A Massive Upswelling of Unfashionable Wealth

Green energy is fashionable -- but it will bankrupt anyone who depends on it. Hydrocarbons such as oil & gas are most unfashionable -- but they are poised to drive a massive industrial and economic renaissance in North America, if fashion-conscious political elites could hold their noses tightly enough to allow the economic resurgence to happen.

US domestic oil production has jumped by 18 per cent in the past year as the shale boom has expanded, and in the first eight months of this year oil imports were 800,000 barrels a day fewer than a year earlier. America's oil exports rose over the same time by 300,000 barrels a day, so net imports have fallen in just one year by 1.1 million barrels a day, or about 6 per cent of total consumption. If that pace if sustained the International Energy Agency's prediction of self sufficiency for the US by 2030 will prove to be conservative.

Oil production from shale in the US is rising much more strongly than expected because the boom itself is working to shift production into liquids. _TheAge

This puts US President Obama in the position of having to make a hard choice -- something he is not known for doing, if he can avoid it. Nevertheless, Obama's fiscal policies are driving the US into an unprecedented deep pit of debt, while his regulatory policies are destroying economic opportunity across the width and breadth of the private sector. If Obama lets the energy & industrial boom happen -- in spite of his close ties to the green / political / academic / faux environmental complex -- he will lose friends among the fashionable, but will also finally allow a much-delayed economic recovery to begin across much of the US.

The six fastest-growing jobs for 2010-11, according to Economic Modeling Specialists International, are related to oil and gas extraction. In total, nine of the top 11 fast-growing jobs in the nation over the past two years are tied in one way or another to oil and gas extraction.

Over the decade, the energy sector has created nearly 200,000 jobs in Texas, as well as 40,000 in Oklahoma, and more than 20,000 in Colorado. Growth on a percentage basis is even higher in North Dakota, which saw a 400 percent increase in these jobs, as well as Pennsylvania, where jobs increased by 20,000.

The energy revolution presents Obama with the clearest path to drive this critical boost to greater economic growth. New technologies for finding and tapping resources, such as fracking and other new technologies to tap older oil fields, could make America potentially the largest oil and gas producer by 2020, according to the International Energy Agency. _Joel Kotkin

A massive upswelling of unfashionable wealth awaits a number of decisions by US President Obama. Now that his re-selection is a fait accompli, what is he waiting for?

Geopolitics: As the North American Shale Revolution Unfolds

Every modern industrial nation requires affordable energy to run its industry, commerce, and to keep its citizens comfortable within their homes. For the last few decades, energy consumers in the western world have lived under the threat of having their energy supplies cut off, by belligerent suppliers in OPEC, Russia, and other bullying dictatorships.

Preliminary Map of Global Shale Gas -- Much More to Come

With the coming of new energy technologies that are unlocking vast supplies of previously inaccessible oil & gas, Russia's and OPEC's stranglehold over more civilised and cultured parts of the world appears to be weakening.

The Gulf is not the only area where the established oil powers are in danger of crumbling. The biggest single loser of all will most likely be Vladimir Putin's Russia, a regime largely dependent on high energy prices and a captive market with no real alternative plan.

..."Russia has just seen its aspiration market disappear. The US is already a bigger gas producer than Russia," Redman said. _Guardian

As US energy production continues to shift away from OPEC toward domestic producers, US industries can once again plan their production schedules based upon a more reliable energy supply. So that as US and Canadian industries re-build based upon more reliable and cheaper supplies of fuels and energy, other countries that depend upon more expensive and less reliable forms of energy -- such as Germany -- will increasingly lose out to North America.

Thanks to new applications of drilling technology to unlock natural gas trapped in shale rock, the nation’s output has surged and energy experts almost unanimously forecast that prices will remain low or moderate for a generation.

...“It has become clear to me that the responsible development of our nation’s extensive recoverable oil and natural gas resources has the potential to be the once-in-a-lifetime economic engine that coal was nearly 200 years ago,” U.S. Steel Chairman John Surma said in a speech this year.

Industrial companies are betting that the surge in the domestic production of natural gas is much more than a blip. Cheap and plentiful supplies of natural gas are flooding the U.S. market, and prices in the United States are as low as a quarter of what they are in Europe or Asia.

