Friday, June 28, 2013

REPOST: Why such hysteria over fracking?

How important is it for the regulators to continue reviewing the rules that apply to hydraulic fracturing? This Los Angeles article will help us understand the issue. 

Fracking is short for hydraulic fracturing
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Is hydraulic fracturing — used for more than 60 years to produce oil and natural gas — safe?

The "safe fracking" question has been asked and answered many times over by government regulators, scientists and other technical experts, and they have concluded that hydraulic fracturing is a fundamentally safe technology. Interior secretaries and EPA heads have repeatedly said that fracking can be done, and is being done, so that it doesn't present environmental or public health problems.

That's been the case for decades, Interior Secretary Sally Jewell, a former petroleum engineer and a former president of REI, the outdoor equipment retailer, said in May. Jewell's predecessor, Ken Salazar, testified to Congress that hydraulic fracturing "has been done safely hundreds of thousands of times" and warned lawmakers against anti-fracking "hysteria."

As far back as 1995, the Environmental Protection Agency studied whether hydraulic fracturing contaminated drinking water. The EPA studied a site in Alabama at the request of environmentalists and found "no evidence" of "any contamination or endangerment of underground sources of drinking water." In 2004, the agency conducted a broader study and also found fracking "poses little or no threat" to water supplies.

In 2009, another study from the U.S. Department of Energy and the Ground Water Protection Council — an interstate body of environmental regulators — concluded that fracking is a "safe and effective" technology for producing energy from deep geological formations like California's Monterey Shale.

More recently, Stanford University geophysicist Mark Zoback, who's also served as an advisor to the Obama administration, confirmed that fluids used in hydraulic fracturing "have not contaminated any water supply," and with more than a mile of rock separating deep shale formations and shallow drinking water aquifers, "it is very unlikely they could." In California, it is worth noting, more than 80% of hydraulic fracturing occurs in parts of Kern County where there is no potable groundwater.

Anti-fracking forces respond to such good news by finding new ways to scare the public. That's why you hear more and more allegations about air quality, water use and earthquakes. On air quality, they are ignoring that California's oil and gas industry already operates under some of the world's tightest emissions controls, and such controls have worked well in states where fracking and drilling are more widespread than in California.

For example, in Colorado, regulators have reported "decreases in the levels of many organic pollutants associated with oil and gas operations" during a dramatic rise in energy production. And in Texas in recent years, regulators responded to air quality fears in the Dallas-Fort Worth area with round-the-clock monitoring, and found "no levels of concern for any chemicals" and "no immediate health concerns from air quality."

Next, activists exaggerate problems associated with water usage and wastewater disposal associated with hydraulic fracturing. In states where hydraulic fracturing is used much more frequently, and where many times as much water is used as in California, the process accounts for less than 1% of total water demand, according to the Department of Energy and the Groundwater Protection Council. In addition, wastewater can be treated and reused, minimizing both issues.

In California, we use much less water than other states because of our geology. For perspective, the amount of water used in all of the hydraulic fracturing jobs in California last year was about the same amount of water that the state's golf courses consumed in half a day.

As for earthquakes, a yearlong study released in 2012, the first of its kind in the state, at the Inglewood Oil Field in the Baldwin Hills area found "no detectable effects on vibration" — and no water or air quality problems either — from hydraulic fracturing. Perhaps that's because, as Zoback has explained, the amount of seismic energy released during hydraulic fracturing is about the same as "as a gallon of milk falling off a kitchen counter." In fact, the National Research Council concluded last year that hydraulic fracturing does not pose a high risk of inducing earthquakes. The separate process of injecting oil and gas wastewater into deep disposal wells, while it does carry some risk, has never triggered an earthquake in California.

Despite the sound bipartisan defeat of legislation that would impose a moratorium on hydraulic fracturing, some activist groups are still pressing lawmakers to ban the technology. There is no reason to impose a moratorium or ban on a technology that is fundamentally safe, will lead to more jobs and economic growth and will reduce our dependence on foreign oil.

Regulators should continue to review the rules that apply to hydraulic fracturing, and find ways to improve them to ensure that the public has the information it needs about the process. The facts clearly show that this technology can be used safely while regulatory updates are made.

Internationally renowned for his expertise and remarkable contributions, Dr. Ali Ghalambor has worked with the finest universities and organizations such as the University of Louisiana, the Tenneco Oil Company, and the United Nations.Follow this Twitter page for more updates.

The myth of abiotic oil

The subject of oil is such an important matter of discussion that the formation of a separate field of science for the sole purpose of its study has been deemed necessary. Consequently, the study has ramified to different areas, and one particular area of interest has been the origin of oil.

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Many scientists tried pitching in their ideas as to where oil was supposedly coming from. Many were considered plausible, while some others were mythicized due to sheer improbability. One among the latter class came to be known as the “abiotic oil hypothesis”—one that purported that gas can come from non-living sources.

Those who formulated this hypothesis laid their groundwork based on the work of Thomas Gold, an astrophysicist, one of the major proponents of the now-obsolete “steady-state” hypothesis of the universe. According to hypothesis advocates, oil originates from carbon monoxide and hydrogen gas rising through the deep layers of the Earth’s crust—a mixture, which they claim, would react and produce petroleum hydrocarbons. If lucky, these hydrocarbons would move up to earth’s crust so humanity could exploit it for their everyday use.

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Initially, this theory made sense because 1) volcanic activity usually produces carbon monoxide and hydrogen, and 2) laboratory tests have proven that these chemicals are indeed capable of forming petroleum given the appropriate conditions. But it eventually fell out of favor by the end of the 20th century because by that time, it didn’t provide any clear forecasts useful for the discovery of oil deposits. It has also been reviewed by many scientists, with most of them dismissing it as myth, mainly because there has been no substantial amount of scientific evidence to back it up.

Majority of geologists now agree that the world’s petroleum supply is organic in origin. The abiotic theory, however, still cannot be completely dismissed since the mainstream theory on oil origin cannot still be established conclusively.

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Thursday, June 27, 2013

REPOST: US drilling rig count sinks 12 units to 1,759

US drilling rig count fell to 1,759 as of June 21 of this year according to this Oil and Gas Journal article.

The US drilling rig count fell 12 units during the week ended June 21 to reach a total of 1,759 rotary rigs working, Baker Hughes Inc. reported. All of the losses were seen on land, with land-based drilling down 12 units from a week ago to 1,682 rigs. The offshore rig count and that for inland waters remained unchanged at 54 and 23, respectively. Of the rigs drilling offshore, 52 were in the Gulf of Mexico, unchanged from a week ago. Rigs drilling for oil lost 8 units to reach 1,405, while those targeting gas lost 4 units to reach 349 rigs working. Five rigs were considered unclassified, unchanged from a week ago.

Rigs drilling horizontally were reported at 1,079, down 7 units from a week ago, and 86 fewer than the comparable week last year. Rigs drilling directionally lost 2 units this week to reach 242. This compared with 233 rigs working horizontally in the comparable week a year ago.

Of the major oil and gas producing states, Oklahoma was down 5 units to 178. Texas and Louisiana, at respective counts of 843 and 106, were each down 3 units. New Mexico, at 75, and California, at 37, were each down 1 rig. Six states were unchanged: North Dakota, 178; Colorado, 62; Pennsylvania, 54; Wyoming, 46; West Virginia, 22; and Arkansas, 14. Alaska was up 2 rigs to 8 units working.

