Tag Archives: LNG

Government Says ‘Plenty, Cheap, No Worry!’ But Others Say, ‘Worry’

Richard Ha writes:

This is a really good graph that shows three projections for future gas production through the year 2040. Click on this postcarbon.org graph and you'll see the black line shows a University of Texas study, the red line shows David Hughes's projection and the blue line represents the government's EIA projection. 

The government projection shows nothing to worry about. Plenty, plenty, plenty!

But the others show an entirely different story. They suggest we better start making some other plans.

Conventional oil, which is our regular oil supply like from Russia and OPEC, hit its max in 2005. It's shale gas and oil that has increased our oil and natural gas supply in the last few years. But it appears that shale gas and oil will start to decline soon and if so, we need to start down the road to adapting to what will soon be again-rising oil prices. 

On the Big Island, geothermal can replace oil and LNG. Not many other places are as fortunate. We just need to be smart and figure out what works.

Geothermal works. We don't have to get there tomorrow, and we don't have to get there in a straight line. We just have to get there. 

We have a way to do this on the Big Island: Geothermal. It's a gift. 

This podcast with David Hughes, author of the recent report Drilling Deeper for the Post Carbon Institute, talks more about this. 

It's all common sense. It’s about data and science—water does not flow uphill, no matter how much we wish it would. Nothing about this is beyond the average person. I find that rubbah slippah folks understand all this in a few minutes.


Why LNG is Such a Bad Risk

Richard Ha writes:

We are getting ready to make huge liquified natural gas (LNG) decisions, and LNG is a big risk. We need to understand the risk and who’s going to be left paying the price.

The first time I heard about shale oil and gas was at an Association for the Study of Peak Oil (ASPO) conference. I attended five of those conferences, the only person from Hawai‘i to do so. Hawai‘i County paid for the trip to the 2010 ASPO conference, held in Washington D.C., and is still benefitting from that small investment.

That discussion about shale oil and gas though was at the 2009 ASPO conference, in Denver, and it turned into a sharp discussion between the geologist Art Berman and a drilling company executive.

Art said he had studied data from 4,000 wells in the Barnett Shale and found that the average well gave off 72 percent of its production in the first year.

The executive countered that his figures showed a hyperbolic curve indicating that production lasts for 22 years.

Somebody was wrong. Later I learned that hyperbolic curves only mean that the following year is less than the one previous.

I didn’t know the definition then, but common sense told me that at the end of 22 years, maybe just a gallon might be coming out per hour. I felt like the executive was just trying to sell stock.

Later, a study of 19,000 wells showed that the average well gave more than ninety percent of its production in its first five years. This was not rocket science – even a banana farmer could tell that you would need to replace one-fifth of the wells each year just to stay even. More if production is higher in the first few years.

As of 2010, it was common knowledge that the average shale oil and gas well depleted in a short time, and it was a subject of intense discussion among those of us who attended the ASPO conferences.

In the meantime, some of the folks out there trying to sell stocks were using the terms “resource” and “reserves” interchangeably in describing what was available. The phrase “Saudi America” started to be thrown around.

The U.S. Energy Information Administration (EIA) finally estimated that the U.S. had an economically accessible shale oil supply of about 100 more years.

But David Hughes, a Canadian geologist, challenged the availability of the Monterey Shale oil due to its geological characteristics. Instead of being flat, the resource rock was wavy and squished. It was hard to access via horizontal drilling.

And then this March, the EIA quietly changed its estimate. In a low-key announcement, it readjusted its estimate of Monterey Shale oil availability – which was two-thirds of our national recoverable supply – downward by an amazing 96 percent.

I saw the announcement and realized its significance immediately. Readjusting the estimate of the US supply of oil downward by two-thirds was a huge, huge deal. But the news kind of just slipped by.

Shale gas has the same characteristics of shale oil – it depletes rapidly. If you ask me who I believe about shale oil and gas? Based on his track record, I believe the data and conclusions of David Hughes.

He based his studies on the same historical data and information the U.S. EIA used, but analyzed it in a more meticulous and targeted way. His data shows natural gas declining much, much faster than does the EIA. A recent University of Texas study agrees more with David Hughes than with the EIA.

