccing in New Brunswick and, in extension, Nova Scotia.

IOW, while fraccing is generally socially "accepted" in NE BC and AB, for all intent and purposes, it seems that it will never be accepted in QC, NB, and NS due to the political fallout.

In that same vein, while a bitumen pipeline will never be accepted in BC, it seems that it will be accepted in SK, MB, ON, QC, and the Maritimes with the contemplated conversion of TransCanada's W-E natural gas mainline from natural gas to bitumen. For now.

At the end of the day, localized and regional politics as well as regional public perceptions definitely play and shape a major roll in terms of fraccing, offshore drilling, bitumen, etc.

The proverbial "social license" needs to be acquired from the majority of the localized population affected by these developments in order for them to successfuly proceed. 


kropotkin1951
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Joined: Jun 6 2002

Centrist, Hecate Strait is one of if not THE worse piece of ocean on the planet.  The winds and seas are brutal especially in the winter, way worse than off the coast of NF'ld plus the Strait is shallow and that makes it way more dangerous than the North Atlantic. 

It's also about priorities and the fact that the Haida will do what ever it takes to stop such a stupid idea since a catastrophe would be inevitable.

Quote:

Hecate Strait is a body of water 48-140 km wide, underlain by a shallow basin (less than 45 m at the north end) separating HAIDA GWAII from mainland British Columbia. Marine weather conditions are severe: winter storms originating in the Gulf of Alaska bring high waves through the strait and winds persistently higher than 40 km/h off the south end of Moresby Island. The open strait and numerous sheltered inlets are rich in marine life.

http://www.thecanadianencyclopedia.com/articles/hecate-strait


KenS
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Joined: Aug 6 2001

Offshore for the East:

the long time moratorium on Georges Bank will soon be renewed.

Drilling on the Saint Lawrence shelf [NF/QU/NS/Canada juriisdictions] is anything but a done deal. For NS, it is really only drilling and extraction on the Atlantic shelf that has minimal oppsition. Overall, I think that public opinion on the two coasts is pretty comparable. From what I know, let alone the Hecate Strait, everywhere on the West Coast would be at least as hazardous as Hibernia or the producing offshore Nova Scotia fields.


KenS
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Joined: Aug 6 2001

"Too much political opposition [to fracking] changes the mind of the respective provincial government."

There needs to be a very big qualifier put on "changes the mind". In New Brunswick, Nova Scotia, and Ontario opposition makes the government go underground and stop openly supporting fracking. With the exception of the NB govt. Since they came out of the gate strongly and unequivocally in favour, they were more limited in thier backpeddaling. And now that NB has come out with a more clever position, you can see the ostensibly "undecided" Ontario and NS governments sniffing around the messaging.

New York and Quebec are comparable in the vocal depth of their oppositions. Both governments were forced to back up, and keep backing up. It doesnt look like either government will ever be in a position to weather a decision to go ahead- though the Cuomo and Charest governments have definitely tried.

Despite the elephant and mouse comparison- there is a major commonality to the NS and New York situations: both governments rode to power with environmentalists as a major part of their base. The Cuomo government thought they could appease people with a review- there is no question they wanted to open up for fracking. The Dexter government has been shoving it to environmentalists on the big questions, especially aquaculture, and so far succeeding at keeping fracking from staying on the front pages. And if they get past the Spring election without having to make any substantive promises about fracking... we can count on a clone of the New Brunswick solution here. There are obviously a lot of differences between NS and New York. Fracking is intense right across the border in Pennsylvania. And New York is New York. [I cant picture the Cuomo governemnt shoving something like the Dexter aquaculture program down people's throats.]

Centrist brings up the useful concept of corporate developers needing "social licence". The dynamic nature of that social license is useful. But when it comes to petro development- and a lot of other 'gifts' from the capitalist cornucopia- all governments need for that license is acquiescence and tolerance.

