Compressed Gas Hits the Metals Markets

By Dave Dubyne In mid-June, Chongqing City held its tenth anniversary as a Special Economic Zone in western China. The city government held a fireworks display on the waterfront, with 120,000 fireworks explode in the sky. Traffic was a gridlocked mess and the business district came to a standstill. Bus engines idled and drivers continued to blow their horns as if doing so would move traffic. Walking along, I noticed the relative lack of air pollution for the large amount of vehicles. The thought dawned on me that if I were in Bangkok the air would be a toxic black cloud. Why are there such pollution differences in gridlocked Asian traffic, and how does all this relate to Peak Oil? In his book GeoDestinies, Walter Youngquist argues that the fuel of the future will be electricity, rather than a liquid we pump from the ground. Wandering along through gridlocked traffic I saw all around me a vital interim step between fossil fuel liquids and electricity: Compressed Natural Gas (CNG). You may not see the connection, but for me – I live in China and study the commodities markets there – the light bulb clicked on. Presently several cities in China run their entire public transportation systems on CNG: from taxis and buses to city utility vehicles, it’s all CNG. Shortly, as the world wakes up to the fact that crude oil supply will soon peak and then decline, there will be a panic for better alternatives for our transportation and delivery networks. I spotted a taxi with its hood open and gave the driver 10 Yuan (about $1.50) for a tour of the vehicle’s CNG system. I wanted to see the main components, and what they were made of. Then I conducted a thought experiment, imagining what the implications would be if the world converted all its vehicles to natural gas. To convert and re-fit every car, bus and truck on our planet, the sheer volume of metal required would drive base metal prices to never-before-seen levels. In 2004, there were 880 million motor vehicles worldwide; this included passenger vehicles, heavy trucks and buses. To convert all of these vehicles, the world would need tanks fabricated from high-strength steel, aluminum or wound fiberglass to contain compressed natural gas, base plates for the tanks, stainless steel hoses, brass couplers, aluminum or steel brackets to hold the tank in place, all of the metal screws, nuts and bolts for the complete assembly of each unit, fuel control valves, oxygen sensors, vacuum hoses, vacuum fittings, fuses, tee fittings, high- and low-pressure regulators and particulate filters, plus solder and welding rods to hold it all together. As you can see, the list is long and each component uses a different metal or combination of metal alloys, and each component is assembled and manufactured at a different location that is dependent on a functioning delivery system. Supply and demand for metals in the re-fitting of our transportation fleet will affect commodity prices worldwide. Entire industries would need to be created to mass-produce pressure-testing kits and to make sure the units were installed properly. Re-fitting vehicles is but one facet of a larger undertaking. We would also need to construct CNG refilling stations throughout the world. Many countries including Argentina, Brazil, China and Italy already use CNG and have a spattering of refilling locations, but in reality CNG charging stations would have to be as numerous as present-day liquid petrol pumping stations. The typical CNG station is expensive, because of the special equipment needed to store and dispense a liquid at a temperature of -200 to -260 degrees Fahrenheit and a pressure of 25 to 135 pounds per square inch. The tanks have to be very large and are usually constructed from magnesium pressure-plated steel, which also needs a base plate and brackets. These gas storage vessels then need to be connected to gas dispensers at the pump. Beyond the use of large amounts of metals, specialized safety equipment needs to be installed at the pumping station. This includes an air extraction system; a lighting system with anti-explosive elements; a manual ventilation system that can be activated from a remote location; remote switching boards for an automatic ventilation system; a fire control system; wires, hoses and couplers to connect everything; and a thick, walled bunker to house everything in case of explosion. In 2006 there were 167,476 petrol stations in America alone, but only 30,000 CNG stations worldwide. Research at the Idaho National Engineering and Environmental Laboratory puts the minimum cost of construction for each CNG filling station at $100,000. You do the math. And don't forget to include stations for the other 200 countries on our planet. Another often-overlooked part of the switchover is space lost where the tank is mounted in the vehicle. In a bus, the last four seats in the rear are displaced; in a car, the high-pressure tank reduces trunk space by 30 per cent. Delivery trucks are another issue altogether: reduced load means more trips and more natural gas to deliver the same amount of goods. Currently to convert a bus to CNG costs $25,000-$35,000. Even in China, where parts and labour are cheaper than in other regions of the world, automobile conversion costs $1,000-$2,000. This transition to compressed natural gas for transportation is dependent on the continued free market access to minerals and commodities worldwide. Many knowledgeable people see more OPEC reductions of crude oil production as a possibility, but I rarely hear talk of a base metals embargo. If resource nationalism became the norm, and the supply of base and rare metals on the world market began to decline, the switchover to natural gas or electricity could find it hard to proceed. This idea is not as odd as it may seem; take a look at China. The government began an export quota on two metals – indium and molybdenum – on June 18. China's molybdenum product exports are set to decrease by 10 per cent or 830,000 tonnes; export permission will only be granted to exporters with a trade export volume during the last three years of more than 3,000 tonnes. China is also the world’s largest producer of indium, accounting for more than 30 per cent of global total, along with 90 per cent of global tungsten production. What happens if Russia, Canada, Brazil or any of the African nations decide to follow in China’s footsteps and begin export quotas or withhold commodity sales to drive up prices? Oil embargo or commodities embargo: which would be more devastating for the world economy? More usage of natural gas would mean more volume of a product that needs to be produced, stored and transported. New spider webs of natural gas pipelines and compression stations would be required to keep it all moving. We would need to increase production of both crude oil and natural gas, which are different fuels and need to be stored, produced and transported by different means and use different infrastructure to do so. In addition, we as a world would need to increase natural gas production as we went ahead full throttle finding, developing and producing from the remaining oil fields. This also means more metal usage. More pipes, more metal, so an increase in metal consumption and metal prices will follow. Not to worry: container ships and trains can continue to chug along burning heavy-sulfur crude oil, which the world will produce more of, especially the new projects coming online from Saudi Arabia and the Caspian Sea Basin. Keep in mind, CNG is only the middle transition stage of fuel sources to keep goods moving around our globalized planet. The final fuel source will be electricity, which requires its own set of infrastructure to generate. Once again, the volume of metals used in those developments will be huge. This unique set of circumstances presents a Catch 22 for all societies on earth. We need to use fossil fuels to extract and manufacture resources to allow a transition to a liquefied natural gas infrastructure. Then our societies will have to use the remaining natural gas reserves to exploit even more minerals and commodities to transition to electric infrastructure. Regardless of nationality, religious background or social status, we as a people will have to complete this conversion process together. We must begin now to convert our transportation systems from liquids to compressed gas to, ultimately, electricity, and to do so will be resource-intensive. To say I expect a continuing bull market in metals would be an understatement.

