U.S. Oil and Gas: Keeping the U.S. Economy Afloat?

The Oil and Gas Journal says, "Study notes boosts from US drilling boom":

• Overall US employment has yet to return to its prerecession level, but the number of oil and gas jobs has grown 40% since then.

• In the 10 states at the epicenter of oil and gas growth, overall statewide employment gains have greatly outpaced the national average.

• A broad array of small and midsize oil and gas firms are propelling record economic and jobs gains—not just in the oil fields but across the economy.

****

• The shale revolution has been the nation's biggest single creator of solid, middle-class jobs—throughout the economy, from construction to services to information technology.

• Nearly 1 million Americans work directly in the oil and gas industry, and a total of 10 million jobs are associated with that industry.

***

• America's oil and gas boom has added $300–400 billion/year to the economy; without this contribution, GDP growth would have been negative, and the nation would have continued to be in recession.

I wonder how all the billions of government dollars spent in developing "green jobs" has worked out in comparison?

Help Your Congressperson to Lower Your Gasoline Prices -Tell Them to Repeal "Renewable Fuel Standard" Mandates

From the Oil and Gas Journall, a little truth in why adding more ethanol to gasoline is a bad idea on a number of fronts:

. . . Congress set mandates for fuel ethanol far in excess of what the market safely and economically can use.

It did so under political pressure from agricultural interests. The ethanol mandate has been great for growers and distillers of corn.

For anyone else who buys fuel or food, it costs too much. And it will get worse.

The statutory requirement for ethanol from grain soon will exceed the gasoline market's capacity to use it at normal blending levels. Refiners and other blenders must buy credits to make up the difference. Prices of the credits are rising.

Meanwhile, a requirement for ethanol from cellulose is phasing in, although that material remains scarce. Blenders unable to meet sales mandates must pay fines.

Producers of gasoline thus face rapidly rising costs and have a growing incentive to export product rather than sell it domestically. Rising costs and diminished supply promise increasing prices at the pump.
...
The program is a disaster—and not because ethanol is bad stuff. It's a disaster because Congress, in order to make those grain growers and distillers happy —meaning rich— tried to outwit the market.

This never works. And it's inevitably corrupt.

A bipartisan bill to repeal the Renewable Fuel Standard, as this fiasco is known, was introduced in the House in April. Now a group of Democrats and Republicans has introduced similar legislation in the Senate.

With consumers in jeopardy, the end of the RFS can't happen soon enough.

It won't remove ethanol from gasoline. It will, however, bring the amount of food burned in US vehicle engines back to rational and affordable proportions.

We have lots of natural gas, which burns cleaner than gasoline and doesn't "burn food." Perhaps this idiotic "Renewable Fuel Standards" effort is a backhanded way to encourage the market to expand NG availability for cars and truck and to help vehicle owners make the switch. Probably not,though, considering the source of the legislation.

According to an Exxon report, vehicles powered by natural gas have a 25% higher initial cost and is less "energy dense" so it may require more frequent fill-ups and other issues. However, these seem to be technological issues and I suspect that higher levels of production of NG vehicles would drive the price down and the availability of refill stations to expand. In addition, NG carries a lower price than gasoline so it is possible to recover the extra costs in a lifetime (unlike,say, with a hybrid car) . . . see here:

With so much supply that energy companies are pulling rigs out of the ground to cut back on production, natural gas is starting to look more appealing as a cheaper and cleaner alternative to gasoline and diesel.

As much as I hate to agree with Boone Pickens NG may be the way to go. And it may help remove one more seed of corruption in Washington.

I think this is a bad idea: "Promotion boards to look at energy efficiency"

While it pains me to say it, the Secretary of the Navy continues to assert a mythical "energy vulnerability" while inserting what can only be construed as a "green" component into Navy officer promotions, as reported at Promotion boards to look at energy efficiency - Navy Times:

Navy Secretary Ray Mabus, who has spent the past two years trying to wean the service off of fossil fuels, said promotion boards will consider an officer’s energy management when deciding whether to move him up. Furthermore, Battle E commendations will be based, in small part, on a command’s ability to sip fuel instead of guzzle.

Look, if the SecNav wants to cut fuel costs that's arguably a good idea, though I would assert it is not necessary to take drastic measures that will hurt combat preparedness. What fries my bacon is his persistent assertion that there is an U.S. strategic fuel shortage and that it requires drastic steps, including pumping millions of DON money into creating a "biofuels" market. Why isn't he screaming for more nuclear powered ships? That's the ultimate effective "energy management" to beat the SecNav's concerns of reducing

. . . the sea services’ dependence on oil from adversaries while reducing the need to refuel, which takes ships out of combat while making them vulnerable to attacks.

As I have said before here, and here, the U.S. has plenty of fossil fuels to operate our Navy for hundreds of years. In the latter post I wrote, "When we claim we're "hostages" to foreign energy, we're just being stupid. Politically correct, but stupid." Develop the energy we have, and stop this nonsense.

This program of the SecNav is a another misstep in already overly "politically correct" environment.

Chart from here

On the other hand, sail makers should be out in force, selling "new" wind energy tools for optimum fuel savings for promotion hungry officers.

Or, hey, just tie the ships up and send the crews home to practice being at sea by playing video games and following other silly guidelines.

Worldwide Energy: Turkmenistan has a great big gas field - #2 in the world

The Oil & Gas Journal reports another one of those nasty fossil fuel finds that drives the gloom and doom "We're running out of energy" crowd insane, in GCA: Turkmenistan's Iolotan gas field is world's second-largest :

Gaffney, Cline & Associates (GCA) said Turkmenistan’s South Iolotan natural gas field is the world’s second-largest, with an estimated 21.2 trillion cu m (tcm) of gas reserves. Supergiant Iolotan field was discovered in the country’s Amu Daria basin in late-2006 (OGJ Online, Nov. 22, 2006).

In a recent presentation, Jim Gillett, GCA business development manager, said South Iolotan’s latest reserves estimate make it second only to giant South Pars gas field, shared by Iran and Qatar.

“Turkmenistan’s gas reserves are more than enough for any potential demand over the foreseeable future, whether it be from China, Russia, Iran, or Europe,” Gillett said.

