It's a Gas!! Let's Build an Import ...er... Export Terminal!!

In Case Anyone Believes the Petro-Biz is Short of Cash

Here's a cool bit of news.  Kinda restores your belief that anything is possible and good times are still rolling.

First, Turn back the clock to 2002. Things are looking pretty sketchy in the North American natural gas tank. Reserves are low. Exploration has pretty much hit a dead end. So the industry decides it's time for another liquid natural gas (LNG) import and regasification terminal. They pick a spot on the Texas coast, 70 miles south of Houston on Quintana Island and, shortly, there is an ownership group, Freeport LNG Development LP (50% owned by financier Michael Smith and 50% by ConocoPhilips) and a plan, with a tentative clientele (ConcocoPhilips and Dow Chemical) already waiting in the wings. Budgeted at $500,000 03/04 dollars, the terminal began operating in 2008.

In the meantime, what happens? Moore's Law kicks in. Computer hardware and software gets good enough to provide 3-dimensional geological modeling which enables precisely controlled directional horizontal drilling and hydro fracturing techniques to be used in natural gas exploration and extraction. Opens up whole new vistas for gas exploration.

Surprise, surprise! By 2010, the natural gas situation in North America is registering impending glut. What do you do if you just hit the "on" button on an importing terminal, when suddenly the place you are importing LNG to is already floating in the stuff? Easy. You switch plans and make it an export terminal. This is a little more difficult than switching the direction of flow in the pipes. Now you have to liquify gas and load it onto ships, instead of unloading LNG off ships and regasifying it. Totally different process.

Import Terminal + $2B = Export Terminal

Put together a slightly different group of players, throw another $2 billion of 2010 dollars at it and presto, you will have a new LNG export terminal ready to ship 1.4 Bcf/day to China by 2015.

Look at it another way. From 2003 to 2015, you've got a whole buncha engineers, equipment, businessmen, workers, techinicians, etc., etc., basically chasing their tails around.

And there's nothing to say that 2015 is going to turn out any more of a sure thing. Maybe China finds enough shale gas of its own. Maybe Russia finds new sources and gives the Chinese a deal they can't refuse. Maybe the whole fracking process runs into too much opposition due to effects on groundwater or other snag. Maybe some new alternative fuel comes along and obsoletes everything. Not necessarily all that far-fetched.

Yet they say this industry doesn't have the ability to invest in making the tar sands more environmentally sustainable.

The tar sands only produces 4 er... 5 er... 6% of Canada's total GHG (for now!)

Shell's New Jackpine Mine Adds 100,000 bbl per day capacity

You've seen and heard the feverishly cut and pasted line before... Canada only produces 2% of the world's GHG emissions and the tar sands only 5% of Canada's total...

This is also the platitude that Alberta spends millions advertising and spreading around the world, and what its PR folks tell people like Speaker of the United States House of Representatives, Nancy Pelosi, and visiting U.S. senators.

Not to suggest that this situation would be acceptable if it were true however... this specific point demands further scrutiny here and now.

For starters, the figures being tossed around by tar sands apologists are probably from  2006, 2007 or 2008 at the latest. Since the tar sands are in a state of expansion, it could probably be presumed that the 5% is already more like 6 or 7%, although economic events since 2008 may have had a slight dampering effect on production increases..

As of this week, with Shell's new Jackpine Mine coming onstream, you can add another 100,000 barrels a day of capacity, so that daily-quoted 5% figure is now looking even rougher around the edges. And don't forget, the tar sands are expected to account for approximately 12% of Canada's GHG by 2020.

Not to mention that this figure only represents the GHGs produced in extracting and upgrading the bitumen. It doesn't count the final combustion by the consumer, wherever they may live. Nor does it include the rarely-mentioned discharges that will need to be incurred in most or all carbon capture and sequestration schemes that have been envisioned.

In case anyone's wondering, I do not advocate shut down of the tar sands. I advocate a net zero-GHG tar sands extraction and upgrading process. Getting there should be fun, interesting and profitable, and should provide Canada and Alberta with a wealth of proprietary technologies.