“For the foreseeable future, thanks to the recovery of vast U.S. underground gas deposits of shale, natural gas is likely to remain 50 to 70 percent cheaper in the U.S. than in Europe and Japan,” said a recent report by the Boston Consulting Group. _WaPo

Whether these new technologies ultimately create a new "economic renaissance" depends upon whether government agencies are able to keep their corrupt and ideology-stained paws off the private enterprise boom.

A sudden surplus of previously rare high quality energy is likely to have unforeseen effects on several parts of the world.

"In the past, when OPEC was cutting production by half a million barrels, everyone was jumping up and down. Today no one cares as we have a real surplus of oil," said the head of Azeri state oil firm Socar's trading arm, Valery Golovushkin.

"There is already plenty of oil in the Mediterranean. We at Socar are relying on long-term supply contract to Asia. But quite honestly we don't feel any particular joy from taking it to Asia and wasting money on freight," said Golovushkin, a veteran of the Soviet oil export industry. _Reuters

The North American shale boom caught a lot of global oil market suppliers flat-footed.

As North American shale oil & gas continues to rise in production -- and as other shale producers in Europe, Asia, South America, Australia, and elsewhere come on line -- the problems for OPEC and Russia will only be compounded further.

It is likely that a number of regional wars will be fought over oil resources, as individual oil dictatorships find that their own production is not able to pay for their ambitions and their need to pacify their people. Many of these wars will be supported and encouraged by Russia -- in an attempt to ramp up the risk premium for oil, and overall oil & gas prices.

The consequences of these rapid shifts in new oil & gas supplies have only begun to shake out. Watch carefully, and be very cautious.

Brian Wang has followed the ramp up of North American hydrocarbon production very closely

US Election Sets Obama Free to Pursue "Final Solutions"

This article is adapted from a posting on Al Fin Energy

President Obama's powerful interlocking network of campaign support organisations has succeeded in making sure that the US President can sit in the White House for another four years. This feat opens the door for a great deal of new regulation which has been held back until after the US elections.

President Obama has spent the past year punting on a slew of job-killing EPA regulations that will destroy millions of American jobs and cause energy prices to skyrocket even more,” Senator Inhofe said. “From greenhouse gas regulations to water guidance to the tightening of the ozone standard, the Obama-EPA has delayed the implementation of rule after rule because they don’t want all those pink slips and price spikes to hit until after the election. But President Obama’s former climate czar Carol Browner was very clear about what’s in store for next year: she told several green groups not to worry because President Obama has a big green ‘to-do’ list for 2013—so they’ll get what they want. As a result, hard working Americans will lose their jobs and be subjected to skyrocketing energy prices

This report also importantly puts the spotlight back on an Obama-EPA that has, as the Washington Post said, earned a ‘reputation for abuse.’ It serves as a stark reminder that President Obama has presided over a green team administration that works every day to ‘crucify’ oil and gas companies and make sure that ‘if you want to build a coal plant you got a big problem.’ _Independent.org

Not just the EPA, but the Department of the Interior, the Bureau of Land Management, and a number of other US federal agencies, have prepared regulations which will work to strangulate US energy industries:

... the proposed BLM rule would drive oil and gas developers off federal and tribal lands. Complying with the rules is too complicated and costly. Producers can realize a much faster and much better return on their capital investment by developing oil and gas reserves on adjoining private lands.

Federal and tribal lands hold large reserves of oil and natural gas. At a time when the United States desperately needs to move toward, not away from, energy independence, it makes no sense to let bureaucratic meddling effectively place these valuable domestic reserves out of reach. _Killing US Shale

Mr. Obama is certainly the president of the US, and probably will be for a number of years to come. He has the right to put his personal stamp on government policy.

In his first term, Mr. Obama largely kept his hands off the shale energy boom. That was fortunate for him, because without the shale boom, the US economy would have been in much worse condition. He "confined" his executive meddling on energy to a stonewalling of offshore oil, a slow regulatory death of coal, an attack against Canadian oil and oilsands, and what is essentially a freeze on new nuclear development.

But now, elections have consequences, and Mr. Obama has no reason to fear the full implementation of his agenda of energy starvation. The greatest uncertainty remaining is: How is it to be done, and when? These things must be done delicately __attributed to the Wicked Witch of the West.

