COAL IS BLACK GOLD
Aside from the mountains analytical data and the reams of cost and production sheets. Let’s look at some interesting bits of info that sometimes zoom right past us when we’re trying to analyze all the data and sift thru all the hype and blogs .
Chesapeake and other energy companies have shifted drilling activity from “dry gas” fields to those that are “liquids-rich,” meaning they contain oil or natural gas liquids such as propane, butane or ethane, whose prices are based on those of crude oil . Chesapeake said it would trim the number of rigs drilling at dry gas fields to about 24 by the second quarter from 47 currently in use, or about one-third the level it averaged last year.
Its production cuts in Louisiana’s Haynesville and Texas Barnett shale should mean lower overall U.S. natural gas production in 2012 than in 2011, Chesapeake said. Those two fields have together accounted for virtually all of the 14 bcf increase in U.S. production over the past five years, the company said. Chesapeake’s spending on dry gas fields will fall 70 per cent to $900-million (U.S.), it said, as it reduces the number of drilling rigs operating in the Barnett and Haynesville shales and in Pennsylvania’s Marcellus shale. On Friday, its smaller peer EQT Corp. said it had suspended drilling in the Huron basin indefinitely because of the low gas prices.
Shale gas: resource estimates for four plays (Haynesville, Fayetteville, Eagle Ford, and Woodford) were updated using the mean value of resource assessments recently released by the U.S. Geological Survey (USGS). The shale gas resource estimate for the Marcellus play was updated using new geologic data from the USGS and recent production data. EIA’s estimate of Marcellus resources is substantially below the estimate used for AEO2011 and falls within the 90-percent confidence range in the August 2011 USGS assessment, although it is higher than the USGS mean value.
At a meeting in New York this morning, (June 27 2012) Exxon Mobil Corp. (NYSE: XOM) CEO Rex Tillerson said that his company is “losing our shirts” on natural gas production. Did he just notice that prices have fallen below the production cost? Wallstreet 24/7
And Exxon is not alone. The other top producers of natural gas — Chesapeake Energy Corp. (NYSE: CHK), BP plc (NYSE: BP), Encana Corp. (NYSE: ECA), ConocoPhillips (NYSE: COP), Devon Energy Corp. (NYSE: DVN), EOG Reso
urces Inc. (NYSE: EOG), Anadarko Petroleum Corp. (NYSE: APC), Ultra Petroleum Inc. (NYSE: UPL), and Questar Corp. (NYSE: STR) — are suffering from an identical problem.
The spot price for natural gas fell below $2/thousand cubic feet earlier this year, and has jumped recently to trade at around $2.84/thousand cubic feet today. Only the Marcellus shale play can post a production cost anywhere near that number. Other natural gas plays all boast production costs above $3.50/thousand cubic feet.
My Take so far:
Yes we have Natural Gas competing with coal . It’s selling for a lot less than what it takes to produce it-- way less . Now who among us thinks that’s not going to change ? Certainly not all the big producers.
The writing is on the wall my friends. You can change the font and make the words look prettier (spin the story) but, the words still say the same thing . THE PRICE IS GOING TO GO UP..
Wait a minute…. If the price is where it is now and it’s competing with coal? What happens when it goes UP..? ? Hmmmmm ?
Coal: The average minemouth price of coal increases by 1.4 percent per year in the AEO2012 Reference case, from $1.76 per million Btu in 2010 to $2.51 per million Btu in 2035 (2010 dollars). The upward trend of coal prices primarily reflects an expectation that cost savings from technological improvements in coal mining will be outweighed by increases in production costs associated with moving into reserves that are more costly to mine. The coal price outlook in the AEO2012 Reference case represents a change from the AEO2011 Reference case, where coal prices were essentially flat. Total coal consumption—including the portion of CTL consumed as liquids—increases from 20.8 quadrillion Btu (1,051 million short tons) in 2010 to 22.1 quadrillion Btu (1,155 million short tons) in 2035 in the AEO2012 Reference case.
The United States exported a total of 107 million short tons of coal in 2011, up 31% from the year before and the most since 1991, according to the STEO. U.S. exports of steam coal, used mainly to fuel power plants, were an estimated 37 million short tons in 2011, the highest since 2008. Estimated exports of metallurgical coal reached record levels in 2011, about 70 million short tons. EIA Data
The Cost of Energy: Comparison per Million BTUs
Chemical engineer Robert Rapier has provided a comparison of costs per million BTUs for various energy sources. It is an interesting beginning point for discussion.
Current Energy Prices per Million BTU
Powder River Basin Coal - $0.71
Northern Appalachia Coal - $1.76
Natural gas - $2.81
Ethanol subsidy - $5.92
Petroleum - $13.56
Propane - $13.92
#2 Heating Oil - $15.33
This is the type of comparison that many with an agenda do not want you to see. But there it is, stark and plain. It is important to separate issues of cost from peripheral issues such as "carbon climate " and "peak oil."
The only way that Powder Basin coal can be used cleanly is via gasification -- preferably using Integrated Combined Cycle Gasification with Combined Heat and Power production (IGCC with CHP). IGCC extracts more energy from the fuel, using both gas and steam turbine cycles. CHP makes productive use of the "waste" heat, making the entire enterprise above 80% efficiency. Powder Basin coal is cheap and dirty, but it can be used cheap and clean using IGCC plus CHP. If you want liquid fuels, you can convert cheap, dirty coal to cheap clean liquids using gasification plus Fischer Tropsch catalysis etc.
Forget the carbon sequestration, unless you have an algae farm or other productive use for the CO2 you are sequestering. Carbon sequestration is a horrific waste of resources. It virtually eliminates the advantages of IGCC while doing nothing for the environment except necessitating the use of even more fuel.
So now where are we? Back to the central and Appalachian and Illinois basin coal. Now us old-timers, we remember . You know the coal mines and railroads that “ BUILT THIS COUNTRY”
CSX and Norfolk Southern have done a better job offering strong dividend growth, but Union Pacific offers a solid 2.1% yield -- somewhat worse than CSX's 2.6% -- and beats out Canadian National Railway's 1.7% yield. Norfolk Southern, however, beats them all with a 2.7% yield.
These conditions have also helped companies like Norfolk Southern, which has recently reported increases in its coal and automotive shipments, and CSX, which recently reported higher overall freight volume. …(Investors daily 6/29/2012 2:19pm)
Northern Region coal shipments declined, but exports from the Eastern and Southern Customs Regions continued surging during the first quarter of 2012. Total US coal exports were up 3.5 percent, putting the country on track to possibly set an all-time coal export record in 2012…..(Sightline Daily 28 June 2012.. 4:10pm)
HOLD THE PHONE ! ! Haven’t we been hearing how coal use is down and in such miserable shape and how it’ all but gona disapear ?
Maybe someone should call up the railroads and tell them that all those railroad cars they’re haul to the east coast “they’re all a mirage” ! Yeh.. and if you decide that coal trial coming down the tracks is a mirage and you decide to cross the RR tracks you’ll find out real quick how it’s NOT!!! ----
HAVE I GOT YOUR ATTENTION YET ? ?
The United States has been called “The Saudi Arabia of Coal” with good reason. We have Vast..Vast..quantities of the highest quality Black Gold on the planet and the rest of the world knows it. They want it and it’s being sold to them.
Take a real close look of what’s being shipped out of THE EASTERN ports .All of them ! Don’t forget the ones that are owned by the railroads either.
Then there’s metallurgical coal yes eastern U.S. spot price pushing $300.00 per ton . Norfolk and Southern pier #6 in Norfolk VA. loads 150,000 ton freighters 2 at a time. Yep $45 million each.