Canada’s rig count gained 21 units this week to reach 197. This count includes 147 rigs drilling for oil (up 21 units from a week ago) and 50 units drilling for gas (unchanged from last week). Canada’s rig count total was down 41 units from the comparable week last year.\

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Wednesday, June 26, 2013

REPOST: For Solazyme, a Side Trip on the Way to Clean Fuel

This New York Times article reports how Solazyme, the leading renewable oil and bioproducts company, started on using algae to produce oils and biomaterials in standard fermentation.

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STARTING when they became friends in freshman year at Emory University in Atlanta, Jonathan S. Wolfson and Harrison F. Dillon would take off into the mountains of Wyoming and Colorado for weeks at time. They spent their days hiking in the wilderness and their nights drinking bourbon by the campfire, talking big about how one day they would build a company that would help preserve the environment they both loved.

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They graduated, and the backpacking trips grew shorter and further between. Mr. Dillon went on to earn a Ph.D. in genetics and a law degree, and ended up working as a biotech patent lawyer in Silicon Valley. Mr. Wolfson received law and business degrees from New York University and eventually started a software business. But the two still got together every year. And they kept talking about the company that, they imagined as time went on, would use biotechnology to create renewable energy.

“These were delusional rantings of kids,” said Mr. Wolfson, who, like Mr. Dillon, is now 42.

Then Mr. Dillon found microalgae, and delusional became real. Microalgae, a large and diverse group of single-celled plants, produce a variety of substances, including oils, and are thought to be responsible for most of the fossilized oil deposits in the earth. These, it seemed, were micro-organisms with potential. With prodding, they could be re-engineered to make fuel.

So in 2003, Mr. Wolfson packed up and moved from New York to Palo Alto, Calif., where Mr. Dillon lived. They started a company called Solazyme. In mythical Valley tradition, they worked in Mr. Dillon’s garage, growing algae in test tubes. And they found a small knot of investors attracted by the prospect of compressing a multimillion-year process into a matter of days.

Now, a decade later, they have released into the marketplace their very first algae-derived oil produced at a commercial scale. Yet the destination for this oil — pale, odorless and dispensed from a small matte-gold bottle with an eyedropper — is not gas tanks, but the faces of women worried about their aging skin.

Sold under the brand name Algenist, the product, costing $79 for a one-ounce bottle, would seem to have nothing in common with oil refineries and transportation fuel. But along with other niche products that the company can sell at a premium, it may be just the thing that lets Solazyme coast past the point where so many other clean-tech companies have run out of gas: the so-called Valley of Death, where young businesses stall trying to shift to commercial-scale production.

For years, policy makers, environmentalists and entrepreneurs have trumpeted the promise of harnessing the power of the sun, wind, waves, municipal solid waste or, now, algae. There has been some success. Since 2007, United States energy consumption from renewable sources has grown nearly 35 percent, and now accounts for about 9 percent of the total, according to the Energy Information Administration.

But the gains have been punctuated with prominent failures. Once-promising clean-tech ventures that attracted hundreds of millions in federal support — like the solar panel maker Solyndra, the cellulosic ethanol maker Range Fuels and the battery supplier A123 Systems — have failed. While ethanol, derived from crops like corn and sugar cane, has become a multibillion-dollar industry, it threatens to drive up the price of those plants for food and cannot yet replace conventional fuel. The next generation of biofuels, based on nonfood plants, is still struggling to take off.

Venture capital, which once gushed to renewable-energy start-ups like crude from an oil well, has slowed. In contrast to software-based companies like Instagram or Facebook, these new energy businesses burn through staggering amounts of capital over many years for research and early-stage equipment before even demonstrating their promise, much less turning a profit. Worldwide in 2012, venture capital investing in clean technologies fell by almost one-fourth, to $7.4 billion, from $9.61 billion in 2011, according to the Cleantech Group’s i3 Platform, a proprietary database.

“These are very high-innovation, capital-intensive, long-term businesses, and new-energy technology is a very new field,” said David Danielson, a former venture capitalist who is assistant secretary for energy efficiency and renewable energy at the Energy Department. “We need a new model for how these projects are going to get financed and commercialized.”

In other words, clean-energy companies can’t rely only on the classic venture-capital approach in which investors demand a fat, fast return. Mr. Danielson said that to succeed, companies need a combination of government research-and-development grants, industrial partnerships and a willingness to pursue higher-value product lines en route to entering larger, but lower-margin markets.

“The problem with a lot of clean-tech deals is that they have been about the way you make things in high volume or in production, which means you can’t prove out the ideas unless you build factories and actually make things in volume,” said Andrew S. Rappaport, a venture capitalist who is a board member of Alta Devices, a solar film start-up.

That company is one of a handful that, like Solazyme, is pursuing niche markets for its core product, in its instance developing fast-charging cases for smartphones and tablets, until it can produce low-cost, commercial quantities of solar materials for homes and businesses. A Bay Area start-up called Amyris, meanwhile, has shifted its genetically engineered yeast toward chemicals and cosmetic ingredients as it tries to build a biofuel business.

For Solazyme, the hope is that by manipulating strains of algae to make proteins, complex sugars and oils that can serve a variety of functions — like moisturizing skin or replacing eggs and butter in brioches — it will stay afloat as it struggles to reach the next stage. And that next step is making huge quantities of renewable energy products at a price that can compete with fossil fuels.

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One obvious question is whether this strategy will work. Another is, will it work too well?

SOLAZYME’S story — which is far from done — shows just how circuitous the road to creating profitable energy technologies can be.

By the time Mr. Dillon and Mr. Wolfson began their company in 2003, researchers had mapped the genome of algae, a feat that started the partners on their quest to redesign the plants’ genetic codes to produce valuable commodities. In addition to oils, algae naturally produce other substances, including hydrogen and oxygen. At first, Mr. Dillon and Mr. Wolfson considered focusing on hydrogen because it seemed that carmakers would be designing hydrogen-powered vehicles. But they soon dismissed that approach because the economic and technical challenges of capturing, storing and transporting hydrogen proved insurmountable — and the vehicles never took off.

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The Solazyme partners realized they needed to make a product that could use existing equipment and infrastructure — so-called drop-in fuels that wouldn’t require car or aircraft manufacturers to make new engines or fuel refiners to use new equipment. Fuel oil seemed the best bet, and they set about trying to unlock the mechanisms that the plants use to make it.

The problem with producing fuel oil is that volume is king. Oil producers generally make only a few dollars on each barrel they sell, so they make enormous profits only by selling billions of barrels. It didn’t matter if Solazyme made a terrific, carbon-neutral product — or if it made it ingeniously. If it couldn’t make enough, the business would never fly.

Nowhere in the clean-tech sector is the conundrum of scaling up more evident than in biofuel. Cellulosic fuel may finally be close to achieving real scale: the Energy Department, which has sometimes been overly optimistic in the past, predicts that there will be 80 million gallons in commercial production by 2015, and at least one company, KiOR, has begun shipping cost-competitive cellulosic biofuel to American customers, with others expected to follow soon. But the Energy Department is supporting research on using organisms like yeast and bacteria to make fuels that can directly replace conventional gasoline, and does not expect them to hit commercial scale until 2017. Those using algae will take even longer, until 2022, energy officials predict.

At Solazyme, the partners’ early realization of the challenge spurred them to step up testing. They poked and nudged the algae, trying to produce something that mimicked existing fuel oil. They also re-engineered the microorganisms to see what else could come out.

“The point was still a straight line to fuels, but it started to be clear how long this was going to take,” Mr. Wolfson said, describing the company’s rapid evolution toward developing multiple product lines. “This was going to be longer and harder than all of our discussions about starting a company.”

