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« The new review | Main | Silly social science »
Thursday
Jun052014

Explain this

A group of academics has written to the Guardian calling for the country to just get a move on with developing our shale resources.

It says: "As geoscientists and petroleum engineers from Britain's leading academic institutions, we call on all political and decision-makers at all levels to put aside their political differences and focus on the undeniable economic, environmental and national security benefits on offer to the UK from the responsible development of natural gas from Lancashire's shale."

The Guardian is predictably sniffy about these benefits pointing, as always, to claims that shale developments in the UK will not lead to price reductions because of the pipeline connections to the continent.

Shale has caused natural gas prices to plunge in America where it has been exploited in vast quantities triggering excitement about the potential to reduce Britain's soaring household heating bills.

But most industry experts warn the economics of extraction here remain unclear in a much-more crowded island and even if large quantities can be produced the volumes could largely be exported, unlike in the US where this is prevented.

Of course, this sale of gas to our European neighbours - if that is what is going to happen - is going to be mutually beneficial anyway, but I thought I might follow up on the suggestion that prices will not fall much in the UK in such a scenario.

I've been interested in the argument that export is "prevented" in the USA for some time. In his evidence to the House of Lords shale gas inquiry a few months ago, Chris Wright pointed out that the US has plenty of gas pipeline connections to its neighbours. These can be seen on the map below:

So while, say, the Marcellus shale is far removed from any export facilities, the Eagle Ford play in Texas is right next to export facilities that can handle thousands of millions of cubic feet of gas exports per day - by my reckoning 2395 MMcf/day (that's 2.3 billion cubic feet per day). So the question is, are gas prices much higher in Texas than in other parts of the USA?

The answer, according to this site, is no. Graphing the data shows that Texas industrial natural gas prices (the heavy green line) are among the lowest in the country:

I wondered if this must come down to the capacity of the pipeline as compared to the volumes of gas being produced, but according to this, the Eagle Ford is producing 3 Bcf/day, which doesn't seem very different to the export capacity of the pipeline. I'm therefore scratching my head slightly to explain why the prices are quite so low. Does anyone know? Are my units wrong somewhere? Or have I got something else wrong?

 

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Reader Comments (43)

Well, my fertiliser prices for next season have just come through to the farm office, and once again, they've tumbled.....Good old shale gas,

Jun 5, 2014 at 11:28 AM | Unregistered CommenterCharlie Flindt

The price 'reductions' aspect is a red herring.

If there's an accessible commodity buried very deep under our country, it should be exploitable.

Unlike the subsidy-soaking wind & solar farms, there'll be NO subsidies for shale development. And if its gas does get exported, the income will benefit all of us in the UK.

Jun 5, 2014 at 11:47 AM | Unregistered CommenterJoe Public

I'm therefore scratching my head slightly to explain why the prices are quite so low. Does anyone know? Are my units wrong somewhere? Or have I got something else wrong?


My tip, when dealing with price data, is first to look to indirect taxes or subsidies. Under the link to "Definitions and Sources" in your source is the following:

Published residential, commercial, and industrial prices are considered to be total prices paid by end-users per thousand cubic feet of natural gas in the respective sectors, inclusive of all tax, delivery, commodity, demand and other charges


I suggest you find out if there are varying rates of state or local taxes applicable.

Jun 5, 2014 at 11:49 AM | Unregistered CommenterGeckko

The UK Left are engaged in an orgy of intellectual onanism about energy. It seems they want to cause total self-destruction of our industrial economy thereby creating a pure, agrarian economy with the rich owning the means of energy production. This has been a clever operation by the elite who have since the end of WWII been trying to recreate Mosleyite fascism.

Jun 5, 2014 at 11:55 AM | Unregistered CommenterSpartacusisfree

Don't look at industrial prices (or residential, for that matter) because they include state taxes etc (where there are any). Look at city gate or wellhead.

