Tom Russo's blog

Why the Oil and Natural Gas Shale Revolution is so Resilient

Someone asked me why the North American Oil and Shale Gas Revolution didn't stall given declining oil and natural gas prices. What came to emy mind was resilency and seven other factors which taken together can explain why OPEC and Russia did not get their wish.

The most important factor is that Oil and Natural Gas can't just be looked at as a single commodity. The fact is, depending on where you drill a hole in North America's onshore shale basins, you will probably get oil and associated natural gas, natural gas and natura gas liquids (NGLs) or just natural gas. So a producer can rely on multiple revenue streams from all or a combination of these commodities or a portfolio of assets. Fortunately, each commodity's price is different and not exactly related. It also helps to have th infrastructure to process and refine these commodities and move them to markets in North America and abroad.  Read more about Why the Oil and Natural Gas Shale Revolution is so Resilient

Important Economic & Policy Issues facing the Energy Industry

The National Capital Area Chapter of the U.S. Association for Energy Economics (NCAC-USAEE) featured Tom Russo, Founding Partner of Russo on Energy LLC in its July 2016 newsletter. Tom spoke about key economic/policy issues facing the energy industry and why the NCAC-USAEE is a great place to network in Washington DC.

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2 Energy Books to Read This Summer

Several friends and colleagues recently asked me for suggestions on what energy books to read this summer. They were planning vacations at the beach, the mountains and a few were venturing overseas. Two books came to mind that I thought would fascinate them and at the same time give them an edge in engaging new friends who always seem to want to discuss U.S. energy policy and environmental matters. Should you read both books? Given that the power sector is becoming a large consumer of gas it would be wise to read The Green and the Black first and then follow it with The Domino Effect. Reading both books is like eating "Mac and Cheeze." They are an unbeatable combination.  Read more about 2 Energy Books to Read This Summer

Vintage Approaches for Planning & Regulating Sustainable Hydropower

22,500 MW Three Gorges Dam in China

Recently, a colleague doing work for the United Nations Development Programme in Russia requested me to send her the best guidance available on planning international hydropower projects. She was attempting to minimize impacts on biodiversity and ecosystem services. While I have been away from Hydropower for a while, I was really hard pressed to find current documents that would help her. Most reports were too general and few, if any, talked about planning and regulating hydropower projects, which can last 50 years or longer. I found this difficult to understand despite the wealth of experience in the U.S. and Canada in siting and regulating hydropower. 

I quickly realized that in the hydro arena, we were still grappling with environmental, regulatory and social issues. The same is true for siting natural gas and renewable energy. However, the stakes are higher today since the World Bank Group and the Asian Infrastructure Bank are investing in hydropower in to spur economic development, address Climate Change and move countries away from fossil fuels. So I dusted off three publications below that should help both developing and developed countries to better plan and manage their hydropower and other energy projects. Here's a short explanation of each:

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'People Think if They Can Stop Pipelines They Can Stop Fracking,' says Tom Russo

http://www.bloombergbriefs.com/power-gas/

Tom Russo, who founded energy consultancy Russo on Energy after spending 30 years at FERC, spoke to Bloomberg's Christopher Long about the state of pipeline build-out in the U.S, and the future of the U.S. natural gas market. The interview also appears in Bloomberg Brief- Power & Gas. Read more about 'People Think if They Can Stop Pipelines They Can Stop Fracking,' says Tom Russo

Southern California’s Summer Electric-Gas Reliability Stress Test

Electric plants served by Aliso Canyon Storage

Excuse my use of the term “stress test”, but that’s exactly how I view the challenges that the California grid operator, State officials and energy companies will confront this summer when they have to operate their electric system without the natural gas from the Aliso Canyon Gas Storage facility. As most of you know, the State of California has banned use of the facility for safety reasons. 