The big discovery was that algae, depending on the strain, could make oils that, biochemically, looked a lot like others found in nature or already in use in the marketplace. And industries like cosmetics, food and petrochemicals would pay more for each gallon, or milliliter, of output. All of the oils in question, whether destined to become gear lubricants or salad dressings, have a similar molecular backbone. But properties like melt point, saturation level or energy storage could be manipulated by adding or subtracting carbon atoms or controlling the location and connection of fatty acids and hydrogen atoms.

But there was a catch: the partners had sold investors on an energy business, not one that made cosmetics, nutritional supplements and soap. They had also told their board that they would be able to make fuel through photosynthesis, a process then considered “sexy,” Mr. Wolfson said. That’s because the sunlight that would fuel the algae’s growth was free; other methods of goosing the algae included adding food sources like sugar. But growing algae where they could get enough sunlight required huge ponds of water and the risk of plant loss.

After several late-night conversations and scrambling to come up with an alternative plan, Mr. Wolfson and Mr. Dillon met with the board in a tiny conference room near the entrance to their Menlo Park lab and offered a new plan. They would grow algae in tanks in the dark in a process called heterotrophic fermentation to make the specialty oils for ancillary markets that would pave the long road to fuel.

They were worried the board might desert them, Mr. Dillon said, but their main backers, Jerry Fiddler, an angel investor who is still the board chairman, and Dan Miller and Roger Strauch of the Roda Group, the company’s largest investor, went along. The three, who had already invested roughly a combined $1.3 million, agreed on the spot to finance further testing of the idea.

Not everyone agreed with the change. Several board members eventually left, and several established venture capitalists who had been interested in leading rounds of financing refused to do so because the founders insisted on pursuing multiple markets, Mr. Wolfson said.

“It’s very true that if you try to do too many things and you don’t focus as a company, you’ll fail — focus actually does matter,” Mr. Wolfson said. “That’s portfolio theory for them. ‘I’m making a bet on you on fuel; I want you to focus on that.’ What they didn’t really understand is our platform is a focused platform to produce oils.”

IT has taken several years of experimenting — starting in a lab with equipment bought on eBay and repaired by Mr. Fiddler — to develop that platform.

The team genetically engineers the microbes to produce oils with the different properties that a customer might want. One might be an oil that doesn’t explode in a transformer. Another might be a fat with the mouth feel of cocoa butter in chocolate, or something that mimics palm kernel oil to go into soap. Starting with a one-milliliter vial, technicians make the algae multiply by suspending them in a broth rich in sugar and other nutrients, moving them into progressively larger vats until they reach the desired volume, anywhere from five to 600,000 liters.

The scientists then deprive the algae of nitrogen, which halts their division. Under this stress, they begin to produce oil, a protective response. The oil swells their tiny cells, up to 85 percent of their mass, in a kind of microscopic version of producing foie gras.

“It’s not a very healthy cell” at the end of the process, said Peter J. Licari, Solazyme’s chief technology officer. But the process could be one of the company’s competitive advantages over other approaches. In open-pond growth, for instance, the cells often yield no more than 15 percent oil, Mr. Licari said.

The resulting liquid is then fed through a series of tanks, rollers and other equipment that squeeze out the oil, leaving behind a mass that is mostly cell walls. No matter the oil, the process varies little, Mr. Licari said, and is easily adapted to make the complex sugars — polysaccharides — that went into the original Algenist skin care line.

The company has a multiyear agreement with Mitsui, the Japanese conglomerate, to tailor oils for chemical and industrial markets. In a joint venture with Solazyme, the Brazilian agricultural and food giant Bunge is building a plant next to its sugar cane refinery in south central Brazil; it will use the sugar to feed the algae, which it expects to make up to 30 million gallons a year of oil for soaps and other products. Solazyme also has an agreement to develop oils for Unilever to be used in soap, personal care and nutritional products.

On the cosmetics side, the Algenist line has been a hit at Sephora and QVC, where executives say customers are particularly attracted to the story of an accidental discovery by lab scientists working on green energy.

“We continue to tell this alternative story about this very interesting ingredient that’s come from a very unlikely source in the world of skin care,” said Claudia Lucas, director of beauty merchandising at QVC.

Solazyme executives say they will get to the fuel business eventually. By producing algae-derived oils at a commercial scale at a reasonable price, they hope to entice established companies to invest in plants and equipment so that the fuel can work as a volume business. But for now the focus is on the higher-value markets.

“The higher returns we can show out of each plant to start out with, the faster we can get plants financed and built,” Mr. Wolfson said. The company expects to charge roughly 30 percent more for its fuels and chemicals than they cost to make, and 40 percent more for its nutritional products. But it can get 60 percent more for the cosmetic oils.

Whether the company can build a profitable business is an open question. Analysts say it has amassed an impressive list of industrial partners and investors — including Chevron — but its operating figures suggest there is still more promise than delivery.

Last year, the company had a net loss of $83 million on $44 million in sales. Its stock price is $12.62, well below its initial public offering price of $18 a share in 2011 and its high of about $26. Like many renewable-energy ventures, Solazyme has relied on government income — it used to supply the military with small amounts of expensive diesel — but in the first quarter this year, revenue for research programs dropped, driven by a decline in government grants. It is also taking on debt, adding roughly $185 million earlier this year.

EVEN so, analysts are generally bullish about the company’s prospects, despite some who express skepticism that Solazyme will ever develop the fuels.

“Fuels is still an opportunity for them,” said Rob Stone, a research analyst who tracks clean tech at Cowen & Company. He added that because the new, commercial-scale manufacturing capacity could be used entirely to satisfy demand in the higher-value markets, it might not make sense for Solazyme to use up its production space to make lower-margin fuels. “I think they could make a very large company without ever doing much at all in the fuel business,” he said.

It is a point that Mr. Wolfson comes close to conceding, saying that the entry to commercial fuel production is years away, and even then might be in making fuel additives rather than the drop-ins they have been pursuing. That possibility doesn’t seem to bother anyone around the office.

Executives seem almost more excited about their ventures into nutrition, making low-saturated fats and oils without transfats. A visit to the company’s headquarters in South San Francisco included a multicourse lunch highlighting Almagine, a powdered fat and protein supplement meant to replace eggs and saturated fats. Solazyme is developing it through a partnership with Roquette, a starch processor. Included in the tasting were salad dressings, Alfredo sauce for pasta, brioches, shortbread cookies and ice cream, all with lower saturated fat and calories and higher protein contents than standard versions.

It’s a far cry from the campfire rantings of two college friends out to save the environment. But now they have a new crusade. "I think the difference that this company will make in food alone will be enormous," Mr. Dillon said. Or, as Mr. Fiddler put it: “Even if we never succeed in energy, food is hugely valuable and hugely beneficial to the world.”

Dr. Ali Ghalambor is the former Director of the Society of Petroleum Engineers. Visit this blog site to find out more.

Tuesday, June 25, 2013

REPOST: Natural Gas To Play A Bigger Role in Transportation, IEA Predicts

The demand for natural gas in transportation arises, according to the International Energy Agency. Read this article.

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The International Energy Agency predicts in a new report that natural gas will emerge as a “significant” transportation fuel, if and when infrastructure issues can be ironed out.

The agency’s enthusiasm for natural gas in transportation arises from the usual factors. Gas is cheap compared to oil, it can reduce dependence on imports in a large number of countries, and it emits fewer greenhouse gases than petroleum. China will account for 30 percent of the increase in global gas demand between now and 2018, according to the report.