Canada's Tar Sands as Risky as the Gulf: Report

A typical comment around Canadian water coolers and message boards, when the topic of the BP environmental disaster in the Gulf arises, is: "yeah it's a tragedy but the Alberta oil sands are looking better every day."

Whooaa... not so fast there. 

A new report claims that "Canada's Oil Sands Face Significant Financial and Environmental Risks as Great as Those in BP Spill"

The report was commissioned by Ceres and authored by RiskMetrics Group.


At the press conference announcing the report May 17, Ceres President Mindy Lubber said, "The risks for companies involved in developing Canada's oil sands are arguably greater than those in the Gulf of Mexico,"

The report cites numerous risks, including pricing, market conditions, transportation obstacles, water and other resource shortages, first nations issues and the mounting costs and liability connected with land reclamation.

Even without considering environ- mental factors, pricing alone is a potential game breaker. If the price of oil is too low, the oil sands then become uneconomical. But, if the price goes too high, alternative sustainable energy sources suddenly become extremely viable.

What the Gulf situation tells us is that the unthinkable does happen and if something can go wrong it will.  


About Ceres
Ceres is leading coalition of investors, environmental groups and other public interest groups working with companies to address sustainability challenges such as climate change. Ceres also directs the Investor Network on Climate Risk, a network of 90 institutional investors with $10 trillion of collective assets focused on the business impacts of climate change.

About RiskMetrics Group
RiskMetrics is a leading provider of risk management and corporate governance services. Its ESG Analytics Group analyzes cutting edge issues like climate change, water and ecosystem services that support the global economy.

Bloom Energy to reveal the Bloom Box on Wednesday

Here's another reason why it is the ultimate folly to burn natural gas "to make oil".

It is something called a "Bloom Box", invented by rocket scientist and visionary, K.R. Sridhar.

What it is is a compact unit, fully scalable, that can power anything from a home to a neighbourhood to a building complex and can use a variety of fuels, such as natural gas or even bio-waste. The maker, Bloom Energy, is revealing its product to the public this Wednesday, but offered a sneak peak on 60 Minutes last night.

This project has some big-time backing. The same guy, John Doerr, of  Kleiner Perkins Caufield & Byers, who was involved in financing Netscape, Amazon and Google (and also such belly flops as the Segway), has driven financial backing into place behind Bloom Energy to the tune of something like $400 mil.

This is not one of those pipe dreams that may or may not ever see the light of day. Google, the first major buyer of the units, has been using them for a year and a half. eBay is powering 15% of one of its major campuses with five big Bloom Boxes. In the case of eBay, CEO John Donahoe points out that the Bloom Boxes are providing more power than acres of solar panels on eBay corporate roofs. Not only that, the eBay units are fueled by landfill bio-waste, making the whole equation carbon-neutral. The eBay unit has saved $100,000 in power costs over nine months.

Obviously an innovation such as this has repercussions throughout commerce and industry.

A couple of key facts: It seems that the Bloom Box only uses the equivalent of half of the natural gas to produce the same amount of electricity as a conventional natural gas power plant. Another advantage of locating the units on site is that something like half of the power ever generated is lost in transmission.

K.R. Sridhar sees his units installed across the world in the next 5 to 10 years. Let's hope he's right...

And let's hope we haven't burned all our natural gas making oil by that time, which is what Canada is doing in the Alberta Tar Sands.
 

China Tar Sands Purchase Appproved by Harper

The Harper government has approved the purchase of two Alberta tar sands projects by the PetroChine International Investment Co. Ltd. from Athasbasca Oil Sands Corp.

The Chinese agreed to spend over $250 million developing the two projects, MacKay and Dover, and open a head office in Alberta to manage things.

Mackenzie pipeline also approved yesterday by fed panel - let the cash flow!

Yet another bombshell of potentially unsavory environmental news snuck through under the radar yesterday while most Canadians were ignoring news of any kind.

