Why U.S. natural gas companies should be focusing on Alaska

On April 10^th of this year, Conoco suspended its plans to drill in the Arctic Ocean off the northern coast of Alaska. Conoco blamed “unclear” federal regulations related to Arctic Ocean drilling, the Wall Street Journal reports. Shell is also no closer to drilling, as both of its drilling rigs set to drill in Arctic waters off the coast of Alaska have been damaged. But maybe Conoco and Shell should be taking Exxon Mobil’s example and working with legislators to get an Alaskan pipeline built.

Currently, it is very cost ineffective to transport natural gas from Alaska’s North Slope to the Midwest or even to cities in Canada. The Gas Pipeline Project Office, a governmental sector of the State of Alaska estimates that if everything goes as planned and the right regulations get passed, the project could be completed by 2021. The Alaskan State government is in support of the pipeline because it would be a large revenue generator and provide many Alaskans jobs.

Why is now the perfect time to build this pipeline? Demand is becoming steadier and thus, cash flows are more predictable.  Not long ago, demand was much higher in the winter months than summer months because natural gas was used primarily for heating. But, now natural gas is being used in the summer to produce electricity by many new natural gas fired power plants.

Also, many companies are slowly, but surely, switching their fleets to natural gas powered vehicles to cut variable costs and decrease pollution. Part of the trend is driven by tax incentives offered by the federal government to companies/individuals who purchase alternative powered vehicles.

According to the U.S. Energy Information Administration, the top natural gas producing states are Texas, Louisiana, Wyoming, Oklahoma, and Colorado but Alaska could enter that list once the pipeline is built.

So why is the pipeline not being built yet? There are multiple laws that need to be passed by the U.S. Federal government, and the Alaskan government to allow the construction to proceed. Then the parts of the pipeline that run through Canada have to be approved by the Canadian government. Plans for the pipeline have been drafted, but licenses still have to be granted. What is behind most of these governmental barriers? Environmentally conscious groups are at the forefront. The BP oil spill in 2010 and an oil line rupture in Kalamazoo recently have shed a negative light on oil and gas exploration and transportation. But there are millions of miles of oil and gas pipelines already in existence and according to TransCanada CEO, pipelines are the safest way to transport oil and gas.

Will we see the Alaskan Pipeline project start soon? I sure hope so.

Natural Gas Pipelines and Baker Hughes

The natural gas industry uses natural gas pipelines to transport natural gas around the country. In the US alone there is a highly integrated transmission and distribution grid that can transport natural gas to and from nearly any location in the lower 48 states.

For natural gas to be able to be transported to almost any location in the lower 48 states there are 305,000 miles of interstate and intrastate pipelines that are needed. There are over 210 different natural gas pipeline systems that make up these 305,000 miles. 400 underground natural gas storage facilities store the natural gas, while there are more than 11,00 delivery points, 5,000 receipt points, 1,400 interconnection points, and 24 hubs or market centers that provide a way to get the natural gas to the consumers.

Pipelines are the best way to transport natural gas in this day and age, but there are several problems that these pipelines and pipeline companies can cause. To start with, under a federal law known as the natural gas act, companies have the right to exercise eminent domain so it can condemn private property for constructing and maintaining the pipeline. If the company chooses your private land as some of the land it wants to use all you can do is live with it or move away.

This doesn’t sound like a big problem to most people, but serious problems with the pipelines are that there is a constant risk of accidents, spills, and explosions. In the past few years, there have been many large pipeline failures that led to massive damage and even loss of live.

In September 2010, a natural gas pipeline explosion of San Bruno, California killed eight people. Once the National Transportation Safety Board had time to investigate the case they found “troubling revelations… about a company that exploited weakness in a lax system of oversight and government agencies that placed a blind trust in operators to the detriment of public safety.”

Luckily companies like Baker Hughes have created the GEOPIG high-resolution caliper in-line inspection service. These PIGs are intelligent robotic devices that are propelled down the pipelines to evaluate the interior of the pipeline. These PIGs can test pipe thickness, pipe roundness, check for signs of corrosion, detect minute leaks, and any other defects along the interior of the pipeline.