However, Gillet said estimates of the central Asian nation’s reserves could increase even more, noting that in addition to South Iolotan, the country’s Yashlar field has substantial gas, too.

For the geographically challenged, the map above will help you locate Turkmenistan.

Expect big pipeline investments from the Chinese. Pipeline rights through a couple of other 'Stans should not cost all that much.

And they probably won't have idiot "greens" whining about a way to get fuel to flow into China.

Algae Fuel "Investment" Baloney

Algae farm (claytonbodiecornell.greenoptions.com)

OK, in light of the "occupiers of Wall Street" complaining of - well, almost everything except labor unions and fire ant bites, here's a little addition to what they should be be concerned about - a government program to provide "venture capital" to a program that apparently has failed to find any real venture capitalists dumb enough to risk their own money in it. An example of "corporate welfare" if ever there was one.

Here,with a little highlighting from me, the "Algal Biomass Organization" offers up praise for an "investment" of $510 million from the USDA, DOE, and Navy (what does it matter whose budget the money comes from? It is all taxpayer money, extracted from the pockets of people who work for a living) into "biofuels" at "ABO Responds to USDA/DOE/Navy Biofuels Investment Promise" from Algae Industry Magazine:

The Algal Biomass Organization has voiced its opinion of the US government’s recently announced $510 million biofuels investment commitment over the next three years. Following is their statement: Late last month, three federal departments came together to launch an ambitious effort to commercialize next generation biofuels. The USDA, DOE and Navy announced an historic commitment to directly invest up to $510 million to retrofit and/or build facilities capable of producing drop-in replacement fuels. Funds from the private sector will be matched one-to-one, bringing the total potential available capital to more than $1 billion.

This announcement is a significant boon to our industry and comes at a time where several of our member companies are moving from lab to pilot, and from pilot to commercial production of algae-based drop-in fuels.

We’ve always praised the US military for its leadership in procuring and testing biofuels—their support has shown that domestic, sustainable fuels can perform at the highest levels of use. But until now, direct investment in companies or projects was not an option.

These three departments have rightly determined that it’s not going to be enough to just be a customer. They understand that the capital costs of facility construction are too high, and not the right model for venture capital, and the technologies still so new as to preclude traditional bank financing.

Let’s be clear – this is not a feel-good publicity stunt. This is an investment in the long-term national security and economic health of our country. As Navy Secretary Ray Mabus said: “America’s long-term national security depends on a commercially viable domestic biofuels market that will benefit taxpayers while simultaneously giving Sailors and Marines tactical and strategic advantages.”

What was most inspiring to me, however, was one aspect of the partnership that went under reported—where the funds were sourced. It turns out that no new authorizations are required (no surprise, given the current climate surrounding our national debt) because the funds have been pulled from elsewhere in the budget.

That means, for the first time in what seems like a long time, that advanced biofuels took precedence for limited funds. From the Obama administration to the departments of the Navy, Agriculture and Energy, the importance of accelerating commercialization of advanced biofuels is now a national priority.

It’s now up to our industry to take advantage of this opportunity and show what we can do.

Sincerely,
Mary Rosenthal

Let's take a look at the highlighted portions.

First, "three federal departments came together to launch an ambitious effort to commercialize next generation biofuels . . ." Uh, pumping federal taxpayer money into a project so iffy that its ". . . capital costs of facility construction are too high, and not the right model for venture capital, and the technologies still so new as to preclude traditional bank financing" means that taxpayers are at risk $510 million on something no rational commercial enterprise would fund (but for, apparently, the government decision to pony up money).

How does the government justify this? The Wall Street Journal editorial of 10 October 2011 has it just right, in describing the "Solyndra economy" mindset of this administration:

And there you have America's Solyndra economy, as the White House understands it: Washington allocates capital, and taxpayers pick up the tab if those choices go bust. Through this political lens, the August bankruptcy of the Fremont, Calif. company was a necessary casualty in the greater campaign to steer the U.S. economy toward Mr. Obama's noble goals. Private competition that winnows out losers is so yesterday.

Politics and a disdain of free markets triumphs economic sense. After all, throwing a big lump of government money at this project hardly seems capable of being described as an effort to "commercialize" anything. We might as well say we provide federal funding to "commercialize the next generation of grade schools." Ms. Rosenthal, I don't think that word means what you think it means.

Secondly, take a look at

What was most inspiring to me, however, was one aspect of the partnership that went under reported—where the funds were sourced. It turns out that no new authorizations are required (no surprise, given the current climate surrounding our national debt) because the funds have been pulled from elsewhere in the budget.

Are you kidding me? The Defense and Navy "budget" process is designed to put money on things that need money. Ship repair, aircraft repair, fuel, ammunition replacement, personnel costs and so forth, Stripping money from such allocations means something suffers. Yep, because "advanced biofuels took precedence for limited funds", something else, planned for as priority, suffered. Was it Seaman Johnny's advancement in rate? Did ships not get under way because they needed repair? Oh, those things are lower precedence, I suppose.

Further, as I have tried to say before, the issue here is not a shortage of domestic fuel that would help with "energy independence" but rather with an extreme "green" agenda that is distorting our economy and wasting taxpayer dollars (see Baloney at the Navy Top: "We use too much fossil fuel"). I am not opposed to the development of a biofuel that is self-funded and self-sustaining. I am opposed to this forced "create a market" by expending tax dollars approach.

If you think this is the wave of future, I invite you to invest your own hard-earned money into companies that produce this product, like Sapphire Energy (no, I don't own any stock, nor do I guarantee any financial results, and all private investments are subject to risk, just like investments in any other company and all the other disclaimers you can imagine) (UPDATE: Oh, wait, it's privately held.)(UPDATE2: Oh, wait, Sapphire Energy got a $50 million loan guarantee from the USDA as set out here to "to build an algae-based diesel biofuels plant in Columbus, New Mexico." - Hmmm.)

My previous rants against this "investment" can be found here, here, here and here.

An Unimportant Navy News Release

Pilotless aircraft in a pilot program (U.S. Navy photo by Kelly Schindler)

Fire Scout Completes First Navy Unmanned Flight on Biofuel

To which my mind says, "So what?"

