Editor’s Notebook: Best Days For Natural Gas Still Ahead

February 2010 Vol. 237 No. 2

Jeff Share, Editor


It’s always been an interesting time to be in the natural gas business. Now is no exception. While many in the industry are uncomfortable with the push toward cleaner fuels and climate change legislation, a combination of factors is joining forces to ensure that natural gas might rightly be coined as the preferred fuel for the 21st century.

The ability of producers to develop resources that were previously regarded as unconventional (or shall we say unprofitable) is stunning. The exploitation of vast shale deposits has helped regenerate a laggard domestic market and will continue to do so for years to come. The area now drawing everyone’s attention is the Marcellus Shale which is located in parts of Ohio, West Virginia, western Pennsylvania and upstate New York.

One report estimates Marcellus could ultimately become the fourth-largest natural gas reservoir in the world. A recent report by Penn State University suggests this development could be worth $4 billion to Pennsylvanians. Another report said upstate New York could see a $2 billion benefit from Marcellus. This is the best news to hit those long-depressed regions in many years.

Assure the good folks up there that you’ll be a good neighbor and will take care of the environment–particularly their local water supplies–and they’ll have a parade when those drilling rigs march in. Assure them that any new transmission and gathering lines will be built safely, using local labor and supplies, and forever protected by an elaborate security system, and you know what? NIMBY will have finally met its match.

A survey by the Deloitte Center for Energy Solutions declared this the “Age of Plenty Predicted for Natural Gas” based on interviews of oil and gas professionals. “The survey numbers are striking,” said Gary Adams, vice chairman and leader of Deloitte’s oil and gas practice. “The overwhelming majority of survey respondents, 84%, say the best days for the natural gas industry are still ahead of us despite today’s low prices.”

Adams said this confirms the growing perception that thanks to technological advances, the country’s energy future will become more closely aligned with natural gas than was expected just a few years ago. In contrast, oil will remain the dominant fuel for transportation for many years to come though it will be increasingly difficult to find and produce.

Most (85%) respondents believe the domestic production of natural gas will increase in the next five years while just 45% think oil production will rise. That’s one reason why 51% of respondents believe the price of oil will increase greatly over the next five years while 32% foresee the price of natural gas greatly increasing in the same time period.

This means that we may finally be seeing an end to the extreme price volatility that has always marked the natural gas business. Producers are getting more out of the ground at lower than expected costs; storage is ample and convenient, providing a necessary hedge for weather concerns; LNG is fulfilling its role as a swing fuel, selling to the highest bidder wherever it’s needed.

Are we looking at a 100, perhaps 200-year supply of natural gas reserves? Or perhaps an infinite number once we unlock the mystery of gas hydrates?

Even an administration not overly friendly to fossil fuels will find it hard to argue against the growth of natural gas. So a new association has emerged to take to the message to Capitol Hill. The American Natural Gas Association (ANGA) is led by independent natural gas producers intent on cultivating both sides of the aisle. Independent has another meaning here as well. They want a fresh start with lawmakers without the biases of past years.

The producers have traditionally led the industry, but can ANGA be a real game changer? Look at it as the ultimate marketing challenge and give it time.