Big Risk on Natural Gas for Automotive Use

EIN News says, "Chesapeake Creating $1 Billion Fund to Boost Natural Gas Use in Transportation Chesapeake Energy Corp. is creating a $1 billion venture capital fund to boost demand for natural gas as a transportation fuel. Chesapeake will start advancing its plan by investing more than $300 million in two companies, including one owned by T. Boone Pickens. (newsok.com)".

Excellent news! This is the kind of thing that made America great. Private capital investing in a big idea. It's now a corporation versus the old-time individual greats, such as Rockefeller on railroads, Carnegie on steel, Ford on automobiles, Bell on telephones, but at least, it's not government. We can only hope that government will not meddle with it and screw it up by imposing impediments or supplying grants.

It's a risky business. The basic question is whether natural gas can compete with gasoline as an automotive fuel.

Natural gas usage has been around for many years as fuel for fleet taxis. It has generally been cheaper than gasoline, but is much less convenient to use. Gasoline is a liquid and can be contained in a relatively inexpensive on-board gasoline tank. Natural gas can only be handled as a liquid at very low temperatures, which is not practical on automobiles. The standard procedure of using natural gas as an automotive fuel is to carry it in very heavy-walled tanks, usually in the trunk of the car. This has the disadvantage of decreasing storage space for other items and also substantially increases the weight of the vehicle, which then requires more fuel.

If natural gas is cheap enough, the weight requirement for more fuel use is less significant, and the size of the vehicle can be increased to accommodate the large heavy-walled tanks. The recent discovery of large quantities of natural gas in the Marcellus Shale of the Northeast may give a gas price which can compete with gasoline.

Some other factors are that gasoline is only obtained from crude oil through substantial investment in refineries. Present refineries are operating at about 85% capacity, which is pretty high for any industrialized process. There have been no new refineries in 29 years, because existing refineries had been continually upgraded for efficient operation. It is also predicted that no new refineries are in sight, because of a predicted oil shortage. The oil shortage prediction may not be realistic, because of advances in drilling techniques and the continuing discovery of new reserves. Limitations on oil production in the US have been self imposed by government. That also can change, as we replace the Administration and the Secretary of the Department of Interior, who controls drilling permits.

All told, it's a risk, which as it should be. The possibility of significant profit is there, as well as significant loss, depending upon how a number of factors work out. We will see whether there is still enough entrepreneurial spirit left, with capitalistic motivation to take on the risk. T. Boone Pickens is apparently one member of the conglomerate. He has a reputation for taking risks on big projects, which have generally been successful. Let's hope that this is not an exception.

Implications for My Energy Consuming Countries

High energy use per capita has generally been considered a detriment in a society. Considerable effort has been made by the US government and various organizations to have the public conserve energy. Since the converse of conservation is waste, most people will agree that we should not be wasting our natural resources.

However, we may want to look at some of the countries whose inhabitants are in the highest category of energy usage (waste?) per capita.

We have considered the per capita energy usage of 17 countries, with their associated populations, and some comments relative to energy usage.

Fourteen of the countries are either unusually rich in energy sources, such as geothermal, hydro, oil, gas, coal, and nuclear or are processing some of these materials for export. Exceptions are Luxembourg, as a large investment fund center, and Belgium and Finland in their use of large quantities of energy for production of export industrial goods.

With respect to population, the countries decrease in size from United States through Canada, Saudi Arabia,, Australia, Belgium, and Sweden. The other 11 countries have very small populations. The largest population countries tend to have lower energy usage per capita.
From these data, we can draw several conclusions:

1. The higher energy usage per capita countries have lower populations. This could result from the mathematics of the low population calculation.

2. The higher energy usage per capita countries may have significant energy usage in production and export of energy per se (oil and gas) or from manufacture of industrial products for export. There may also be significant waste because of ready availability of energy sources.

