James Clad has a lot of opinions on the global energy industry. These days, he’s an international political risk consultant for the energy industry. He’s also a senior advisor for the Center for Naval Analyses and at Jane’s Defence and Cambridge Energy Research Associates. From 2002-2010, he was the U.S. deputy assistant secretary of defense for Asia.
Clad was in Louisville last month to address the Louisville Committee on Foreign Relations.
On coal gasification:
Some companies are experimenting with this technology to convert coal to synthetic natural gas. Clad says with natural gas prices so low, he doesn’t see the technology becoming economically viable in the near future.
“And the trends, if anything, have made investment in coal gasification, no matter how laudable and desirable the outcome might be, it’s made it much more difficult because the comparative cost advantages of natural gas are now just indisputable. And with all the shale potential continuing to grow, as well as just conventional gas production, it’s very difficult to see it becoming economic.”
But that’s not to say it couldn’t happen, he says. Several different technologies could come together and change the game, much as they did to advance shale gas drilling in 2006.
On gas drilling in Kentucky:
Even though there’s very little shale drilling in Kentucky, Clad says the technology that’s being developed to drill the Marcellus and Utica shales could end up expanding conventional drilling here.
“I think that it’s a mistake to think of conventional gas production and shale gas production as two separate universes. A lot of effort going into doing better extraction with shale has consequences for more conventional gas extraction.”
On Appalachian coal exports:
Clad says whether there’s a demand for exported Appalachian coal depends on the quality of the coal, and the export infrastructure.
“You can argue that it’s better to export it if it continues to find a market and if it obviously continues to provide a livelihood to a very important and long-established part of our economy. But that appears to be the only comparative bright spot in the picture.”
What could take the place of coal in Kentucky?
Clad says to build up exports, there needs to be a long-term investment in infrastructure. And so far, he hasn’t seen that for thermal coal exports from Appalachia.
“I think that this question of proximity to end user and the whole question of existing infrastructure…there are pipeline prospects being discussed and obviously attracting some opposition as well. But it seems to me that the more infrastructure you have, therefore the more choice you have. And it could be that what’s seen now as a high degree of dependence without any alternative out there could be, in five or ten years, be seen retrospectively as not having been that bleak. But again, we can only deal with what we know and what we see in front of us. And it’s difficult to see anything stepping up and taking the place of coal in the Kentucky economy.”
What’s next for energy?
Clad says even when trends seem to be negative, in a broader sense they can still hold out promise. Even a technology like coal gasification.
“Duke Energy in neighboring Indiana has invested a lot of effort in a coal gasification plant. The critics say it’s late and it’s over cost and all the rest of it. And yet, things are learned along the way, and they’re not lost just because they run into difficulties. So I think that this idea that it’s one or the other, it’s a zero sum game, you either choose this or you choose that, there’s a right or a wrong answer. I think in the energy business, the more you look, the more you see the interconnections.”