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The end of the cheap hydrocarbons era
by Staff Writers
Moscow (Voice of Russia) Nov 13, 2012


Tokyo Gas mulls pumping gas from Sakhalin
Japan's gas company Tokyo Gas is looking into the possibility of laying a gas pipeline from deposits on Russia's Sakhalin Island to the central regions of Japan, the company's spokesperson said. The project in question provides for building a 1,400 km pipeline between Sakhalin Island and Ibaraki Prefecture north of Tokyo. A section of the pipeline will run across the Pacific bottom. Should the project be successful, the cost of natural gas delivery from Russia to Japan will drop several times. The idea of building this pipeline came into being following the Fukushima disaster in March 2011 and the subsequent shutdown of nuclear reactors all over the country. The end of the cheap hydrocarbons era.

Addressing the recent summit of the Europe-Asia forum, Russia's Prime Minister Dmitry Medvedev said that energy markets were facing new challenges to their stability. Among these challenges experts name 'the end of cheap hydrocarbons' era.

Pessimists say that a further increase in fuel prices is inevitable, and sooner or later the world will face a kind of energy apocalypse, and that its consequences are likely to be very dramatic. Actually, the end of cheap hydrocarbons era marks the start of fuel wars.

The need to look for alternative energy sources has become a widely discussed issue recently. Gas can be found in soil in the form of methane concentrated in coal layers, or as associated gas close to oil fields.

Sand layers can also be charged with gas, and it may also be found in the form of crystal gas hydrates under the sea floor. Another source is shale gas which can be found on all continents and thus can provide any energy dependent country with enough fuel.

The U.S. has become the first country to take advantage of shale gas production. In 2010 it was announced that shale gas production in the U.S. reached 50 billion cubic meters which is not so much, actually. Americans, however, decided to spend more on shale gas production, and soon joint investments in this branch of industry exceeded $20 billion.

Some time later the U.S. authorities admitted that local gas companies had overrated the amount of produced shale gas, misled people on the number of explored fields and underrated production cost in order to send stock prices up. So, it turned out that the success of a new technology resulted from a fraudulent scheme, says Sergei Pikin, director for the Energy Development Foundation:

"Most investors would take loans to join the exploration of shale gas deposits, expecting to pay off debts once the fuel is sold at a high price. The situation in US market has changed since new technology was introduced and gas production increased manyfold. The prices fell, and many companies turned out to be on the brink of bankruptcy."

As of today, many experts say that shale gas production earns no profit. That is why new gas routes are being lobbied all the time, and constant attempts are being made to switch to short-term contracts between consumers and suppliers. Apparently, this is done for some geopolitical reasons, says Sergei Pravosudov, director general at the National Energy Institute:

"Fuel wars have never stopped. Now the U.S. focuses on a new strategy which is about living on its own energy resources: to produce shale oil, developbituminous sands in Canada, and to produce shale gas.

All these are very costly projects. It is necessary to set very high prices on the resources. If the situation in the Middle East remains unstable, oil and gas produced in North America will be in high demand. We can see that the situation in the Middle East is far from stable."

Shale gas has not yet affected the energy market. The new technology still cannot be relied on when it comes to the future of energy resources. Shelf drilling remains the most promising path to follow, which means that the geopolitical interests of the world`s leading countries will collide over the North Pole. Whether this will be a tough fuel war or a war of words depends on how sensible the participants are. There is no chance to avoid this scenario anyway.

Source: Voice of Russia

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