But the possible shift toward gas will be driven by another factor: softness in demand in electricity markets. With more gas coming out of the ground all of the time, gas suppliers need additional markets. The U.S. has yet to enact significant carbon regulations. With gas prices inching up, many power plants may shift to cheaper coal. (These factors, of course, could easily reverse themselves too: the White House is said to be on the verge of proposing a new emissions strategy and there is growing pressure to revise the royalties for coal mining.)

In Europe, meanwhile, there is “persistent demand weakness.” The IEA, in fact, lowered its projections for the growth of gas in the global energy mix : the agency now expects gas’s market share to grow by 2.4% a year through 2018, lower than the 2.7% annual growth rate in an earlier projection.

Overall, demand for gas will grow from 3,427 billion cubic meters in 2012 per year to 4,000 billion cubic meters meters.

IEA Executive Director Maria van der Hoeven also noted that the demand for gas in transportation will occur “once the infrastructure barriers are tackled.”

That won’t be easy. As we’ve chronicled here, natural gas cars tend to be expensive and so do natural gas filling stations. You get some of the disadvantages of electric cars-range anxiety–without the benefit of a fun, zippy driving experience. Honda’s natural gas Civic for consumers (pictured) has undersold projections.

On the other hand, fleet owners can amortize the cost of filling stations and they typically don’t buy cars for a fun driving experience. EV sales have been climbing, but EVs clearly haven’t colonized the world’s freeways either.

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Exploring the potentials of fracking

Fracking has been nothing less but controversial in the United States. There have been many people who are greatly opposed to this practice, citing that the environmental damages that it may incur can bring forth drastic changes that can impair the ecosystem as a whole. 

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What they fail to see, however, is the other side of the coin—the many advantages that this practice may bring forth in terms of energy and economy.

First and foremost, the main reason why fracking is seen as an advantage is because the country has the natural capacity to support it. Unbeknownst to many, America is abundant in natural resources, and it is only through fracking that these may be harnessed to support the many needs and wants of men. 

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How much of these resources can be obtained by fracking? According to the Energy Information Agency, there’s approximately 750 cubic trillion feet of potentially recoverable shale gas in the country. This translates to approximately 24 billion barrels of shale oil for human consumption. Apart from slaking fuel demands unlocking these resources via fracking can also translate to more jobs, thus contributing to the solution in the longstanding unemployment crisis.

More than anything, this draws a clear and brighter picture of the US economy as a world leader—self-sufficient and energy independent.

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Monday, June 24, 2013

REPOST: Biofuel project in Kenya ignites land, environmental disputes

Foreign investors see Africa as a new frontier for biofuel production. This Los Angeles Times article has the details. 

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DIDA ADE, Kenya — With its leaf-thatched mud huts, bad roads, chronic unemployment, crushing poverty and vast tracts of "underutilized" land, the Tana River Delta in eastern Kenya seemed the perfect place for a foreign businessman looking to grow crops that could be turned into biofuel.

Canadian David McClure believed the project, which involved leasing more than 600 square miles at a minuscule cost, would be both profitable and humanitarian.

But McClure underestimated local resistance and deep sensitivity about land in a region where ethnic violence linked to land use has flared repeatedly. Four years after launching the project, his company pulled out, leaving McClure bitter and defeated, accusing the Kenyan government of betraying Kenyans by frustrating his plans.

He was not alone in seeing Africa as an exciting new frontier for biofuel production, with cheap land that, to an outside eye, looks wasted.

Millions of acres have been snapped up across the continent by foreigners for farming biofuel plants, such as the oil-producing jatropha, which McClure wanted to grow. These projects are usually pitched by companies as being good for the environment and good for poor Africans.

But biofuel crop projects have been attacked by environmental and humanitarian activists as doing more harm than good, often replacing food crops that are badly needed in poor countries or destroying natural habitat like forests.

Demand for biofuel is driven by European Union regulations requiring that 10% of energy consumption in member states come from renewable sources by 2020. A British humanitarian organization, Action Aid, reported last year that more than 193,000 square miles had been planted with biofuel plants globally, much of it in Africa.

Foreign biofuel companies promise benefits such as jobs, but their projects have driven rural communities in some of the world's poorest countries off their land, offering only modest benefits in return, critics say.

Jatropha is a shrubby flowering plant whose seeds can be processed to make diesel. Such biofuel crops need vast tracts of cheap land to be viable, hence Africa's attraction for foreign investors. A 2011 report by the International Monetary Fund and United Nations agencies, including the Food and Agriculture Organization, linked sharp rises in food prices in poor countries to the demand for land to plant biofuel crops.

McClure, chief executive of Bedford Biofuels, a Canadian company, thought the Tana River Delta project would be popular with residents and win government support as it converted a vast swath of semiarid land to corporate farmland.

"Four years of our blood, sweat and tears to feed babies went into that project. It was a beautiful humanitarian project. We were going to reforest semiarid land with a crop. We had interest from major investors," McClure said in a phone interview from Canada.

The Tana River flows like a lazy, mud-colored python through a region of dry, forlorn-looking bush. About 250,000 people live in its delta, farming, herding cattle and fishing. To McClure, the land was unused and ripe for development. To locals, it was at the heart of years of conflict over grazing rights and subsistence farming.

Dahir Bile, 42, a tall thin man wearing small white skullcap and a colorful wrap around his waist, has lived in the remote sandy village of Dida Ade all his life, in a circular mud hut thatched with leaves and fenced with forbidding spiky plants. The smell of wood smoke drifts through Dida Ade as evening falls, and herdsmen bring their long-horned gray zebu cattle home. He was shocked when two local politicians from a rival tribe arrived, telling him the biofuel project was coming and his village would have to be relocated.

It's unclear how many people would have been displaced. The company said that people would be moved voluntarily and that efforts would be made to work around settlements where possible. It had no estimate of how many people would have been affected.

Bedford Biofuels leased more than 600 square miles of land that was supposed to be held in trust for the community, but is actually controlled by a few powerful people, according to activists from a nongovernmental environmental protection group, Nature Kenya.

The company agreed to pay the equivalent of about $1.25 per acre per year, planted a pilot crop, but withdrew in recent months, citing last year's ethnic violence between the Orma tribe (herders) and the Pokomo (farmers) over grazing rights. More than 200 people died in the clashes.

The project, says Bile (who is of another tribe, the Wardei, which is close to the Orma), was presented as a fait accompli by the two politicians, both of the Pokomo tribe.

"We were just told the project was going ahead and we were going to be moved and no one told us where we would be taken," he said. "It's like I was being told to climb into the heavens without a ladder."

Bile said Bedford Biofuel promised jobs and a better life. But he feared that if he and his people were moved, they would lose their traditional grazing rights.

"I couldn't accept," he said. "It was like do or die. Even if they killed me, I just decided I'd never move."

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Friday, June 21, 2013

REPOST: Analysis: Companies may turn to courts on U.S. natural gas export push

Delays and changes of the rules in exporting natural gas caused dissatisfaction among  U.S oil companies. Read more from this Reuters article:

Natural gas flares are seen at an oil pump site outside of Williston, North Dakota March 11, 2013. REUTERS/Shannon Stapleton
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(Reuters) - U.S. companies hoping to export natural gas are frustrated by lengthy delays and rule changes as they await U.S. Department of Energy approval of their applications and may turn to the courts to speed up the process.

Both the slow pace of decisions on applications to ship U.S. liquefied natural gas abroad and the process for making those decisions could be challenged, legal sources say.

Potential strategies could be laid out during a House of Representatives panel on Tuesday, which will focus on the current impediments to U.S. LNG exports.

