Re:Good Piece on the Developing Oil/Gas Crisis

["dmschanoes" <dmschanoes@xxxxxxxxxxxxx>]

Lots of good pieces out there although many are available by sub only...

Re: the shortage of natural gas:  Not really a shortage-- of anything but
profit where production costs have engendered tremendous overproduction,
causing the anti-sense response of price increases as it has with oil.

Deepwater drilling is emerging from its period of uncompensated costs and
will yield more gas than originally estimated.

In response to low prices (historical norm of $2.50 per million btu),
production in Gulf of Mexico declined from 1997-- 4.8 trillion cubic feet to
2000-- 4.0 tcf.   NG prices after 2000 more than doubled to $5.54 per
million btu.  Still it wasn't enough, given the looming financial collapse
of energy producer/marketers.  In 2001, as part of its overall "transfer the
profits" program, the Bush administration decided to forego royalty payments
on extraction from the Gulf.  Still not enough,  Gulf of Mexico production
has declined to 3.3 tcf.  But all that production and drop off is on the
Gulf's shallow shelf.

In response the Bush administration has advocated forgiving all royalties,
permanently, on  wells deeper than 15,000 feet.  Three dimensional computer
mapping indicates significant reserves at 18,000 feet.  It is, currently,
more expensive to get at, but as is the case with oil extractive operations,
technological costs will drop, and the expense of exploration and production
will be circulated in and through increased product at inflated, then
declining prices.

The current price and  availability of natural gas is a social category not
a geological one.  Pemex, the Mexican state company, today imports 100,000
bbls/day of gasoline from the US, and 1 trillion cubic feet of natural gas
as it lacks production facilities.  What does Pemex do with the natural gas
released from its oil wells in the pumping process?  Why, it burns the gas
off.

The history of oil price and  industry for 30 years has been overproduction
depressing prices,  followed by sharp price increases, followed by war,
followed by price collapse, followed by further development of more
efficient technologies for extraction, followed by more overproduction...

Gas isn't all that different.

dms



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