What Energy Executives Should Be Asking Themselves Today In the first half of 2015, Chesapeake trailed only ExxonMobil as the top producer of natural gas. At the time, natural gas was down over half from the $6.15/MMBtu peak seen in the previous year, sliding daily. Highly hedged, $10 billion in debt, and looking at 14 bonds due beginning in 2017, Chesapeake leadership decided to hold steady as an independent entity. A year later, in February 2016, rumors started to spread that it had hired restructuring attorneys, dropping the natural gas giant’s already slumping stock over...
“I want to tell you something,” he said to me on many occasions during the quarter-century of our relationship. “As long as I’ve been in this business, I’m still learning because there’s still so much I don’t know.”
That was Carol Freedenthal, one of the smartest men I’ve ever known. So smart, in fact, that he was always the first to admit he still had so much to learn about a changing business in an even faster changing world. For someone like me, who would never know a tenth as much about the business as he did, those words taught me a lifelong lesson.
TransCanada’s Keystone Pipeline has just completed a year’s service of bringing Canadian tar sand syn crude from Alberta to U.S. Gulf Coast facilities for refining and marketing. This was the third phase of the project. Bringing crude from Cushing, OK to Texas began in January 2013 and still has a lateral line to be completed that will bring crude oil from Nederland, TX to Houston-area refineries. A terminal will be completed in mid-2015 for the Houston refining.
Booming U.S. crude oil production, especially in areas that were not already big producing locations with good takeaway pipeline capacity, have made it necessary to find new ways of transporting the growing production coming from development of shale reservoirs.
Call it a revolution – an energy revolution! The new supplies of natural gas and crude oil that are coming from shale deposits have a greater meaning than just ample supply for an energy-hungry world. Its overall impact will change transportation and distribution infrastructures, it can change a country’s overall energy balance and in all likelihood, it will change the economics of oil and natural gas!
Sometimes it feels like a black box and a crystal ball are the biggest help in forecasting energy product prices. Forecasting prices on the primary fuels – crude oil, natural gas and coal – which comprise over 90% of the fuel used worldwide, is an important part of the business. Price outlook coupled with demand forecast are essential considerations for developing operational levels and planning capital expenditures to meet the constant demand for fuel.
Methane, the major ingredient of natural gas (98% plus), is getting more heat than just from the sun’s radiation! Considered a greenhouse gas (GHG) because of its ability to absorb heat and transfer it to affect the earth’s climate, methane is getting federal and state government as well as civic attention.
There is little doubt that natural gas and light oil from shale resources have changed the U.S. energy picture. The abundant supply has led to a 40% increase in natural gas production and a doubling of oil production since the beginning of the century. Equally important and perhaps outshining these tremendous production increases is the explosive growth of the energy midstream infrastructure.
Technology advances in recent years on horizontal drilling and better methods of producing hydrocarbon resources from tight formations like shale reservoirs have had a major impact on United States energy resources. The shale-driven “revolution” has made the U.S. a leading natural gas, crude oil and liquids producer worldwide.
Liquefied natural gas, LNG, as a product is cold – minus 162 degrees centigrade. Commercially, it is hotter than a 4th of July firecracker! In mid-September the federal government issued a conditional license to a fourth company, Richmond, VA-based Dominion Resources, to sell up to 770 MMcf/d of natural gas for 20 years to any buyers abroad including those without Free Trade Agreements. The gas will go mainly to Asian markets.
“Green energy sources” are becoming more popular but still make only a small dent in the country’s or even the global energy supply. Green energy today includes conventional hydropower, wind, solar, wood and waste biomass, and geothermal. Some observers include nuclear because the waste products are easily collected and handled. Almost any source of energy that is free of fossil fuels is considered green energy. Many times the green fuels are a renewable source of energy.
The hot topic in energy circles is whether recently developed drilling and producing techniques that are raising oil and gas production will help solve the age-old problem of U.S. energy independence.