Fracking that is not here yet is a good laboratory for that social license. Maybe I shouldnt have been, but I was surprised when I found out how broadly unpoular fracking is in Nova Scotia. We havent had the kind of protests and many dozens of community groups springing up like in New Brunswick. It turns out that generally people dont have a lot to say in public, until fracking or waste treatment is looking concretely to be coming close.

Choosing a green light for fracking will NEVER be a net vote winner in NB or NS. Yet the NB government, and naceantly the Dexter governemnt in spite of angering it's base [again], keeps working on managing the issue, with the clear expectation they can eventually get the goodies without too much blowback.

 


Brachina
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Joined: Feb 15 2012
I don't oppose fracking, I do support reasonable regulation, not carte blache development. Still long term I see Algae Oil as the future of the Oil Industry. Honestly I don't understand the investment in so called carbon capture tech, when the carbon could be profitable recycled to grow Algae. Fracking will only be profitable for up to a decade at most before other tech displaces it the way the Oil Sands is just starting to be displaced by fracking. Strong regulation is what's needed, not a ban.

KenS
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Joined: Aug 6 2001

Jeff Rubin thinks that what will save us from killing ourselves is the price of extracting fossil fuels.

The faith of economists.

And why would not the market "correct" by everyone just living with more polluting and poisoning extraction so that the economy and the environment are safe for fossil fuels?

In other words, petro development economics already is driven by the lowest common denominator. We have every reason to expect that the operation of laissez faire is in the direction of a cumulative race for the bottom- lowering that denominator further.


KenS
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Joined: Aug 6 2001

The devil is in that "reasonable regulation" that would make fracking acceptable.

To even think about fracking that does not definitely harm us to the same degree as tar sands production, drilling standards would have to be higher than they are anywhere, and there would have to be strict air emission controls that exist nowhere. [Stricter than those of the EPA, which it remains to be seen will come into force.]

All of that is technologically possible, but it will make fracking more costly. None of the existing producing states and provinces are going to go there.

Nova Scotia has an NDP government, and BC will soon have one. Are they going to lead the way to real regulation when the consequence is that the industry has plenty of other places to go?

What the call for good regulation and 'best practices' gets is the regulatory regimes of BC and what is proposed in New Brunswick: it's better than Pennsylvannia and Wyoming, but thats it. It just lulls enough people for the petro developers and the governments to get that "social licence".... and not because the majority of people think that it's all being taken care of.... simply because the whole mess no longer stinks enough to get people alarmed... and there are all those jobs...

 


KenS
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Joined: Aug 6 2001

Rosy Forecast of Cheap Oil Abundance, Economic Boom a Myth

By Dr. Nafeez Mosaddeq Ahmed , Truthout

This is a really excellent article. There is much more to it than what I quote.

Quote:

For most serious analysts, far from signifying a world running out of oil, "peak oil" refers simply to the point when, due to a combination of below-ground geological constraints and above-ground economic factors, oil becomes increasingly and irreversibly more difficult and expensive to produce.

That point is now.

 

....

Therefore, world conventional oil production is already on a fluctuating plateau, and we are now increasingly dependent on more expensive unconventional sources. The age of cheap oil abundance is over.

 

Quote:

Indeed, Business Insider reports that far from being profitable, the shale gas industry is facing huge financial hurdles. "The economics of fracking are horrid..."

The article goes on from there to raise the possibility of fracking exposure causing some majors to have to be bailed out. My personal opinion is that it isnt going into tht region of possibilities. But we get the shit end of the stick either way.

Unconventional extraction is expensive. So is liquified natural gas export and transport. There are just about no prospects that prices are going to be at a level to make real the optimists predictions. The majors have to buy in because they have to get new reserves- and that means unconventional oil and gas. And the many companies that have bet the form on this brave new world, they are past the point of no return. If the path they are on is not going to pay off, they are toast. So of course they still sing the chorus loud.

So the petro industry is going to face crushing internal pressure to keep production costs low, and since there is shale gas everywhere, there will always be plenty of jurisdictions keeping the costs to companies low, if not going lower.....

where does that leave the value of the pretty words we hear about what the industry CAN do, and governments who assure us there will be no fracking unless it is safe?


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