What is Peak oil?
"The term Peak Oil refers to the maximum rate of the production of oil in any area under consideration, recognising that it is a finite natural resource, subject to depletion."
U.S. Gas Exports
Submitted by Kjell Aleklett on Sat, 2012-12-08 00:18.
By Kjell Aleklett
On Friday I boarded the aircraft in New York to travel back to Stockholm from (among other things) the ASPO-USA conference. When I did so I picked up two newspapers, The Wall Street Journal (WSJ) and the Financial Times (FT). The front page of the WSJ was headlined with the news, “U.S. Gas Exports Clear Hurdle" and on page 3 in FT one could read “US study on gas output backs exports”. (The Internet version of the article is titled, “Report gives green light to US gas exports")
If we focus on the WSJ article then we can examine the graph it shows of future production.
According to the graph, the USA will produce 33.1 trillion cubic feet of natural gas in 2040 compared to the 23 trillion cubic feet that was produced in 2011. At the recent ASPO-USA conference the Canadian geoscientist David Hughes presented his studies of shale gas production in the USA. The field from which the most gas is produced is Haynesville and it was interesting to note that this field had an “overall decline rate” 52%, i.e. if they stopped new drilling then production would decline very rapidly. The field is now showing a plateau of production. The problem for the operators there is that the price of gas is too low. Currently one is seeing more and more drilling rigs switching to drill for shale oil. If the price of gas does not increase it will soon be unprofitable.
In Japan the price of natural gas is eight times higher than in the USA. In Europe the price is five times higher than in the USA. Opening US natural gas to exports will increase the domestic price in the USA. In the home of free trade, the USA, it is forbidden to export natural gas and oil. This means that the price of oil in the USA is about $20 lower per barrel than in the rest of the world and the price differential is even greater for natural gas. The proposals to allow export that currently lie on President Obama’s desk should be regarded as an effort to maintain the production that they currently have.
During the 1990s there was also a period when the price of natural gas was markedly lower than the international price. Industry in the USA blossomed and President Clinton was able to take the credit for the nation’s economic success. It will be interesting to study what happens now.