Unlikely That the Northeast Will Replace Texas As a Polyethylene Source

EIN News says, "Natural Gas Discoveries Mean Growth Ahead in the Northeast Cheap and abundant natural gas has revitalized the Gulf Coast's petrochemical industry, after demand for its plastic products took a beating in the recession. But some of the chemical comeback isn't coming back to Texas. Discussions about the industry's growth are increasingly focused a thousand miles northeast, in the booming Marcellus Shale region. The natural gas cocktail buried in that Appalachian rock is rich in ethane, the raw material used to create the ethylene that produces many types of plastics. While the Eagle Ford Shale in South Texas offers the same bounty, some industry analysts say the Northeast holds a strategic advantage in its proximity to manufacturers who mold plastic consumer goods. (chron.com)".


That's good news on availability of natural gas from Marcella Shale in the Northeast, but will it come to development? We will grant that there is a market for polyethylene consumer-products from many Northeast molders, but there can always to be a "slip twixt the cup and the lip".

The other favorable aspect is that the Marcella Shale gas as a higher ethane content, which is amenable to cracking to produce ethylene. However, one needs to first separate the ethane from the methane. That takes equipment. Then we need to crack it to ethylene. More equipment. Then we need to polymerize it to polyethylene chips to supply the molders. More equipment. This equipment is not presently available in the Northeast. It is available in Texas in the Houston area. We call it a petrochemical complex. The molding granules are easily shipped by rail car to the Northeast plastic molders, and anywhere else in the US where there are plastic molders.

Could equipment be installed in the Northeast to do the same job that is being done now in Texas. Yes, if could, but why build more than one needs? In addition, there is a high concentration of environmentalists in the Northeast. They will do their best to stop construction of any major petrochemical complex. They will also have the support of the present Federal Administration, which has demonstrated antagonism to the development of any new energy sources, unless it's wind and solar. With pressure from subversive environmental organizations, the Department of the Interior (Salazar) will stall the development of this newly discovered natural resource.

US Oil Independence

EIN News said on 6/19, "OPEC Split Threatens Increase in Saudi Oil Production A growing split between the world's biggest oil consumers and major OPEC producers over prices means Saudi Arabia may no longer increase its oil output by as much as it pledged. (telegraph.co.uk)".


The next day it also said, "OPEC Seeks Tranquil Market OPEC's top official said he wanted to mend fences with the International Energy Agency and avoid a repeat of a release of oil from stockpiles that has strained consumer-producer relations. (theaustralian.com.au)

One minute OPEC appears tough and the next minute they appear conciliatory. Why is that?

The answer lies in their recognition that they have started to lose their world monopolistic power. At one time, they could deny production and therefore supplies to the US, which could cause great pain. Some will remember the long gas lines in 1973 as OPEC cut supplies to the US.

That is now a significantly reduced possibility.

OPEC countries produce 32.9 million barrels per day. They collectively consume 7.5 million barrels. Therefore, they have 25.4 million barrels available for export.

The big change has come about in great increases in production of non-OPEC countries. Non-OPEC countries produce 46.9 million barrels per day, consume 59.6 million barrels, and have a deficit of 12.7 million barrels.

While the non-OPEC country still have a deficit of 12.7 million barrels, it is only half of what OPEC countries have available for export.

The big deficit countries are the US with 10.9, the EU with 11.3, China with 4.1 and India with 2.1 million barrels per day. Russia has a surplus of 7.8 million barrels for export.

While non-OPEC countries have considerably increased world oil supply, the US and the EU are still somewhat at the mercy of OPEC, although less so than previously. The US has large oil reserves, which are only unavailable because of government restriction. We are now producing 7.8 million barrels. If we a little more than double the production rate through significantly increased drilling and pumping, we can be out of OPEC's clutches. Russia would likely be glad to supply any temporary deficit amounts.

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China Recognizes Oil Versus Solar/Wind As Major Energy Source

EIN News says, "China Eyes Canada's Oil Sands In the northern reaches of Alberta lies a vast reserve of oil that the U.S. views as a pillar of its future energy needs. China, with a growing appetite for oil that may one day surpass that of the U.S., is ready to spend the dollars for a big piece of it. (huffingtonpost.com)".

China is now the fifth largest oil producer in the world, among 114 countries. It produces 4 million barrels per day, and is ahead of Canada and Mexico.

China obviously realizes the importance of oil as an energy source, even though they are now fifth in world production.

Notice that in spite of a little talk on solar and wind energy, the major concentration is on oil and coal.