Although it is great that companies like Baker Hughes have created these PIGS that are making pipelines much safer, they have not solved all of the problems for the natural gas pipelines. It will be interesting to see how increase use of natural gas will affect these pipelines and the safety hazards that go along with them.

Natural Gas Pipelines by Region:

Weekly Recap

This Week in thenaturalgas ALTERNATIVE…

 

To start off the week we posted about the new science of the Heat Capture System.   This technique allows us to attain nearly double the production in power generation from natural gas using the same quantity of gas.

The Heat Capture System funnels the intense heat generated from the combustion of natural gas into a heat transfer system which reacts with water.  When this reaction occurs, the water boils and then becomes steam, the steam in turn is used to power a secondary generator and thus nearly double the power is generated from the same amount of natural gas.

We followed up this blog post with a post about Casella Waste Systems, a company who is helping create plants that are capable of processing out the harmful chemicals and radioactive materials that are brought to the surface after fraccing occurs.

This is a very significant topic in the natural gas industry because one of the leading causes of resistance to the shift towards natural gas is the negative reparations of fraccing.  If the waste from this extraction method can be easily processed through plants like those being built by Casella, then the transition from oil and coal to natural gas will likely become a much more popular option.

The blog proceeded with a post about the use of natural gas as a surface fuel for vehicles.  This post really highlights the reasons as to why using CNG is a very popular choice for vehicle fuel of the future.

The preceding post for thenaturalgas ALTERNATIVE is about Australia being the new frontier for natural gas exploration.  Australia has an abundance of attractive traits for natural gas exploration such as a large amount of reserves, proven off-land reserves, a relatively near by energy hungry market (Asia), and drilling permits which have already been allotted to exploration companies.  Australia is likely to be one of the larger natural gas producers in the future and thus is a popular area for natural gas exploration.

The final blog post of the week is about the investment opportunities in the natural gas industry.  As discussed throughout our blog, the natural gas industry is on the rise and thus is a potentially very good area for individuals to put their money.  This post gives examples of different areas that can be invested in throughout the industry, as well as a few examples of companies who are big players in their respective areas of the market.

Further Reading Links

From: New Investment Opportunities in the Natural Gas Industry

-This is the website of Enterprise Products Partners, a company which is suggested in this blog post as a potential investment opportunity because of its large presence in the area of natural gas transportation and processing.  The link will take you to the company’s home page from which you can derive the majority of the information needed on the company.

From: Australia, the new frontier for natural gas?

-This article provides further insight on Exxon’s recent decision to build a FLNG, Floating Liquid Natural Gas, vessel to be placed off the western coast of Australia.  This is a vessel that once built, will likely be the largest vessel in the world.

From: Drive a lot?  Switch to natural gas

-The provided link will take you to a page where you can enter your driving habits and statistics and find what your estimated savings if your car were converted to run on CNG.

From: Wastewater and Casella Waste Systems

-This link is to Casella’s who we are portion of their website.  This link provides insight to the companies’ mission in helping build plants which can process the waste that is produced as a result of fraccing.

From: Natural Gas Powering Industry

-The link provided will take you to a YouTube video of the “Heat Capture System”, which gives an explanation of how the process works

New Investment Opportunities In the Natural Gas Industry

Now that the U.S. economy has started to recover from its recent recession, many Americans are asking the same question: where is the safest and smartest place to invest their money? The natural gas boom currently in action is one of the most important trends affecting the American economy and it would be the smartest choice to invest in this new era of sustainable energy.

According to Forbes’ “Energy Forecast 2013-2014,” the outlook for energy in the next two years is surprisingly diverse. Oil and gas prices are expected to remain high while natural gas prices continue to fall increasing the gap between the two fuels to unprecedented levels.

Oil and gas prices are unreliable and unpredictable because it changes on a daily basis which makes it an unstable investment. For example, on February 11, 2013 it was reported that gas prices rose every day for 25 days straight, reaching a national average of $3.59 per gallon, the most expensive national average recorded on February 11. Within these two weeks, gas prices increased by 25 cents which was the biggest jump in prices in over a year. Even though gas prices constantly change future expectations remain high for its price level.

