The LNG export play

Nice FT story on what Shell is saying about natural gas in the US.  Current Henry Hub price has been hanging around $2.25-2.55, which is about 3-4 times cheaper than Europe MMBTU (millions British thermal units) and bizarrely cheaper than most Asian countries are being quoted right now (more like $14-15 and moving north for the summer to almost $20 - by some predictions).

Think about that for just a second.  Natural gas in the US at something like 1/8 the price in Asia.  How long do you think that lasts?  Why should it?

To me, that's a huge LNG (liquid natural gas) market waiting to be captured by US producers.  Selling LNG ain't like moving 100,000 metric tons of diesel or jet fuel or 2 million barrels of crude in one large tanker.  Those transactions are the equivalent of one-night stands and leave your money on the dresser.  Selling LNG is more like getting married: the buyer has to have a relationship with a regasification terminal nearby.  There must be pipes that connect the end-user to that LNG terminal (only so many in the world, but plenty being built).  If no regasification terminal, then buyer needs to rent himself a regas ship ($50m a year), park it somewhere, and then connect that by pipes to the end-user.  All very complex. 

Of course, the seller must have liquefaction facilities at ports, with pipelines connecting fields.  

America is piped up like crazy and adding more pipe all the time.  We're just getting our first for-export liquefaction facility set up in Louisiana by Cheniere, which is leading the effort here to gear up for export.

All very exciting stuff, as we could be exporting - within a few years - upwards of 1/4 of our production.  Then you factor in all the coal displaced in electricity generation, and we can be exporting that high-quality stuff to Asia along with the LNG -  a win-win on trade balance and energy security.

Back to the FT piece:  the currently depressed US prices are just too low, reflecting that we're running out of storage after a mild winter and a continued production boom.  Shell's prediction?  US NG prices will double by 2015.  Expect the petrochem industries to hawk that fear like crazy, but in truth, it's a reasonable rise to just $4-6 MMBTU.

[Shell, BTW, has done a lot of exploratory drilling on NG in China and says it thinks the reserves can be developed economically.]

Shell is also "examining plans to liquefy US gas for export - which would allow it to attract higher prices, particularly in Asia - transform it into clean-burning transport fuel through gas-to-liquids technology, and use it as a feedstock for petrochemicals."  That's a quick rundown of the range of economic opportunities - in addition to displacing coal in electricity.

All good stuff and an integral part of America's coming industrial renaissance.

The race card cannot work on Obama, or really any national candidate going forward

WAPO story on Romney rightfully steering clear of those within GOP who, in their desperation, consider racially motivated election attacks against Obama.

The problem with this approach is that it is magnificently self-defeating - that's how America has evolved in its racial make-up.

Obama is carrying Blacks, Hispanics and Asians - plus the "minority-majority" that are women (historically far less welcoming of racially tinged messages than men, to include white women versus white men).

All three of those major minority groups tilt decisively toward Dems, and racially-tinged political messages simply reinforce that reality and perhaps lock it in for the longer term.  Simply put, as a polity, America is past all that nonsense.

And the fact that the Republicans are considering it - even among just their fringe hardcore elements - signals just how bereft of ideas and leadership and vision they really are.

And that is a very sad day for this republic, because, quite frankly, Obama does not deserve a second term and it won't be any better than the first.

But I do take comfort in this reality, being the father of one Asian female and two future African-American women.

Time's Battleland: SYRIA Obama Cleverly Leading from Behind — Again

The quiet coalition has come together to reverse the decline of the opposition rebel forces in Syria, according to this nice front-pager in Wednesday’s Washington Post.  Much like in the case of Libya, the Obama Administration is hanging back and letting the local “market” determine his military response.  He simply refuses to take the strategic lead, which is frustrating to many and yet decidedly clever on his part.

To me, this is the Obama Doctrine: respond to local demand for U.S. crisis-response services rather than — in typical American fashion — pushing our way to the front of the line, bossing everyone, and then finding ourselves alone on the postwar backside.

 Read the entire post at Time's Battleland blog.

Iranians not unique in democratic aspirations

Interesting op-ed in WSJ by Israeli political researcher who explains his rather sophisticated attempts to surreptiously measure democratic attitudes across Iran.  It's a very impressive effort, really.

Left scale says Iran is terribly undemocratic, but bottom scale says Iranians are middle of the pack on democratic aspirations, meaning the argument that says "Iranians get what they deserve/want/etc" is absolutely wrong.  It's not an authoritarian society - just an authoritarian government.

Yuval Porat's final words

Our findings demonstrate that Iranian society as a whole is characterized by a pro-liberal value structure that is deeply at odds with the fundamentalist regime.  This presents considerable potential for regime change in Iran and for the development of liberal democracy.

