Shale Gas Hitting Global Thermal Coal Market

Any idea if natural gas will permanently replace coal?


Shale Gas Hitting Global Thermal Coal Market (and Prices)

by Stuart Burns on MAY 15, 2013 Style: Commentary Category: Commodities, Macroeconomics

We have heard a lot in the press – and indeed we have written ourselves – about the impact of shale gas and, more recently, shale or tight oil, on the energy market in the US. Lower gas prices have stimulated a pronounced switch to natural gas-powered electricity generation, provided a huge boost to the petrochemicals industry and the early steps of a switch to natural gas for transportation, but like a pebble dropping in a pond, the ripples from the shale gas revolution continue to spread outwards with consequences far beyond America’s shores.

A recent note to investors by South Africa’s Standard Bank explores one such consequence for the global thermal coal market, and as a result, for consumers of thermal coal around the world. The bank reports that cheap natural gas has seen it eat away at coal’s pre-eminence as a feedstock in US electricity generation, yet US coal production has not fallen off to the same extent. As a result, this displaced demand (more than 90% of US coal consumption is for electricity generation) has found its way onto international markets, particularly those of major importers Europe, China and Japan. With demand down in the depressed European market, traditional suppliers such as Russia, Colombia and South Africa have had to look elsewhere for markets, particularly the still-expanding Asia region. For example, South Africa, long the swing supplier to Europe, has been all but displaced by cheap US imports to the region and now only ships thermal coal to Asia.

This is good news for electricity consumers in Europe and Asia, as lower coal prices mitigate electricity cost pressures from other fuel sources and help in some way to share the benefits of the US shale gas bonanza with the rest of the world, albeit at the expense of coal producers everywhere. How much longer this will continue remains the subject of some debate, but with gas supplies plentiful in the US and the rising threat of carbon emissions legislation making a switch back to coal unlikely, it would be surprising to see thermal coal prices rise anytime soon. In the medium term, low prices will stifle new mine investment.

The bank estimates the lowest breakeven cost for US coal miners is in the region of $90/metric ton, which, given the above, provides little incentive for investment in green-field projects and, at current price levels, might even see some marginal miners go out of business. In the meantime, the US will continue to be a significant thermal coal exporter while at the same time reducing its oil imports. The point at which the country becomes a net exporter of energy as measured in barrels of oil equivalent can’t be far away.

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I think that day may come eventually, but it would take time.

Quote:http://www.eia.gov/todayinenergy/detail.cfm?id=7350

U.S. carbon dioxide (CO2) emissions resulting from energy use during the first quarter of 2012 were the lowest in two decades for any January-March period. Normally, CO2 emissions during the year are highest in the first quarter because of strong demand for heat produced by fossil fuels. However, CO2 emissions during January-March 2012 were low due to a combination of three factors:

A mild winter that reduced household heating demand and therefore energy use
A decline in coal-fired electricity generation, due largely to historically low natural gas prices
Reduced gasoline demand

The following is probably the most ironic result of shale gas. The country that did not sign the Kyoto protocol is the first to meet the emission requirements.

http://wattsupwiththat.com/2013/04/05/us...racing-it/
In 2012, a surprising twist and without ever ratifying it, the United States became the first major industrialized nation in the world to meet the United Nation’s original Kyoto Protocol 2012 target for CO2 reductions.

Luff....

Haha I guess Kyoto protocol has nothing to do with carbon emission. Probably to do with Japan's interest to sell nuclear technology.

The best way to cut carbon emission is to slow economic growth, which non of these industrialized nation is willing to participate. They are scared to death when their GDP fall by 1%. So, I see all these carbon emission stories as a hoax for the rich nation to bully the poor, into complying something that doesn't really matter.

Australia is another joker. Talk around Green all the time, but 90% of its power come from coal. Then sell its gas to Japan.

The IEA's assessment is in a best case scenario, gas would overtake coal as the second most dominant demand source from the energy mix in 2035.

Shale gas or any other gas has arrived. Its not hot air but a reality.

Human spirit never say die. Peak Oil is one of the doom's day prediction but when the going gets tough, the tough gets going - the discovery of fracking, horizontal drilling that make previously economically not viable shale gas viable.

Gas burns cleaner and hence its abundance will make it the energy of the future.

GG

(30-05-2013, 09:39 AM)Musicwhiz Wrote: I think that day may come eventually, but it would take time.