The US has, for many years, been a net importer, primarily from Canada. As North America as a whole (US, Canada, Mexico) becomes self-sufficient because of shale production, North America as a whole has a surplus. Flows within the continent are a matter of geography and economics: it's a very fluid market (or interconnected cluster of regional markets) that arbitrages well. Parts of the US will continue to import from Canada.

There isn't, as yet, the ability to export on a large scale (via LNG) so the surplus is indeed 'stranded' and prices have been depressed (relative to world levels), although rising from the recent historical lows as more coal-fired electricity generation is displaced by gas-fired plant, and industrial demand picks up. If the gas industry gets its way, exports will commence ASAP (= before the end of the decade) and in that case it is most probable that US prices will converge once more with European prices (US up, Eu down), just as used to be the case when the combined markets were arbitraged by LNG imports coming in to both sides of the Atlantic (i.e. when N.America as a whole was still a net importer).

Incidentally, we in the UK have already imported US shale gas - indirectly - when cargos of LNG imports already in US waters (and paid for) but not yet unloaded have been diverted across the Atlantic in response to winter price spikes. And, yes, these cargos have served to keep our gas prices down. The dynamics of this are well-understood, and exactly what you'd expect.

As consumers (in open markets) we will all benefit from increased supply, wherever it comes from and wherever specifically it flows.

Jun 5, 2014 at 11:55 AM | Unregistered CommenterNick Drew

The greeny official response to shale gas in the Uk is a case study in kettle logic


Kettle logic is a type of informal fallacy wherein one uses multiple arguments to defend a point, but the arguments themselves are inconsistent. The name derives from an example used by Sigmund Freud who relates the story of a man who was accused by his neighbour of having returned a kettle in a damaged condition and the three arguments he offers.

1) That he had returned the kettle undamaged;
2) That it was already damaged when he borrowed it;
3) That he had never borrowed it in the first place.

The greeny response is...
"There is not enough shale to be worthwhile and there is so much that it will be terrible and the companies will make huge losses while sending huge profits overseas and we need to think of the children and you are nasty racist so shut up."

Jun 5, 2014 at 12:01 PM | Unregistered CommenterJack Hughes

The savings are potentially huge simply because we won't have to pump hundreds of billions of tax payer pounds in to windmills, mirrors and ground unicorn horn power generation.

The reality is prices WILL come down as you will no longer be paying hundreds of pounds a year in green related troughing!

Mailman

Jun 5, 2014 at 12:08 PM | Unregistered CommenterMailman

The Guardian seems to ignore uncertainty when it is all things climate. But seems to think that uncertainty in shale exploitation is all important.

No surprises there then!

Circulation of the Guardian = 193,228 and the Beano = 128,417. Given the decline of the Guardian, soon both comics will have about the same circulation number.

Jun 5, 2014 at 12:11 PM | Unregistered CommenterCharmingQuark

Nick Drew

Thanks for that - I've added a graph of citygate prices.

Jun 5, 2014 at 12:24 PM | Registered CommenterBishop Hill

Ding a ling ..if you want progress to be made, then why would you write to the Eco-Loony controlled Guardian ?
- That's like asking for plans to be stopped...as it will never give realists (non-greens) a fair hearing.

Jun 5, 2014 at 12:26 PM | Registered Commenterstewgreen

Mailman, I wouldn't depend on that if I were you. Did you not know that windmill operators get paid whether they produce any useful power or not, whether anyone needs it or not, whether the wind blows or not, and so on? And that these payments are contractually guaranteed for periods of time which - as we now know - probably exceed the lifetimes of the windmills themselves?

So even after those monstrosities have fallen down, or been blown up by outraged citizens, you'll STILL be paying green levies and taxes to make those bankers and landowners even richer.

Jun 5, 2014 at 12:28 PM | Unregistered CommenterPeter MacFarlane

"shale developments in the UK will not lead to price reductions because of the pipeline connections to the continent": perish the thought that we take any action that would benefit our Continental cousins. Damn foreigners!