You can read that statement two ways:  

1. If you take the kinetic route on regime change, you will ultimately be rewarded; or 
2. The soft-kill approach is the way to go.

While I have written that I think Israel will be hard-pressed not to attack in the end, I still maintain - as I have since 2005 - that the soft-kill on Iran will work.  To me, the soft-kill is the detente here, just like it was with the Sovs.  Open up ties, admit the regime is valid, blow off the nuke pursuit (which grants Iran nothing in terms of leverage with anybody - including already nuked-up Israel), and let the connectivity that results do the rest in terms of regime delegitimizing from within leading to eventual democratization.

Ultimately, this strategy - and not Star Wars - brought down the Sovs, and it can do the same on Iran - in far faster order.

Not a risk-free path, nor one that obviates unpleasant developments along the way (Russia, for example, is still a pain in the neck), but it does work.  It dismantled the Soviet system and it can do the same with the IRGC-dominated mafia-system in Iran.

Find Porat's full report at www.iranresearch.org.

Time's Battleland: PIRACY How America Settles Down Somalia (And, By Extension the Piracy Problem)

Nice Washington Post story about how the U.S. is training Ugandan soldiers (along with some from Burundi, Sierra Leone and Djibouti) in Uganda on how to do battle with Islamic extremists in Somalia – namely the al-Shabaab group affiliated with Al-Qaida. 

Read the entire post at Time's Battleland blog.

Take that! All the girls I was afraid to date in high school!

Found here.

Red Dawn! Chinese state banks to enter US market

You just want to summon your inner Yakov Smirnov:

In America, banks loan you money.

In China, you loan banks money!

WSj front-page lead on "Chinese banks get nod in U.S."  The Fed Reserve okayed 3 state-run banks to enter and apparently didn't stop the first ever acquisition of a U.S. retail bank by one of them.

The goal of Chinese banks?  Initially, to service Chinese companies operating overseas and those foreign investors looking for "exposure" to the renminbi.

Exposure is the key word here - in both directions.  But, in general, I heartily approve.

China is the biggest saver in the system these past couple decades.  So yeah, access is crucial for an economy with shakey finances.

Of course, China's financial system has its own dangers, but - again - in general I greatly approve of even more financial interdependence.  

It'll help keep the China crazies inside the Pentagon on a leash.

Chart of the day: Why GM and SAIC naturally decided to pair up

Pretty obvious, actually. 

Far short of merger, but the same logic holds:  you are weak where I am strong and vice versa.  Why not ally and crush all opposition on global basis.

This would-be globally integrated enterprise as a preview of globalization's coming attractions.

From an Economist story on Chinese carmakers.

Chart of day: Rapidly falling under-5 mortality across Africa

From Global Development blog via Craig Nordin:

Under-5 mortality (per 1,000 live births) in selected
sub-Saharan African countries surveyed since 2005

Go to the blog post for analysis. My point:  interesting how opening up to globalization coincides with this.  Not arguing initial causality, which is multivariate.  Point is:  opening up to globalization certainly doesn't "impoverish" along these crucial lines.

This joyous development begets a demographic dividend, which sets a clock a'ticking.  How Africa handles this historic opportunity is crucial of course, but clearly this is the best problem yet for the continent.

And what is progress other than moving off worse problems to better ones?

This story is nothing new.  We saw doubling of human life expectancy across 20th century (started in low 30s in 1900 and reached 65 by 2000) and that was almost all about reducing under-5 mortality - and that was overwhelmingly due to vaccines, with clean(er) water a crucial second.

To what extent China can copycat the fracking revolution in US

Big FT piece.

China, we are told, has enough shale gas to cover its needs for 200 years.  It currently has no commercial production but wants to reach 60B cubic meters by 2020. A number of big Chinese and foreign energy firms are currently exploring China, with Sinopec running the big Tarim basin that is routinely described as the biggest in the world.

Dozens of exploratory wells have, so far, yielded mixed results.  The geology is just not the same as the US - more complex, so serious additional innovation will be required.  China's reserves are deeply buried and feature more clay, which is far harder to break up to release the gas.

China also lacks the US's existing pipeline network and trained personnel.

To overcome the stiffness of its three primary national energy companies, China has allowed foreign companies in and plans to liberalize prices on oil so its own companies will invest more.

Then there's the Chinese investment in US firms over here, a development that's been met with far less resistance than when CNOOC tried to buy Unocal seven years ago.  CNOOC plopped a solid $2b into Chesapeake Energy to access some of this technology.

This will be one follow-on to the US fracking revolution worth watching closely.