Obama Executive Order to Stamp Out US Shale Revolution

Today we bring you some good news, and some bad news, about the US shale revolution -- which has been the saving grace in the US economy over the last few years.

First, the good news:

Image Source

The U.S. shale boom... has transformed the U.S. energy sector. Shale gas alone is now 10 percent of the overall energy supply in the country.

A surge in unconventional oil and gas extraction nationwide will trigger more than $5.1 trillion in capital spending and support a total of 1.7 million jobs this year, a number that will swell to almost 3 million by 2020, a leading consultant said in a study released Tuesday. _IBT

Now, the bad news:

...the Obama administration is working to increase federal control over hydraulic fracturing in the United States. In April of this year, President Barack Obama issued an Executive Order on hydraulic fracturing that created a working group of 13 executive branch departments to coordinate policies between departments, share research and information on hydraulic fracturing, and ensure that the federal government spoke with one voice on the subject. This was in response to actions being undertaken by the Environmental Protection Agency to release new air pollution regulations for shale gas drillers and by the Department of Interior to release new hydraulic fracturing regulations for drilling on public lands.

In April, the Environmental Protection Agency (EPA) required drillers to capture emissions of certain air pollutants (volatile organic compounds and methane) from new wells. Drillers can burn the pollutants at the wellhead until the start of 2015, when EPA expects that enough equipment will be available to capture the pollution.[ii] The original proposed rule issued by EPA in 2011... was estimated to reduce oil production from hydraulically fractured wells by up to 37 percent and reduce federal royalties by $8.5 billion and state severance taxes by up to $2.3 billion due to reduced drilling and production.[iii]

While other countries are using hydraulic fracturing to increase production and revenues, the United States – which pioneered the technological breakthroughs that led to the practice — is looking to lower oil and gas production and increase costs by increasing regulations on the technology. To date, hydraulic fracturing has helped to reduce our dependence on imported oil and natural gas, lower natural gas and electric utility bills, and increase employment in states where shale oil and natural gas are produced. It looks like hydraulic fracturing should be a win-win relationship for domestic production and consumption of oil and natural gas, but the Obama Administration has proposed changes that threaten that through increased regulations, despite the fact that the states have successfully regulated that industry for half a century or more. _IER

Obama conveniently (and duplicitously) claims credit for the shale revolution, while his administration works behind the scenes to clamp down on the technologies which made the revolution possible.

Oil Job Finder

Plentiful oil & gas opens the door to a wide range of other industries to grow -- and to return to the US from overseas. No wonder Obama wants to stop it.

Global Shale Energy Revolution: It Has Barely Begun

The Earth has barely been explored in terms of its vast energy potential. New sources of energy are cropping up in unlikely places, on an almost daily basis.

Shale and other unconventional gas resources have been identified in France, Germany, Hungary, Italy, Netherlands, Poland, Romania, Spain, Sweden, Switzerland and the UK. Land and license acquisition, and even some early stage exploration, is already underway or foreseen in a number of these countries. _New Shale Frontier

South Africa, for example, is now moving ahead to develop its significant native shale resource.

News from Japan's new shale discoveries
Notice that the map of shale resources above is incomplete, with large areas "greyed out". The map below reveals a broader view of the presently known global shale resource, but even that map is woefully incomplete.

JOHN Howard has warned that the development of the shale gas industry in the US could shake up the global energy scene and have a dramatic impact on China and Australia.

... "I think the potential for gas and oil from shale to transform the world energy scene, including the energy scene in China, is quite significant," Mr Howard said. _Global Shale Shakeup via Australia

Australia is yet another energy-rich country that has just begun to discover its potentially huge shale resource.

We should not forget China, which is thought to possess a gargantuan resource of shale gas. While China is unlikely to ramp up shale production rapidly, it is already using the threat of its shale gas to negotiate much tougher terms with Russian gas company Gazprom.

On Tuesday, Chinese sources told Platts in Astana that price remains the key issue in the negotiations, echoing earlier statements by the Russian side.

Russia wants a price close to that paid by its European customers, while China is insisting on a lower price, similar to what it pays to Middle Eastern LNG suppliers, according to the Chinese sources. _Platts

Left unsaid in most press reports is the profound impact of North American shale oil & gas development on the energy hopes and dreams of other nations possessing large reserves of shale hydrocarbons.