This time, it's the MacKenzie Valley pipeline, in Canada's Northwest Territories, up for approval by Stephen Harper's Conservative government. Yeah, this is the same pipeline that was Considered too much of a potential sociological and environmental hazard to be allowed even by lax 1976 standards,

That was then, this is now:

"The project would provide the foundation for a sustainable Northern future," the panel concluded while laying down numerous conditions. The project is backed by Imperial Oil (Exxon), Shell and ConocoPhillips.

All this fall, there has been rumblings of discontent from the carbon industry, commentators and various interest groups. They say construction was supposed to have already started. The panel has "dragged on" for four years, they say. woo-hoo!

Even though industry has been pushing for 40 years for this $16 billion construction project / cash pipeline to go through, they are still pushing for hefty government incentives... which of course the Harper Reform Cons will be sure to give (after pretending to play it tough a bit longer).

Meanwhile, previously ambivalent or hostile first nations groups have been bought out by promises of free-flowing construction cash as hundreds or thousands of workers trample through the boreal forest and across the permafrost...

Considering that this would be the country's largest construction project, to be built through the most fragile ecosystems imaginable, it would be pure folly to allow it.

When you consider that the purpose of this pipeline is to pipe natural gas to the Tar Sands... just so that they can burn more carbon and make more profit while they "MAKE" dirty oil... it is absolute insanity.

And they want public money to build this?

These guys are pathological! It is disgrace.

Not to mention - they could have coughed up a few billion 5, 10, 15 or 20 years ago and put up windmills to their hearts' content. They would have clean power to spare up there by now - to "make" all the oil they want. Clueless.

Alberta Oil - One Glob for the Price of Two Globs

Has anyone noticed the elegantly profitable symmetry that is unfolding in the Alberta oil patch?

A phalanx of oil companies, all of whom swear that they do not have time nor resources to put up a few windmills or do any other reasonable thing, are lining up to get their dibs in on the Athabasca Oil Sands.

Why is this, I wondered to myself.

Of course, the answer came quite easily.

Because these oil sands are a profitable operation.

But, they are really more profitable, even, than meets the eye. That's because there is a special magic in the air in Alberta that actually doubles the sales... and who knows what's going on with the profits? The oil companies are raking it in as it is, of course. Posting gargantuan profits with minimal worries about what the economy is doing. Cheating the public outright at the retail level at every turn. It is mind boggling what they get away with.

The coffee card effect

But the real sleight-of-hand goes on in the oil sands. Remember, this is the operation where it takes something like 4 times the energy to produce a barrel of oil as it does in conventional oil production. For starters, it takes 1200 cu. ft. of natural gas to produce one barrel of oil in the extraction process of conventional tar sands production. Since a barrel of oil is equal to about 6,000 cu. ft. of natural gas, it's just about like a Tim Horton's coffee card - extract 4 barrels of oil - you get to sell another barrel! Then there is all the other fuel used in the operation. Running all those dump trucks on steroids, shuttling the workers, etc., would all be additional energy burnt and additional Co2 and other emissions in the air and water. Even today, with oil production at possibly 15-20% of the anticipated future levels, the tar sands are consuming 40% of Alberta's natural gas production.

At that point we can consider the barrel of oil delivered, for the purpose of this discussion, but the consumption of fossil fuels associated with that barrel has only just begun. That's because Alberta has the intent of using carbon capture and storage (CCS) to reduce or neutralize the impact of the fuel burnt in the extraction process. In a nutshell, each time the Co2 emissions from one unit of fossil fuel is sequestered in CCS, the equivalent of another 50-75% of a unit of fuel is burnt. As explained in more detail here, this includes 20-30% in the capture, another 20-30% in liquefaction and a long list of other costs, including transportation of the liquid to the storage site, facilities construction, etc.

The net effect is a clusterbomb of fossil fuel consumption. To be sure, there may be few, if any, cases where the oil company running a project is one and the same as the company supplying the natural gas. But it is clear that all of these companies, together with their smaller suppliers and the Province of Alberta, form a common community that, as a whole, stands to realize exceptional benefits from the multiple combustion engine that is the Athabasca Tar Sands.