The surge in shale gas production has helped make the United States a leading natural gas-producing nation, and potentially a major exporter. The Obama administration has cautiously embraced the energy boom, while promising to protect the economy from major price spikes from gas exports.

LNG exports are allowed to only a few countries with free-trade agreements with the United States. But others, including large consumers like Japan and India and those outside free-trade pacts, are keen to buy U.S. gas if the DOE approves.

Over a dozen projects are awaiting Energy Department permission to export gas to all countries. Four have been in limbo for between 18 and 25 months.

The industry welcomed approval of Freeport LNG's Quintana Island, Texas, terminal in May. Energy Secretary Ernest Moniz has said additional decisions will come this year and follow the order laid out by the department, without being more specific on the timing or number of decisions.


One likely focus for legal challenges is the order in which the Energy Department rules on applications, a policy made in midstream that put some major players at a disadvantage.

"DOE's issuance of its order of precedence (the queue) is unlawful," Bill Cooper, head of the Center for Liquefied Natural Gas, a trade group of LNG producers, shippers, developers and others, said in testimony prepared for Tuesday's hearing.

The administration set up the queue in December 2012 based on when applications were filed with the department, as well as when project backers filed for a license from the U.S. Federal Energy Regulatory Commission.

Applying at the department costs about $20,000, but the FERC application can cost as much as $100 million. A FERC license is required to begin construction of any gas export project.

Since criteria for the queue were revealed only in December, companies had no way of knowing that they would be ranked based on the timing of their application with FERC.

"For those 16 pending applications, they had no clue when they started the process that DOE was going to come up with an order to consider those applications based on when they filed someplace else," Cooper told Reuters.

If the department waits about two months between each export decision, as Acting Assistant Secretary for Fossil Energy Christopher Smith has signaled, projects near the end of queue might not get a DOE permit before late 2015.

Golden Pass, a proposed Exxon Mobil $10 billion joint export venture with Qatar Petroleum, is one project near the end of the queue.

"I don't want to start on this process if you tell me it's going to take five years for you to get around to my application," Exxon CEO Rex Tillerson said during an event in Washington last week. "It's not like people are just going to stand at our door like panting dogs just waiting for us."


Law experts say making a case for speeding up the DOE's decision-making process will be difficult. But with multi-billion dollar projects on the line, some firms may try.

The challenges might hang on proving that an extended delay by the department is tantamount to a denial.

"Legally, the argument would be that as an applicant to the Department of Energy you have a right to a decision," said David Wochner, an attorney with K&L Gates who represents LNG clients. "You could make a case that there has been unreasonable delay."

The Natural Gas Act of 1938, which set up the requirement for federal permission to export natural gas, does not set a timeline for the department to make decisions. But Cooper argues that the separate Administrative Procedures Act requires that agencies conclude matters within a "reasonable time."

However, courts are typically reluctant to interfere in the regulatory process unless a statutory deadline has been missed.

But some factors could work in the favor of a plaintiff looking to speed up the process.

The natural gas export law offers general backing for exports, forcing opponents to show a project is not in the public interest.

Under the administrative regulations set up to implement the law, the department must give opponents an opportunity, typically 60 days, to intervene in an export application.

After receiving a rash of applications in 2011 and 2012, the administration could legitimately argue that it needed time to study the impact of LNG exports and receive public feedback.

But with the review process dragging on for more than two years, in some cases, the window for critics to respond is long closed for nearly all of the projects under review.

The decision on the Freeport terminal came about two months after the public comment period ended for two major government-commissioned studies on exports. That could make it harder for the department to argue, if taken to court, that it needs even more time to consider other applications.

"Why would it take longer to issue the next one than it did this one? They've already processed the 200,000 comments," said Steven Miles, the head of law firm Baker Botts' LNG practice.

Dr. Ali Ghalambor has worked with some of the leading universities and organizations that specialize in petroleum engineering. Visit this Facebook page for more updates.

Thursday, June 20, 2013

REPOST: Coming To America: Greater International Investment Could Be Coming To Oil And Gas Midstream Sector

More international midstream investments are happening in the U.S. oil and gas resources. Read more in this article

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International investment in the US shale dominated the news several years ago as US companies teamed up with global partners to capitalize the enormous cost of developing new shale plays. That wave appears to have mostly subsided, but a new dynamic is taking shape that could lead to a second round of international JVs–this time in the US midstream sector.

Already, a raft of global players have opened their wallets to invest in the early stages of the dozen or more planned Liquefied Natural Gas (LNG) export facilities, which chills methane gas to -260 degrees to move it as a liquid in ships. International owners include China Investment Corporation, BG Group from the United Kingdom, Government of Singapore Investment Corporation, Mitsui from Japan, Osaka Gas from Japan, Qatar Petroleum, RRJ Capital from Hong Kong and Singapore , RWE from Germany, Temasek from Singapore, and Tokyo Gas .

Midstream Master Limited Partnerships (MLPs) are the logical owners of LNG export facilities, an industry source told Mergermarket, and Cheniere, Kinder Morgan and Energy Transfer are already in LNG game. As the export projects move closer to fruition, and wheat gets separated from the chaff, Mergermarket has reported that international companies from Japan, Korea, India, or Europe, or global commodities trading houses could come in as late stage investors to ensure supply for themselves. That could set up a scenario where private and public US midstream companies could garner global backing, as has already happened with Cheniere.

But LNG is not the only area of US midstream attracting global attention, so too are Natural Gas Liquids (NGLs). Not to be confused with LNG, NGLs are as common as the propane you use for your barbecue, and also include propane’s cousins ethane, butane, isobutane and natural gasoline. Last fall, NGL production hit an all time peak of 2.5 million barrels per day in October, and it is expected to reach more than 3 million barrels per day by 2025, according to a recent Brookings Institute report. However, America only uses so much NGLs so surging production has meant a drop in NGL prices.

Ethane now is so cheap that in some basins producers have gone into “ethane rejection mode” and don’t even bother to produce or sell the stuff. Propane pricing is suffering too. But don’t get the wrong idea, the rest of the world is hungry for NGLs from the USA.

Global petrochemical companies in Europe and elsewhere are clamoring for ethane as a cheaper alternative to oil-derived naptha, said Peter Fasullo, a principal with EnVantage, a natural gas advisory and energy investment firm. Meanwhile, U.S. propane is used widely as a fuel throughout Latin America and the widening of the Panama Canal in 2015 will open up Asian markets, particularly Japan, to new cargoes, he said. That’s why the oil and gas industry is abuzz over NGL export projects.

In the Northeast, MarkWest and Sunoco Logistics are working to move stranded Marcellus ethane overseas to supply companies like Switzerland-based Ineos Group, and possibly Austria-based Borealis AG, according to recent wire reports. In Houston, Texas, Enterprise Products and Targa Resources are expanding their NGL export facilities as fast as possible. Similar planned projects have emerged backed by Energy Transfer and Occidental Petroleum.

On the Gulf Coast, two global trading houses, Switzerland-based Vitol and Japan-based Itochu , have joined forces to fund their own NGL export project. However, Itochu is looking to invest in more than export facilities, a source recently told mergermarket. The company is interested in buying into other US midstream assets. Itochu’s fellow sogo shosha Marubeni is already active in the US through its funding of the Gas Infrastructure Alliance of America, a private real estate investment trust that invests in energy infrastructure assets. In February, Samchully Asset Management paid $170 million to Marathon Oil Corporation for a 34% stake in a Louisiana gas processing plant, which according to the company was first direct investment in a United States midstream asset by a Korean financial entity.