What did the testers think was going to happen? Hadn't they tested the fuel ahead of time?

If it's fuel that burns in a gas turbine, it's gas turbine fuel. I don't believe there will be much chemically different from a fuel based on petroleum. In fact, I bet it is almost like a petroleum product.

The question of whether or not Department of Navy funds should be diverted to support this "biofuel" industry is not answered by this sort of rigged test. As I've noted over and over, the U.S. has plenty of fossil fuels available to help us become energy independent - the announced goal of the Secretary of the Navy and his ultimate boss, the President. SecNav's pitch, which we heard repeatedly during a DoD Bloggers Roundtable with him earlier this year, is that he is seeking alternative fuels that, essentially, cost the "same" as fossil fuel products. Oddly enough, fossil fuels cost the same as fossil fuels and don't require a dime of Navy (taxpayer) money to develop a market or to build refineries, pipelines and the like.

The "Green" Navy and "Energy Independence" were the topics of DoDLive Bloggers Roundtable: Secretary of the Navy Ray Mabus. From the transcript:

SecNav: ***The most overarching or broadest goal was by no later than 2020, at least half of all Navy energy, both afloat and ashore, would come from non-fossil fuel sources. I did this to address a vulnerability. We simply buy too much petroleum from volatile places on earth, and we need to address that vulnerability to reduce our dependence on foreign sources of fuel.

My translation: "So, instead of focusing on buying fuel from non-volatile places (like say, the U.S. and Canada), we have decided create a whole new industry using your tax dollars."

The U.S. Navy's least polluting ship?

SecNav: The Navy will do two things. One is, we will make our contribution of about $170 million to help either build or retrofit biofuel plants for -- to produce biofuel. We will also be willing to sign offtake contracts so that we will provide the market for these biofuels. And finally, earlier this summer, the Defense Logistics Agency, on behalf of the Navy, issued a request for proposals for 450,000 gallons of biofuels for our test purposes, which we think is the largest biofuel purchase ever undertaken in the United States.

My translation: "Biofuel production is not 'shovel ready' so we are going to take taxpayer money and try to push production of this product into a market in which the only real demand will be the taxpayer funded military. Building plants and all that is needed to get the biofuels ready for real production has yet to be accomplished."

Catching Up

Having had a couple of days off, it's time to play "catch up"- let's start with an annoying BBC article BBC News - Somali pirates face hard time in US prison, in which the sympathy is entirely misplaced. Further, the article originally had a completely different title, which Lex captured as "Somali pirates face hell in US prison system." When I first saw the original headline, I wondered if the "hell" they will experience in U.S. prisons is even a vague shadow of the "hell" of a Somali prison or even daily Somali life for that matter. But the article is even more biased than its headline:

Federal prison is a frightening, perilous environment of intrigue, violent gangs, terrible food and severe isolation, even for the most hardened criminal.

For men from a faraway land with little or no English-language skills and no prior familiarity with American culture, it will be especially hard, say lawyers for the men, and experts in psychology and the criminal justice system.
***
On Monday, Muhidin Salad Omar and Mahdi Jama Mohamed were sentenced to life in prison after pleading guilty to their part in the hijacking in February of the yacht S/V Quest, in which pirates shot to death four American yachters as the US Navy sought their release.

On Tuesday, four more men are to be sentenced to automatic life terms in prison following their guilty pleas to piracy counts in the Quest case. More are to be sentenced in the autumn.
***
Language and cultural barriers will make it difficult for the men to form the support groups and informal social networks that lawyers and social workers say are necessary to get by in prison.

"They have all the stressors associated with prison," says Frederic Reamer, a professor of social work at Rhode Island College with extensive experience working in prisons and a member of the Rhode Island state parole board.

"But unlike most inmates, they cannot just go into the dining hall and sit at a table and start conversing with people with whom they have some shared cultural experience. They are likely to be isolated in every imaginable way."

God spare from bleeding heart professors of social work. I figure under some Somali law, we could have simply stoned these guys to death, as it seems to be a favored punishment. Read the part again about how these pirates "shot to death four American yachters."

Isn't it interesting that as the assertions of the world "running out of fossil fuels" continue to be heard that we keep finding more? Here's a report of a possible discovery off Sri Lanka -

While further drilling is required to determine the commerciality of the natural gas discovery, this is the first oil and gas well to be drilled in Sri Lanka in 30 years -- and the first hydrocarbon discovery ever in the country.

Which reminds me that the gas field off Cyprus continues to be a blip in international relations. The Turkish government has deployed a ship to "investigate" the waters off Northern Cyprus, as set out here. Saturn5 from Bosphorus Naval News has a series of posts on the topic, Part 1, Part 2 and Part 3. It's all about the gas and oodles of money. The Russians, the French and others are out there playing hard.

More Defense Money Baloney: "New Biofuels "Market" to Reduce Foreign Oil Dependence"

Runnng on empty

I guess discovering that in the real world biofuels still are an expensive novelty, the decision has been made to dump a few hundred million dollars of Department of the Navy dollars into an attempt to create a "market" for them, as reported at New Biofuels Market to Reduce Foreign Oil Dependence

The Department of the Navy is providing the market share for the nation's nascent biofuel industry as part of a White House initiative to kick-start the alternative energy sector, administration officials announced Aug. 16.

The Navy, in partnership with the departments of Energy and Agriculture, is working with the private sector to create a sustainable U.S.-based alternative energy industry as part of a plan President Barack Obama announced in March to reduce American dependence on foreign oil.

Navy Secretary Ray Mabus, along with Agriculture Secretary Tom Vilsack and Energy Secretary Steven Chu, announced the latest part of the plan in a conference call with reporters Aug. 16.

Under the plan, the Navy, Agriculture and Energy departments will share equally in a $510 million investment over three years -- estimated at half the private sector's cost -- in the production of advanced "drop-in" aviation and marine biofuels, which can be used with existing fuels to power military and commercial vehicles, they said.

The White House's Biofuels Interagency Work Group and Rural Council will oversee the initiative with the simultaneous goal of boosting America's rural economies, they said.