David DuByne is from the United States and is presently living and teaching Business English in Chongqing, China. He and webmaster Marc Hastenteufel are translating www.daveseslbiofuel.com, an English teaching web site devoted to bio-fuel and oil depletion, for those studying English around the planet into Mandarin Chinese. Robert Rapier, an expert on cellulose ethanol, gas-to-liquids (GTL), and butanol production, also provides technical assistance for content throughout daveseslbiofuel in the renewables and conservation section.

Spring Break in Burma

By Peter McKenzie-Brown

Burma is a land of many colours. It is poor beyond imagination, making Thailand seem positively First World by comparison. It is ethnically diverse - about 135 tribes in total, and more than 100 languages and major dialects - yet we found the people almost without exception to be warm, friendly and hospitable.

The Burmese we met did not seem to have the refinement or charm of the Thais. However, given the oppression under which they live, we were amazed that they have such spirit. The day of their deliverance cannot come too soon. To gain powerful insights into the sorry state of that country, read From the Land of Green Ghosts.

The country has wealth in its minerals and other natural resources, plus its tourism potential. Unfortunately, however, the government is dysfunctional. In barely 50 years, the prevailing socialist regime has transformed Burma from the richest country in Southeast Asia into one of the poorest countries in the world.

Everywhere we looked we saw large billboards extolling what we called the country's "national creed." One of the "people's desires", for example, is to "Crush all internal and external destructive elements as the common enemy." Charming. Among the country's "four economic goals" is the following gem: "The initiative to shape the national economy must be kept in the hands of the State and the national peoples."

Yangon and Ngapoli Beach: By the state, of course, they mean the generals, who have looted everything lootable. A visit to the National Museum in Yangon (Rangoon) shows how little of value actually remains in the public trust. This institution would be better called the National Embarrassment.

That said, Yangon's amazing Shwedagon Paya is in a class of its own. Thailand has nothing comparable. The main pagoda of this great temple is covered with an estimated 60 tons of gold, and it is capped with a "golden umbrella," the top vane of which turns with the wind and is made of much precious metal plus 1100 diamonds weighing 278 carats, plus 1383 other precious stones. At the very top is a golden orb studded with another 4351 diamonds, on top of which is a single 76-carat diamond. Or so explains the Insight guidebook.

We also went to a tiny bungalow-style lodge at Ngapali Beach, on the Bay of Bengal. The beach is unspoiled and wonderful, although you can't walk outside the resort area without being reminded of the grinding poverty of the Burmese people. That is ironic, since this is a modest tourist destination. You would expect tourism - modest though it was - to help the local economy. Yet it was here more than anywhere else that the people looked sad and desperately poor.

