Haq's Musings

Riaz Haq writes this data-driven blog to provide information, express his opinions and make comments on many topics. Subjects include personal activities, education, South Asia, South Asian community, regional and international affairs and US politics to financial markets. For investors interested in South Asia, Riaz has another blog called South Asia Investor at http://www.southasiainvestor.com and a YouTube video channel https://www.youtube.com/channel/UCkrIDyFbC9N9evXYb9cA_gQ

Showing posts with label Shale. Show all posts

Sunday, June 16, 2013

US EIA Estimates Pak Shale Oil Reserves at 9.1 Billion Barrels

Pakistan has more shale oil than Canada, according to the US Energy Information Administration (EIA) report released on June 13, 2013.

The US EIA report estimates Pakistan's total shale oil reserves at 227 billion barrels of which 9.1 billion barrels are technically recoverable with today's technology. In addition, the latest report says Pakistan has 586 trillion cubic feet of shale gas of which 105 trillion cubic feet (up from 51 trillion cubic feet reported in 2011) is technically recoverable with current technology.

The top ten countries by shale oil reserves include Russia (75 billion barrels), United States (58 billion barrels), China (32 billion barrels), Argentina (27 billion barrels), Libya (26 billion barrels), Venezuela (13 billion barrels), Mexico (13 billion barrels), Pakistan (9.1 billion barrels), Canada (8.8 billion barrels) and Indonesia (7.9 billion barrels).

Pakistan's current annual consumption of oil is only 150 million barrels. Even if it more than triples in the next few years, the 9.1 billion barrels currently technically recoverable would be enough for over 18 years. Similarly, even if Pakistan current gas demand of 1.6 trillion cubic feet triples in the next few years, it can be met with 105 trillion cubic feet of technically recoverable shale gas for more than 20 years. And with newer technologies on the horizon, the level of technically recoverable shale oil and gas resources could increase substantially in the future.

Source: US EIA Report 2013

As can be seen in the shale resource map, most of Pakistan's shale oil and gas resources are located in the lower Indus basin region, particularly in Ranikot and Sembar shale formations.

Source: US EIA Report 2013

Since the middle of the 18th century, the Industrial Revolution has transformed the world. Energy has become the life-blood of modern economies. Energy-hungry machines are now doing more and more of the work at much higher levels of productivity than humans and animals who did it in pre-industrial era. Every modern, industrial society in history has gone through a 20-year period where there was extremely large investment in the power sector, and availability of ample electricity made the transition from a privilege of an urban elite to something every family would have. If Pakistan wishes to join the industrialized world, it will have to do the same by having a comprehensive energy policy and large investments in the power sector. Failure to do so would condemn Pakistanis to a life of poverty and backwardness.

The availability of large domestic shale oil and gas expands the opportunity to reduce Pakistan's dependence on imports to overcome the current energy crisis and to fuel the industrial economy. But it'll only be possible with high priority given to investments in developing the energy sector of the country.

Tuesday, July 17, 2012

American Shale Fracking Fuels Demand for South Asian Guar

Guar bean is so hard it can crack human teeth--a quality that makes it ideal for fracturing shale rock to extract oil and gas. Guar was eaten by the poorest of the poor or fed to animals in India and Pakistan before the shale oil and gas boom in North America dramatically increased its demand and pushed its price higher. It's also used to produce guar gum which is an ingredient of various sauces and ice cream as a thickening agent.

"Shortages of guar beans, an essential component in the shale gas ‘fracking’ process, have resulted in huge price hikes for the commodity in 2012,” said risk consultancy Maplecroft in a recent report. “This has hit the profits of oil and gas companies hard and a search is under way to find supply chain alternatives, such as direct farm contracts and man-made substances.”

India's National Commodity and Derivatives Exchange (NCDEX) banned trading of guar futures in March this year after prices rallied nine-fold to a record US$1,680 per 100 kilograms, according to Bloomberg data. Over 95% of the world's supply of drought-resistant guar comes from the desert regions of South Asia. India produces a million tons a year making up 80% and Pakistan 15% of the world's supply. The rest comes from Sudan and the United States.