Russia's Gazprom Struggles Against the Current

Gazprom profits are an important foundation of Putin's system of government. But Gazprom is confronting difficult challenges -- both outside of Russia and inside of Russia itself. No one knows how long the company can continue playing its current role of propping up the Putin regime, which is facing significant opposition on many fronts.

Russian President Vladimir Putin, who faces the biggest protests of his 12-year rule, could lose power overnight if the oil price sinks and he fails to reduce corruption... "The regime may fall apart overnight, and in a way that we don't know. It may be in a peaceful way, it may be in a bloody way," _India Times

[Gazprom] is large and sprawling and, with a seemingly eternal income stream, had no need to be innovative or especially adept at what it did. ... Unlike oil, natural gas until recently was difficult to ship except in pipelines; this gave Gazprom a guaranteed, if partial, monopoly as a gas supplier to Europe.

...But that era is passing. Gazprom executives have been very slow to recognize the competition. ... The advent of shale gas in the United States has increased supplies and driven down spot prices worldwide, and Europe can now buy liquefied natural gas from the Middle East at a relatively attractive price. It is also exploring its own shale-gas potential. Customers have been renegotiating contracts, as the Russian giant comes under more pressure.

At the same time, though, Putin is shaking up the gas business at home. A beneficiary has been a domestic competitor called Nova­tek, which recently snapped up a Gazprom subsidiary known as Sibur for way under market value. Novatek may, reportedly, get permission to start exporting gas, as well, breaking Gazprom’s monopoly.

“The favoritism toward Nova­tek is pretty striking,” Gaddy said. The company is half owned by Gennady Tymchenko — a former judo instructor who knew Putin when they belonged to the same martial arts club in St. Petersburg. He also runs a Swiss company called Gunvor that has become extremely profitable as a middleman in exports of Russian oil. His partner is Leonid Mikhelson, who rose to second-richest man in Russia on the Bloomberg billionaire index thanks to the Sibur deal — the index valuing Sibur at its actual value, not what Novatek paid for it.

The government has also announced that it is reversing its policy and once more placing its own people on the Gazprom board. That is unlikely to substantially change the way the board — already a rubber stamp — runs its business. It is probably a sign of “a fight under the rug” between Prime Minister Dmitry Medvedev and Igor Sechin, a close associate of Putin and head of the Rosneft oil company, Krutikhin said.

One thing remains unchanged, no matter who wins that inside struggle, Milov said: “Putin is the central figure who makes the major decisions.”

Is he preparing for Gazprom’s decline? “I would hope they’re thinking about that,” said Greene, at the New Economic School. But it’s difficult to imagine, he said, how you could remove Gazprom from the political and economic system in Russia and still have the system. _WaPo

Russia itself is a nation in slow motion decline. Its best young people choose to emigrate to the west. Capital flight continues to plague efforts to create an economy separate from energy, mining, and logging. The public health situation is horrendous, and the core ethnic population is slowly being replaced by Muslim immigrants -- both in civilian and military populations. And in the far East, Chinese influence continues to expand rapidly.

Russia's leaders and ruling classes have never been known for thinking on their feet, or being able to quickly adjust to changing circumstances. The next 2 decades are likely to be a time when they may wish to increase their flexibility more than just a bit.

Russia, Gazprom, Change Their Tune On Shale Gas

Cross-posted to Al Fin Energy

Gazprom's top managers have for years said that shale gas production would never threaten demand for Russian gas. Gazprom has recently started to change its view...

Russia's economy ministry sees "serious" risks posed by shale gas to the revenue of Gazprom (GAZP.RS) beginning in 2014, as higher supply from the nontraditional hydrocarbons may hurt prices and demand for Russia's pipeline gas.

"Gazprom had undervalued the importance of shale gas, but is starting to look at it seriously," Deputy Economy Minister Andrei Klepach said Tuesday as he presented a weaker outlook for the country in 2012 and beyond.

Russia satisfies about a quarter of Europe's demand for gas, which generates revenue for the budget.