Jun 5, 2014 at 12:29 PM | Unregistered Commenterdearieme

waiting for Chandra and Vangel......

Jun 5, 2014 at 12:42 PM | Unregistered Commenterdiogenes

The USA does not prevent gas export. The problem was that all their coastal terminals were for gas imports. Many of these are being converted to export and new export terminals are in commission.

WSJ

Jun 5, 2014 at 12:43 PM | Unregistered Commenterssat

ssat - you're right - where the hell did The Guardian get that piece of fanasy..? Is Grangemouth not tooling up to accept American shale gas..?

Jun 5, 2014 at 12:50 PM | Unregistered Commentersherlock1

'Price reduction' is a weasel phrase: the price may remain unchanged and yet there could be substantial additional tax revenue instead of the liability of eco subsidies.
If you read it in the Guardian or listen to it from the BBC, then its agenda driven propaganda.

Jun 5, 2014 at 12:51 PM | Unregistered CommenterSceptical Me

ping! paging Mr Vangel

Jun 5, 2014 at 12:56 PM | Registered Commentertomo

Peter,

Yes I'm well aware of the green troughing that goes on. I see fracking as a way of bringing that all to an end. So even though the actual cost of gas may not go down, removing all the green taxes that are used to pro up those dead end industries will result in cost reductions for end users.

Mailman

Jun 5, 2014 at 1:04 PM | Unregistered CommenterMailman

Bishop, my pleasure. Your new graph shows a much tidier distribution across the states, as you'd expect. (BTW, notice how it was even tidier until around 2000-01. This is parly because absolute prices rose after that, but also because Enron used to arbitrage the regional price differences in a highly effective manner ... until it went under in 2001, with no real successor.)

Sherlock1 @ 12:50 - no, Grangemouth is gearing up to accept US ethane (not nat. gas, = methane), which is a chemical by-product of the nat. gas industry. That can be liqufied and exported much more easily than methane. It's in as much surplus in the USA as methane, and for the same reason (shale, of course).

Jun 5, 2014 at 1:09 PM | Unregistered CommenterNick Drew

The big cost with gas is transporting it. Pace Gekko, but it is not taxes that explain the major price differences.

The most expensive gas for the UK is that imported as LNG, because it has to compete on a netback basis (i.e. less cost of freight from export terminal) with other LNG buyers - so the fact that Japan pays top dollar to Qatar means that we are left paying nearly as much - only benefitting from slightly lower freight cost. through being closer via Suez and able to take QMax vessels at Milford Haven. Back out Qatar LNG and our prices would be lower. US LNG will soon be available to compete, as will Russian LNG from Yamal, so LNG itself is getting a little more competitive. There is a limit on the export capacity of our pipelines to the Continent, which flow both ways: we have been net importers of Dutch and Norwegian gas via these routes. To import, we must pay Continental price plus a premium to cover shipping and provide a profit. When we export, we have to accept Continental price less a discount to cover shipping - so the price is lowered by at least TWICE the cost of shipping. When the pipeline is full, no further arbitrage is possible, and prices are then entirely subject to local factors - a spike upward on the side with a shortage, and depressed prices on the side with a surplus: prices become completely de-linked.

That is exactly what we had in the previous era when we were self-sufficient in gas and with a potential export surplus (extended by Norwegian imports to the UK via dedicated pipelines). UK prices were consistently lower than Continental ones, and owners of export pipeline capacity were able to extract good margins. The Guardian is ignoring history and basic arbitrage economics.

Incidentally, the idea that you would simply build more export capacity is far from certain: such projects have long lead times. In NWE, gas demand is highly seasonal, so marginal capacity is far from guaranteed to make an adequate return. The market for gas is limited when demand is low, and the export supply is low when demand is high. It can make more sense to produce to storage to help meet winter peaks, or simply to shut in in low demand periods.

Of course, it remains to be seen how much shale production we achieve, and therefore how much by way of imports we can back out, and whether we are able once again to achieve an export surplus (rather than merely acting as an offshore LNG terminal for the Continent, which we already do at times).

