Friday, September 24, 2010

One if by land, two if by sea

As natural gas vehicle proponents concentrate on selling the idea to more local governments, school districts, and businesses, a Finnish engine manufacturer has identified a US market for NGV marine systems.

John F. Hatley, vice president of Wartsila Corp.’s Americas division in Houston, invoked instructions given to Revolutionary War patriot Paul Revere more than 225 years ago at a recent American Gas Association Natural Gas Roundtable. This time, he indicated, the signal isn’t coming from Boston’s Old North Church, but from a marine engine market which will have to meet new government environmental regulations.

The United States and Canada have agreed to establish an emissions control area within 200 miles of their coasts, and the US Environmental Protection Agency plans to tighten requirements beginning in August 2012, Hatley said. “It’s a regulatory game-changer for fuel and nitrogen oxide in the marine marketplace,” he maintained.

He said that the United States represents 8% of total global ocean vessel calls, second only to China, and is ripe for 284 billion cubic feet of annual gas sales for marine NGVs. Wartsila is looking initially at the nation’s more than 6,000 inland barges and workboats (which Hatley termed “a very focused track for your infrastructure”); dockside power supplies for 60,000 oceangoing ships (concentrating initially on the ports of Los Angeles-Long Beach; New York; Savannah, Ga.; Houston; and Seattle-Tacoma), and 4,300 cruise ships which visit US ports annually.

“Because of who they serve, we believe the cruise industry will be one of the earliest adopters of clean natural gas,” said Hatley. “We’re working very closely with some major lines. There may be some announcements in the future.” Targeted annual demand in the 3 markets is 213 Bcf for inland barges and workboats, primarily on the Mississippi River and its tributaries; 29 Bcf for ocean vessel ports (with the 5 mentioned above representing about two-thirds of the possible demand), and 4 Bcf for cruise ships (with about half the demand occurring at Miami, Port Canaveral, Fort Lauderdale, and Los Angeles).

These marine transportation markets are also ripe for gas because it’s so much less expensive than petroleum fuels, Hatley suggested. Delivery can be accomplished by compressing or liquefying the gas onshore, and putting it in a delivery truck which pulls up alongside the docked vessel, he said. Wartsila has been doing this for years overseas, he noted.

Typical of such presentations about NGV markets, actual infrastructure details weren’t immediately forthcoming. So I asked former US Energy Information Administration chief Guy F. Caruso after the luncheon, where he also spoke, how he thought more efficient refueling systems might be developed in one case: the domestic inland waterways along the Mississippi River and its tributaries. “One large facility in New Orleans and another in St. Louis possibly could do the job,” he replied.

State and local governments would need to take the lead, he continued, but since federal subsidization already is being discussed for establishing extensive refueling systems for fleets of gas-burning long-haul trucks, it wouldn’t be that big a leap for inland barges, Caruso said. “The goal in both cases would be to reduce greenhouse gases,” he observed.

Friday, September 17, 2010

New reasons to celebrate US shales

Just when I thought I’d heard everything about hydraulic fracturing’s potential to increase US natural gas production, University of Wyoming energy economics professor Timothy J. Considine suggested some other developments and possibilities at a Sept. 13 Capitol Hill briefing sponsored by the Natural Gas Supply Association.

The event occurred as the US Environmental Protection Agency held the first of two public forums in Binghamton, NY, on whether development of the Marcellus shale formation potentially threatens drinking water supplies. New York’s legislature has suspended Marcellus development for a year, while Pennsylvania and West Virginia are moving ahead.

“This resource is going to be around for a long time because it’s going to take a long time to develop – not just a few years, but 10 or 20. It could employ more Pennsylvanians than the steel industry,” said Considine, who was at Pennsylvania State University until his recent move to Wyoming.

Because Marcellus gas is dry and requires little treatment, some producers are also building processing plants which could serve petrochemical customers, he indicated. MarkWest Liberty Midstream & Resources announced on Apr. 15 that it reached agreements with several southwestern Pennsylvania and West Virginia Marcellus producers and would expand its processing and fractionation capacity to 625 million cubic feet/day by the end of 2011. Considine said that the midstream partnership will sell the butane and natural gas liquids to a West Virginia petchem plant.