Pagan and Mandalay: In many ways, Pagan (pronounced Bagan) was the most interesting part of the trip. The ancient city is located on the banks of the Irrawaddy River and covers about 40 square kilometres. About 2,000 temples, stupas and other monuments remain. Its civilization rivalled that of Angkor nearly 1000 years ago.

The ancient ruins at Pagan were anything but unspoiled, however. Tragically, much of the restoration of temples and monuments at Pagan amounts to archaeological vandalism. As we were leaving, we ironically passed the grand opening ceremony for a "restored" ruin. It was actually a new structure based on certain old architectural styles, constructed at an archaeological site where there once had been a pile of ancient bricks.

The Pagan zone suffered an earthquake in 1975, and many of the buildings were damaged. However, much of the art and architecture can still be seen - without the distraction of other tourists. We frequently were given access to ancient temples by ladies who, when we arrived, mysteriously appeared out of the shadows with a key. Their English was usually poor, yet they showed us around and quite effectively pointed out the most interesting features of the ruins.

We arrived in Mandalay on the first day of the New Year water festival (southeast Asia's mega-holiday). The tourist attractions were closed, and for five days the locals poured buckets of water on each other's heads, and tourists were part of the madness. We were totally drenched in a short ride on a tri-shaw (rickshaw). After that we just walked and got soaked. We decided it was time to move on, and cut our stay short. (The soaking of people with water is a purification ritual associated with Buddhist New Year throughout the Theraveda Buddhist countries in Southeast Asia: Burma, Thailand, Laos and Cambodia.)

Birds and Inle Lake: We are birders, and in most of these places we saw new species. Inle Lake hosted innumerable pond herons, and was one of the best places we have seen for waterfowl in general.

We spent our last four days at Inle Lake in the Shan State. That small poor town was really wonderful - as always, especially the people. We decided to trek into the mountains through some Pa-O (one of the many hill tribes) villages, and hired a guide to lead us. It was a 6-7 hour hike with a 30-minute stop for lunch in a village.

Spring Break: Then I had quite a bad accident. Just as we crested the mountain and were headed back downhill, I fell and broke my arm quite badly. Our government-certified, 32-year-old guide had no training in first aid, nor any provisions for such. Instead, he started to cry, and begged our forgiveness. Eventually he explained that the government holds him responsible for the welfare of the people he guides. As soon as they found out what had happened, they would throw him in jail and take away his license.

We hiked three hours down the mountain to a village where we caught a horse cart to our hotel, leaving our guide behind. In the room, Bernie performed first aid using such advanced medical technology as a toothbrush container for a splint, and we toughed it out for the night. The strangest part of that experience was our fear that police would burst into the room late at night, demanding to know who our guide had been when I broke my arm. Our paranoia was palpable. However, the police did not come, and nobody at Inle Lake found out about the incident.

The next morning we boarded our scheduled flight to Chiang Mai via Yangon. Once home, we headed for Chiang Mai Ram hospital. From the time I had my fall, it took 28 hours to get medical treatment. Repairs required a 2-hour operation.

Free Aung San Suu Kyi! Are we glad we went? Absolutely, because of the people we encountered and the remarkable places and artefacts we saw.

Would we go again? Maybe. The hardest part of the trip to describe is the dark reality of the country's wicked rulers. Oddly, though, that in itself was an interesting part of the experience.

Would we recommend it to others to visit there? Yes, because with a conscious effort to only use privately-owned and operated facilities, visitors can make a small difference in the lives of the people. I believe the American-led sanctions on the country only hurt the poor. They have had little impact on the generals and their cronies. In this matter, we differ from the view of imprisoned opposition leader Aung San Suu Kyi.

Myanmar and its people will always stay with us. We can only hope that democracy will come to that country and that one day these people will get to live in dignity and without fear. A good place to start would be to release Aung San Suu Kyi from house arrest. She is a symbol of hope for the people.

A Natural Gas Crisis Coming?

This resource triangle illustrates that conventional resources (the apex of the triangle) represent a relatively small volume of the total hydrocarbons in an area or basin. Unconventional hydrocarbons depicted by the lower part of the triangle tend to occur in substantially higher volumes. Early exploration and production is focussed on the apex of the triangle. Industry only pursues opportunities lower in the triangle when the opportunities at the top of the triangle are inadequate to meet demand and consumers are prepared to pay to make the opportunities economic. The oval illustrates that the Alberta oil and gas industry has moved significantly down the triangle in pursuing both oil (heavy oil, tar sands) and gas (coalbed methane, tight gas).

By Dave Russum

The final years of the 20th century saw a rapid escalation in natural gas drilling in Western Canada. For the first time, however, the rate of production growth began to falter. In early 2000, as Murphy Oil, Apache and Beau Canada announced their discovery of the Ladyfern Slave Point gas field in a remote area of Northeastern British Columbia, their achievement seemed to herald a new era of successful wildcat exploration.