Jun 5, 2014 at 1:10 PM | Unregistered CommenterIt doesn't add up...

I wondered why they wrote to the Guardian, but on reflection I suppose it is the best way of getting it discussed on the BBC. It can't be their circulation which is now less than half that of the Times and now a little more than a third of the Telegraph.

Jun 5, 2014 at 1:12 PM | Unregistered CommenterDavid S

Nick Drew:

Our largest surrogate imports of US shale gas have been in the form of US coal displaced from power generation there. The data show that our LNG imports are dominated by the Qatar contract: very few cargoes on diversion come to the UK, being more likely to go to other European destinations that are closer to their ports of origin. Cargoes diverted to the UK are more usually to cover unanticipated shortage due to cold weather or failure in North Sea supply. (BP statistical review has nice tables of global gas trade as LNG and by pipeline - new edition due shortly- 16th June - always a treasure trove on global energy data including renewables and CO2 emissions)

Jun 5, 2014 at 1:41 PM | Unregistered CommenterIt doesn't add up...

Nick Drew: glad you corrected the claim that grangemouth would import "shale gas". it must also be stressed that ethane (along with propane, butane and c5+ hydrocarbons) is not just a by-product of shale gas but must necessarily be removed from the raw gas to meet pipeline specifications. hence my oft repeated statement that shale gas utilisation on the scale being proposed by government is not a simple matter of drilling wells and connecting to the grid; there will also be extensive processing facilities.

Jun 5, 2014 at 1:46 PM | Unregistered CommenterVernon E

"But most industry experts warn the economics of extraction here remain unclear "
I'm not sure I'd say 'most' - more like 'some'. But the main unknown variable in the economics is the amount of interference and delay to be exprected from planning and environmental busy-bodies.

But we know all these stale arguments against shale gas extraction form a smokescreen around the real issue that they will likely prevent windmills and solar farms being built instead. Of course those concerned celebrities wouldn't like windmill or solar farms being built next door either.

Jun 5, 2014 at 1:49 PM | Unregistered CommenterJamesG

Have you noticed that the link in the Guardian article to the letter actually leads back to the article itself!

50 academics eh. And Damian Carrington knows better than all of them!

And his qualifications are.....

Jun 5, 2014 at 2:01 PM | Unregistered CommenterJan

fwiw - I'm stuck in a hotel room with local (mostly bizarre and incomprehensible) TV to stave off the boredom a bit and Russia Today is piped in - oh boy! are they going to town on knocking fracking in the UK! - our next King is taking quite a pasting too :-)

The overt and negative propagandising aimed at UK shale gas might just have the effect of making people actually engage a bit and check out more than RT / BBC = the Steisland effect - please....

Jun 5, 2014 at 2:07 PM | Registered Commentertomo

It is not correct to say that the US generally prevents exports of natural gas, including LNG. Exports require a license, calling for the US Department of Energy to determine if the export is in the public interest. Exports to countries that have a free trade agreement with the US (such as Mexico and Canada, with NAFTA, and Korea with KORUS) are automatically "deemed consistent with the public interest and granted without modification or delay." Therefore, gas can be exported to any country with which the US has a free trade agreement - that is in fact a primary motive for European and Asian countries to seek agreement with the US on the Trans-Atlantic Trade and Investment Partnership (TTIP) and the Trans-Pacific Partnership (TPP), respectively.

Land-based exports to Mexico and Canada are constrained by pipeline capacity, which is acceptable today but faces future capacity constraints. Sea-based exports are currently greatly limited by the available LNG export shipping terminal capacity (there are only a few LNG export terminals, but more are being built now and even more are seeking permits from the US govt and/or the Canadian govt to be built in the future - a hot current US political topic). As a result, the vast majority of natural gas exports from the US are made today by pipeline to Mexico and Canada. Total natural gas exports have almost doubled from 2005 to 2013 - http://www.eia.gov/naturalgas/importsexports/annual/. Natural gas exports to Mexico have in fact doubled just between 2009 and 2013 - http://www.eia.gov/todayinenergy/detail.cfm?id=16471.

