The concept of ‘Peak Oil’ has finally found its way to the receptive minds of educated public opinion. On the March 18/19 weekend, it even did erupt on TV screens worldwide as CNN aired its documentary “We Were Warned: Tomorrow’s Oil Crisis”.
However, some energy analysts have found a way to belittle ‘Peak Oil’ by advancing that in case of an oil production peak, natural gas would simply take over --- in other words, gas would timely fill the energy gap between an oil-driven world and the for-ever supply of bountiful hydrogen...
Both the gas take-over and the hydrogen utopia are fallacies brought forward to try cushion the inevitable ‘Peak Oil’ shock. Not only are massive hydrogen supplies decades away (if ever!), but worldwide natural gas supplies are about to peak too !!
According to my model
simulations ‘Peak Oil’ should now be occurring (within the 2006-2007 time frame
[1]) and ‘Peak Gas’ will promptly follow suit in either 2008 or 2009 [2].
If signs of ‘Peak Oil’ are now abounding (as we are now in ‘Transition One’), the first precursor hints of ‘Peak Gas’ can now be caught in the wind. Over the past four months I have noted quite a few of these in routine daily news. Here, I will focus on three major ones and their implications:
The outrageous gas price hike of Q4/2005 in the
Fortunately for American families, however, the 2005-06
winter was extra-mild so that gas prices plummeted and by March 10 there were
still some 1,832 billion cubic feet available in
“lack of rigs, higher decline rates and a slowing in efficiency was likely to constrain the gas supply picture for years to come” [3]
On New Year day,
Put in a nutshell, Gazprom’s present predicament is untenable. With a dwindling production based on declining major gas fields (and no fresh giant field on tap), the Russian gas monopolist will inevitably have to curtail its exports as it cannot (or rather dares not) cut domestic supplies (delivered at extreme-low prices which many indigenous consumers fail to pay). Thus, it will have to boost export prices in order to compensate for internal ‘manque a gagner’ and also hope to somehow lower external demand.
Gazprom has two main export market: (a) the CIS countries,
and (b)
Gazprom with its 330,000 employees and dozens of interest
outside oil and gas (e.g., the TV channel ‘NTV’ and the daily ‘Izvetsia’) is a
management’s nightmare with no easy fix that would require a good dozen of
professional managers (a la Khodorkovsky) to live up to
On March 13, 2006, the price of natural gas at Bacton (England) skyrocketed to the mind-boggling level of 255 pence per therm: thereby setting a new world record – which I computed to be 44.62 $/MMBtu and an energy-equivalent oil price of 259 $/barrel (higher even than the maximum price predicted by Mr. Matthew Simmons in his latest 200-250 $/b range for 2010 which I personally consider to be the best present available prediction range worldwide).
Circumstances such as the February fire at England’s biggest
gas-storage unit at ‘Rough’ (shut down for a month) and an “unexpected spring
chill” certainly played their role and pulled their full weight; but, on March
17, the price was still at 150 pence per therm (26.25 $/MMBtu). And it all
looks to me like being a benign prelude to a dire supply-demand imbalance in
the
The Confederation of British Industry [CBI] had always been skeptical of adequate gas supplies for the 2005-06 winter and has now been vindicated in the teeth of the Government’s reassurances that Great Britain was “awash with gas” (as late as November 2005 [5]). The CBI is bound to be the major loser in this game...
And British energy planners would be well advised not to rely too much on gas supplies from the ‘North European Gas Pipeline’ – Gazprom’s present pet project !
All in all, these small hints flowing in the wind add together to paint a bleak global gas picture for the near future. ‘Peak Gas’ is not that far off and it will prove to be far more devastating and shocking than ‘Peak Oil’ because natural gas is far less ‘fluid’ and ‘fungible’ than crude oil – as it requires dedicated pipelines and LNG facilities (plus carriers) for any eventual export...
References
[1]
A.M. Samsam Bakhtiari, ‘World oil production capacity model suggests output
peak by 2006-07’, in ‘Oil & Gas Journal’, April 26, 2004, pp.18-20.
[2] I am indebted for much of my raw
data on natural gas to the pioneering studies made by the great French expert
Mr. Jean Laherrere.
[3] Natural Gas Intelligence’s Daily
Gas Price Index, March 21, 2006.
[4] A.M. Samsam Bakhtiari, ‘
[5] Terry Macalister & David
Gow, ‘Fourfold gas price rise is forcing production cuts, industry warns’, in ‘The
Guardian’, March 15, 2006.