As word of a major discovery leaked out, many of the significant players in the industry jumped on the bandwagon. A frenzy of land purchases, drilling and pipeline construction followed. In little more than a year, production from the new fields rose to more than 700 million cubic feet per day - and this from an area only accessible during the cold winter months. Production from this region helped raise Canada's gas production to a new peak (in late 2001) of 17.4 billion cubic feet of sales gas per day.

Rather than representing a new era of large discoveries, Ladyfern appears to have been just another increasingly-rare large gas find. During boom periods in the 1950s, for example, gas exploration yielded large new gas fields almost every year, and many discoveries waited for years to be tied into the pipeline network. As the industry matured, such discoveries became unusual. Prior to Ladyfern, the last large gas discovery had been at Caroline, more than ten years earlier.

Unconventional gas: In any given area, free-flowing, buoyancy-driven conventional gas represents a very small fraction of the natural gas resources present. Unconventional gas represents possibly hundreds of times more natural gas resource than there is for conventional gas. It comes from five major sources:

 1. One is shallow, biogenically-derived gas in mixed sand and shale sequences. Shallow biogenic gas is considered to be an unconventional gas resource since it is not generated in the same temperature and pressure systems found in conventional hydrocarbon generation. The Milk River and Medicine Hat sands of southeastern Alberta and southwestern Saskatchewan are classic examples of this type of unconventional gas. This is the area where gas was first produced in western Canada, and it is still a major producing region. This continuously gas-producing area is the largest in the Western Canadian Sedimentary Basin.

 2. Coalbed methane is natural gas within the structure of coal. Special production techniques to remove this gas from its coal seam reservoir include lowering reservoir pressures rather than keeping them high. Coalbed methane knowledge has advanced rapidly. So has the development of water-free natural gas from coal in the Horseshoe Canyon Formation in Central Alberta. First commercial production only occurred in 2002, but current production is already more than 500 million cubic feet per day.

 3. Tight gas is gas in low-permeability rock. Reservoirs require artificial fracturing to enable the gas to flow. Canadian Hunter Exploration in the 1970s identified a huge gas resource in the Deep Basin of western Alberta. In this area, much of the sedimentary section is charged with natural gas. The rock can have extremely low permeability but production is not hampered by the presence of water. Similar gas-charged areas have been found in many parts of the world; a common term for this kind of reservoir is "basin-centred gas".

 4. Shale gas is held in shale reservoirs. This is also a low-permeability, highly-challenging resource. Large volumes of gas molecules are trapped in shales which represent one of the commonest rock types in any sedimentary sequence. Shale gas production has been pursued in the United States since the early days of the natural gas industry, and in recent years the Barnett Shale in west Texas has been a tremendous success. Many companies are experimenting with shale gas production in Saskatchewan, Alberta and northeastern British Columbia, but a commercially viable project has yet to be announced.

 5. Gas hydrates consist of natural gas trapped in ice crystals in areas of permafrost and on the ocean floor. In 1985, unconventional gas production received a boost when the United States introduced incentives to encourage the development of energy alternative. This incentive advanced the technical understanding of the resources themselves and of ways to develop them. Canada has benefited from this, learning new ways to exploit her own unconventional resources.

Complacency: The existence of these resources has led to complacency among consumers, who still assume they will always be supplied with gas at "reasonable" rates. Developing these resources can have substantial impacts on the environment through closer well spacing, more intensive infrastructure, additional noise from compression, the challenges of water disposal, NIMBY issues, and other factors. More to the point, most people do not understand that little unconventional gas is extractable in large volumes at lower prices. Consider this matter in the context that natural gas producers generally buy mineral rights from the Crown but must negotiate surface access and other land rights with their neighbours. In this environment, the chances are high that some projects will face delays as a result of public hearings - for example, as Shell and the other contenders did at the Caroline hearing. After all, those with an interest in a single land use decision could include petroleum producers, Aboriginals, landowners, farmers, ranchers, loggers, trappers, campers, sports and environmental groups, and others.

Many conflicting interests need to be resolved. Forecasters now commonly suggest that western Canada's conventional gas production has peaked and will continue to decline. Gaps between traditional supply and growing demand are already being filled with gas from such diverse sources as tight sands; coalbed methane; and since January 2000, frontier gas and liquids from Nova Scotia's Sable Offshore Energy Project. Other possible future sources include Mackenzie delta gas and liquefied natural gas from abroad. This suggests higher future costs and risks, and that suggests higher-priced future energy.

Note to readers: This article first appeared as part of a series in Wikipedia. To read it in context, click here. Then scroll down until you find the "resource triangle" graphic.