INSIGHT: New US gas resources may be blocked

13 November 2008 16:30  [Source: ICIS news]

By Joe Kamalick

 

WASHINGTON (ICIS news)--New and abundant US resources of natural gas keep cropping up every few weeks it seems, but getting those potentially vast assets to the energy marketplace presents perhaps insurmountable political, financial and environmental challenges.

 

This week the Department of the Interior and the US Geological Survey (USGS) said that approximately 85,400bn cubic feet (bcf) of technically recoverable gas hydrates lie beneath the Alaskan North Slope.

 

The US consumes about 23,000 bcf of natgas annually, so the estimated gas hydrate resources on the remote Alaskan north coast could represent a major addition to the nation’s energy resources.

 

The term “technically recoverable” means that the gas hydrates can be developed and produced using current technology and industry practices.

 

The North Slope estimate “points to a truly significant potential for natural gas hydrates to contribute to the energy mix of the US and the world”, said Interior Department Secretary Dirk Kempthorne.

 

US gas supplies are critically important to the nation’s petrochemicals producers and their downstream customers because natgas is a principal feedstock for the sector. Chemical producers have seen gas prices increase four-fold since 1999, forcing shutdown of some production capacity and squeezing margins in general.

 

USGS Director Mark Myers said that his agency’s estimate of North Slope hydrates resources “is especially important now that a growing body of evidence indicates that concentrated gas hydrate accumulations in conventional hydrocarbon reservoirs, such as those in northern Alaska, can be produced with existing technology”.

 

Methane gas hydrates are an open, solid lattice of water molecules that enclose, without chemical bonding, molecules of methane.

 

The hydrates are stable at varying levels of pressure and temperature, even up to 50 degrees Fahrenheit, although generally they are found at low but not necessarily freezing temperatures.

 

When heated, the hydrates release methane, the principal component of natural gas.

 

While the methane gas from hydrates would not directly benefit the general petrochemicals industry - which needs the ethane from conventional natural gas for feedstock - it could be the raw material for methanol production. 

 

Perhaps more significantly, a large influx of hydrates gas into the North American energy marketplace would help drive down prices for the natural gas feeds so important to chemical producers.

 

The new estimates of North Slope gas hydrates resources came about in part because of field research completed in early 2007 by BP and the US Department of Energy that demonstrated the reliability of seismic detection for hydrate deposits.

 

Overall, the USGS estimates that in the US and its offshore regions there is as much as 200,000,000 bcf of gas hydrates, more than 100 times greater than known US reserves of recoverable natural gas at approximately 1,500,000 bcf.

 

Not all of the estimated gas hydrates throughout the US could be recovered, but just a fraction of that total would constitute a many-fold increase in US energy resources.

 

News of the North Slope hydrates analysis followed word of vast new shale gas resources that production firms say could bring as much as 11,000 bcf of additional natgas to the US market annually within ten years.

 

In addition, the Energy Department recently reported that US proven reserves of natural gas rose 13% in 2007 to 237,700 bcf, the highest level in the 31 years that the department has been tracking gas supplies.

 

And there’s still more domestic gas resources near at hand.

 

This week the Interior Department’s Minerals Management Service (MMS) formally issued its notice of intent to begin leasing energy development acreage in the outer continental shelf (OCS) off the Virginia coast.

 

It is the first step toward developing what may be vast oil and gas resources off the US Atlantic coast and came following the end of a 27-year-long offshore drilling ban that Congress - with much lament and protest - allowed to expire at the end of September.

 

Actual drilling off the Virginia coast is not likely before 2012 at the earliest, and that’s assuming that the MMS leasing plan for that piece of OCS and potentially many others off the East Coast survives what surely will be a heavy bombardment of legal and political challenges by environmental groups and in Congress itself.

 

Democrat leaders in Congress - who saw their majority control expanded in both the House and Senate in this month’s US national elections - have already indicated they will try to restore drilling bans along much of the US coast other than the Gulf of Mexico region.

 

Environmentalists are dead certain to pitch court challenges against development of North Slope gas hydrates. 

 

Full development of the seemingly vast shale gas reserves also may come under environmental guns because the hydro fracturing process used to free gas from shale is water intensive and could be seen to pose risks to nearby communities’ water resources.

 

Shale gas development also is costly and becomes financially untenable if natgas prices fall below $8/m Btu.

 

Still, taken together, these new developments suggest that the US may have enough gas resources to be free of imports. 

 

But, just as environmental, political and NIMBY (not in my back yard) challenges have severely limited US development of its vast coal resources, access to offshore gas and onshore shale and hydrates gas supplies may be beyond political possibility.

 

As the incoming administration of President-elect Barack Obama takes shape, people in the chemicals industry and throughout the broad US manufacturing sector will be watching closely for hints of the new president’s energy policies.

 

For the record, Obama has said that he would support “limited” offshore energy development, but he has not further articulated that policy.

 

Obama also will have to contend with Democrat allies in Congress who are staunchly opposed to further development of hydrocarbon energy resources, focused instead on energy efficiency, conservation and massive spending on alternative energy proposals.

 

In what may be the first turn of the weather vane for Obama energy policy, John Podesta, head of Obama’s transition team, has already declared that the Obama administration will move quickly to repeal plans recently announced by the MMS to open new areas of Utah to drilling.

 

That suggests an ill wind soon to blow for US energy development hopes.

 

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By: Joe Kamalick
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