How fast King Coal gets fracked

Fascinating to watch all the "they're trying to kill clean coal" commercials on TV that target some politician, the Obama administration or so on (evil regulators).  In truth, what's killing King Coal right now is the uber-cheap price of gas in the US.  

Citing a WSJ story, the millions BTU price of natural gas in the US is about half of what it was just a year ago, and that previous price was at least half of the average global price - which is rising in most places given the lack of LNG and the difficulty in buying it for most emerging market players.

So, amidst that crazy glut in the US, made all the more worse by the mild winter that did not much draw down US natural gas stocks, and we're seeing stunning drops in the US use of coal to generate electricity. It fell by almost one-fifth (!) in the fourth quarter of last year, and we're expecting first quarter news any day now.

But as I've noted before, the answer for coal is exports.  The energy value of our coal is significantly higher than that found just about anywhere else, so if new market export relationships can be built, we can displace a lot of less-valuable coal from other sources.

My prediction is that America becomes a huge and important coal source for both India and China.  Just give it enough market change.

What got me tuned in on all this?  Wikistrat's recent simulation on the "North American Energy Export Boom."

Planning for less Chinese growth

Citing FT here (pic from NYT), but there's been a slew of stories recently in WSJ and FT on same subject:  Western companies planning for less exports to China and looking more to home markets as a result.

As one exec put it: "The problem in emerging markets for us is really isolated to China."

Here also: "... the speed of the slowdown in Chinese demand has taken companies by surprise."

This is the higher labor costs kicking in prior to the domestic consumption driver kicking in enough to compensate for it - the essence of the middle-income trap.  

Doesn't mean companies don't expect growth in China or aren't planning on it.  Just means all this hype about the Chinese economy ruling all is rapidly dissipating.

West's conundrum on Syria

WSJ story: "Syria attacks seen as sign of extremists' rise."

Reason why, in a column a bit back, I argued for quasi intervention (imagining something in air control along Turkish border + arms support to rebels) is that, the longer this goes on, the more it becomes next natural cause celebre for AQ and associated.

So conunudrum is usual one: people say, don't get involved because we encourage terrorism/are forced to ally with terrorists.  Problem is, best way to ensure their growth is to sit back and let civil strife unfold over longer haul now made possible by our inaction.

We also buy lots of stiff-arming diplomatically from great powers generally because we don't resolve this.  If we went harder and faster, we'd still get stiff-armed, but speeding the killing also speeds the great-power dynamics past this dispute.

We all know we'll be in semi-aggressive stance on Syria so long as Assad remains, so why not get it over with? Why not speed the kiliing?

My preference is always the "damned if you do" variant.

No question about the "right side of history" here.

Chart of the day: remittance "corridors"

From the Economist.

I just love global maps indicating flows - naturally.

What do we see here?

Per my vernacular, in sheer volumen we see New Core being fed remittances by expats living in Old Core.  But when it comes to countries relying heavily on remittances as percentage of GDP, it tends to be mostly Old/some New Core and it all pretty much goes to Gap countries.

Per my flow concept:  whatever the resource, it flows from regions where it is plentiful (here, earning opportunities) to where it is less so.  Yes, we think of India, China, Mexico as New Core and thus "made," but all share the reality of significant numbers of rural poor.  In truth, in most New Core countries, there is massive internal remittances flows.

What I love about this:  this is the best foreign aid there is, because people use it as they see fit.  

You may say to yourself:  What a drain on Core - especially US!

Studies have shown, however, that expats living in new countries spend something like 90% of their earnings in-country, sending about 1/10th home.  It's just that those flows still number in the billions, swamping anything we do on official developmental aid.

Final column at World Politics Review

The New Rules: Globalization's Future Depends on Stable U.S.-China-India Order

BY THOMAS P.M. BARNETT | 30 APR 2012
COLUMN

Editor's note: This will be the final appearance of Thomas P.M. Barnett's "The New Rules" column at World Politics Review. We'd like to take this opportunity to thank Tom for the insightful, compelling analysis he has offered WPR readers each week for the past three years, as well as for the support he has shown for WPR over that time. We wish him continued success.  

Amid all our current fears regarding the global economy’s potential “double dip” back into deep recession, a longer-term question stands out: How can a supposedly declining America protect the golden goose that is globalization while managing the rise of twin economic superpowers in the East -- namely, China and India? History says that three is a crowd when it comes to system stability. Invariably, some conflict will arise to trigger a two-against-one dynamic that must yield to either the stable stand-off of bipolarity, as during the Cold War, or the emergence through decisive conflict of an acknowledged unipolar hegemon, as in the early post-Cold War period.

Read the entire column at World Politics Review.

Chart of the day: You can import the milk cows. The water is another story

Fascinating WSJ piece on China importing cows like crazy to build up its dairy stock.