This Peak Prosperity podcast features an interview with David Hughes talking about shale production and how he did his analysis. It’s a good interview (47:24). Alternately, you can read the transcript here.

On p. 300 of his report, in figure 3-116, Hughes shows an interesting graph of the EIA’s forecast for shale gas projections and how, in the long term, they are greatly overestimated.

At the end of Hughes’ study on natural gas, he cautions (click to enlarge) :

David Hughes report

Here on the Big Island, based on the precautionary principle, I would rely on geothermal rather than liquid natural gas for our electricity generation. A faster decline probably means a faster rise in natural gas price. If we rely on LNG, the rate payer will assume that risk.

And in Hawai‘i we do not have methane underground. So the bad effects of fracking does not apply to us at all. We have drilled 85,000 wells by now. It’s a mature industry that deals with H2S routinely.

In the future, geothermal could also help us solve our transportation problem by providing hydrogen for fuel-celled vehicles. The cost of hydrogen comes from either natural gas or from passing electricity through water. Eventually, the cost of making hydrogen from natural gas will pass the cost of making hydrogen from electricity from geothermal. Then we will have a permanent advantage over the rest of the world. That’s what we want!

Geothermal is climate change-friendly and as infinite as we can get—we will sit for 500,000 to a million years over the “hot spot.” And we are one of the few places in the world with these circumstances and this opportunity.

We have truly come to a crossroads in our history. We must put our personal agendas behind us and do the right thing for ourselves and future generations.


Kauai Island Utility Co-op Execs To Brief On How They Formed Their Co-Op

Richard Ha writes:

We have invited Dennis Esaki, a founder of Kauai Island Utility Cooperative (KIUC), and David Bissell, CEO of KIUC, to speak to us about how one forms a community-based utility. Having such a utility cooperative here on the Big Island would give us more control over our destiny.

It will be held this Friday, December 19, 11:30 a.m., at the former C. Brewer Executive Center in Wainaku. The event is sponsored by the Big Island Community Coalition, the Hilo Hamakua Coast Development Corporation, and the Hawaii Farmers and Ranchers United. The Ed Olson Trust is providing the Wainaku Executive Center facilities. Please R.S.V.P.

The Kauai Island Utility Cooperative was formed in 2002 when Citizens Communications’ Kauai Electric announced that it was selling the Kaua‘i utility. We have a similar situation right now in that Hawaiian Electric Industries (HEI) recently announced it is selling to NextEra.

NextEra plans to use utility-scale solar, backed up by liquid natural gas (LNG) as a bridge fuel. The average shale oil and gas well lasts only five years, so that model is a concern for Big Island rate payers. (This link is an even more in-depth explanation of how shale oil is massively over-hyped, and analyzes the best data available.) Fortunately, we have geothermal we can use in place of LNG on the Big Island. We have options.

This is not an endorsement of converting to a co-op so much as it is an informational briefing.

Please R.S.V.P. to richard@hamakuasprings.com.


Canada, LNG & What Our Electricity Will Cost in Hawaii

Richard Ha writes:

Hawai‘i’s utilities depend on liquefied natural gas (LNG) as a “bridge fuel,” which will allow it to lower rate payers’ costs. The cost to rate payers, though, depends on the long-term contract HECO can secure.

Canada is probably the best place for Hawaii to acquire LNG. But Canada has some important decisions ahead. Should they build LNG plants, which will require huge upfront investments in the multiple billions? They will have to make some decisions soon.

Click to read a special report on the subject from TD Bank Group (PFD):

Higher prices abroad and an increasingly promising global demand outlook for natural gas have garnered a considerable amount of attention from North American resource producers, who are interested in tapping into foreign markets, via liquefied natural gas (LNG) exports…. 

Japan is the highest priced market for LNG, but Japan has not yet made its final decision about whether it will restart its nuclear plants. And the Russia/China natural gas pipeline could take 10 percent of Asia’s demand off line.

What will Canada do? They are wrestling with this decision right now.

Hawaii rate payers will be interested to see what price contract HECO is able to secure. Whatever it is will determine the electricity rates we pay for the following twenty years.

And we don't want to see what happened in the Aina Koa Pono docket – where the price was kept secret.

The Big Island has geothermal as a low-cost base power. What we don’t want here is for expensive LNG to prohibit the development of our low-cost geothermal.