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October 14, 2009

Huge Supplies of Natural Gas Now and in 2020s Underground Gasified Coal Will Ramp Up Too and Displace Oil and Lower Prices

From the Bulletin of the Atomic Scientist: The long-term ratio between the real price of oil and the real price of natural gas has constantly varied between 1 and 2 with the long-term average hovering at 1.6. Since January, however, that ratio has jumped to more than 4 to 1, which is unprecedented and has implications for long-term energy policy.

The most obvious explanation is the time lag in fuel switching. Some users can switch from oil to gas overnight, but for others, it takes more time. Since the ratio has trended up for the last three years, most of those who could easily switch probably have already done so. And thus, with the "quick" fuel-switching response more or less complete, additional supply of natural gas hasn't been quickly met with increased demand.

There is, however, enormous potential for additional fuel switching. Nearly all consumers of distillate fuel oil could--in principle--switch to natural gas, and at the current energy-cost premium of oil relative to gas, there should be little doubt that making such a switch would be economical. In particular, about 37 percent of distillate fuel oil is used in stationary applications, which are relatively easy to convert to natural gas

Expect to see a rebound in the building of natural gas-fired power plants--which had all but ceased a few years ago.

Furthermore, the remaining 63 percent of distillate fuel oil used in transportation is a decent candidate for switching to natural gas. Long-haul freight could cut fuel costs by more than 75 percent--at current prices--by converting trucks from diesel. Although the volumetric energy density of compressed natural gas is 25 percent that of diesel, at current price ratios the cost of bigger fuel tanks and engine retrofits will be paid for very quickly by the fuel savings. There simply is no way that trucking companies will leave that much money on the table. Advice to energy traders: Go short on oil and long on gas.




50 billion cubic feet of natural gas per day is equal to 8.6 million barrels of oil per day. From the flat level of 56 billion cubic feet per day production of natural gas there has been an increase of 5-6 billion cubic feet per day. 5 billion cubic feet per day is equal to 860,000 barrels of oil per day. Several shale gas (Haynesville, Marcellus) plays could reach the Barnett Shale production levels 4.8 billion cubic feet per day). 5000 trillion cubic feet of gas would be equal to an oil reserve of 860 billion barrels of oil.

Details on seven large gas shale plays in North America.



Unconventional natural gas reserves will be huge.

Underground coal gasification (UCG) is going through commercial scale pilot projects now in many countries (China, Canada, Australia etc...) and successful commercialization in 5-7 years would lead to large projects to unlock trillions of tons of coal. There are estimates that UCG could provide fuel for the equivalent of $20/barrel. Current projects are mostly in the tens to hundreds of Megawatt levels.

Multi-frac Horizontal drilling technology is getting better and better to enable more huge amounts of tight seam gas supplies to be accessed.



Underground Coal Gasification

Why will Underground Coal Gasification likely proceed once it is technically perfected ? Because it has the potential to be cheap and it will unlock energy resources for different countries like China and India. They will do it for cheap energy and national energy security.

Under ideal conditions, UCG syngas costs as little as $1 per million BTU. More realistically, the technology can produce raw syngas deliverable to most markets at less than $3 per million BTU. By contrast, Alberta and U.S. natural gas traded between $7 and $11 per million BTU in 2008 and early 2009. Because the price is low, it becomes cost-effective to couple UCG with sequestration technology.

If Canada's deep seams were developed without sequestration, their emissions could exceed those of the tar sands. But UCG's carbon footprint could easily be less than that of a single natural gas plant if combined with partial or complete sequestration programs. All commercial projects proposed for the U.S. and Canada will capture and sequester most or all of the carbon dioxide they produce. The decarbonized syngas, in turn, could be used to produce power or low-carbon fuels.

Several countries have already deployed and even commercialized UCG. Most such projects were built in the Soviet Union during the 1950s and 1960s and in the U.S. after the oil shocks of the 1970s and early 1980s. But the later flood of low-cost natural gas undermined these projects' economic viability. Nonetheless, one plant in Uzbekistan has burned UCG syngas continuously since 1959. Today, three commercial projects are ramping up in Australia and two in China.


Lawrence Livermore National Labs examined underground coal gasification and carbon sequestration of the carbon that is produced by UCG


At a UCG production facility, air is injected into the cavity, water enters from surrounding rock, and partial combustion and gasification take place at the coal seam face after ignition. The resulting high-pressure syngas stream is returned to the surface, where the gas is separated and contaminants are removed.














Options for storing carbon dioxide (CO2) in deep geologic formations are represented here. (Courtesy of Intergovernmental Panel on Climate Change, 2005.)













Should the U.S. Build Its Next Coal Plants Underground?

Underground Coal Gasification (UCG) in India
Underground Coal Gasification (UCG) in India

Underground Coal Gasification (UCG) and Coal Seam Methane (CSM) in Australia


Press Release for Linc Energy Ltd (ASX:LNC) report written by PricewaterhouseCoopers (PwC) titled “Industry Review and an Assessment of the Potential of UCG and UCG Value Added Products. PricewaterhouseCoopers 2008”


Large US, China, India and Australian reserves shown but Canada also has a lot and significant amounts all over.

FURTHER READING
Underground Coal Gasification Partnership
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