The quantities currently exported are quite small compared to the US domestic market, but the quantities available for LNG export are expected to grown significantly as new export terminal construction in the US and Canada (shipping US pipeline gas) is completed - http://en.wikipedia.org/wiki/List_of_LNG_terminals. The LNG demand will grow significantly in some years' time if Japan and the US enter into the TPP and if the TTIP is entered into.

Below are details of licensing requirements from the US Department of Energy.

http://energy.gov/fe/services/natural-gas-regulation/how-obtain-authorization-import-andor-export-natural-gas-and-lng

Natural Gas Import & Export Regulation - Free Trade Agreement (FTA) Countries and LNG Exports

1. Deemed Public Interest Imports and Exports - Section 3(c) of the NGA was amended by section 201 of the Energy Policy Act of 1992 (Pub. L. 102-486) to require that applications to authorize (a) the import and export of natural gas, including LNG, from and to a nation with which there is in effect a free trade agreement requiring national treatment for trade in natural gas, and (b) the import of LNG from other international sources, be deemed consistent with the public interest and granted without modification or delay.

2. FTA Countries that Require National Treatment for Trade in Natural Gas -As of October 31, 2012, the United States has FTAs that require national treatment for trade in natural gas with Australia, Bahrain, Canada, Chile, Colombia, Dominican Republic, El Salvador, Guatemala, Honduras, Jordan, Mexico, Morocco, Nicaragua, Oman, Panama, Peru, Republic of Korea and Singapore. Panama is the most recent country with which the United States has entered into a FTA that requires national treatment for trade in natural gas, effective October 31, 2012. Not all countries that have a FTA with the United States require national treatment for trade in natural gas (i.e. Costa Rica and Israel). A list of all countries with which the United States has a FTA can be found at: http://www.ustr.gov/trade-agreements/free-trade-agreements.

3. Applications Not covered by Deemed Public Interest Criteria (including LNG Exports to non-FTA Countries) - Applications not covered by the deemed public interest finding in section 3(c) of the NGA include applications to export natural gas, and/or LNG to countries with which the United States does not have a FTA that requires national treatment for trade in natural gas, and applications to import natural gas, excluding LNG, from these non-FTA countries. These applications shall be filed in hard copy format. DOE/FE will issue a Federal Register Notice of application seeking comments, protests, and motions to intervene in order to make a public interest finding for these types of applications.

----------------------------------------------------------

I hope this is useful.

MK

Jun 5, 2014 at 2:11 PM | Unregistered Commentermkantor

From 'The debate on Hyrdraulic fracturing' at the Mermaid London attended19 May.... (Ross Gurdin Energy Policy advisor CBI.....

Who considers it would be of benefit to the UK economy and manufacturing. And considers in fact the economic argument for fracking to be the main one.

The economic potential is significant in the supply chain for manufacturing feedstock, for job creation, for the steel industry, for skilled job creation, and others. It would generate tax revenue, and local jobs.

A reduction in energy prices (by 2050)...no short term change in energy prices however, because of the European market and the need for economies of scale.

A reduction in industry costs reducing industry prices overall.

We need gas anyway (and so the government position is where we get it from, not doing without) and so even if the job creation proves to be the lower end of the estimates it would still be worth proceeding.

By using gas for feedstock we increase by products such as chemicals, paper, steel, and ceramics. and improve security of supply for electricity, direct heat, and even transport.

Jun 5, 2014 at 3:18 PM | Unregistered CommenterFenbeagle

Fen,

You hit the nail on the head with two little words, improved security!

Regards

Mailman

Jun 5, 2014 at 3:50 PM | Unregistered CommenterMailman

Pricing gas is tricky in Texas - controlled by Railroad Commission IIRC. Gas transported and sold interstate used to be cheaper than gas extracted and sold in Texas.. Hunter, who I believe lives there can likely explain this in more detail. And maybe correctly, If I've screwed this up or my impression is obsolete.