"America's long-term national security depends upon a commercially viable domestic biofuels market that will benefit taxpayers while simultaneously giving sailors and Marines tactical and strategic advantages," Mabus said.

"Having energy independence in the United States is one of the most important things we can do from a security standpoint," he added.

The United States imports more than $300 billion in crude oil annually, and "price shocks and supply shocks" of the international oil market are "too much for the military to sustain," Mabus said. Every dollar per barrel increase in oil adds $30 million annually to the Navy budget, he said.

"Today's announcement not only leverages our home-grown fuel sources to support our national security, but it also helps advance the biofuels market, which ultimately brings down the cost of biofuels for everyone," Mabus added.

The initiative is in line with Mabus' goal to cut in half the Navy's oil usage by 2025, and supply its growing use of biofuels, which the secretary estimated at 8 million gallons per year.

"We've already flown an F/A-18 on biofuels," said Mabus. "We've flown a MV-22 Osprey on a mixture of biofuels and petroleum. We've tested our riverine craft, are sea hawk helicopters, so we are, well down the road to making sure we meet this goal tactically and strategically."

"The Navy can be the market," Mabus said. "We have a big need for biofuels. It will make us better warfighters, it will save lives, and it will reduce a vulnerability in our military that we simply shouldn't have."

The Energy Department already supports 29 biofuels projects in which producers manufacture fuels from cellulosic feedstalks -- wood, grasses and nonedible parts of plants, Chu said. Under the initiative, there can be no negative impact on U.S. food supply, they said.

The initiative is important, the secretaries said, to diversify the nation's energy supply, remove risk from the burgeoning biofuels industry, and create economic opportunities in recession-hit parts of the country.

The departments plan to release a request for proposals soon from biofuel manufacturers, and Mabus said the Navy conducted the largest-yet biofuels request of 450,000 gallons in a bid last spring.

"There is a market there that is real, that is solid," he said of producers, and added that it is growing enough that prices already are starting to decline.

The Navy will "repurpose existing funds" for its $170 million share of the investment, Mabus said. "It's a matter of setting priorities," he added.

Secretary of the Navy Ray Mabus laid out five aggressive energy goals in October 2009 to improve the Navy's energy security and efficiency, increase the Navy's energy independence, and help lead the nation toward a clean energy economy. This initiative assists in achieving the energy goal of increasing alternative energy afloat and ashore where by 2020, 50 percent of the total Department of the Navy energy consumption will come alternative sources.

As I have noted in previous posts (see Baloney at the Navy Top: "We use too much fossil fuel", Shale Gas and U.S. National Security), the U. S. has plenty of domestic energy which is being and can be developed further without taking money from the Navy and giving a "special deal" to the biofuels people who have already spent millions of dollars of taxpayer money.

Instead, the administration prefers to attack the gas and oil energy industry for receiving special "tax breaks" while taking tax money better spent on ship and aircraft repair and giving it to different politically-favored gaggle of "projects."

As I said in prior post:

The problem is not that we use too much fossil fuel, the problem is that we have allowed ourselves to become dependent on imported fossil fuel, despite sitting on the world's largest deposits of "fossil fuels."

It is the importation of foreign oil that is a strategic issue, not their use. It's the long lines of commerce that bring oil to our shore that are vulnerable.

If every dollar increase in a barrel of oil adds $30 million to the Navy budget, perhaps, now that the price of a barrel of oil has dropped, we should be stocking up . . . at current prices, assuming that oil is $10 a barrel lower than it has been, the Navy has "saved" $300, 000, 000. [Using Sec Mabus's $1bbl figure to assume Navy usage of 30 million barrels]. That's enough to build a ship. He should be celebrating!

If there is "a market that is real, that is solid" for biofuel, as Sec. Mabus asserts, then there is absolutely no need for this money to be diverted in this fashion.

I have no problem with the development and use of biofuels, I just think the Navy has little or no business funding them to "remove risk from the burgeoning biofuels industry"  - if it's a real "market" then let that market work. 

And let the existing energy industry assist us in being energy independent. "Drill, baby, drill" is not just a political slogan, it's a way to energy independence while allowing the scientists to work their way toward biofuel heaven.

Let these "projects" bid on the same basis as all the other energy providers. Let them develop the pipeline, storage tanks and associated equipment necessary to make delivery of the fuels they can provide.

I can't wait to see how we handle refueling our ships and aircraft around the world with this stuff. Will we have a fleet of new Navy oilers carrying only the finest vintage biofuels following each of our ships? Or will we still be buying fuel in foreign ports, using "carbon based" fuels when deployed while keeping up the pretense of "green-ness" domestically? Potemkin ships?

One final thought. The energy markets are global, so that if the U.S. does succeed in becoming energy independent by using biofuel, those nasty old oil and gas products being sold to us will simply be sold to some other country with an appetite for energy and an indifference to the environment. The net result will not be much of an improvement in the "clean energy economy", will it?

Shale Gas: Who Objects to Poland's Exploration and Development?

 For some background, you might want to review Shale Gas and U.S. National Security and the links therein. We'll be talking about this during Midrats today at 5pm Eastern.

Buried in the Rice report is an interesting projection that Europe outside of Russia has shale gas and that the country with the highest projected level of shale gas is Poland - estimated to 120 trillion cubic feet of this gas. This is about 55% of the total estimate for Europe.

This is also a threat to the leverage that Russia hoped to invoke as Europe's largest supplier of gas.

Russia made no secret about its desire to leverage its position and create a cartel of gas producers -- a kind of latter day OPEC.

Poland - it's always Poland for Russia, isn't it? - Poland has gas - perhaps lots of shale gas. Russia's OPEC-style price fixing cartel will fail if Poland develops its own resources, especially in conjunction with development of U.S. gas shale.

And Poland is moving to develop its gas shale - with Chevron among others:

In an area becoming a new hotbed of shale natural gas exploration activity, oilfield services firm Halliburton (NYSE: HAL) has been awarded an integrated services contract from supermajor Chevron for shale natural gas exploration in Poland.

Work on Chevron Polska's initial shale gas exploration drilling program is expected to begin in the fourth quarter and the contract award is for three years, with extension opportunities. Chevron was awarded licenses to explore for unconventional gas resources in the area in December 2009.