Mr. Klepach added that the ministry also saw a lower outlook for gas prices in Europe, driven by both the euro-zone economic crisis and a higher supply of shale oil and gas from other sources. _WorldOil

After years of denial by Putin and Gazprom's top executives, Russia is finally acknowledging what Al Fin energy analysts have been saying all along. But political deception is nothing new for Russia or Putin. It is only those who still give the Russian government credibility who were fooled.

Meanwhile, Russia is jumping into shale fracking for oil & gas big-time, despite all that Putin has said about the evils of shale fracking. I suppose the shale oil & gas bonanza would look evil to a corrupt pol such as Putin, when it threatened his corrupt system.

Present recovery rates at various tight oil projects across Russia are between 2 to 8 percent. However, tight oil reserves could account for as high as 62 percent of Russia’s total reserves.

In the face of all this, Russia looks eagerly to the success experienced by North America in its shale revolution. The geology of the Bazhenov is quite similar to that of the Bakken shale here in the U.S., meaning fracking could be the solution to Russia’s oil situation.

The Russian oil producer Rosneft has already paired up with ExxonMobil (NYSE: XOM) to jointly work the Bazhenov formation. They will begin drilling in the Bazhenov and Achimov formations in 2013, following completion of an ongoing geological study. Rosneft has also reached an arrangement with Norwegian firm Statoil (NYSE: STO) to develop Russian oil assets in Southern Russia and West Siberia.

Other major oil companies like Lukoil (PINK: LUKOY) and Gazprom (MCX: GAZP) are also exploring ways of developing tight oil reserves.

The Russian unconventional oil and gas market could be heading for a time of profit and success. _Energy & Capital

This development points out some interesting things about Russia's economic future:

1. Russia's "prosperity" depends primarily on its energy production
2. For Russia to maintain its production, it must attract the expertise of foreign companies
3. Everything that Russia has said about the dangers and the inconsequential nature of shale oil & gas, was nothing but a politically expedient smoke screen
4. Russia needs to exploit its own vast shale oil & gas reserves

There are other interesting tidbits that can be read from between the lines, but that is enough for now.

Meanwhile, Europe's emerging recession is already having an effect on Russian gas profits:

Russia’s Economy Ministry is reportedly cutting its gas export forecast for this year due to sluggish demand from recession-mired Europe.

The forecast is said to be reduced to 193 billion cubic metres (bcm) from an earlier 212 bcm.

A government source has told Reuters that it will also reduce its average export price estimate.

State-controlled Gazprom has a monopoly on Russian gas exports.

Earlier this week the Deputy Economy Minister Andrei Klepach had said the gas export forecast would be reviewed, in the face of competition from US shale gas and liquefied natural gas. _Euronews

This tells us that Russia is reluctant to admit its earlier lies, when it claimed that US - style development of the global shale gas resource was no threat to future Gazprom profits.

It is important to understand that Russia's budget (official and unofficial) not only depends upon oil profits, but also depends upon gas profits. If Gazprom profits begin to fall because its customers in Europe and Asia begin to develop their own tight oil & gas resources, Russia's government will come under serious financial pressure.

Why Russia Hates the Global Gas Bonanza

Multiple voices out of Russia have been condemning the global shale gas movement -- deriding unconventional gas as "unsafe," "uneconomical," and "irrelevant." In other words, Russia is running scared, hoping that irrational lefty-green influences over western governments will subdue Gazprom's unconventional competition, before Russia loses all of its lucrative, high priced natural gas contracts.

Economist

Poland is just one of many countries suffering under extortionate Russian natural gas prices, which would like to develop its own cheap shale gas resource:

If geologists are right, up to 768 billion cubic meters of natural gas sits trapped in shale deposits deep beneath the surface in Poland, enough to meet the country's needs for the next 50 years and more. The estimates have tantalized Poles with visions of ending their reliance on Russian gas, which warms them through harsh winters but puts them at the mercy of their former masters far more than they would like. _LA Times

Other of Russia's customers looking to slip the Gazprom chains from around their necks include the Ukraine, China, and a number of central and western European nations.