Notice also that China has great ability to purchase foreign oil sources, with US dollars obtained from our purchase of their manufactured goods.

House Of Representatives Addresses Oil and Gas Drilling Permit Problems

EIN News says, "Oil Drilling Approvals by EPA Expedited Under House-Passed Bill The Environmental Protection Agency would have to issue or deny air permits for offshore oil drilling within six months under legislation passed by the U.S. House. (bloomberg.com)".


Unfortunately, EIN News has this wrong. An EarthJustice website probably has it correct. http://earthjustice.org/news/press/2011/house-passes-bill-that-would-rush-oil-drilling-permits.

According to EarthJustice, which is apparently an environmental organization, the House-passed bill H.R. 1229 requires the Department of Interior to decide whether to approve a drilling permit within 30 days after receiving an application and allows only two 15-day extensions of this deadline. Notice that it is the Department of the Interior and not the EPA.

While the EPA is a significant danger to the economy, it appears not to have anything to do with oil drilling. The big problem with the EPA is establishing regulations to control emissions of carbon dioxide from power plants, which will significantly increase the cost of electricity through carbon capture and will also allow the development of a carbon tax, which will again increase the cost of electricity.

Sec. Salazar of the Department of the Interior has been the main instrument to deter oil and gas drilling by denying drilling permits. He works for Pres. Obama, whose objective is to foster the development of wind and solar energy, even at the total expense of reducing the economic capacity of the US.

I am pleased to see that the House has taken this action, and hopefully will have the support of the Senate. There is likelihood that Obama may veto it, but he has a strong incentive to be reelected in 2012, and if he feels that there is strong public support for the bill, he may sign it.

Capturing Carbon Dioxide?

A second article in the May 30th issue of C&E News is by Rajendrani Mukhopadhyay and is entitled, "Capturing Carbon Dioxide".


He starts the article by saying "Researchers and lawmakers alike are looking always to reduce the amount of carbon dioxide released into the atmosphere, because of its contribution to global climate change". Notice that he apparently embraces the hypothesis that CO2 in the atmosphere has such an effect on climate change, as to warrant control of CO2 emissions. I normally don't continue with such articles that start out with a writer's bias, which is either false or questionable.

I make an exception in this case to discuss two Congressional bills, which the Senate Energy & Natural Resource Committee is considering. Both bills involve carbon capture and sequestration, also known as CCS.

S.699 is an amendment to the Energy Policy of 2005 and would allow the Department Of Energy to provide technical and financial help to commercial scale projects on integrated CSS systems. In other words, citizen money would likely be spent to various emission sources, probably including coal-burning electrical utilities, to subsidize the capture of CO2. In other words, another indirect tax to the American public.

The second bill, S.757 drew less attention, but it seems to me equally dangerous. It provides incentives (public money) to encourage development and input implementation of technology to capture CO2 from dilute sources, such as air. A ridiculous notion, especially since there is no reason to reduce the concentration of CO2 in air, nor would it be justifiable to harvest the CO2 for use as a raw material.

Unfortunately, the Senators concentrated on the wrong aspects of the S.699. Instead of considering whether there was any justification for carbon dioxide capture and sequestration, they chose to discuss costs of storage, etc. Oil and gas industry executives were complaining of having difficulty in obtaining CO2 to use for enhanced oil recovery. This may have been instrumental in sidetracking the Senators, but the obvious answer to the oil and gas executives is that they should make their own arrangements with CO2 emitters. It's not government's responsibility to arrange marketing situations. One government executive explained that CCS is "prohibitively expensive". Is that a reason why it should be done public expense rather than by industry? The discussion broadened to consider various ways to capture and use the resulting captured CO2, with no consideration of the main point, which is, "Why do it?"

The only person who seemed to make a little sense in the discussion was a Senator Manchin. He asked whether carbon capture and sequestration (CCS) would affect the nation's competitiveness by increasing the price of energy. If it would, he this could give countries like India and China a competitive advantage with cheaper energy. He then asked, "why would we lose more jobs because of our high cost of manufacturing when we don't have the proven technology and why should we put money into research to develop the technology that will make the US less competitive? No one had a response