Higher prices are inducing farmers in India and Pakistan to plant more guar. Despite the expanding supply, however, many analysts believe that guar prices will remain high for the foreseeable future. Neil Beveridge, an oil analyst at Sanford C. Bernstein & Company, told New York Times that demand for fracking services should continue to grow rapidly as the industry expanded outside North America.

Both India and Pakistan are planning to develop their substantial reserves of shale oil and gas. India has 63 trillion cubic feet of shale gas and Pakistan has 51 trillion cubic feet, according to US Energy Information Administration (EIA).

Trican Wells Services of Calgary told Edmonton Journal that its bottomline would be directly hit by the elusive and expensive bean. “Average guar costs increased sequentially in the second quarter and we were largely unable to pass these costs on to our customers due to the competitive pricing environment,” the company said, explaining its larger-than-expected estimated loss of $24-million to $34-million.

Fracking companies are already looking for guar substitutes. Trican, for example, is looking to introduce a new hybrid fluid system that will reduce its guar usage. “We have started to see a reduction in guar prices and we expect guar prices to continue to decrease throughout the remainder of 2012 as a result of the development of hybrid systems and guar substitutes, and the new guar crop that is expected to increase supply later in 2012.”

Rising demand and increasing prices of guar are already helping lift many Indian farmers out of poverty. A New York Times story highlights the life changes of an Indian farmer "Sohan Singh’s shoeless children" who "have spent most of their lives hungry, dirty and hot. A farmer in a desert land, Mr. Singh could not afford anything better than a mud hut and a barely adequate diet for his family". The Times quotes Singh as saying, “Now we have enough food, and we have a house made of stone,”

The shale revolution now sweeping North America is helping change the fortunes of many poor farmers in South Asia. Bringing about the shale energy boom in India and Pakistan can overcome energy shortages and help millions more improve their lives.

Related Links:

Haq's Musings

Pakistan's Vast Shale Gas Reserves

Pakistan's Rural Economy

US Can Help Pakistan Overcome Energy Crisis

Abundant and Cheap Coal Electricity

US Dept of Energy Report on Shale Gas

Pakistan's Twin Energy Crises

Pakistan's Electricity Crisis

Pakistan's Gas Pipeline and Distribution Network

Tuesday, April 17, 2012

Pakistan's Shale Gas With US & KSA Help?

There are strong rumors that Kingdom of Saudi Arabia has joined the United States to oppose Iran-Pakistan gas pipeline project for which Pakistan is trying to arrange financing in the face of tightening US sanction on Iran.

The Chinese have already pulled out of the project after the US imposed sanctions on banks and other entities dealing with projects and transactions involving Iran. Russia's Gazprom is reportedly interested in financing and constructing the Pakistan section of the pipeline, but only on the condition that the project be awarded to it without any competitive bidding.

The question now is how should Pakistan deal with the situation? Can Pakistan satisfy its growing energy needs without alienating the Saudis and avoiding crippling US sanctions which could be more damaging than its current energy crisis?

To answer these questions, let's first examine the following facts:

1. Pakistan has at least 50 trillion cubic feet of recoverable domestic shale gas reserves, according to US Energy Information Administration.

2. US oil and gas companies are pioneers and leaders in shale gas development. In fact, these firms have been so successful that there is now a gas glut in the United States and gas prices have plummeted to less than $2 per mmBTU (approx 1000 cubic feet).

3. Iran-Pakistan deal requires Pakistan to pay $11-12 per mmBTU for its gas, six times the current price in the United States. Since the pricing formula for Iranian gas is based on the price of oil, it's almost certain that Pakistan will end up paying more than $12 per mmBTU with rising oil prices in the future.

4. Pakistan needs investment and technical know-how to develop its shale gas reserves to assure cheap and abundant energy supply.

Considering the above-mentioned facts, I think the best option for Pakistan is to go with its own domestic shale gas at a fraction of the price Iran is demanding.