The unconventional-gas bonanza has roughly doubled the gas resource base, a measure of the total gas in the ground rather than what might be economically recoverable. In 2009 the IEA estimated the “long-term global recoverable gas resource base” at 850 trillion cubic metres (tcm), against 400tcm only a year earlier. The main reason for the rethink was shale gas and other unconventionals. Not just America but parts of Europe, China, Argentina, Brazil, Mexico, Canada and several African countries, among others, sit atop as yet unknown quantities of gas that could transform their energy outlook.

...Historical factors have led to another anomaly: much of the gas traded across borders is sold at prices linked to those of crude oil. When gas was first brought to market as a commercial fuel in the 1960s, as an alternative to home heating oil, it made sense to price it against a substitute. But there was also a more subtle reason. Oil was used as an independent price arbiter for Dutch gas in the 1960s and then for Algerian and Norwegian gas in the 1970s because neither side could influence the supply and demand for it. The system persisted as Russian gas came to Europe in the late 1970s. But the economics have changed, and valuing one commodity in terms of another now seems bizarre.

...A more competitive market the world over would doubtless make gas cheaper by breaking the link with oil, but that will be difficult to bring about. Gazprom, Russia’s huge state-run gas producer and supplier of 25% of Europe’s gas, is strongly opposed to dropping oil indexation. A tussle is under way between it and the continent’s big buyers. Some pundits say that gas must eventually become a global fungible product like oil, with regional price differences closing as more gas is shifted in the form of LNG, draining gluts and making up shortfalls in regional production in North America, Europe and Asia......

Gas producers are naturally happy with the high prices resulting from oil indexation, arguing that without them the economics of big gas projects would never work. But Rick Smead of Navigant, a consultancy, thinks there are good reasons for all concerned to want competitive gas prices. He points out that they would reduce regional price volatility and provide gas producers with a broad and flexible market instead of having to rely on a single consumer at the end of a pipeline. That should offer an incentive to make the huge investments required.

If the “shale gale” blowing through America can be replicated worldwide, the huge surpluses it would bring could hasten the advent of a global market. Just as the 20th century was the age of oil, the 21st could prove to be the century of gas. _Economist

In early 2009, at the height of winter, Gazprom withheld gas from Ukraine in a dispute over prices and payment, a shutoff lasting for days that also affected delivery to more than a dozen other shivering European nations. On at least one day in February of this year, Poland detected a sudden 7% drop in supply from Gazprom; some suspect Russia was holding back some of its gas for itself to combat a nasty cold spell. _LATimes

Russia not only stands to lose its ability to extort high gas prices from its customers -- it is in danger of losing many of its customers altogether. Since Russia's government depends upon Gazprom profits to finance many of its "unofficial" expenditures, the crony-ocracy at the highest levels of Russia's government is extremely concerned.

Losing China and Eastern Europe would be a significant blow to Gazprom. But the loss of western Europe might be the final straw, leading to revolutionary changes inside Russia.

These are basic, earth shaking trends which should be taught to every school boy and girl. Unfortunately, almost all school boys and girls are too busy being indoctrinated into climate hysteria and politically correct multicultural mind pablum, to have time to understand what makes the world go around.

Unconventional natural gas is just the beginning. Unconventional liquid fuels are closing in on economic production when oil sells for between $100 and $120 a barrel. As technologies continue to improve, that breakeven price is slowly but surely dropping.

If Russia is to benefit from its vast resources of energy wealth, it had best open itself to foreign investment and development as quickly and cleanly as possible -- cleaning out the destructive corruption and cronyism from top to bottom to make way for a better future for Russia's people.

For if Russia continues down its current path, it is certain to lose everything East of the Urals in a matter of decades, and perhaps everything else shortly thereafter.

China Begins to Face a New Wealth of Energy

According to estimates from the US Energy Information Administration, China leads the world, with about 36 trillion cubic meters of recoverable shale gas reserves in several basins on land and under the South China Sea. The reserves are believed to be able to meet China's demands for more than 300 years at the current rate of consumption. _China Daily _ via _ GWPF

Chinese demand for energy and other commodities has boosted world commodities markets to somewhat inflated levels. As the Chinese economies moves away from its "bubble-growth" scheme to a more balanced economy, and learns to develop its native resources more efficiently, wisely, and in a less corrupt manner, Chinese demand on global commodities markets should begin to ease at least a bit.