The plan calls for Halliburton to provide services including drilling services, mud logging, cementing, coiled tubing, slickline services, well testing, completion and hydraulic fracturing. Halliburton will support the project with project management services.

In June 2010, the company announced it had also acquired rights to explore for natural gas in the Grabowiec concession, located in southeastern Poland.

Present in Poland for more than 15 years, Halliburton performed the first-ever shale hydraulic fracturing operation in Poland for PGNiG in August 2010.

The Voice of Ameria reports "Shale Gas in Poland Sparks Hopes of Wealth, Energy Security":

The rush for shale gas in Poland is attracting some of the world’s biggest energy companies, giving the country hopes of energy security and strengthening ties with the United States.

Recent finds in northern Poland appear to confirm what experts have suspected for years - that Poland has Europe’s largest reserves of shale gas.  The news promises to encourage what has become a feeding frenzy of major gas companies and Polish hopes of energy independence from Russia.

***Poprawa says it will be several years before anyone knows exactly how much gas Poland has, and at least a decade before large-scale production can begin.  But in the mean time, exploration concessions have been granted to some of the biggest energy companies in the world.

“We have on our market real majors, the biggest companies globally," he said.  "We have here Exxon, Chevron, ConocoPhillips, Total - this is kind of unique, really.  This place a couple of years ago was empty.  Now everybody from the world comes here to make their exploration.”

Of course,suddenly there are voices deriding this ambition of the Poles, as noted in
Resistance to Poland’s Shale Gas Exploration Plans Emerging:

Interest groups that want to block production of gas from shale rock will lobby at the European Union for rules that would make shale gas output unprofitable, a Polish member of the European Parliament said.

“In the fall, we expect more informational activity to encourage legislative work against shale gas,” Pawel Kowal told a press conference. “It’s not possible, for political reasons, to introduce a pan-EU ban on shale gas. But it’s possible to introduce regulations that would make it unprofitable.”

Poland’s Prime Minister Donald Tusk has called shale gas a “great opportunity” for Poland. The unconventional gas industry, while still in its infancy in Poland, could create thousands of jobs and, eventually, generate export revenue. If it turns out to be economically viable to extract, it may free Poland from dependence on Russian natural gas supplies.

Environmentalists in several countries are pushing to restrict hydraulic fracturing, or “fracking.” The technology involves injecting water, sand and chemicals into porous shale rock to release the gas trapped inside the rock. Critics say fracking contaminates ground water.

The U.K. government in July rejected calls for tough new controls on the technology. France in June became the first country to ban it completely.

Mr. Kowal, in 2006-2007 a deputy foreign minister in the conservative cabinet of Jaroslaw Kaczynski, said Poland should take steps to prevent rules that would derail Warsaw’s plans for shale gas.

“Compared to other sources of energy, extracting shale gas isn’t particularly dangerous,” he said. “But lobbying against it may come from various sources. Disinformation will lead to objections in local communities.”

Russia’s OAO Gazprom has called shale gas “a bubble” and “a danger to drinking water.”

So, who could be behind this bad-mouthing of Polish energy independence? Follow the money that will be lost to Poland's (and the rest of Europe's) current suppliers and you'll have an answer.

Stay tuned to see how this unfolds.

Geopolitics. Oh, by the way, Poland isn't the only place that has gas shale:

Sunday on Midrats: Gas Shale and National Security

Energy independence and energy security are not just buzzwords. From the car you drive to the food you eat and the heat that makes winters livable and power that makes summers productive to our urban culture; energy and power are what makes our civilization possible.

If you don't have secure energy, you do not have a secure nation. The areas of the world that have the greatest energy supplies are neither stable or natural friends of our Western Democracy.  That is a problem, and explains why most of our wars have been fought where they have been.

Is new technology helping to change the national security equation?

To discuss for the full hour will be Amy Myers Jaffe, the Wallace S. Wilson Fellow in Energy Studies, director of the Energy Forum at the Baker Institute, author, and associate director of the Rice Energy Program at Rice University.

Ms. Jaffe is one of the authors of the paper, sponsored by the U.S. Department of Energy, from the James A. Baker III Institute for Public Policy at Rice University, “SHALE GAS AND U.S. NATIONAL SECURITY”  linked to in this earlier post Shale Gas and U.S. National Security and has studied this area extensively.

Please join us for what should be an interesting conversation. Sunday, 5pm Eastern or, if you can't make it, the show will be available for download from  BlogTalkRadio or iTunes. You can join us live by clicking here

Shale Gas and U.S. National Security

A paper, sponsored by the U.S. Department of Energy from the James A. Baker III Institute for Public Policy at Rice University, "SHALE GAS AND U.S. NATIONAL SECURITY":

The Baker Institute study "Shale Gas and U.S. National Security," sponsored by the U.S. Department of Energy, investigates the role that U.S. shale gas will play in global energy markets as global primary energy use shifts increasingly to natural gas. Specifically, the study concludes that shale gas will diminish the petro-power of major natural gas producers in the Middle East, Russia and Venezuela, and it will be a major factor limiting global dependence on natural gas supplies from the same unstable regions that are currently uncertain sources of the global supply of oil. In addition, the timely development of U.S. shale gas resources will limit the need for the United States to import liquefied natural gas for at least two decades, thereby reducing negative energy-related stress on the U.S. trade deficit and economy.

But, hey, don't take this summary as truth when you can read the source document by downloading it from here.

Here's an interesting section that points out how global energy markets work (click on it to enlarge it):

 Not only is shale gas important for U.S. national security, it's providing a benefit to Europe and Asia.

Damn right it will "have significant geopolitical ramifications."

And we have a lot of it, as set out here:

The U.S. Has Abundant Shale Gas Resources

Of the natural gas consumed in the United States in 2009, 87% was produced domestically; thus, the supply of natural gas is not as dependent on foreign producers as is the supply of crude oil, and the delivery system is less subject to interruption. The availability of large quantities of shale gas will further allow the United States to consume a predominantly domestic supply of gas.

According to the EIA Annual Energy Outlook 2011, the United States possesses 2,552 trillion cubic feet (Tcf) of potential natural gas resources. Natural gas from shale resources, considered uneconomical just a few years ago, accounts for 827 Tcf of this resource estimate, more than double the estimate published last year.