Pakistan's best interest is not in defying Saudis and Americans to buy expensive Iranian gas and end up with crippling sanctions which could be much worse than its current energy crisis. Its best interests will be served by developing its own cheap domestic shale gas on an accelerated schedule with Saudi investment and US tech know-how. If the Americans and the Saudis refuse to help, then Pakistan will have a stronger case to go with the Iran gas option.

Related Links:

Haq's Musings

Pakistan Needs Shale Gas Revolution

Pakistan's Vast Shale Gas Reserves

US Can Help Pakistan Overcome Energy Crisis

Abundant and Cheap Coal Electricity

US Dept of Energy Report on Shale Gas

Pakistan's Twin Energy Crises

Pakistan's Electricity Crisis

Pakistan's Gas Pipeline and Distribution Network

Pakistan's Energy Statistics

US Department of Energy Data

Electrification Rates By Country

CO2 Emissions, Birth, Death Rates By Country

China Signs Power Plant Deals in Pakistan

Pakistan Pursues Hydroelectric Projects

Pakistan Energy Industry Overview

Water Scarcity in Pakistan

Energy from Thorium

Comparing US and Pakistani Tax Evasion

Zardari Corruption Probe

Pakistan's Oil and Gas Report 2010

Circular Electricity Debt Problem

International CNG Vehicles Association

Rare Earths at Reko Diq?

Lessons From IPP Experience in Pakistan

Correlation Between Human Development and Energy Consumption

BMI Energy Forecast Pakistan

Thursday, April 12, 2012

Pakistan's Energy Security Via Shale Gas Revolution

US natural gas prices have fallen below $2 per million BTU (approx 1000 cubic feet), about one-sixth of the price Pakistan has agreed to pay for Iranian gas. With over 50 trillion cubic feet of known shale gas reserves in Sindh alone, Pakistanis can also enjoy the benefits of cheap and abundant source of energy for decades via the shale gas revolution already sweeping America.

Increased production of gas from shale rock in the US has created a huge new supply, pushing down gas prices from $13/BTU (million British thermal units) four years ago to just $2/BTU today, even as the price of oil has more than doubled. By contrast, the Iran pipeline gas formula links the gas price to oil prices. It means that Pakistan will have to pay $12.30/BTU at oil price of $100/barrel, and a whopping $20/BTU for gas if oil returns to its 2008 peak of $150/barrel.

To encourage investment in developing domestic shale gas, Pakistan has approved a new exploration policy with improved incentives as compared with its 2009 policy, a petroleum ministry official said recently. Pakistan Petroleum is now inviting fresh bids to auction licenses to explore and develop several blocks in Dera Ismail Khan (KPK), Badin (Sind), Naushero Firoz (Sind) and Jungshahi (Sind), according to Oil Voice.

In addition to the fact that the Iran gas is extremely expensive, the entire Iran-Pakistan gas pipeline project raises other serious issues as well.

Iran-Pakistan Pipeline Issues:

1. Chinese investors and contractors have pulled out of the project for fear of being hit by US sanctions on their banks and other companies.

2. Russia's Gazrom is reportedly interested but only if it gets the deal at whatever price it decides to charge without any competitive bidding.

3. Pakistani companies and financial institutions are also under threat of US sanctions if they participate in the project.

4. If the pipeline does eventually get built, it will still be several years before gas starts to flow to Pakistan.

5. If Iran is still under US sanctions when the Iranian gas imports finally begin, Pakistan will have difficulty paying for the gas using international banking system. Iran has already been suspended by SWIFT, the Society for Worldwide Interbank Financial Telecommunication, which is the main mechanism used for international bank transactions.

6. The largest chunk of Pakistan's trade deficit is accounted for by energy imports. Iranian gas bill will only worsen this deficit, contributing to yet another balance of payments crisis sending Pakistan back to IMF.

Advantages of Domestic Shale Gas Development:

1. Cheap domestic gas can start flowing from Pakistani shale in a couple of years if Pakistan can make a deal with US (and American pioneers of shale gas like George Mitchel's Devon Energy) to invest and execute on an accelerated schedule in exchange for dropping Iran pipeline.