He also tried to temper shale gas’s bright prospects with some realism. Much of the Marcellus in Pennsylvania is in a sparsely populated part of the state, and “there’s going to be some environmental disruption as trees are cut and roads and pipelines are built.” Other problems have occurred, such as when one producer tried to save money by buying imported Chinese pipe which turned out to be substandard and contaminated drinking water supplies – a clear-cut piping problem which Marcellus development opponents have tried to link to hydraulic fracturing.

“There are risks. It’s the responsibility of the industry and government to communicate what the risks are, along with the benefits,” Considine maintained.

But he also said that the 20 known US shale resources plays include a few which are more oily than gaseous, such as the Eagle Ford in South Texas and the Niobara in the Denver-Julesberg Basin as well as North Dakota’s Bakken shale, which is already producing. Considine told me following his presentation that EOG Resources Inc. has extensive Niobara holdings, and a test of its Jake well there flowed 1,558 bbl/day. In a Sept. 16 presentation to a Barclays Capital investors conference, EOG chief executive Mark G. Papa said described the Niobara as a highly fractured play requiring additional production history to evaluate its rock matrix contribution. The Houston independent producer’s four-rig drilling program is concentrating on 100,000 of its 400,000 net acres there, he said.

Considine added that enthusiasm about the Niobara’s prospects helped Wyoming attract nearly $13.3 million in successful bids at its Aug. 4 lease sale because the underlying formation could extend north all the way to the Powder River Basin.

Friday, September 3, 2010

Another explosion, and “lessons learned”

Can life get any more ironic than Mariner Energy Inc.’s Gulf of Mexico production platform exploding the same day BP PLC issued a report about lessons learned from the Apr. 20 Macondo well blowout, rig explosion, and crude oil spill? I don’t think so.

The good news from the latest event is that 13 workers are safe after evacuating the Mariner platform, only 1 of whom was injured. Almost all of them got into insulated suits which protected them as they waited 2 hours in very cold water before being rescued. The US Bureau of Ocean Energy Management, Regulation, and Enforcement has begun an investigation, with help from the US Coast Guard. Democratic leaders of the House Energy and Commerce Committee have requested a briefing on what happened by Sept. 10.

BP senior executives, meanwhile, submitted a 46-page, 4-color report entitled “Deepwater Horizon Containment and Response: Harnessing Capabilities and Lessons Learned” to BOE Director Michael R. Bromwich, who requested the information on Aug 5.

“The nature of the Deepwater Horizon incident – including the scope, scale, and complexity of the response – has driven large capability advances for the oil exploration industry as a whole,” it began. “These new capabilities should be an integral part of an improved planning and response regime for industry, government and other responders. We believe it is valuable to document them even as our response efforts continue. These advances can serve as part of an initial discussion on how to institutionalize the increased capabilities and ensure that they can be readily mobilized in addressing a marine oil spill of any size.”

The report said that these new capabilities and responses could be grouped into 4 general areas: collaboration, because a broad range of stakeholders came together to respond and develop new solutions; systemization, because extensive new systems, procedures, and organizational abilities had to be developed to adapt to changing and unique conditions; information, which had to be timely and reliable for better decisions, safer operations, and more timely reports to stakeholders and the public; and innovation.

In this last regard, said BP, “the result has been a series of developments, ranging from incremental enhancements to step changes in technologies and techniques that have advanced the state of the art and laid the foundation for future refinements as part of an enhanced regime for any type of source-to-shore response.”

Bromwich said that BOE will share the report with other officials in the US Department of the Interior, as well as other appropriate federal agencies, and that he and his staff members will continue to seek additional information and clarification as they carefully review BP's report. The discussions are part of BOE’s ongoing work to evaluate current deepwater drilling safety, containment, and response procedures as it works to strengthen all aspects of offshore regulation, he indicated.

Separately, Bromwich announced on Sept. 3 that he will hold the final of his 8 fact-finding forums on offshore drilling safety reforms, well containment, and oil spill response on Sept. 13 in Lafayette, La. It could be one of BOE’s livelier sessions.