This was a sensitive issue in the late '70s when I worked NE of Houston.

Jun 5, 2014 at 4:02 PM | Unregistered Commenterjferguson

jferguson:

The TRC did control oil and gas prices in the 1970s and while the US remained insulated from world market prices at the turn of the 1980s. However, price decontrol happened in the 1980s as oil prices generally moved to free market bases. Today, most gas prices off Henry Hub futures basis or Inside FERC

http://www.platts.com/IM.Platts.Content/methodologyreferences/methodologyspecs/na_gas_methodology.pdf

FERC only set the rules for pricing on pipeline transport charges offshore and interstate - an area of arcana that I investigated in some depth about 15 years ago.

http://www.ferc.gov/about/ferc-does.asp


The current remit of the TRC is more as a technical regulator: it no longer sets prices:

http://www.rrc.state.tx.us/about-us/organization-activities/divisions-of-the-rrc/oil-gas-division/

Jun 5, 2014 at 4:56 PM | Unregistered CommenterIt doesn't add up...

The endless arguments about whether UK shale gas production would reduce gas prices compared to current gas prices is an irrelevant red herring. What matters is that increasing the supply of anything, including gas, means that the price when it is produced will be lower than it would have been if it had not been produced.

Jun 5, 2014 at 5:03 PM | Unregistered CommenterGuy Leech

Any business investing in mineral or energy resources is highly experienced at assessing the risks (the type of expertise that led Steve McIntyre to investigate the HS). Its amusing that eco-luddites think we should instead listen to their own 'expertise' on the economic risk assessment.

Jun 5, 2014 at 5:10 PM | Unregistered Commenteroakwood

More on US natural gas exports to Asia ("[w]hen US LNG produced from the shale gas boom begins to reach Asia next year ...], as well as the impact of the Russia-China gas deal announced last month -

http://qz.com/217234/the-us-and-russia-may-be-headed-for-a-gas-war-in-asia/

****

The trigger for the shakeup is a critical mass of US and Russian gas exports destined for Asia over the coming decade and beyond, much of it likely to be priced at a substantial discount to the liquefied natural gas (LNG) currently on sale in the region.

****

LNG sold in Japan last month went for about $15 per 1,000 cubic feet, and in February, it went for more than $20. But in May, Russia committed to sell 38 billion cubic meters (bcm) of gas per year to China at half that February price—an estimated $10 per 1,000 cubic feet. When US LNG produced from the shale gas boom begins to reach Asia next year, Citi estimates that it will sell for about the same price–$10 to $12 per 1,000 cubic feet.

****
... According to numbers compiled by Citi, Russia could supply 30 bcm of gas to China by 2020 and as much as 95 bcm to Asia as a whole by 2025. The US is in approximately the same posture—seven export projects in various stages of approval could export 93 bcm of LNG in a similar time frame. The combined potential US and Russian volume is equivalent to more than 3 million barrels of oil a day.

Jun 5, 2014 at 9:51 PM | Unregistered Commentermkantor

So Nick Drew was kind enough to suggest taxes were the problem.

So we know whose comments you don't read then!!!!

Jun 5, 2014 at 9:56 PM | Unregistered CommenterGeckko

More.

Anyone at the Guardian or elsewhere who believes that US regulations prevent natural gas exports is not aware of the actual facts. With respect to export terminal projects in the U.S. Federal govt approval process, see a May 18, 2014 article in the Wall Street Journal - http://online.wsj.com/news/articles/SB10001424127887324767004578489130300876450 - and an interactive map from the American Petroleum Institute - https://api.maps.arcgis.com/apps/StorytellingTextLegend/index.html?appid=aa7b306e4769400fbc69989d9cbcbea4.