2. Pakistan will dramatically reduce its dependence on foreign sources and save a lot of foreign exchange spent on hydrocarbon imports.

3. Gas burns a lot cleaner than coal which is also a option given vast amounts of it in Thar desert. World Bank and other International financial institutions are more amenable to financing shale gas development than coal.

4. Abundant and cheap domestic gas supplies can help reduce electricity load-shedding which is caused mainly by under-utilization of installed generating capacity for lack of affordable fuel.

Shale gas revolution began a few years ago when an American named George P. Mitchell defied the skeptics and fought his opponents to extract natural gas from shale rock. The method he and his team used to release the trapped gas, called fracking, has paid off dramatically. In 2000, shale gas represented just 1 percent of American natural gas supplies. Today, it is over 30 percent and rising.

Among the potential downsides of shale gas development is the possibility of groundwater contamination reported in some places in the United States. Such risks can be minimized by following accepted practices to protect the aquifers which are found at levels well above the deep shale rock fractured for extracting natural gas.

Cheap and abundant energy is a pre-requisite for rapid economic growth in any country. Pakistan is no exception. The sooner Pakistanis recognize and resolve this crisis, the better it will be for the south Asian nation.

Related Links:

Haq's Musings

Pakistan's Vast Shale Gas Reserves

US Can Help Pakistan Overcome Energy Crisis

Abundant and Cheap Coal Electricity

US Dept of Energy Report on Shale Gas

Pakistan's Twin Energy Crises

Pakistan's Electricity Crisis

Pakistan's Gas Pipeline and Distribution Network

Pakistan's Energy Statistics

US Department of Energy Data

Electrification Rates By Country

CO2 Emissions, Birth, Death Rates By Country

China Signs Power Plant Deals in Pakistan

Pakistan Pursues Hydroelectric Projects

Pakistan Energy Industry Overview

Water Scarcity in Pakistan

Energy from Thorium

Comparing US and Pakistani Tax Evasion

Zardari Corruption Probe

Pakistan's Oil and Gas Report 2010

Circular Electricity Debt Problem

International CNG Vehicles Association

Rare Earths at Reko Diq?

Lessons From IPP Experience in Pakistan

Correlation Between Human Development and Energy Consumption

BMI Energy Forecast Pakistan

Wednesday, April 4, 2012

US Can Help Pakistan Develop Shale Gas

Pakistan has over 50 trillion cubic feet of shale gas reserves, according to the US Energy Information Administration (EIA) estimates. It's enough to energize Pakistani homes, businesses, power plants, CNG vehicles, fertilizer plants and factories for 25 years at a rate of 2 trillion cubic feet of consumption per year at half the currently agreed price of imported gas from Iran, an agreement the US strongly opposes. It will also save Pakistanis hundreds of billions of dollars in foreign exchange.

The relevant question here is whether America is willing to offer through its oil and gas companies the necessary investment and the advanced technology to quickly and profitably develop shale gas fields in Pakistan in exchange for abandoning the Iran-Pakistan gas pipeline?

Shale gas revolution began a few years ago when an American named George P. Mitchell defied the skeptics and fought his opponents to extract natural gas from shale rock. The method he and his team used to release the trapped gas, called fracking, has paid off dramatically. In 2000, shale gas represented just 1 percent of American natural gas supplies. Today, it is over 30 percent and rising.

Up until 2009, the US was the largest importer of Qatari LNG. However, the discovery of development of shale gas has caused a glut in the US. The Qatari LNG imports are no longer needed and the gas prices have plummeted in the United States. Qatari oil minister was quoted by Bloomberg as saying that 60 percent of Qatari LNG exports “moved to the east” in 2009.

Increased production of gas from shale in the US has created a huge new supply, pushing down gas prices from $13/BTU (million British thermal units) four years ago to just $2/BTU today, even as the price of oil has more than doubled. By contrast, the Iran pipeline gas formula links the gas price to oil prices. It means that Pakistan will have to pay $12.30/BTU at oil price of $100/barrel, and a whopping $20/BTU for gas if oil returns to its 2008 peak of $150/barrel.