Shale Gas is not the Saviour you Think – Bill Powers Interview

http://oilprice.com/Finance/investing-an...rview.html

(31-05-2013, 12:44 AM)smallcaps Wrote: Shale Gas is not the Saviour you Think – Bill Powers Interview

http://oilprice.com/Finance/investing-an...rview.html

Quote: "In fact, most shale gas wells will produce the majority of their reserves within their first five years of production."

That's what I have written previously as well. People think Shale gas fields last as long as oil fields and I think this is the key variable.

With abundance of energy resources, nominal inflation will be less of a concern for central bankers...

http://money.cnn.com/2013/06/05/news/eco...l?iid=Lead

U.K. prepares for U.S.-style shale gas boom
By Alanna Petroff @AlannaPetroff June 5, 2013: 3:54 AM ET


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Engineers are hoping they will soon be able to use fracking techniques in the U.K. to extract huge deposits of non-conventional gas.
LONDON (CNNMoney)
The United Kingdom could be one step closer to a U.S.-style energy renaissance as new estimates show there is a massive amount of untapped shale gas in the Northwest of England.
Energy firm IGas released estimates this week showing there could be as much as 170 trillion cubic feet of gas in its license area - a monumental amount given that the U.K. uses only 3 trillion cubic feet each year.

IGas is among a handful of energy companies that have been granted licenses to look for shale gas opportunities in areas across the U.K. in the hopes that the country may be able to replicate the energy boom currently playing out in the U.S.
New techniques such as hydraulic fracking -- which involves injecting water, sand and chemicals deep into the ground at high pressure to crack the shale and allow the oil or gas to flow -- have made the extraction of oil and gas from shale rock commercially viable.
"It's inevitable that we will find more shale gas and it's inevitable that we will begin to exploit it," said London-based energy analyst Steven Fawkes. "We need more indigenous, local energy. We need cheaper energy. And as long as appropriate [policy and environmental] safeguards are put in place, I think that's a good thing."
Related: U.S. to become biggest oil producer - IEA
But before Britons start getting too excited about energy independence, it's important to understand that the IGas numbers are only preliminary estimates.
"It's only when you drill wells that you really know," said Peter Atherton, an energy analyst at Liberum, though he says the IGas numbers were "encouraging."
Energy experts also point out that only a fraction of the available shale gas -- between 10% to 30% -- can actually be extracted from the ground, while the remainder is unreachable and uneconomical to pursue.
Meanwhile, the U.K is still years away from any potential energy boom. So far, there has been no commercial shale gas production in the country.
"We're in the same place as where the U.S. drillers were in 2001," Atherton said. "Even with the best will in the world, we're still at least five years away from anyone commercially exploiting onshore non-conventional gas."
Atherton explains that the U.K. still has to develop and refine its shale gas policies, it has to get the drilling wells in place and it also has to cultivate an onshore energy industry.

The fracking industry is an easy target for environmental and community groups who are concerned about the possibility that fracking might cause earthquakes and contaminate groundwater.
"A lot of people have concerns about the environmental impact," said Fawkes. "In the U.S., the industry managed to get itself exempt from environmental regulation and we shouldn't allow that to happen."
A spokesperson for the U.K. Department of Energy and Climate Change says it's important that the industry acts responsibly, so it created the Office for Unconventional Gas and Oil to "promote the safe, responsible and environmentally sound recovery of the UK's unconventional gas and oil resources."
"We will develop proposals by summer 2013 to ensure that local communities will benefit from shale gas projects," she said.


First Published: June 5, 2013: 3:54 AM ET

(31-05-2013, 11:01 AM)specuvestor Wrote:

(31-05-2013, 12:44 AM)smallcaps Wrote: Shale Gas is not the Saviour you Think – Bill Powers Interview

http://oilprice.com/Finance/investing-an...rview.html

Quote: "In fact, most shale gas wells will produce the majority of their reserves within their first five years of production."

That's what I have written previously as well. People think Shale gas fields last as long as oil fields and I think this is the key variable.

No matter how I look at it, Mr Bill Powers does not look like he had drilled a well, know how to drill a well and has an army of scientists and engineers behind him analysing the shale gas reserve.

He is probably more interested to sell his book and get some instant fame.

If he is right, then exxonmobil, shell, Chevron must be mad to put in money to develop shale gas.