Enough for 110 Years of Use

At the 2009 rate of U.S. consumption (about 22.8 Tcf per year), 2,552 Tcf of natural gas is enough to supply approximately 110 years of use. Shale gas resource and production estimates increased significantly between the 2010 and 2011 Outlook reports and are likely to increase further in the future.

So, why, instead of screwing around with ethanol and really expensive electric cars, are we not working hard to produce vehicles powered by shale and other natural gas?

U.S. Energy Information Agency study, Review of Emerging Resources: U.S. Shale Gas and Shale Oil Plays":

Although the U.S. Energy Information Administration's (EIA) National Energy Modeling System (NEMS) and energy projections began representing shale gas resource development and production in the mid-1990s, only in the past 5 years has shale gas been recognized as a "game changer" for the U.S. natural gas market. The proliferation of activity into new shale plays has increased dry shale gas production in the United States from 1.0 trillion cubic feet in 2006 to 4.8 trillion cubic feet, or 23 percent of total U.S. dry natural gas production, in 2010. Wet shale gas reserves increased to about 60.64 trillion cubic feet by year-end 2009, when they comprised about 21 percent of overall U.S. natural gas reserves, now at the highest level since 1971. Oil production from shale plays, notably the Bakken Shale in North Dakota and Montana, has also grown rapidly in recent years.

You can thank the engineers who developed the technology and techniques to make this possible.

Crude Oil Prices

Interesting chart from Chart of the Day:

Today's chart illustrates that most oil price spikes coincided with Middle East crises and often preceded or coincided with a US recession. The logic behind this is that a Middle East crisis can potentially disrupt an already tight oil supply and thereby drive crude oil prices higher. Also, rising oil / energy prices can, among other things, increase costs within the global economy's supply / distribution chain and thereby contribute to inflation which can in turn encourage governments to halt or reduce any plans to stimulate the economy.

 So, you'd think that a government sitting on some of the world's largest reserves of energy (see here) would be pushing development of that energy to ease the "tight oil supply" so as to unleash its plans to "stimulate the economy," wouldn't you?

Wouldn't you?

Baloney at the Navy Top: "We use too much fossil fuel"

I wish people would get it straight, despite what the Secretary of the Navy said at the 2011 Current Strategy Forum Focuses on Energy, U.S. National Security,
"We use too much fossil fuel . . .", thus,

. . .Secretary of the Navy Ray Mabus, described energy as the main vulnerability to U.S. national security in his keynote address.

No!   No!   No!

The problem is not that we use too much fossil fuel, the problem is that we have allowed ourselves to become dependent on imported fossil fuel, despite sitting on the world's largest deposits of "fossil fuels."

It is the importation of foreign oil that is a strategic issue, not their use. It's the long lines of commerce that bring oil to our shore that are vulnerable.

Lines that we can control or eliminate.

We import 51% of our oil, with 51% of that from the Western Hemisphere (thanks Canada (23.3%), Venezuela (10.7%)  and Mexico (9.2%)). Only 17% of our oil comes from the Persian Gulf states. What would it take to make it a national strategic priority to replace that 17% with domestic supplies? And then reduce the flow from Venezuela?

The solution is not all that exotic. Instead of looking for "alternative" fuels as our primary energy sources, the emphasis should be on developing our known internal energy resources so that we eliminate the energy "vulnerability" identified by Mr. Mabus as soon as possible.Then we can chase windmills and solar fields and the like.

It seems, however, that developing our own resources seems not to be the politically "in" thing right now, so we continue to squander money on half-baked projects that may actually be doing worse damage to both man and the environment than fossil fuels.For example, we continue to convert corn to ethanol despite knowing that it is both not as "green" as its proponents suggest and is helping to create food shortages that may stir civic strife in countries used to getting cheaper food. That strife I mentioned? Get ready for more humanitarian interventions and civil wars as this goes on.

In the mean time, as set out here, look at these charts based on the Congressional Research Service (which you can view or download here):

When we claim we're "hostages" to foreign energy, we're just being stupid. Politically correct, but stupid.

You want jet fuel (which also powers gas turbine war ships)? Try our vast amounts of oil shale:

How large is this resource? In the Piceance Basin, an area of 1,100 square miles, the oil shale is over 1 million barrels per acre, or roughly 750 billion barrels of recoverable oil. If you extend outward to Wyoming and to Utah, it is 1.3 trillion. This is why you hear shale next to trillions, not billions or millions, of barrels. The Air Force in the 1970s looked at shale, tested it, and found that it was a superior liquid for jet fuel. Roughly 65 percent of the oil shale is liquid, which could go into jet fuel. The J-8 engine can take shale oil as premium jet fuel.

Expensive? How much does it cost to have to defend sea lanes through which our imported oil flows? How many awful governments do we have to prop up to keep the foreign oil flowing. It's not the oil that's to blame, it's the lack of internal development of our known resources. It's not working to get a realistic balance of all the costs involved in our use of energy.

Natural gas - another fossil fuel - we have more than we ever thought. Some of this "new" gas is due to the development of horizontal fracking and horizontal drilling. Is there some reason why U.S. Navy trucks and cars don't run on natural gas?

Don't think it's safe to do horizontal fracking? Imagine if we put as much money into making it safer as we waste trying to convert switchgrass to ethanol. That may all work in some future, but the other supplies are here now and ready.

Coal -The EIA says:

The United States is home to the largest recoverable reserves of coal in the world. In fact, we have enough coal to last more than 200 years, based on current consumption levels. Coal is produced in 25 States spread across three coal-producing regions, but approximately 72% of current production originates in just five States: Wyoming, West Virginia, Kentucky, Pennsylvania, and Montana.