To encourage investment in developing domestic shale gas, Pakistan has approved a new exploration policy with improved incentives as compared with its 2009 policy, a petroleum ministry official said recently. Pakistan Petroleum is now inviting fresh bids to auction licenses to explore and develop several blocks in Dera Ismail Khan (KPK), Badin (Sind), Naushero Firoz (Sind) and Jungshahi (Sind), according to Oil Voice.

Under the new policy, exploration companies will be offered 40-50% higher prices for the extracted gas compared with the $4.26/Btu price announced in Exploration and Production Policy 2009. Companies which succeed in recovering gas from tight fields within two years will get 50% hike over the 2009 price and if it takes more time they will get only a 40% hike on the 2009 price. As an added incentive, the leases for the fields will now be for 40 years instead of 30 in the 2009 policy, the official said.

Even with the higher prices for the tight gas offered to the exploration companies, it is estimated that Pakistan will have to pay a maximum of $6.50/Btu for the gas compared with $12.30/Btu for gas imports, according to a report by Platts.

Pakistan should ask the Obama administration to help fund and develop shale gas in exchange for abandoning the Iran-Pakistan gas pipeline. It will be a historic win-win for both nations, as historic as the US aid to Pakistan for Green Revolution in 1960s. Pakistanis will get relief from the severe energy crisis which affects almost everyone in the country. The US energy companies will create thousands of American jobs and make a huge profit in the process with the potential bonus of largely neutralizing the strong anti-American sentiments in the country.

Related Links:

Haq's Musings

Abundant and Cheap Coal Electricity

US Dept of Energy Report on Shale Gas

Pakistan's Twin Energy Crises

Pakistan's Electricity Crisis

Pakistan's Gas Pipeline and Distribution Network

Pakistan's Energy Statistics

US Department of Energy Data

Electrification Rates By Country

CO2 Emissions, Birth, Death Rates By Country

China Signs Power Plant Deals in Pakistan

Pakistan Pursues Hydroelectric Projects

Pakistan Energy Industry Overview

Water Scarcity in Pakistan

Energy from Thorium

Comparing US and Pakistani Tax Evasion

Zardari Corruption Probe

Pakistan's Oil and Gas Report 2010

Circular Electricity Debt Problem

International CNG Vehicles Association

Rare Earths at Reko Diq?

Lessons From IPP Experience in Pakistan

Correlation Between Human Development and Energy Consumption

BMI Energy Forecast Pakistan

Saturday, May 14, 2011

Pakistan's Vast Shale Gas Deposits

Reports of new gas reserves of 40 trillion cubic feet (upped to 105 TCF in 2013 by US EIA) are specially welcome at this moment in Pakistan when it is facing a very serious and growing energy crisis. The US Energy Information Administration (EIA) puts the estimates even higher at 51 trillion cubic feet. Even if the demand doubles from the current one trillion cubic feet a year to two trillion cubic feet a year, the estimated current gas reserves can last as long as 30 years or more.

Pakistan is particularly heavily dependent on natural gas for its energy needs. Demand for natural gas in Pakistan has increased by almost 10 percent annually from 2000-01 to 2007-08, reaching around 3,200m cubic feet per day (MMCFD) last year, against the total production of 3,774 MMCFD, according to Pakistani official sources. But, during 2008-2009, the demand for natural gas exceeded the available supply, with production of 4,528 MMCFD gas against demand for 4,731 MMCFD, indicating a shortfall of 203 MMCFD.

The gas supply-demand imbalance is expected to grow every year to cripple the economy by 2025, when shortage will be 11,092 MMCFD (Million standard cubic feet per day) against total 13,259 MMCFD production. The Hagler Bailly report added that Pakistan's gas shortage would get much worse in the next two decades if it did not bring on any alternative sources.

