FROM A REGULAR CONTRIBUTOR
I just read your latest blog where Marvin Odum (right) blathers on about the strategic importance of Alaska to the domestic energy production future of the US and how Royal Dutch Shell and the White House have found ‘common ground’ on this matter. Really, and to whom besides Shell is it strategically important???
And since when is the White House (or DoI or DoE) considered competent on energy policy issues. Institutionalized competence is the issue here.
The simple fact of the matter is that with proven US natural gas reserves climbing steadily (as a result of advances in drilling technology and exploration in the lower 48 states) it is these on-shore natural gas reserves of the lower 48 state that are of strategic importance to the US. And will be of increasing importance as gas reserves continue to climb.
With currently available technology this natural gas can readily be converted into diesel, gasoline, and other liquid hydrocarbons at a cost that is a fraction of the current price for a barrel of West Texas crude. We just don’t have the facilities in the US to do that at the present time, although the US Defense Dept. is looking into the feasibility of building such facilities to provide it needs in case of a national emergency.
And I will remind your readers that Royal Dutch Shell has spent roughly $20 billion building a facility in Qatar to produce roughly 250,000 bbl/day of diesel and other liquid hydrocarbons from Qatar’s otherwise largely unexploitable natural gas reserves. And it will generate billions of $$$ for Shell annually (provided they can get it to work better than their newly expanded and modernized Motiva refinery). Qatar provides the gas at no charge and the government and Shell split the profits. Shell says it will cost about $5 processing costs to generate 1 bbl of diesel, etc. Of course, this ‘refined’ liquid hydrocarbon can be sold for well over $100 per bbl. That is a tidy return on investment, something on the order of $6 plus billion per year. At that rate it won’t take long to pay out the cost of that plant.
Now, roughly 10 TCF of natural gas will, when converted to liquids hydrocarbons, produce about 2.0 billion barrels of diesel fuel, etc., and at a cost of somewhere between $15 – $25 per barrel of diesel (depending on the price of gas per mcf – $2 – $4). That amount of ‘refined’ liquid hydrocarbon is roughly 1/3 of US annual consumption of unrefined crude oil. It also equates to about 6 million bbl/day that the US need not import from foreign sources. Remove 6 million bbl/day from global demand and world crude oil prices will clearly drop dramatically.
Contrast this with recent media reports that the major oil companies now want to start exporting US natural gas in the form of LNG. Really. Why ??? Well, because money is to be made with LNG, and LNG won’t have a significant impact on crude prices.
I say prohibit exporting of a vital and strategic US energy resource and instead convert some of the excess natural gas production capacity to the production of liquid hydrocarbons to reduce US reliance on foreign sources or crude oil.
I am missing something here ???
Could it be the major oil companies don’t want to build any gas to liquid conversion plants lest they have an adverse and long term influence on the price of crude oil ?? Enlighten me, someone, if I am incorrect.
Of course, the incompetence of American political leadership on such matter is absolutely mind boggling. And if these ‘public servants’ are not incompetent they are corrupt to the core and can readily be ‘influenced’ by oil & gas industry political lobby groups with lots of money to spread around.
So, what is new.