In addition to the new projects described in these links, and the existing pipelines to Mexico and Canada, an existing LNG export terminal for Alaskan natural gas going to Asia is located at Nikiski, Alaska.

Excerpts from the recent Wall Street Journal article follow.

U.S. Approves Expanded Gas Exports

Wall Street Journal

By Keith Johnson And Ben Lefebvre
Updated May 18, 2013 11:18 a.m. ET

The Obama administration on Friday cleared the way for broader natural-gas exports by approving a $10 billion facility in Texas, a milestone in the U.S. transition into a major supplier of energy for world markets.

****

The Department of Energy said it had given conditional authorization to the Freeport project to export up to 1.4 billion cubic feet a day of liquefied natural gas. The approval is needed for exports to countries with which the U.S. doesn't have a free-trade agreement, a category including major trading partners in Europe and Asia. The project, which is expected to begin exports in 2017, still needs approval from the Federal Energy Regulatory Commission.

The Freeport terminal is the second export facility approved by the Obama administration. Cheniere Energy Inc. LNG -0.36% 's Sabine Pass facility in Louisiana won approval in May 2011 to export LNG to the countries without free-trade agreements. It expects to begin exporting in 2015.

The first approval got relatively little notice, but the issue gained prominence as export applications piled up and leading companies on both sides of the issue began to clash over the merits of exports. The Department of Energy spent much of 2012 waiting for a report it commissioned on the issue, which was released in December 2012 and concluded that exports would benefit the U.S. economy overall.

Friday's decision is an important harbinger for the remaining 19 applications to export gas to non-FTA countries. That's because, by law, gas exports are presumed to be in the public interest unless shown otherwise.

Freeport LNG has signed preliminary 20-year contracts to sell much of the export facility's capacity to Chubu Electric Power Co. 9502.TO 0.00% , Osaka Gas Co. 9532.TO -0.72% and BP Energy Co., and the company says it expects to announce a deal for the rest of the capacity this summer. Chubu Electric and Osaka Gas, both major Japanese utilities, have a partial stake in the portion of the facility that is feeding the Japanese demand.

****

The Department of Energy will next consider the application of a slightly larger export facility in Lake Charles, La. While there are nearly a score of applications outstanding, analysts expect that only a handful will be built, due to the high cost of gas liquefaction facilities.

Moody's Investors Service has said that projects building from existing facilities, including Cove Point LNG in Maryland and Cameron LNG in Louisiana, are best placed to secure approval and financing from the private sector.

See also http://www.oregonlive.com/business/index.ssf/2014/03/feds_approve_lng_exports_from.html discussing export approval for the large Cove Point, Oregon project still in development.

I hope this is useful.

MK

Jun 5, 2014 at 10:20 PM | Unregistered Commentermkantor

Vernon E; thrashing that hobby-horse again, I see. How about some hard info? Show us how these "extensive processing facilities" are sprouting across the US.
You should take a look at how, for decades, the industry has dealt with gas mixtures by piping them to a few large separating and processing facilities. Why would shale be any different?
About 25% of the UK's gas lands at the St. Fergus plant from a multitude of N. Sea fields.There it is cleaned up and the methane is fed to the grid and the rest is piped to Mossmoran for further processing. One similar complex could handle the entire projected output of the Bowland shale.

Jun 5, 2014 at 10:35 PM | Registered Commentermikeh

On the broad economic issue, there is a lot of focus on what might happen to gas prices. Little attention is given to the huge benefits which follow from indigenous resources.
The GWPF recently posted an article from the Wall Street Journal which included this statement: "In all, some 66 industrial projects—worth some $90 billion—will be breaking ground over the next five years in Louisiana. Another $55 billion of new investment could be coming, says Louisiana’s economic development secretary, Stephen Moret. How many of them will actually get built remains to be seen.
Assuming that most will, you realize we are still probably underestimating the positive impact of the gas boom on both local and national economies. The entire GDP of the state of Louisiana is about $250 billion annually."
That is the potential which industry and councils in the Northwest should be chasing.

