TPT January 2012

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98 January 2012 ›
Global Marketplace
the Journal reporters, the deal in October for the gas from Cheniere
Energy Partners, the first of its kind in the US, calls for the British
energy company to pay Cheniere some $8.2bn over 20 years.
Messrs Gilbert and Chazan wrote, “[This] underscores how quickly
the shale gas boom has transformed the US energy landscape,
as surging domestic production is prompting companies that built
facilities to import natural gas to use them to export the resource”
instead. (“BG, Cheniere Forge Gas-Export Pact,” 27 October).
The agreement is a coup for Houston-based Cheniere as it seeks
contracts for its LNG, to be super-cooled for export in ocean-going
tankers. The company will break ground on a $6bn facility for the
purpose in Cameron Parish, Louisiana, this year. It expects to begin
exporting the gas in 2015.
As noted in the Journal, it is also significant for BG, which will be able
to buy comparatively cheap gas and sell it for much higher prices
in Europe and Asia. BG, formerly one of the largest importers of
LNG into the US, is now seeking permits to convert a facility in Lake
Charles, Louisiana, to export use.
A tale of two crudes – West Texas
Intermediate and Brent – and their
significance to the cost of filling up
the tank of a car
For the many car owners in the US who wonder why the price of
gasoline does not go down when oil prices drop, Ben Casselman
of the Wall Street Journal blog “Real Times Economics” provided
an explanation. It begins with the definition of oil, which for most
Americans (including economists and newspaper reporters) will be
West Texas Intermediate, or WTI: the grade of light, sweet crude
that is the basis for contracts traded on the New York Mercantile
Exchange.
Historically, WTI has been the dominant global oil price, and has
closely tracked such other benchmarks as Brent (a North Sea
crude that is the basis for the crude contract on the Intercontinental
Exchange) and the OPEC reference basket.
But, Mr Casselman wrote in October, over the previous year WTI
prices had decoupled from those in the rest of the world. WTI was
trading for about $91 per barrel, fully $20 less than Brent. Among
the reasons offered for the differential were surging demand for oil
in Asian markets, which are more tightly connected to Brent than to
WTI; and limited storage capacity at the Cushing, Oklahoma, oil hub
where WTI is traded. (“Why Don’t Gas Prices Fall When Oil Does?,”
25 October)
Why should this matter to American drivers? It happens that US
refineries get much of their oil from overseas, and therefore often
pay prices that are linked to Brent, not WTI. Mr Casselman noted,
“That is especially true of refineries on the coasts, which is part of
why a gallon of regular unleaded costs $3.54 in New England and
$3.36 in the Midwest. Nationally, gasoline prices generally track
Brent much more closely than WTI.”
Fortunately for the American motorist, Brent prices have come down
from their Spring highs of $125 a barrel, as reflected in a 50-cent
drop in US retail gasoline prices. But blogger Casselman again
provided context. He wrote, “Brent is still up nearly 18 per cent from
the start of [2011], while WTI is nearly flat.”
Technology
› Virgin Atlantic Airways intends to run scheduled flights on a
50:50 blend of conventional and “recycled” jet fuel by 2015,
employing a technology that creates ethanol from the carbon
emissions of such manufacturing operations as steel making. The
privately owned British carrier says it will use the alternative fuel,
which is being developed by New Zealand-based LanzaTech and
Swedish Biofuels, on its London-Shanghai and London-Delhi flights
“within two or three years.”
As reported by Rose Jacobs in the Financial Times (11 October),
Virgin’s fuel is produced by capturing the carbon byproduct of energy-
intensive heavy industry for conversion into ethanol by means of
microbes found in rabbit gut. The ethanol is then transformed into
a synthetic, aircraft-ready “drop-in” fuel. “In a nutshell, what we’ve
gone into is the recycling business,” said Sir Richard Branson,
founder of the exclusively long-haul airline. An early innovator, Virgin
flew the first commercial jet using a biofuel blend in 2008; although,
Ms Jacobs noted, no paying passengers were aboard.
› Chevron Technology Ventures, a division of Chevron USA
(Houston, Texas), has launched a demonstration project to
test the use of solar energy in oil production. The feasibility study
is being conducted at the Coalinga Field, in California, which began
operations in the 1890s. The heavy Coalinga crude does not flow
as readily as lighter grades of crude. Chevron taps the sun to
heat the heavy crude and reduce its viscosity, making it easier to
extract. Currently, this steam is generated by burning natural gas. In
demonstration, the solar method reportedly yields about the same
amount of steam as one gas-fired generator.
The solar-to-steam initiative utilises 7,644 mirrors to focus sunlight on
a 327-foot solar tower that functions as a boiler. The steam produced
is distributed throughout the oilfield and injected underground for
enhanced oil recovery. The project, which covers 100 acres, devotes
65 acres to the mirrors, and 35 acres to support facilities. According
to Desmond King, president of the Chevron unit, the technology has
potential to assist oil recovery in areas of the world where natural
gas is expensive or not readily available.
BrightSource Energy (Oakland, California) provided technology,
engineering, procurement and construction for the project, to be
operated by Chevron Technology Ventures.
› The South Korean Ministry of Land, Transport, and Maritime
Affairs has set itself to promote the development of a new
desalination technology, utilising natural gas hydrate, with the
potential to produce cheap fresh water in a period of water scarcity
in many regions, including Korea. As described in the Korea Herald
(4 October), the mechanism entails removing gas from methane