Right now we export coal in addition to our internal use. But we can convert coal to oil. South Africa does. China does. At one time, Barrack Obama thought we should, too:

For decades, scientists have known how to convert coal into a liquid that can be refined into gasoline or diesel fuel. But everyone thought the process was too expensive to be practical.
The lone exception was South Africa, a one-time pariah state that had huge reserves of coal and, thanks to anti-apartheid sanctions, limited access to foreign oil. Sasol Ltd., a partly state-owned company, built several coal-to-liquids plants, including the ones at Secunda, and became the world's leading purveyor of coal-to-liquids technology.
Now, oil prices are above $70 a barrel, and Sasol has emerged as the key player at the center of the world's latest alternative-energy boom.
China is building a coal-to-oil plant costing several billion dollars in Inner Mongolia and may add as many as 27 facilities -- including some with Sasol's help -- over the next several years, according to a recent tally by Credit Suisse.
In the U.S., the Defense Department is studying coal-to-oil technology as a way to reduce the American military's dependence on Middle Eastern crude oil. And the National Coal Council, an industry association, is pushing for government incentives to help generate some 2.6 million barrels of liquid fuel a day from coal by 2025. That would satisfy some 10 percent of America's expected oil demand that year. The plan would require 475 million tons of coal a year, which represents more than 40 percent of current annual U.S. production. Industry officials believe America's coal reserves are big enough to allow for the extra production.
Coal-to-liquids "is not going to replace oil," says Lean Strauss, a Sasol executive who directs the company's overseas energy business. "But it's an important substitute. It is one of the solutions to energy security."
In June, two senators from coal-producing states, Barack Obama of Illinois and Jim Bunning of Kentucky, introduced a bill to offer loan guarantees and tax incentives for U.S. coal-to-liquid plants.

It amazes me that the what used to be "can do" leadership in this country has become a bunch of "true believers" in what is provable nonsense.

I expect better from those who are concerned with our national security and especially from those tasked with maritime security, who should be arguing for reducing our energy sealines of communication through developing all of our resources, and not just those in favor with one administration or another.

It's not fossil fuel, but why are we not developing and encouraging the use of nuclear power?
Because Harry Reid says "no" to a viable storage location for spent fuel in his state?

You want to get people working? Get them working on this - developing our fossil fuels, nuclear power and, yes, alternatives.

Once weaned from imported oil, we can use our internal supplies as we develop the "alternative energy" sources.

While being less vulnerable in the process.

Or I guess we could rig sails and fly kites. Or build triremes. All the while sitting on huge energy reserves.

UPDATE: I probably should have caught this before, but here's hint at Secretary Mabus's agenda in which it is revealed he wants to use Navy money to drive the move to "renewable fuels":

The Navy’s goal is to shift half its energy usage from fossil fuels to renewable sources by 2020. Critics have cast doubts on these plans, and have questioned the Navy’s assumptions about the future cost of biofuels. Other experts have pointed out that the military, which accounts for less than 2 percent of all U.S. fossil fuel demand, cannot on its own drive the renewable energy market until the United States adopts a national strategy that would generate greater economies of scale.

Mabus disagrees. “I think the military can lead on that,” he told reporters April 27. “The  Navy can be a market … I’m absolutely convinced we can do it.”

Count me as one of those critics . . .

India: Major Coal Player

As set out in this Platts article "India emerging as a major force in the global coal market":

Replacing Europe as the main consumer of Richards Bay coal, a major customer for Indonesian material and with huge power projects about to come online -- India is fast becoming a force to be reckoned with.

The largest coal mining company in the world, Coal India Limited is putting the finishing touches to a long-term coal supply contract framework that could see it purchase tens of millions of tons of imported thermal coal from Australia, Indonesia, South Africa and the US from a list of pre-selected coal suppliers for delivery starting in April, according to sources in the Indian market.

Importing coal means more ship at sea carrying coal.

Part of Richards Bay Coal Terminal

Questions regarding the environmental impact of coal should be addressed to the government of India.

UPDATE: U.S. exports of coal are on the rise - see here:

Asia's appetite for coal to generate electricity and bake into coke for steel making could make 2011 a banner year for U.S. exports. It could boost business for railroads and shipping ports that transport coal, industry observers say.
Continued demand and supply limitations that caused surging U.S. coal exports to China and India last year are expected to increase exports to 86.5 million tons, up from 79.5 million tons in 2010, according to the U.S. Energy Information Administration. The agency said 2009 shipments fell to 59.1 million tons, a result of the recession, from 81.5 million tons in 2008.
"Exports will be at the highest level ... in decades," predicts James Thompson, editor of U.S. Coal Review, a trade publication in Knoxville, Tenn.

 Richards Bay Coal Terminal is "the single largest export coal terminal in the world"

Richards Bay is located in South Africa:

Situated at Longitude 32º 02' E and Latitude 28º 48' S, Richards Bay, South Africa's most northernmost and easterly port, is 87 nautical miles (160 km) northeast of Durban and 252 n.miles (465 km) southwest of Maputo.

Arrow points toward Richards Bay, RSA

 According to the U.S. Energy Information Agency,

India also has been increasing its imports of coal while facing ongoing coal transportation challenges. Its improvements in infrastructure include the expanded use of smaller ports to satisfy increasing demand for coal imports. Like China, India increased its coal imports in both 2008 and 2009 (although preliminary data suggest that the growth in 2009 was much less than that in China). In 2035, India's coal imports in the Reference case are four times the 2008 level, spurred by rising imports of both coking and steam coal.

The large coal-fired electricity plants planned for India's coastal areas will be fueled by imported steam coal. The country is faced with domestic coal supply and quality issues and, while it is building new plants, its demand for coal imports continues to grow. Unfortunately, delays in meeting established construction schedules are commonplace in India, and transportation infrastructure issues abound. For instance, in 2009 India had difficulty handling coal imports at its river port of Haldia because of an unexpected loss of water depth. In order for tonnage to be handled at the port, larger ships have been diverted to deeper ports, where their coal cargos are transferred to smaller ships for delivery to Haldia.

India's planned infrastructure improvements include coastal port expansions at Goa and Paradip. Freight capacity at Paradip is expected to increase from about 55 million tons in 2009 to 77 million tons in 2012, but recent bottlenecks at the port must be overcome in order for that goal to be achieved. In addition, coal-handling capability at the port of Mormugao will be expanded from 6 million tons to 17 million tons by 2014. India completed the new port of Gangavaram in 2009, only one of two (the second being the Mundra port) capable of handling capesize vessels. Gangavaram already handled about 17 million tons of freight (not all of it coal) in 2009. In the long term, Gangavaram's owners would like to expand its freight handling capability to 221 million tons per year. The new port of Dharma, also capable of handling capesize ships, should begin operation by the end of 2010.