Shale gas offers an alternative source for energy-starved Pakistan. Rough estimates indicate the presence of at least 33 trillion cubic feet of unconventional gas reserves trapped in tight sands, according to an ENI Pakistan report. Another report by Shahab Alam, technical director of Pakistan Petroleum Concessions, puts the estimate at 40 trillion cubic feet of tight gas reserves in the country. These unconventional gas reserves are in addition to the remaining conventional proven gas reserves of over 30 trillion cubic feet.

With the pioneering work done in the United States on deep drilling and hydraulic fracturing (fracking) to extract hydrocarbons from shale rock, it is now estimated that the US alone has over 1000 trillion cubic feet of recoverable unconventional gas, according to the Wall Street Journal. Unlike the bulk of world's conventional natural gas reserves that are found in Russia, Iran, Venezuela and Qatar, the shale gas reserves have been discovered in rock formations spread across many parts of the world, including Australia (396 TCF), China (1275 TCF), North America (1931 TCF), South America (1225 TCF), Europe (639 TCF), South Africa (485 TCF), India (63 TCF) and Pakistan (51 TCF). Many energy analysts argue that tapping these new hydrocarbon resources could be a game-changer in terms of global economics and geo-politics.

Increased production of gas from shale in the US has created a glut, pushing down gas prices from $13/BTU (million British thermal units) four years ago to just $4.23/BTU today, even as the price of oil has more than doubled. By contrast, the Iran pipeline gas formula links the gas price to oil prices. It means that Pakistan will have to pay $12.30/BTU at oil price of $100/barrel, and a whopping $20/BTU for gas if oil returns to its 2008 peak of $150/barrel.

To encourage investment in developing domestic shale gas, Pakistan has approved a new exploration policy with improved incentives as compared with its 2009 policy, a petroleum ministry official said recently. Pakistan Petroleum is now inviting fresh bids to auction licenses to explore and develop several blocks in Dera Ismail Khan (KPK), Badin (Sind), Naushero Firoz (Sind) and Jungshahi (Sind), according to Oil Voice.

Under the new policy, exploration companies will be offered 40-50% higher prices for the extracted gas compared with the $4.26/Btu price announced in Exploration and Production Policy 2009. Companies which succeed in recovering gas from tight fields within two years will get 50% hike over the 2009 price and if it takes more time they will get only a 40% hike on the 2009 price. As an added incentive, the leases for the fields will now be for 40 years instead of 30 in the 2009 policy, the official said.

Even with the higher prices for the tight gas offered to the exploration companies, it is estimated that Pakistan will have to pay a maximum of $6.50/Btu for the gas compared with $12.30/Btu for gas imports, according to a report by Platts.

Although it does burn much cleaner than coal and oil, the process of extraction of shale gas in Pakistan, or anywhere else, is not without risks, particularly risks to the environment. In the United States, there have been many reports of ground water contamination from chemicals used to fracture rocks, as well as high levels of methane in water wells. In the absence of tight regulations and close monitoring, such pollution of ground water could spell disaster for humans and agriculture.

Given Pakistan's heavy dependence on natural gas for energy and as feedstock for industries such as fertilizer, fiber and plastics, it's important to pursue shale gas fields development under reasonably tight environmental regulations to minimize risks to the ground water resources.

Related Links:

Haq's Musings

Abundant and Cheap Coal Electricity

US Dept of Energy Report on Shale Gas

Pakistan's Twin Energy Crises
Pakistan's Electricity Crisis

Pakistan's Gas Pipeline and Distribution Network

Pakistan's Energy Statistics
US Department of Energy Data

Electrification Rates By Country

CO2 Emissions, Birth, Death Rates By Country

China Signs Power Plant Deals in Pakistan

Pakistan Pursues Hydroelectric Projects

Pakistan Energy Industry Overview

Water Scarcity in Pakistan

Energy from Thorium

Comparing US and Pakistani Tax Evasion

Zardari Corruption Probe

Pakistan's Oil and Gas Report 2010

Circular Electricity Debt Problem

International CNG Vehicles Association

Rare Earths at Reko Diq?

Lessons From IPP Experience in Pakistan

Correlation Between Human Development and Energy Consumption

BMI Energy Forecast Pakistan