Thursday, March 31, 2005


When it comes to truly understanding peak energy and its implications, you either get it or you are clueless. Based on some recent experiences at work I would have to say most people still do not get it. The Gas Company supply procurement representative I spoke with certainly appeared clueless. After a few unsuccessful attempts, I finally reached a representative that handles the “big picture” natural gas acquisition and planning elements for the company. When the matter of depletion was discussed, the response proceeded along these lines:

“The low market prices of [gas in] the late 1990’s discouraged investment, resulting in a lack of new supplies being brought online. Now demand has skyrocketed, which will result in more fields being found.” He added that the decrease in hydro power helped drive up the demand for gas while higher prices caused the depletion of existing inventories. (There is anecdotal evidence of this depletion of inventories—stored gas—proceeding the March 2003 natural gas crisis. At that time, rising natural gas prices in the fall of 2002 spurred users to tap into their already purchased gas reserves for consumption rather than acquiring the gas on more expensive spot market. Then when the natural gas was legitimately needed in the late winter period, the market discovered dramatically less of it was stored in reserve). His concluding thought on the matter was that depletion was more a function of market price than anything else.

Now where have we heard this argument before? Ah, yes the economists.

Earth to economists…earth to economists: Geology trumps the economy. Energy isn’t any ordinary commodity; it’s the principal means to do all types of work. When it’s gone, it’s gone. But I won’t get into that.

Returning to the issue of the looming natural gas crisis, I should take a few moments to discuss everybody’s knight in shining armor, Sir LNG. According to the same individual with the Gas Company, LNG received at the Energia Costa Azul facility in north of Ensenada (Mexico) will provide up to one billion cubic feet of gas (BCF) per day in new supplies to both Californias. The details of this plan are still sketchy as the LNG staff with Sempra has not returned my phone calls. But according to their web site, up to half will be consumed in Mexico with up to 500 MCF/day being exported to the US, declining as increasing growth in that country consumes more that facility’s supply. So where does this facility fit into Sempra’s service area? According to their staff, a maximum of 5 BCFs/day are consumed during peak gas season (winter), declining to a base load of about 2.5 BCFs in the more temperate part of the year. At the current levels of consumption, that would indicate the need for 3-5 new LNG terminals. And that is just to supply Sempra’s territory.

Where is all of that gas going to come from? How many ships will that require? Do we have the long term contracts? Can we afford it? The math in my mind does not look promising. Never the less, companies, state agencies and politicians are slowly warming to the necessity of planning for the eventual handling for that very cold substance. Too bad they seem to be clueless on its likely capabilities.


Blogger Terry Finley said...

Nice Blog. Thank You.

I think the gas prices are
(legal) robbery.

Check out my site.

Terry Finley

4/04/2005 5:17 PM  
Anonymous Anonymous said...

I asked someone, "What is peak oil?"

She said, "Are you talking about a brand of motor oil?"

Totally clueless.

9/15/2005 8:07 PM  
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10/02/2005 5:57 AM  

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