Just as shale gas production in the US has reduced its dependence on imports, China hopes that shale gas will play a leading role in the country making the most of its energy mix and curtailing its reliance on foreign imports. To that end, the government has made great efforts to lure more companies into finding and developing this unconventional energy source.

First, it reformed the pricing mechanism in two pilot provinces and let the market decide wholesale prices for unconventional gas, including shale gas. This has created a new incentive for companies to produce shale gas.

Second, China has unveiled some supportive measures for shale gas development. The National Energy Administration established a shale gas laboratory in Langfang, Hebei province, where the national shale gas research center is located.

It also promised to increase investments and set up shale gas special funds to support shale gas discovery and evaluation, as well as relevant technologies on shale gas exploration and development.

In addition, the government is encouraging companies to increase investment in technological research and development by exempting shale gas resource taxes and granting financial subsidies.

Third, in December last year the government approved shale gas to be an independent mining resource, paving the way for Chinese private companies' entry into the sector, which previously was restricted only to State-owned enterprises. _China Daily

If China truly has the world's largest reserves of shale gas, and if China can develop its resources free from the corrupt dead-weight of state owned enterprises and regional government moochers, it may begin to learn the valuable secrets of shale gas production which North American producers spent many decades developing and learning.

If Chinese producers can operate relatively free of the rampant corruption that burdens many other aspects of the Chinese economy, they may be able to help under-gird an important new Chinese energy industry -- unconventional liquid fuels production. Such an industry might begin with gas to liquids (GTL) and coal to liquids (CTL). But from there it is likely to develop biomass to liquids (BTL) and other "XTL" industries, including gas hydrates to liquids.

Such alternative liquid fuels production would progressively aid China in reducing its expensive oil imports, and would also place a downward force on world oil prices -- in the wake of increased supplies. It is likely that OPEC and Russia would reduce production in response to any meaningful growth in XTL production of liquids on the part of China, North America, and other regions rich in unconventional hydrocarbons.

But the very fact of significant XTL production in the face of ample spare production capacity on the part of the world's big oil exporters, should have a somewhat dampening effect on the somewhat over-enthusiastic global oil marketplace.

China may be developing its new oil & gas resources just in the nick of time: Japanese researchers suspect that the globe may be on the brink of a period of significant global cooling h/t GWPF

Russian Energy Oligarchy's Fears of Shale Gas Rising

Now and again Russian President Putin has warned Russian gas-giant Gazprom that it must face the growing threat of abundant shale gas. Shale gas is a massive and newly accessible energy resource ranging from North America to China to South America to Europe. But it is the shale gas resources in Europe and China that Putin is most worried about, for those resources represent a huge and devastating threat to Russia's ability to finance its government. Putin's ambitious plans to make Russia into a world superpower, like the collapsed USSR, are at stake.

Could the boom in shale gas challenge the leadership of Russia in gas?

Until now, Moscow and Gazprom have seemingly been nonchalant about the threat. But as the impact of the boom in US natural gas production becomes clear, depressing prices to levels not seen in 10 years and increasing the prospect of the country becoming an exporter, the Kremlin is beginning to pay attention. The change in attitude is led by Vladimir Putin, Russia’s president-elect. He told the Duma last week that the boom in shale gas can “seriously” reshape the global energy market. “National energy companies, obviously, must respond to these challenges,” he said, in a clear reference to Gazprom. ...The biggest risk for Russia is not the US shale gas but the potential of the development of similar reserves in neighbouring Bulgaria, Romania, Poland and Ukraine.


Eastern European countries are racing to tap shale deposits using the same technology – hydraulic fracturing, known as fracking, and horizontal drilling – used in the US gas industry. Gazprom supplies Europe with about 20 per cent of its gas needs, so the development of shale deposits in its backyard is a serious long-term threat. Until now, European companies have found it difficult to renegotiate their expensive contracts with Gazprom because the lack of alternative suppliers. Over the next decade, the development of the European shale industry could give the Continent’s natural gas consumers a bit more leverage. _FP_via_GWPF

China is another Gazprom customer which will soon be in a good position to re-negotiate its contracts, based upon the development of its own native shale gas resource. All of these re-negotiations will be extremely painful for a corrupt energy oligarchy such as Russia, which depends upon high energy exports to finance its very existence -- an existence already threatened by an ongoing demographic collapse, a worsening public health disaster, an industrial infrastructure that cannot keep up with the west, and a military that is increasingly seen as a "paper tiger" by its ambitious neighbor to the southeast. Putin has green activists well in hand, in his battle to keep Russia's energy customers helpless and dependent upon their Russian energy suppliers. But governments are being pushed to the wall by energy prices and ongoing budget deficits. Most of Russia's customers are not overly fond of the aggressive bear, and do not care to pay for Russia to re-develop its nuclear and conventional threat.