Oil prices are expected to remain high because of the limited supply and increase in demand. There is a limited supply of gas and its liquid derivatives in the world and this is why oil prices are constantly increasing. On the other hand, natural gas will continue to be cheap in the North American market because supply is greater than our demand. Although new drilling is declining, a well that has been drilled will continue to be productive long after prices have fallen. Operating costs are tiny in most cases, so natural gas will continue to move into the world market.

Here are some companies to keep an eye on for future investments.

Natural gas is replacing dirtier and more expensive sources of fuel like coal at a rapid peace, and this increases demand for transportation, storage and all kind of related services. That is why, Enterprise Products Partners (NYSE: EPD), a company that transports and processes natural gas, natural gas liquids, crude oil, refined products and petrochemicals, will have such a profitable future because the demand for transportation of natural gas is on the rise and will continue to be in high demand as the demand for natural gas increases.

The company is in the process of developing a new 270-mile pipeline header system that will deliver ethane to petrochemical plants in the Gulf Coast region, and it’s in the position of accumulating all of the benefits from the increase in demand of LNG. Being a natural monopoly, competition is not a big problem and, in addition to all this, investors in this master limited partnership are getting a 4.4% dividend yield.

Companies like Westport Innovations (NASDAQ: WPRT) and Clean Energy Fuels (NASDAQ: CLNE) have many things in common, to begin with: both companies are betting on LNG as a cheaper and more efficient fuel for vehicles. Westport is in the business of building engine conversion technologies, and it has partnerships with giant like Caterpillar and Cummins. Westport has been increasing sales rapidly over the last years, and gross margins are on the rise too.

Here is the bottom line, the natural gas industry has only just begun its first stages and will provide many opportunities for its investors over the next few years. If you are willing to take the risks and commit to long term investments, disruptive plays like Westport and Clean Energy Fuels can potentially deliver amazing returns if LNG continues to gain traction as the fuel of our future.

Australia, the new frontier for natural gas?

Australia is the new frontier or exploration in the global natural gas industry.  The endless pursuit for a natural gas producing region resembling the United States has lead many of the worlds largest gas companies to the shores of Australia.  The countries combination of abundant gas, low population density, efficient transport methods, and hungry market are that factors that make any gas company go falling head over heals for a piece of land.

THE STATS

Australia has approximately 390 Trillion cubic feet of natural gas reserves, which equates to about 45% that of the United States reserves, according to Forbes.  However, while this is only 45% of the quantity of natural gas that the U.S has, it needs only to serve 7% of the population that the U.S has.  Thus, Australia will have a plethora of natural gas to export.

THE FACTS

One of the largest appeals of natural gas exploration in Australia is the geographic location of its gas reserves.  The vast majority of Australian reserves lay on vacant or sparsely populated land, meaning that there will be much less resistance from environmentalists about the fraccing method used to extract the natural gas from the deposits below.  Less resistance is very appealing to all natural gas companies because it means time saved, money saved, and public image saved by staying out of the papers.

Offshore exploration is another significant upside about natural gas in Australia.  There are many medium-large sized reserves located just off of the coast but they have long been considered useless due to the fact that drilling machinery could not reach the depths at which the reserves lay.  In addition, it would be a monumental task to install the piping needed to get the extracted natural gas to the shore.  However, with the recent discovery of super chilled natural gas and an increased capacity to drill deeper water, these open sea reserves are all of a sudden quite easily trappable.  By super chilling the extracted gas, the volume of the material is condensed to 600 times smaller than what it is in its natural state, making for easy offloads to tankers which can then deliver the gas to the global markets.

As pointed out before, Australia’s natural gas reserves far outnumber what the local market demands for consumption, thus it will have a surplus of natural gas to export and profit from.  With Australia’s relatively close proximity to energy hungry Asian markets such as China and Japan, the demand for Australia’s easily accessible natural gas will be very high.

THE BELIEVERS

Many of the world’s gas giants agree that Australia is the next big place for natural gas exploration and they are showing it through their recent investments into Australian projects.  For instance, Shell has dished out an approximate U.S $12 billion for their FLNG plant off of the northwest coast of Australia.  Exxon was quick to follow and just recently applied for permits to build a similar and slightly larger FLNG vessel also off of the western coast of Australia, Forbes.  Another gas giant, Chevron, made proactive moves in Australia by acquiring two permits to mine 810,000 acres of Australian land, costing the company an estimated U.S $349 million, Forbes.