Since 2009, China has become the world's most important buyer of dairy cows, driving up prices for calves world-wide and putting pressure on other markets such as alfalfa and bull semen. China has imported nearly 250,000 live heifers, or cows that haven't yet reproduced, since 2009, according to data tracker Global Trade Information Services. Last year it spent more than $250 million on 100,000 foreign heifers, about 25 ships worth.

China old cows were European and it has a cattle ban on North America since the mad-cow disease scare in 2003, so it's buying up stock in Australia, New Zeland - even as far as Uruguay.

Story describes the setting-up of modern American-style dairy farms (our cows outproduce the world on a per-head basis), but the trick is the amount of fresh water they require.  All the places they import these cows from are relatively water rich (more global freshwater share than population share), whereas China is 22% of the world pop with 7% of the water.

Tricky business, that.

But clearly, the attempt shows how intent China is on continuing to try and remain food self-sufficient. China won't succeed, but it'll try like all get out.

Chart of the Day: Different listing of shale gas reserves globally

Previous one I had found (and used in brief) said:

1. China 36.1 trillion cubic meters
2. US 24.4
3. Argentina 21.9
4. Mexico 19.3
5. South Africa (didn't write down because not in Pac)
6. Australia 11.2
7. Canada 11.0

Here's an old post that has similar 1-5 ranking expressed in tcf (like below), and the weird thing is, it agrees exactly with the FT numbers for China, Argentina, Mexico and South Africa but puts the US at 862.

This one, in bit FT full-pager says:

1. China 1,275 tcf
2. Argentina 774
3. Mexico 681
4. South Africa 485
5. US 482
6. Australia 396
7. Canada 388

Big difference is US ranking/estimate.

Second one says EIA, as in U.S. Energy Information Agency, so I guess you gotta go with that one.  

Or is this just weird mistake by FT?

No mistake.  After some quick Googling it turns out the EIA said 862tcf a year ago and says 482tcf now, reducing its estimate of recoverable shale gas by 42%!

Betcha some industry experts refute that!

Will have to see where that number goes over time.

The coming American industrial renaissance

WSJ piece on Dow Chemical building . . .

. . .  a multi-billion-dollar plant to convert natural gas into the building blocks of plastic in this coastal city [Freeport TX, just south of Houston], becoming thelatest chemical maker to capitalize on abundant gas supplies that are helping spur a renaissance in U.S. manufacturing.

This is all wonderful news, but it doesn't stop up from still exporting a significant portion of our now severely glutted natural gas supplies to improve our trade deficit and empower our extractive industry further to take its revolutionary fracking techniques global.

Natural-gas futures closed Wednesday at $1.95 per million British thermal units, down 55% from a year ago and the lowest price in 10 years.

This is killing futher exploration and production in the U.S.

Why do we allow this glut to remain bottled up in the U.S.?  This crazy-ass notion of "energy independence."

GM casts its global lot with Shanghai Automotive

Favorite subject of mine, that I highlight in the current brief: the creation of what fmr IMB CEO Sam Palmisano calls "globally integrated enterprises."

GM links itself up with Shanghai Automotive Industry Corp to create a GIE that looks to take on Honda, Tata, VW, etc on a global basis while cementing GM's participation in China's booming domestic car market.

GM's tie-up with SAIC is considered one of the region's most successful. GM and its partners in China have a 14% share of the auto market, the world's largest. The company's sales volumes have grown 41% since 2009.

GM chief exec: "SAIC is the principal relationship that we have around the globe now [italics mine] and we expect that to be the case in the future."

GM and SAIC are now jointly eyeing exports to LATAM and eventual production there.

Amazing stuff, as GM impresses with its bold global vision and execution.

Elvis has re-entered the building

Interesting WSJ piece on how Snoop Dogg and Dr. Dre are testing out a touring approach at the Coachella festival that sees him on stage with a hologram recreation of Tupac Shakur - he of many posthumous albums.  The guy has been dead for 16 years.

Technical wizards claim "This is not found footage.  This is not archival footage. This is an illusion."

One imagines a well-designed avatar that's detailed enough to work at a visual distance in a dark auditorium/arena.  It uses the same technology that the company in question, Digital Domain, employed to render the "younging" Brad Pitt in "The Curious Case of Benjamin Button."  Done live, I suppose it's a high-end version of Disney's Haunted House ride.  The basic trick, says the piece, goes all the way to Victorian England.

If you saw the most recent Mission Impossible movie, Ethan Hunt employs something like this when breaking into the Kremlin.

What would you pay to see a dead figure "live" on stage?  I am sure we'll find out over the coming years.

Still, as someone who does public speaking, it's hard not to be intrigued at the possibilities.