16 February 2010

Get Ready: Russia to Unleash Energy Avalanche

Russia is a corrupt, exhausted, dying nation.  But Russia is full of valuable energy and mineral assets -- enough to make any oil sheikh envious.  For a number of reasons, Russia's energy assets have remained largely undeveloped up until now.  But with enormous discoveries of unconventional natural gas in North America, and with increasing development of Canada's oil sands, Russia is beginning to understand that if it doesn't develop and sell its energy assets now -- it may never have the chance.

As young ethnic Russians disappear from the planet, the ability of Russia to defend its vast mineral wealth is shrinking daily.  And as unconventional fossil fuel use, plus nuclear energy infrastructure, plus bioenergy  development all expand, the world's need for Russia's product is beginning to shrink.  The lesson to Russia: use it or lose it.
Gazprom started coal-bed methane production in Russia after U.S. success in developing unconventional fuel reserves spurred global interest.

Gazprom plans to produce 1.5 billion cubic meters of the gas a year in 2012 at the Taldinskoye field in Siberia’s coal-rich Kuzbass area, the Kremlin press service said Friday in a statement distributed to reporters during President Dmitry Medvedev’s visit to the region.

Successful extraction of shale gas, another unconventional fuel, has led to what International Energy Agency chief economist Fatih Birol called “a silent revolution” in the United States. The world’s biggest energy consumer, the United States may become self-sufficient in gas through its shale-gas developments. Unconventional fuels had been too complex to develop until new technologies made extraction feasible.

Russia, which holds the largest gas reserves, may have as much as 87 trillion cubic meters of coal-bed methane, according to Gazprom chief executive Alexei Miller.

“It’s two Gazproms,” Medvedev said in Omsk, where he met with businesses to discuss innovation in the energy industry, which he said accounts for as much as one third of the country’s gross domestic product.

Coal-bed methane, shale gas and tight gas are the most common unconventional sources of the fuel and currently account for about half of U.S. production, said Valery Nesterov, an analyst with Troika Dialog. Unconventional gas won’t make up more than 0.5 percent of output in Russia in the long term, he said.

“It is more about technology, so as not to fall behind" as we did with liquefied natural gas, he said.

Russia last year started liquefying gas, more than a decade after Qatar, the world’s biggest LNG producer.

The world may see an “acute glut” of gas because unconventional fuel output worldwide is set to rise 71 percent between 2007 and 2030, the IEA said in November.

Unconventional gas competes with coal in thermal power generation and will be displacing the commodity from global markets, Vekselberg said.

Russia may produce as much as 21 billion cubic meters a year of coal-bed methane at Kuzbass, Gazprom said Friday.

“We have made an important step on the path toward a new subindustry in Russia’s fuel and energy complex,” Gazprom’s Miller said in an e-mailed statement.

The company plans to drill 30 wells at Taldinskoye this year, and 28 a year starting in 2011, the Kremlin said.

Russian coal-bed methane resources make up one-third of the country’s potential gas resources, Gazprom said in an e-mailed statement. The Kuzbass area of the Kemerovo region may hold 13 trillion cubic meters of the unconventional gas, the Kremlin said.

The United State’s success in extracting gas from shale has spurred global interest, while also displacing some LNG supplies and lowering spot prices in Europe.

Europe and China are playing catch-up, which could increase competition for LNG, Mark Greenwood, a Sydney-based analyst with JPMorgan Chase, said in a Feb. 9 note.

“U.S. shale gas could grow by 2015 to a similar scale as the entire global LNG market currently,” Greenwood said. “A land-grab has occurred in Europe over the last two years” as international companies such as Exxon Mobil, ConocoPhillips, Chevron Corp. and Statoil seek resources. _MoscowTimes
The rush for development of Gazprom's unconventional gas follows recent Gazprom claims that "shale gas production may be environmentally hazardous." Hint hint, wink wink to US environmental organisations. In other words, Gazprom wants US shale gas to be shut down, and it wants to use US environmental groups as its cats' paws. Nothing new there. In the past it was the KGB doing similar things. The names of organisations change, but the people stay the same.

If the world's fossil fuel resources were freely developed, the resulting glut of energy would take a thousand years or longer to be exhausted. But thanks to a manufactured crisis of climate hysteria, and myriad faux environmental restrictions, we have Political Peak Oil -- man-made energy starvation. Top-down economic devastation, courtesy of the Obama - Pelosi gang.

Russia and the other oil dictatorships have profited from the artificial constraints that western nations have burdened themselves with. But even with all the constraints, private western companies are finding ways to provide the west with energy -- much to Russia's and Obama's chagrin.

Russia will not be able to defend its vast territories in 50 years. It had best wake up, update its technology, and start turning its minerals into more fungible wealth as fast as it can. Before the world no longer needs fossil fuels. It had better hurry.

An expanded version of this article appears at Al Fin Energy

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Blogger Ayrdale said...

Paertinent, and very good indeed. I rather like the analogy between green reds and "peace" reds. I will be posting on this and referring to you, with thanks.

Tuesday, 16 February, 2010  
Anonymous Anonymous said...

"Europe and China are playing catch-up, which could increase competition for LNG" - Europe is going to face a wave of soveereign defaults, don't expect much energy demand from there, and China is even worde off: There will be much more hardship soon with a looming Chinese collapse bigger than the Soviet Union's.

Tuesday, 16 February, 2010  
Blogger al fin said...

Thanks for your comments.

It is certainly likely that future demand for fossil fuels has been largely overstated. Polyanna projections for the future expansion of China and India have hoodwinked a lot of investors and intellectuals into a distorted vision of the near global economic future.

Tuesday, 16 February, 2010  
Blogger kurt9 said...

You're assuming that the Russians get overcome their corruption and other BS and get their act together enough to develop these resources. I'm not convinced they can do this.

Tuesday, 16 February, 2010  
Anonymous Anonymous said...

That's why they are called Watermelon Marxists, since they are green on the outside and red on the inside.

Monday, 22 February, 2010  

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“During times of universal deceit, telling the truth becomes a revolutionary act” _George Orwell

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