It’s definitely not “business as usual” with Aliso Canyon out of the picture. California takes pride in its renewable energy portfolio, but relies on 17 gas-fired power plants in the Los Angeles Basin and San Diego to meet peak demand and changes in supply due to the variable nature of solar and wind power generation. These 17 power plants are normally supplied by the Aliso Canyon Gas Storage Facility.  Other electricity regions also rely on gas-fired generation and available pumped storage hydro projects to manage changes in wind and solar power. If they lost significant natural gas infrastructure, they would be in the same position as California.

The opportunities to learn this summer from California’s experience are great. The electric power industry relies heavily on modeling to forecast likely events and necessary investments in electric infrastructure and the fuels to operate power-generating facilities. Hopefully we can argue less about banning fracking and natural gas facilities and learn more about how to operate an increasingly “gassy” and renewable energy portfolio in California under less than ideal conditions. Of course, the weather will dictate the electricity demand and what resources California will use to maintain adequate service, and maintain electric reliability and air quality. Read more about Southern California’s Summer Electric-Gas Reliability Stress Test

Pipeline Constraints Could Stifle Clean Power Plan, Increase Gas Prices

Gas-fired Power Plants and Pipeline

Many people fail to see or are willing to admit the positive role that the shale gas revolution will play in easing the pain of implementing EPA's Clean Power Plan (CPP). In my opinion, abundant and cheap natural gas really takes the wind out of the sails of those who argue against the CPP. Lets also remember that affordable and efficient gas-fired combustion turbines will be ramped up and down in many regions to integrate all the wind and solar into the electric grid for the near future. Current natural gas prices at $2.07/MMBtu make that relatively easy and very affordable. As a result, the U.S. power sector is becoming more "gassy" and more dependent on a reliable delivery of gas. At this time, 3,000 MW of new, natural gas-fired generating capacity is either under construction in New England or will be soon. New York and PJM are also seeing increases in natural gas fired power plants.

But what would happen if there wasn't enough pipeline capacity to transport gas to markets to meet heating and electricity needs during winter? We already have the answers- very high natural gas prices that were up to 50x the average price. Read more about Pipeline Constraints Could Stifle Clean Power Plan, Increase Gas Prices

Oil's Critical Role in Electricity Markets During Cold Winters

Winter Storm Jonas brings 20 inches of snow

I know that declining oil prices are in the news. However, the one bright spot is oil's role in electricity markets, especially during winter. Here’s a short summary of work that Devin Hartman [now the Electricity Policy Manager at the R Street Institute] and I did previously when we were trying to determine dual-fuel oil fired power generation’s role in ensuring the electric reliability in organized electricity markets.  Read more about Oil's Critical Role in Electricity Markets During Cold Winters

Why I'm Bullish on Natural Gas

Smog in Tehran Iran

Most politicians, energy experts and consumers cite the abundant supply and low price of natural gas realized by the U.S. Shale Gas Revolution as reason to celebrate. However, natural gas producers, investors, and speculators who have bet on higher prices still continue to “sing the blues.” Despite recent NYMEX natural gas futures prices hovering around $2.05/MMBtu and lower physical natural gas prices, I am very bullish on natural gas for a variety of reasons. In fact, I believe that three times the current price is a bargain for the benefits that the fuel provides. 

Recent events in the Chinese stock market and the steep decline in crude oil prices are wreaking havoc on global economies and reducing revenues to OPEC producing countries, respectively.  However, when things are not going well economically, it forces national and local governments to rethink their energy policies and the fuels they rely on to heat and cool homes and businesses, produce electricity, and transport people and goods. It is indeed a time when fuels traditionally used in a country are vulnerable to new thinking that puts a premium on human health and environmental issues.

Fortunately, abundant and inexpensive U.S. shale gas and LNG Exports from the U.S. to Europe, Asia and South America will provide more economic options to national and local governments that want to begin attacking chronic air pollution problems in their large urban centers. As natural gas takes center stage as a solution to chronic air pollution, demand for the fuel will increase and so will prices. Let me explain. Read more about Why I'm Bullish on Natural Gas

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