India has domestic resources of coking coal, but its quality is poor in comparison with foreign-sourced coking coal. India's long-term plans include expansion of its steel industry to between 165 and 198 million tons of raw steel output by 2020, up from about 62 million tons in 2008, with increased imports of coking coal supporting the expansion. Some plans for new steelmaking capacity, such as ArcelorMittal's new coastal steel plant in Orissa, appear to have been delayed by land acquisition difficulties and environmental issues and thus are unlikely to add to India's demand for coking coal imports until after 2014. Largely because of its imports of coking coal, India surpass Japan as the world's largest importer of coal by 2025 in the IEO2010 Reference case.

UPDATE: Speaking of ports for coal operations, the increase in demand for U.S. coal is also spurring people to look at our "coal ports" - see Port Strategy: "US ports may rise on Indian coal market ":

Some US ports could well be riding the “Indian Tiger” as talks have begun on possible exports of coal from the US to India, with officials from Coal India visiting the United States recently to meet with local producers.

The ports that may well benefit include Lamberts Point Coal Terminal at Norfolk, Virginia; the CNX Marine Terminal at Baltimore, Maryland, the Port of New Orleans, Louisiana; the Port of Mobile, Alabama; and the Port of Seattle, Washington. Coal exporters could also use the Port of Vancouver.

So, coal exports are fueling growth in exports, port operations and coal mining. All while various senior political powers in the U.S. are pushing programs to reduce coal production. See here:

The coal industry stands to lose nearly $2.6 billion in federal tax incentives over the next decade as part of the Obama administration's proposed fiscal 2012 budget released Monday.

The administration's proposal is identical to coal incentives cut in its budget last year. The White House is aiming to meet a G-20 climate change agreement from 2009 in which member countries pledged to phase out fossil fuel subsidies.
***Repealing the tax provisions would "foster the development of a clean-energy economy and reduce our dependence on fossil fuels that contribute to climate change," the administration said in its budget message. The tax incentives equal less than 1% of the coal industry's revenue over the next 10 years, according to White House projections.

Under the budget proposal, coal companies would no longer be able to expense exploration and development costs; use percentage depletion for hard mineral fossil fuels; or claim domestic manufacturing deductions against coal production income. Royalties from privately owned coal blocks would be treated as regular income rather than capital gains for tax purposes, translating to a higher tax rate.

Gasoline prices

Gasoline prices up over 60% - Chart of the Day:

So while gasoline prices are currently well below the record high levels of 2007, this recent rally has brought prices to a level well above what was witnessed from 1984-2004 ñ a two decade span of relative energy price stability.

Why are gas prices increasing? WSJ says it's due to the possibility of increased consumer demand:

Oil prices are jumping on the hopes of an accelerated economic recovery.

The kindling for that flame came from the U.S. Federal Reserve, which talked about the U.S. economy “leveling out.” It was fueled further by euro-zone economic data, as Germany and France are growing again (and a 0.3% growth rate is almost boom-time for those two).

But, as the article notes, this may be "irrational exuberance" -

Never mind that crude oil inventories in the U.S. are still growing (what summer driving season?) or that retail sales are still falling.

One way to curb your enthusiasm - looking into the future:

According to NSWA, by the end of President Obama’s current term in office (2012), restrictions put in place will likely reduce future oil output by 1.32 million b/d (15.4 percent) and natural gas by 8.9 percent annually. By 2019, restrictions and new taxes could have reduced the federal take from oil and gas production by more than $118 billion, or about 4 times the expected yield of the new taxes. By 2030, these proposed policies will have the effect of lowering oil production in the United States by over 3 million b/d (approximately 28 percent) and natural gas by 30 percent.
Also, by 2030 the cumulative reduction in federal tax take from the oil and natural gas industry could be more than $780 billion, under current administration policies.

“The decreased production that will result from the proposed tax increases will have a catastrophic effect upon the American consumer since less domestic oil means higher prices,” said Dewey Bartlett, Jr., chairman of the National Stripper Well Association. “The OPEC leadership will have almost exclusive control over the world-wide pricing of crude oil as well as all products refined from crude oil such as gasoline, jet fuel and diesel fuel. Each of the thirtyplus states that have oil and natural gas production will experience a sharp decrease in tax revenues and significant job losses. A vital domestic industry that today helps fuel our national
economy will become an insignificant creator of American jobs much like the shipbuilding, electronics and clothing industries. The consequences of the demise of our domestic oil and natural gas industry are beyond imagination.”

Lower tax revenue in a time of growing deficit spending, higher fuel costs and an increase in dependence on foreign crude - what a change!

Of course, if the current administration believes that all of the dire warnings of the NSWA chairman will come to pass but the result of higher oil prices will be to unleash a huge increase in demand for alternative fuels, more fuel efficient cars, more green technology - all of which would lead to a decrease in domestic oil consumption and a resultant "energy independence" from OPEC as demand for overseas oil goes down, the result of which will eventually be an increase in tax revenue and more green jobs, then, well, in the long run these tax increases may make some sort of sense. As in "forcing change" from above - by raising energy prices so high that alternatives make economic sense. In effect, "taxing" Americans into going green.

From an environmental view, however, it seems to me that the administration would have to be very naive to believe that global warming, if it exists, would be reduced by reducing U.S. consumption of crude oil. Dumping onto the market large amounts of oil that the U.S. isn't using simply means a lowering of crude oil prices for the rest of the world, and encourages other countries to replace the U.S. as a consumer. The worldwide demand for oil will not decrease. Indeed, with lower prices, there may be more development in countries without the U.S. standards for air and water quality and there may be an increase in "greenhouse gasses" as a result of the U.S. going "green." The law of unintended consequences may rear its ugly head yet again for this Administration.

On the other hand, there are only about 2 years before the next presidential election cycle kicks in, 6 months before Congressional campaigns start - and short term pain at the pump may cause the American people to vote a different vision of the future into place.