Natural Gas: Sharing Will Benefit All
We all know that the United States has a major dependence on oil, not to mention a dependence on foreign oil. With the new technology such as fracking and horizontal drilling, there has been positive momentum building towards the hopes for energy independence. But, what if that just doesn’t cut it? Export natural gas? You betcha! Christopher Helman explains why this would be the case.
…going after oil instead of gas isn’t helping reduce the gas glut at all, because in virtually every oil field you’ll also find associated gas. With the price of oil so high the drillers are incentivised to give away the gas for free and just make money on the liquids. In the Woodford shale of Oklahoma, Continental Resources says the gas they produce is so “wet” with other liquids like butane and propane that they can get $8 per mmbtu, far more than the going rate of $4.32 for dry gas…
…It feels like a bait and switch. America needs to reduce its reliance on foreign petroleum, but that won’t happen without further boosting our already ample supplies of gas. So to import less oil we’ll need to export more gas–at least until electric utilities, manufacturers and car makers build enough new plants, factories and natgas-powered cars to soak up the excess…
…Gas exports can’t come soon enough for America’s natural gas drillers, looking for something, anything to goose demand. Yet the Industrial Energy Consumers of America, lobbyists for manufacturers of plastics, cement, paper, steel, chemicals and such, sought to block Cheniere’s export approval. They want the gas to remain in the U.S. to provide cheaper electricity and cheaper feedstock for making chemicals and plastics. They say that shipping gas overseas will only hurt Americans by making it more expensive at home.
This makes some sense, but the price impact is unlikely to be enough to derail LNG exports. A recent study by Navigant Consulting found that if Cheniere manages to send out the full 2 billion cubic feet per day that it has approvals for, the effect would be to raise the domestic price of natural gas in 2015 by about 35 cents per mmBtu. That’s not insignificant, and would be an 8% increase on current gas prices of $4.32 per mmbtu. But looking deeper…
…Frankly, if the U.S. doesn’t export North America’s surplus gas, then Canada likely will. Apache Corp., with partners EOG Resources and Encana, is moving forward with plans to build an LNG plant at Kitimat in British Columbia. It would liquefy gas from the Montney and Horn River shale plays (where ExxonMobil is a big landholder) and send it to Asia.
Another U.S. gas hoard ripe for export is on the North Slope of Alaska, where for decades operators led by BP have been reinjecting associated gas recovered from Prudhoe Bay and other oil fields back into the ground. There’s an estimated 40 trillion cubic feet of gas there, but no way to get it to market. One option that looks increasingly viable is to pipe the gas across Alaska to the Kenai peninsula, where ConocoPhillips andMarathon Oil operated America’s only LNG export terminal for four decades, until it was mothballed last February due to declining gas supplies…
As you can see, we have the opportunity to export natural gas in order to benefit ourselves. However, there is an in inherent need to hoard our natural gas supplies, which can end up hurting us in the long run. What will the U.S. government and oil distributors decide? I guess we will have to wait and see, but it looks like exporting excess gas could be the right move.
Quotes taken from report by Christopher Helman, Read the entire article here.
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Check out what others are saying...[...] couple weeks back we posted an article that stressed the importance of the U.S. exporting their excess natural gas being produced. This is a great idea. However, there would be a need for the creation of multiple [...]