...Gazprom’s European customers, tired of being ripped off by Gazprom, are avidly exploring the possibilities of undertaking fracking to develop their own sources of the “blue gold,” and nowhere is interest higher than in the Russian Federation’s neighbors Ukraine, Poland, Romania, Bulgaria and China. ...the rapid growth in U.S. shale gas production has already led Gazprom to postpone the launch of its massive Shtokman gas condensate field development in the Barents Sea, which contains an estimated 3.9 trillion cubic meters (tcm) of natural gas. In 2009 the U.S. overtook Russia as the world’s biggest producer of natural gas as expanded fracking activity to extract fuel trapped in shale rocks. Even worse, by 2016 the U.S. plans to become a net exporter of liquefied natural gas, with initial sales of 31.1 million cubic meters (mcm) a day doubling within three years.
Gazprom’s exports to Europe are already falling because of increased competition.
Moscow’s National Research University Higher School of Economics Center for evaluation of commodity assets director Valery Kryukov noted that while Gazprom previously supplied 37 percent of Europe’s natural gas needs, that had slipped to 25 percent and concluded, “Russia risks losing its main source of income - the export of natural gas.” Perhaps the weirdest aspect of Russia’s views on shale gas is that it has criticized recent interest in Rumania, Bulgaria and Poland in shale gas development as environmentally irresponsible, a somewhat surreal complaint given the USSR’s ecocide inflicted by more than seven decades of headlong industrialization. _GWPF

China's situation is even more threatening to Russia than the prospect of losing its European customers. Because China is a clear and developing threat to Russia's very possession of its vast East Siberian resources -- from timber to minerals to oil & gas to uranium. If China becomes self-sufficient in gas production, not only will Russia lose a lucrative customer, it will also be faced with a more dangerous competitor -- on many levels.

Cross-posted to

Al Fin Energy

blog

China's Huge Shale Gas Deposits Promise Global Revolution

China cannot afford the "energy starvation affectation" which certain foppish leaders of western nations are displaying. No, China is in a life or death struggle for its survival as a nation. The leaders of the middle kingdom cannot afford to fool themselves in that way. They must face reality and shape it to their advantage, or they will become history.

GWPF

The Ministry of Land and Resources said Sunday that China will strengthen the survey and appraisal of shale gas in 2012 to expedite discovery and development of China shale deposits. The move comes after the recent approval of the State Council in the capital to list shale gas as an independent mineral resource. China is slowly moving towards producing shale gas.

Currently, the country does not have any shale natural gas production, adding to the country’s overall lack of natural gas in its energy matrix. China’s rough terrain and lack of technological know-how has kept it out of the shale gas biz. The country is largely beholden to coal to keep the lights on.

China’s Ministry of Land estimates the country holds around 31 trillion cubic meters of natural gas hidden under shale, equivalent to the total amount of conventional natural gas. If developed, the country’s shale gas output could exceed 100 billion cubic meters by 2020, Land Ministry’s second in command, Wang Min, told reporters during a national geological survey conference in Beijing this weekend.

China’s reserves are almost 50% greater than those of the U.S., according to the U.S. Energy Information Administration. _GWPF

Once this massive shale gas resource hits China's economy -- particularly when transformed by GTL, ethane cracking, and other advanced technologies into far more valuable materials -- the global commodities markets will be shaken to their foundations.

Cross-posted from Al Fin Energy

It doesn't take a crystal ball to understand why Mr. Putin of Russia would find this development somewhat disconcerting. Others who will not welcome this news include Mr. Chavez of Venezuela, the mad mullahs of Iran, Persian Gulf gas magnates, suppliers of other hydrocarbons to China (including coal), and the big global green influence machine of faux environmentalism.