Jun 5, 2014 at 10:36 PM | Registered Commentermikeh

"The Guardian is predictably sniffy about these benefits pointing, as always, to claims that shale developments in the UK will not lead to price reductions because of the pipeline connections to the continent."

I may be mis-remembering things but the first Poyry report on the effects of shale had it keeping gas prices static out to about 2030 rather than doubling in price without shale gas. If the price remains static while we 'enjoy' 20 years of inflation that is almost as good as saying it will get cheaper.

Jun 6, 2014 at 1:13 AM | Unregistered CommenterGareth

Gareth,

Using BBC logic that is a price cut!

Regards

Mailman

Jun 6, 2014 at 10:58 AM | Unregistered CommenterMailman

mkantor:

The US has been exporting LNG to Japan for decades from Kenai, Alaska. The next exports will tend to be into the Atlantic basin - backing out supplies from Qatar, and forcing them to rely more on Eastern markets.

Vernon E/mikeh:

There is already a large gas terminal at Rampside, just outside Barrow in Furness, that has been handling Irish Sea gas production - not to mention plenty of capacity just the other side of the Pennines in Easington, Theddlethrope et. al. - no need to go all the way up to St Fergus - and Teesside has long been a petchem centre - as indeed has the area around Manchester (Port Sunlight, Stanlow etc.)

Jun 6, 2014 at 3:31 PM | Unregistered CommenterIt doesn't add up...

oakwood

Its amusing that eco-luddites think we should instead listen to their own 'expertise' on the economic risk assessment.
You're easily amused! In my experience the conversation goes something like this:
"I'd rather listen to the people who actually know what they're talking about."
"But they have a vested interest."
"And you don't?"
Note the giveaway in their reply leading to the possibility of re-opening the dialogue with something along the lines of, "well, at least you admit ..."
Sooner or later they blow a fuse. Now that can be amusing!

Jun 7, 2014 at 9:03 AM | Registered CommenterMike Jackson

The price reduction argument is complex.

First there could be a very substantial reduction in gas price if UK shale is extracted since the UK Governement could make this a condition of any licence given to the oil companies. It could take the view that shale is a UK asset and must thereby benefit the UK finanically. It can achieve this by a combination of factors, eg. high licensing costs, taxing shale oil profits at a higher rate, or insisting that the oild companies sale the shale gas on a first basis to the UK energy generators at cost price plus a fixed percentage profit margin, and only after these first served customer orders met, can any balance be sold on the open market.

Second, of course in any market supply and demand influences costs. the fact that the European market will become swamped with shale gas from the UK and gas exports from the US, will lower the European market price. By how much, is debateable, but one should expect to see a price reduction.

Third, and this is the point most often overlooked, many European countries have substatntial shale gas reserves. as soon as the UK exploits its own reserves, other countries will follow suit. Indeed, they may be forced to do so in order for their industries to remain financially competitive. This will mean that over time the European gas market will become flooded with not only 'cheap' gas from the UK, from the US, but also from other European Countries. Eventually, there will be the sort of gas surplus seen in the US which surplus caused gas prices to fall dramatically.

Predicting the future is always difficult. My prediction is that initially, there will only be a small reduction in gas price but after a few years there will be a very noticeable reduction in Eurpoean gas price.

But as I say, for the UK to benefit, from its shale reserves, it does not need gas prices to fall. Revenues from licensing and taxation from profits could add substantially to the treasury's coffers and this windfall could be used to lower general taxation (income tax and/or VAT), reduce consumers bills (by cutting off all the green subsidies and using the new income to pay those subsidies), to increase public spending (whether on benefits or health care or education or infrastructure) without the need to raise additional revenue from the general population, to bring down the deficit or fund the presently unfunded public sector pension entitlements etc. How one would like to see this revenue stream spend depends upon one's political views.

The idea that the shale gas reserves will not be valuable is ridiculous.

Jun 9, 2014 at 12:00 PM | Unregistered Commenterrichard verney

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