Australia has the key components to make it the new frontier in the ever increasingly competitive of natural gas exploration and extraction market.

Drive a lot? Switch to natural gas

Waste Management recently switched their garbage trucks to Compressed Natural Gas. Two months ago, the first natural gas powered food truck was introduced in New York by Mayor Bloomberg. And taxi cab drivers in Afghanistan are converting their cars to compressed natural gas in increasing numbers specifically because it is much cheaper than gasoline. Companies are switching their fleets to natural gas, still at a small, but ever-increasing rate. So should you be converting your vehicle to natural gas too?

Well, the downsides can’t be overlooked. To start, to convert a vehicle to natural gas requires you to give up most, if not all, of your trunk space because of the large natural gas containment tank required. Also, there are relatively few compressed natural gas fueling stations available. Prices of natural gas a volatile and fluctuate based on the season.

Now, the bright side. The relatively cheap price of natural gas is what’s driving many companies to switch to its use in company vehicles.

Average price per gallon:

• Regular Gas: $3.57
• Diesel: $3.98
• Compressed Natural Gas (Gallon Equivalent): $2.11

Natural gas is the cleanest burning hydrocarbon which means it’s better for environment and for our health. The EPA is currently planning to introduce new rules that would reduce the amount of sulfur in gasoline from 30 parts per million to 10 ppm which would increase the cost of gasoline production by roughly 10 cents per gallon, the Wall Street Journal reports. This plan comes in an effort to reduce smog and is backed by the Obama administration. According to the American Lung Association, the use of lower-sulfur gasoline in cars currently on the road would be the equivalent of taking 33 million cars off the road in terms of its effect on pollution.

Is using natural gas really better for the environment than using oil? That’s hard to say because while natural gas burns cleaner, the extraction method of fracking, which has made natural gas so cheap is a controversial method which pollutes surrounding bodies of water.

There is a calculator offered on www.cngnow.com that allows you to plug in how far you drive yearly and then calculates for you the fuel savings and break even point of converting your vehicle to CNG. The average American drives about 13500 miles per year, in a passenger vehicle that gets 22.5 MPG. That American wouldn’t get her investment for a basic conversion system back until after 7 years after installation

My findings are as follows: If you drive long distances weekly, don’t use all the space in your trunk, can afford a small upfront investment and want tremendous fuel cost savings then it’s time to convert to natural gas. Otherwise, you may want to wait a few more years until prices for conversion kits drop, oil prices rise, natural gas prices decrease even more, or you start having to commute longer distances

Wastewater and Casella Waste Systems

Natural Gas companies use Hydraulic fracturing or fracking to increase the rate that natural gas can be recovered from the natural reservoirs. These reservoirs are typically porous sandstone, limestone or dolomite rocks and are found deep below the earth’s surface. Fracking provides a path connecting a large volume of the reservoir to the well at a faster rate. To make this path they pump fracturing fluid into the well bore at a rate that will increase pressure down hole to exceed that of the fracture gradient of the rock.

The fracturing fluid is made up mostly of water, but most fracturing fluid contains a very low concentration of between 3 and 12 additive chemicals depending on the characteristics of the water. Between 20% to 40% of the water used for this fracking returns to the surface as wastewater, also known as produced water. Wastewater includes the chemicals from the fracturing fluid as well as contaminants that it picks up from deep within the earth such as heavy metals, volatile organic compounds, salty brine, and radioactive materials.

Potentially this wastewater could be treated at treatment facilities if the plant is properly equipped to remove these chemicals and radioactivity. The problem is that there are very few plants that have the technology to do this.

One company, Casella Waste Systems, is helping build plants that have the technology to break down and remove these chemicals and radioactivity.

Casella Waste Systems’ mission statement is “Every day we help create better people, businesses and communities by helping them to protect and enhance our environment and natural resources” and that is exactly what them have been doing.