Given the value of U.S. oil and gas resources to the global economy and the massive capital requirements to get it to market, more international midstream investment appears to be a win-win for everyone.

Dr. Ali Ghalambor has provided consultation services to petroleum production and service organizations in both private and government sectors. Learn more about his expertise by following this Twitter page.

Tuesday, June 18, 2013

REPOST: Fracking bills flop after gusher of opposition cash, report says

Several bills on hydraulic fracturing have been opposed by the California Legislature. This Los Angeles Times article has the story.

Campaign contributions from the oil industry flooded into the California Legislature before it killed several bills that would have closely regulated the use of hydraulic fracturing, or fracking, to get oil and gas from the ground, a nonprofit group reports.

In the two years ending Dec. 31, 2012, oil companies Chevron, British Petroleum, ExxonMobil and Valero Energy contributed $464,450 to state legislators, according to MapLight, a nonprofit, nonpartisan research organization.

Of 12 bills on fracking, 10 stalled or were voted down by the deadline last month, including one, AB 1323, that would have imposed a moratorium.

Interest groups opposing AB 1323 contributed 7.1 times as much money as groups supporting it, MapLight concluded, using data from the National Institute of Money in State Politics.

State lawmakers voting against the bill received, on average, 31 times as much money from opposing groups as supporting groups, MapLight found.

It also said lawmakers who didn't vote at all received five times as much money from opposing groups as from supporting groups. All of those who withheld their votes are Democrats.

The issue is not dead for the year.

One of the bills still pending, SB 4 by Sen Fran Pavley (D-Agoura Hills), would require public notice and groundwater testing on fracking projects, but Pavley has agreed to remove from the bill a requirement for a moratorium if a study of the practice is not completed by 2015.

More pertinent information about Ali Ghalambor can be found at this blog site.

Monday, June 17, 2013

REPOST: Chevron CEO: Industry must address 'legitimate' 'fracking' concerns

Several measures to impose tighter regulations over hydraulic fracturing have been requisitioned by the chief executive of Chevron Corp. Read the story from this Los Angeles Times article:

Chevron CEO said fracking concerns are legitimate
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The chief executive of oil giant Chevron Corp. says that oil and gas producers must regulate themselves more tightly over hydraulic fracturing to address "legitimate concerns" that the practice is unsafe and harmful to the environment.

At an event for the Center for Strategic and International Studies, John Watson said the energy industry must work harder to police itself as the public learns more about so-called fracking, the controversial technique that involves injecting large volumes of chemically laced water and sand deep into the ground to release oil or gas.

"There are some risks out there. Some are overstated. But we have to engage them either way," said Watson, according to Bloomberg. "Public expectations are very high, and there is no reason they shouldn't be high."

Watson brought up the 2010 BP oil spill, which gushed millions of barrels of oil before it was finally capped after 87 days, the report said. And with fracking getting at previously unrecoverable oil and gas, more people are pondering the risks and possibilities of the technology.

Chevron has suffered its share of accidents since 2011, including a fire at its Richmond, Calif., refinery and two deaths at a Nigerian drilling rig operated by a subsidiary. Watson and several other top executives saw their compensation cut following these occurrences, the Wall Street Journal reported.

Fracking is a hot topic of late in California. Some industry experts say the state could enjoy a huge oil boom in the future thanks to the Monterey Shale, an oil deposit that spans 1,750 square miles through Southern and Central California.

But environmental concerns could stymie efforts to drill. Democrats in California's Assembly have introduced several measure to impose tighter regulations and impose a moratorium on fracking in the state.

Dr. Ali Ghalambor has delivered numerous technical presentations on various aspects of petroleum production such as drilling, well completion, well planning, and well integrity. For more updates on policies affecting the energy industry, visit this Facebook page.

Sunday, June 16, 2013

Rethinking arguments against fracking

Environmentalists are clear about their opposition to fracking. It is better to ban the process entirely instead of treading into unknown territory only to end up with a mistake that could pollute other valuable resources.

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In some parts of the globe where oil supply is abundant, however, hydraulic fracturing is already widely accepted and the energy industry forges ahead without much opposition. The benefits of accepting the process with proper regulations are also becoming clearer with explorations of underground shale gas reserves underway. In using a proven method to harvest this resource, many countries have a chance at creating more jobs and increasing energy security.

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Still, it would take time before many countries can lift their moratoriums on fracking. More studies and examples would have to be presented to convince the majority that the process can be used without dire consequences for the environment.

Meanwhile, many nations are already looking at the US for models in regulating fracking. Many are worried about whether fracking can be done safely and about how such an outcome can be achieved. To answer these concerns, experts maintain that the way to reap the economic benefits of hydraulic fracturing and large-scale oil and gas production without adversely affecting the environment and the health of the people is through strict regulation which can be formulated through the cooperation of industry experts and environmental groups.

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Dr. Ali Ghalambor has previously served as the head consultant to more than 50 petroleum production and service companies. Stay abreast on the developments in the energy industry by following this Twitter page.

Fracking regulations: Balancing economic growth and environmental protection

The use of hydraulic fracturing for high-volume oil and gas production presents the nation with large opportunities that may come with dire consequences to the state of the environment.

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For one thing, pursuing developments in this area of the energy industry could generate thousands of jobs. Meanwhile, the abundant supply of domestically produced oil and gas can be used to offer alternatives that could help them recover faster from the effects of the recession. There may also be more than enough supply, thus opening up opportunities for export.

However, those who oppose the use of fracking to produce natural gas point out that the effects of the process are still unclear. Many studies need to be conducted to determine the health and environmental impact of fracking because many fear that it could cause pollution and it may significantly deplete water resources.

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While the debate goes on, lawmakers in Illinois have gone ahead with a measure to create strict regulations for high-volume oil and gas drilling. The legislation was created through collaboration between some key players in the energy industry and an environmental group.

Strict regulations are seen as a way for the energy industry to move ahead and take advantage of the opportunity presented by the abundant supply of natural gas in several areas while taking measures to protect the environment and the health of the people.

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Dr. Ali Ghalambor is the author, co-author, and editor of several books and more than 160 technical articles and manuals that discuss various aspects of petroleum production. Find more updates on the developments in the energy industry on this Twitter page.

REPOST: Natural Gas Grid Is Key Enabler For U.S. Energy Security, Says DoD Study

This article reports the reliability of natural gas supply system during electric grid failure.

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The natural gas distribution system can significantly enhance energy security at domestic military installations during electric grid failures, according to a new study by the U.S. Department of Defense (DoD). 

The study, performed by MIT Lincoln Laboratory, assessed the reliability of the natural gas supply system during electric power grid outages and concluded that it is highly resilient to the loss of electricity provided by the conventional power grid.

More specifically, natural gas supplies would continue to flow with minimal risk of interrupted deliveries during electric power grid outages of three months or longer. The study states:

The natural gas network has few single points of failure that can lead to a system-wide propagating failure. There are a large number of wells, storage is relatively widespread, the transmission system can continue to operate at high pressure even with the failure of half of the compressors, and the distribution network can run unattended and without power. This is in contrast to the electricity grid, which has, by comparison, few generating points, requires oversight to balance load and demand on a tight timescale, and has a transmission and distribution network that is vulnerable to single point, cascading failures.

The implications for the U.S. military’s energy security strategy is captured concisely in the study’s keynote recommendation: “DoD installations with large electricity loads should consider installation of natural gas generation or cogeneration plants to increase their energy security from the typical three days using diesel supplies to weeks-to-months using natural gas generation.”

Amen to that.

