The Crisis In Ukraine Could Give Shale Gas A Huge Bump

[xchrom]

http://www.businessinsider.com/the-crisis-in-ukraine-could-give-shale-gas-a-huge-bump-2014-3

As geopolitical uncertainty surrounding Ukraine sent commodity prices on a roller coaster ride this week, it could be time for U.S. shale oil to take center stage, some analysts told CNBC.

Prices of European and U.S. crude rose over $2 a barrel on Monday, after a bloodless invasion of Ukrainian peninsula Crimea by Russian troops sparked worries over disruptions to global energy markets. Meanwhile, U.K. gas for April delivery climbed 10 percent on Monday, the largest one-day gain since September 2011. On Tuesday, oil prices eased after President Vladimir Putin ordered troops that took part in military exercises in central and western Russia to return to base. But investors remained nervous.

Gaurav Sodhi, resources analyst at Intelligent Investor, told CNBC Asia's Squawk Box, that volatility around Ukraine would cast a more favorable light on the U.S.'s growing energy independence.

"This will be a test of the new American shale prowess, a chance to prove supply can respond to higher prices. If they are the new Saudis, now is the time to prove it," he said.



Read more: http://www.cnbc.com/id/101462724#ixzz2v0AfD62j

[LiberalEsto]

1. Swell. More fracking.

Let's destroy more of Pennsylvania, West Virginia, Ohio, Texas and other states where fracking is ruining aquifers.

[happyslug]

2. The problem is Russia can ship most of its gas AROUND The Ukraine.

http://en.wikipedia.org/wiki/Russia_in_the_European_energy_sector

Now, prior to 2011, the Ukraine had a stranglehold on gas from Russia to Europe, but to get around that Russia build a new gas line from St Petersburg to Germany using the Baltic Sea.

http://en.wikipedia.org/wiki/Nord_Stream

That line is capable of 55 billion cubic metres per year.

Map of Russian-Europe Gas line (It shows Nord Stream as not completed, but it is now finished and being used):



The older Yamal/ Jamal Line bypasses the Ukaine and has a 33 billion cubic meters per year capacity:

http://en.wikipedia.org/wiki/Yamal-Europe_pipeline

Now the Yamal/Jamal pipeline is connected to the Soyuz and Brotherhood Pipelines by the Yamal II pipeline, and these three later pipelines go through the Ukraine.

The Brotherhood Pipeline was completed in 1967 and goes through the Ukraine and can handle 30 billion meters of gas per year. Before the completion of the Nord Sea pipeline it was the main pipeline of Natural Gas to Western Europe. The Soyuz has a capacity of 29 billion meters of gas per year. Again it is an old pipeline that the Yamal/Jamal and the Nord Stream can by pass.

file:///C:/Documents%20and%20Settings/phmen/My%20Documents/Downloads/Analysis+Oil+and+Gas.pdf

During the Severe winter Europe had a few years ago, Russia had a hard time getting all the Natural Gas Western Europe wanted. One problem was the Ukraine "stealing" the gas for its own use and not paying for it. In many ways the Nord Stream was an attempt to replace both pipelines that goes through the Ukraine. The Yamal/Jamal line generally transport 17 billion meters of gas per year, but can do 30, while the Nord Stream can do 50 billion meters of gas per year. This 62 billion meters of gas per year is more then enough to replace the two pipelines going through the Ukraine. Thus since 2012, Russia no longer is dependent on the pipelines through the Ukraine to get its Natural Gas to Europe no matter how hard the winter in Europe is.

Just pointing out Russia has the Gas pipeline to get its Natural Gas to Europe around the Ukraine. Thus this conflict will have minimal reduction in Russian Natural Gas Shipments to Europe.

Side note: Europe has also done some Shale Gas drilling, but the results have NOT been good. One well in Poland contained so much nitrogen in addition to natural Gas as to be nonburnable without extensive work to remove the Nitrogen (easier said then done). Furthermore Shale Gas (Some times called "Tight Gas&quot wells have short life spans, generally under five years, with most of the Natural Gas gone within 18 months of drilling. The biggest sources of gas are drilled first, then you get into a race as you drill more and more into smaller and smaller pockets of Natural Gas. Sooner or later (It is expected by many people that within five years, the number of new wells coming on line will increase, but the amount of gas from each well will decrease. The decrease is expected by 2020 to be so bad that the US will be below US Natural Gas production of 2010).

Second side note: To Get natural Gas from the US to Europe, it has to be compressed to fit onto tankers that have strong hauls to contain the liquefied natural gas. To compression two gallons of of Natural Gas to a liquid form takes the energy of one gallon of Natural Gas. Yes for every two gallons shipped, one gallon has to be used to compress the gas so it can be shipped. It is for this reason gas is best shipped by pipeline, no need to compress natural gas if shipped as a gas. Thus Russian gas can be 1/3 more expensive then US gas, and they can still under cut US profits. Thus, on a short term basis US gas shipments can be profitable, but if Russia lowers its price, they goes US profits, while Russia is still making money.

[FBaggins]

3. Not much of a test of "American shale prowess"

It would take years for the Ukraine to develop the LNG import capacity necessary to put a dent in this... and Russia would always be able to undercut the pricing since global LNG prices are driven by Japan right now (and likely for some years to come).

This is likely making the news because it's effective spin for shale gas interests that are looking for any additional push to fast-track export capacity for their product.