A lot of the wastewater is sent to landfill plants where they remain wastewater, but not at Casella Waste Systems. Casella knows that landfills are not going to disappear, but they are changing the way they see landfills. They see landfills shifting from resource consumption to resource sustainability. Their landfills have a gas collection system that is not merely designed to passively capture gas, but they also are designed to extract gas to power gas-to-energy plants producing clean electricity and to mitigate greenhouse gas emissions. They also call these landfill sites environmental campuses because resources are extracted from all aspects of the waste stream.

Casella Waste Systems is finding creative solutions to the natural gas industry’s problems, and are hopefully getting other companies to change the way they think about landfills and wastewater.

Natural Gas Powering Industry

There have been many new developments in the realm of natural gas over the past few years. One of the most ground breaking new inventions is the ability for Natural Gas to be used in power generation. Originally Natural Gas was converted into energy in a typical combustion system. However, with the advancement in technology the excess heat given off from the combustion cycle can now be funneled through a heat transfer system that reacts with water, causing it to boil and become steam. This steam is then utilized to power a secondary generator. Thus, generating twice as much electricity as the tradition combustion process. This increase in efficiency can dramatically increase the level of electricity that can be created using Natural Gas.

This link provides one example of one of these new systems. Heat Capture System
For a more detailed description of the process, the U.S. Environmental Protection Agency has released a brief description of the process.

While being able to harness electricity from Natural Gas is a vital leap forward, this is only one sector and we have to expand the use of this resource to encompass a greater aspect of our energy sector.

While there have been many advancements in electricity generation, Natural Gas is also helping to reshape the automotive industry. The complex process of using Natural Gas as an automotive fuel begins by firstly cooling the gas into its liquid form or compressing it. The cooling process requires the temperature of the gas to reach -260 degrees fahrenheit before it transforms into a liquid. The new LNG(Liquid Natural Gas) must be kept cool for it to remain a liquid. The compressed gas must be kept in a pressurized tank. LNG is a more efficient fuel source because it is denser then traditional Natural Gas and therefore stores more energy per unit. Traditionally the LNG will be stored in double insulated vacuum sealed containers similar to Compressed Natural Gas (CNG).

Below is an example of how this gas would be stored in a commercial vehicle. Many companies are in the process of designing prototype vehicles with expected release dates within the next decade. These vehicles will be either LNG as previously mentioned or a less costly process of compressed natural gas.

Manufactures have found that CNG many be more efficient for passenger cars where LNG would be preferable to larger transportation vehicles such as trucks.

The idea of Natural Gas has become so prominent, Shell has recently announced it will be adding LNG and CNG to its portfolio of energy resources.

As the technology matures and new breakthroughs are made, I believe that we will see further development of Natural Gas in both the industries of power generation and as fuel source for vehicles. There are many exciting research proposals waiting to be funded and it seems like there is very little Natural Gas cannot replace.

Weekly Recap

On April 1, 2013 five students from the University of Colorado were given the opportunity to start this thenaturalgas ALTERNATIVE blog  to inform our readers about natural gas as an alternative source of energy and to emphasize its driving force behind a more sustainable future.

Throughout the course of this blog we will be discussing the concerns about natural gas based on the principles of its exploration, development, scientific background and environmental impacts, which will all be our main focus points. A few other areas of emphasis may include natural gas as a bridging technology and its transportation networks, natural gas as an automotive fuel, its impact on economic growth and a whole bunch more.

This week, we touched briefly on some major US natural gas companies who have contributed copious amounts to the health care systems, with Cabot Oil and Gas leading the way and many others following in their footsteps. Their contributions provide a positive image for natural gas and are having major impacts on health care.

Another topic discussed this week was about the breakthrough in the development of floating liquefied natural gas and how Shell is leading the charge. Shell has set forth what is known as the Prelude Project, in which shell is poised to be the first company in the world to create a vessel which can extract remote deposits of floating liquefied natural gas.

This post goes hand in hand with the discussion on US exports of natural gas controversies. Both give a nice contrast to the other and provide the readers with both positive examples within natural gas production and the road bumps companies face in this market.

We hope you enjoyed reading the discussions this week and we look forward to providing you with more discussions in the future.