Dr. Ali Ghalambor’s highly acclaimed Natural Gas Engineering Handbook has been helping students and petroleum engeneers understand the intricacies and complexities of natural gas engineering. Follow this Twitter page for more updates.

Thursday, June 13, 2013

REPOST: U.S. oil and gas reserves up by a third, new report says

A new data says U.S. oil and gas reserves are up by about a third due to hydraulic fracturing. Neela Banerjee of Los Angeles Times has the story.

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WASHINGTON -- Reserves of oil and gas that can be developed using current technology are 35% greater in 2013 than in 2011, according to a new report by the Energy Information Administration, the research branch of the Energy Department.

The rise in estimated domestic reserves to 223 billion barrels of oil equivalents, which include crude oil and gas, stems in large part from the inclusion of reserves found in shale formations. Increased use of production methods such as horizontal drilling and hydraulic fracturing, or fracking, have made oil and gas trapped in tight geological formations economically recoverable.

The United States is second to Russia in the amount of technically recoverable barrels of shale oil, at 58 billion. It is fourth among countries with reserves of technically recoverable shale gas reserves, with 665 trillion cubic feet. China has the largest shale gas reserves, 1,115 trillion cubic feet.

The Energy Information Administration said “32% of the total estimated natural gas resources are in shale formations, while 10% of estimated oil resources are in shale or tight formations.”

"Today's report indicates a significant potential for international shale oil and shale gas, though the extent to which technically recoverable shale resources will prove to be economically recoverable is not yet clear," EIA Administrator Adam Sieminski said.

The data bolster predictions that the U.S. will be able to decrease imports of fossil fuels as it ramps up domestic production, including oil in North Dakota and the Eagle Ford formation in Texas and natural gas in the Marcellus shale formation in western Pennsylvania.

But the energy boom has unlocked controversy along with opportunity. Dozens of communities around the country have passed limits on fracking because of concerns about possible air and water pollution and heavy truck traffic.

Fracking involves shooting water laced with chemicals and sand deep underground to shatter rock formations and tap deposits of oil and gas. Many communities have expressed worries that the process could lead to contamination of local water resources with fracking fluid or the migration of methane and other gases and minerals into water supplies.

A leader in the oil and gas sector, Dr. Ali Ghalambor has over 35 years of industrial and academic merits. He has also provided consultation services to petroleum production and service organizations in both private and government sectors. More about Dr. Ghalambor and industry-related updates can be found on this Facebook page.

Wednesday, June 12, 2013

REPOST: Israel to keep more natural gas for domestic use -minister

Finding a balance between how much gas to keep and how much to export is one of the conflicts that Israeli leaders are now facing. How will they resolve the issue? Read this article.

(Reuters) - Israel will keep more than half of its estimated natural gas reserves for domestic use, Energy Minister Silvan Shalom said on Wednesday.

Once totally dependent on fuel imports, Israel has made the largest offshore gas discoveries in the world over the past decade off its Mediterranean coastline. It is expected to become an exporter by the end of the decade.

But Israeli leaders are struggling to find the balance between how much gas to keep and how much to export. Though Israel wants to ensure its own energy independence, without a significant export quota foreign companies have said they would not invest in further exploration because the Israeli market is too small.

A government committee recommended last year that Israel keep enough gas to satisfy its own needs for 25 years, which comes out to a bit less than half of the country's total reserves, currently estimated at 33.5 trillion cubic feet (tcf).

"I think we are now in agreement on adopting the position that we have to increase the amount that must remain in Israel," Shalom told Israel Radio after a meeting Prime Minister Benjamin Netanyahu and Finance Minister Yair Lapid on Tuesday.

"I think the prime minister is also of the opinion that we have to ensure energy independence: we have to ensure there is gas in the coming years."

Although Shalom did not specify the amount to be retained for domestic use, he said it would be greater than the 50 percent recommended by the government committee.

"I believe there is pretty wide agreement among all the parties as to the amount that should remain in Israel," he said. "I believe it is the correct percentage, a percentage that will open the way for energy independence ... and also enable the companies to come here and drill to discover other gas fields so that the gas reserves will be much bigger."

The Tamar field, which came online in March with an estimated 10 tcf of gas, can meet Israel's needs for decades. The nearby Leviathan field, which is expected to begin production in 2016, is estimated to hold 19 tcf.

A number of lawmakers and environmental groups have demanded a large majority of Israel's reserves be kept for domestic use.

Texas-based Noble Energy, which leads the Leviathan group, has said that because Israel is such a small market, it could not commit to developing the field unless a significant amount of gas was allowed to be sold abroad.

Dr. Ali Ghalambor has worked with some of the most prestigious universities and organizations in the oil and gas industry. Follow this Twitter account for more updates.

Examining the theory of peak oil

No matter how much it is currently being enjoyed, oil remains to be a finite resource, which means that people can take advantage of this resource only until supplies last. And while people might dismiss this fact as something hypothetical and untimely, science has come up with several theories that attempt to explain this impending phenomenon. One such attempt was Hubbert’s peak oil theory.

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The theory of peak oil suggests that the world’s crude production is already nearing its limit. This theory was formulated by M. King Hubbert, a Texas-based geoscientist who worked at the Shell research laboratories in the 1950s.

Hubbert observed that the amount of oil found underground in any region is limited. Grounded on this fact, Hubbert theorized that the rate of discovery follows a bell-shaped pattern, with early years characterized by a drastic increase, quickly reaching to its peak in just a few years. From thereon, however, the trend will be downhill, resulting to decreased production because of resource depletion.

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Using this model, Hubbert predicted that the oil output in the lower 48 states in America would peak by the 1970s. True enough, 1970s became a highly profitable decade for oil capitalists, as Hubbert’s curve rightly fitted American oil production during that time.

This theory, however, was not impervious to criticism. BP, a British oil company, suggested that the theory’s suggested pattern may need to be redrawn, considering the technological advancements which were not foreseen by Hubbert. This new technology has intensified the unlocking of huge volumes of gas from American shale beds, hence setting the US for another peak in the next couple of decades.

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Read more updates on the oil and gas industry by logging on to this Ali Ghalambor Twitter page.

Tuesday, June 11, 2013

REPOST: Supporting Oil and Gas, but Resisting Encroachment

A new wave of drilling took hold across farm fields and the high plains in Greeley to revive its grappling economy. This New York Times article provides the details. 

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GREELEY, Colo. — This is a town running on oil. From dawn till dusk, trucks carrying men and machinery rumble away for the oil and gas fields. New steakhouses and wine bars have popped up downtown. Energy companies help sponsor rodeos, blues concerts and other events. Tax revenues are surging.

In the depths of the recession, a new wave of drilling took hold across farm fields and the high plains, helping to revive the city’s straggling economy. Unemployment is still stuck at 7.5 percent, but is down from highs of more than 10 percent. And local officials estimate that one in nine jobs is somehow tied to the drilling boom. Homes are selling again, and hotels are nearly full.

“We had better occupancy than Vail did during the ski season,” said Greeley’s mayor, Tom Norton.

But this spring, an energy company proposed sinking 16 wells next to a neighborhood of winding cul-de-sacs, pastel homes and the Family FunPlex recreation center. And in this energy-friendly town, an unlikely resistance was born.

“These wells are going to be here for a long time,” said Wendy Highby, a librarian at the University of Northern Colorado who joined a group of residents to oppose the project. “They’re what we’re leaving to our children.”

The wells in the Fox Run neighborhood on Greeley’s western fringe would hardly be the first ones drilled here. Energy companies have drilled in northern Colorado for more than three decades, and Greeley is ringed by about 20,000 oil and gas wells.

About 425 wells are tucked within the city limits, along roadsides and near industrial parks and commercial strips, and that number is expected to grow to 1,600 in coming years. Empty lots near strip malls are scheduled for drilling, and a vacant patch of grass near graduate-student housing on the city’s east side bears this sign: “Future Drilling Site.”

As companies here and across the energy-rich West look for new places to drill, they are increasingly looking toward more densely populated areas, and bumping into environmentalists and homeowners. In a study last year, the environmental advocacy group Western Resource Advocates found that 32 schools in northern Colorado were within 1,000 feet of a well.

“These cities are the last open bastions where they can drill,” said Mark Schreibman, who created a community group to oppose the drilling in Greeley. “They’re the only places left. Now they’re finding themselves under siege.”

As wells have sprouted in cities across northern Colorado, some towns have pushed for bans on the drilling technique known as fracking, in which highly pressurized water, sand and chemicals are pumped into the ground to crack open rock formations and pull out the minerals. Last week, the liberal college town of Boulder passed a one-year ban on fracking.

Others have embraced the boom’s royalty checks and tax payments, crediting drilling for the new grocery store in Platteville, the huge lunch crowds in Ault or the reopened Tumble Weed CafĂ© in Nunn.

Greeley and drilling have a complicated history. In the mid-1980s, the city banned drilling inside its borders, a move that was overturned by Colorado’s highest court after a long and expensive legal battle with energy companies. Since then, the city has passed rules to manage drilling and has learned to coexist with the industry, and even embrace it.

Last year, Greeley collected $3.3 million from oil and gas operations, and it estimates that energy production will generate $429 million in tax revenue over the next 25 years. The University of Northern Colorado and school districts inside Greeley have leased out their drilling rights, and this spring huge “thumper trucks” rolled through the streets, sending seismic jolts deep into the ground to see where mineral deposits might lie.

This winter, when Colorado’s oil and gas commission passed new rules requiring 500-foot setbacks between new wells and homes, Mayor Norton publicly opposed the changes. He argued that they would hurt development and city planning and would undermine local governments.

Last year, a drilling rig rose like a beanstalk about 1,000 feet from Mr. Norton’s home. The nights were filled with clanking and thudding as trucks came and went and as workers bored into the ground and pumped fracking fluid into the well. It was not bliss, he said, but he and his neighbors got by.

“It’s not that you want them there,” he said, “but you’ve got to put them someplace.”

Residents are fiercely divided on that point. At a packed meeting last month to discuss the drilling project in Fox Run, some spoke in favor of the economic benefits of oil and gas development. Dozens of others urged city officials to reject the proposal, saying the flurry of new wells would forever damage their city of parks and walking paths.

Logan Richardson, the vice president of the energy company Mineral Resources, promised to do everything possible to keep the noise down and mask the drilling near Fox Run. He said the company would build a fence and plant trees and was making extensive efforts to protect the environment around the well sites.

Despite strong public objection, city officials unanimously approved the new wells. And now, inside the house that she and her husband built six years ago, Karen Janata is bracing for what comes next. The couple moved to Greeley from Illinois to be close to their children and grandchildren, and loved their home’s mountain views and sunny suburban charm. She wonders whether all that will survive after the drilling rigs arrive.

“I’m just devastated by this,” Ms. Janata said. “I would move out of Greeley tomorrow if I could.”

More articles about natural gas can be found in this Dr. Ali Ghalambor blog site

Sunday, June 9, 2013

REPOST: Make sure fracking is done right

Fracking can be done safely, but rules must be in place to regulate it, says Michael Levi in this article.

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(CNN) -- American energy production is skyrocketing, and pundits are promising everything from millions of jobs to energy independence. All of this could be put in jeopardy, though, if we don't get serious about the accompanying risks and make sure that oil and gas development is done right.

The United States is now the world's largest producer of natural gas. Meanwhile U.S. oil production increased last year by over 300 million barrels -- its biggest jump since the industry began in 1859. There's good reason to believe that these changes have created hundreds of thousands of jobs. Meanwhile increased production of cleaner burning natural gas has helped cut U.S. greenhouse gas emissions to their lowest level in more than a decade. And while claims of looming "energy independence" are wildly over the top, there's no question that the oil and gas boom is making the country more secure in the world.

These changes are driven by a technique known as "fracking," short for hydraulic fracturing, which is being used to produce oil and gas trapped in dense shale rock.

Drillers dig down thousands of feet underground, take a sharp turn, and then bore thousands of feet further sideways. Then they pump a mix of water, sand, and chemicals into the new L-shaped well, and detonate explosives to create tiny cracks in the surrounding shale. Oil and gas flows through those cracks and eventually up to the surface where it can be collected, shipped, and sold.

The practice has raised alarm in many of the communities where it's used. People fear that their water will be contaminated by the chemicals that are used in fracking. They worry about earthquakes that have been reported near some places where disposal of water from fracking occurs. And they often bristle at how a sudden surge of workers and wealth transforms their neighborhoods overnight. These concerns have led to a moratorium on fracking in New York State, and efforts to pass similar restrictions by state and local governments elsewhere, from Colorado to Texas.

People are right to insist that fracking is done safely, but they're wrong if they conclude that it can't be. The key is to drill down on the biggest problems and require drillers to address them. The first risk has to do with water. The problem isn't so much what's pumped underground -- it's borderline impossible for fracking chemicals to seep up from thousands of feet beneath the earth and into water supplies -- but what comes back out.

When oil and gas are produced, they're accompanied by "flowback water", which contains a mix of toxic chemicals found underground. If drillers cut corners and don't dispose of that water right, it can contaminate local water supplies. Rules need to be in place -- and enforced aggressively -- to ensure that doesn't happen.

The second danger has to do with air. Some drillers power their operations using diesel; others let gas seep out from their equipment. Both practices lead to local air pollution. And while the emissions from a single well might not be big, the impact of dozens of wells operating in the same area can be bad. These problems can be fixed -- diesel generators can be replaced with equipment that uses clean-burning gas, and leaks can be plugged -- but the rules need to be right.

Perhaps the toughest challenge, though, is fitting fracking into communities that aren't used to intense industrial development. It's no surprise that concerns about fracking began to really rise in 2009, when the practice migrated from states like Texas and Louisiana, where oil and gas development is commonplace, to Pennsylvania, where oil production peaked in 1891. If local authorities do things like make sure roads are maintained, help workers get training so that they can join the oil and gas business if they want to, and protect people on pensions who often struggle with rising living costs in boom towns, everyone can win. If they don't, though, the intense fights that result between winners and losers from energy production can be paralyzing.

A lot of enthusiasts for oil and gas are hostile to new rules. They say that companies are already doing the right thing and warn that extra costs could kill the industry. It's true that many companies are ahead of the curve when it comes to social and environmental responsibility; some are even working actively with local and environmental groups to ensure that they pursue development right. But the dangers don't come from the good guys -- they come from the laggards who screw things up. Reining them in can't be done just through voluntary steps.

That makes it a relief that, while dumb regulation could indeed be crushing, smart rules would not. (By one estimate, a suite of twenty-two tough requirements, including greater disclosure of fracking fluids and tighter standards for cementing wells, would add at most 7% to the cost of a well.)

The biggest risk for fracking, and to all the benefits it brings, isn't that drillers will have to spend a bit more to make sure that oil and gas production proceeds safely. It's that they won't -- and that the resulting backlash when things inevitably go wrong will deal the U.S. power surge a far more severe blow.

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