As natural gas prices fell below $4 for the first time in nearly six months Thursday, participants at an energy conference hosted by former President George W. Bush pondered the future demand for the fuel given that trailblazing U.S. shale drilling has helped create what could be a 100-year supply.
"We have enough for our kids, our grandkids and our great-grandkids," said Randy Foutch, CEO of Tulsa-based Laredo Petroleum and a panelist for the one-day Natural Gas Nation conference at Southern Methodist University.
Not long ago there was widespread concern whether the U.S. could produce sufficient natural gas to meet demand for heating, power generation and other uses. There was also angst over excessive price volatility. However, with recent huge increases in proven and potential natural gas reserves as a result of so-called unconventional drilling in areas such as the Barnett Shale of North Texas, energy experts say there is likely a century's supply, and price volatility appears less of an issue.
"I believe relative price stability is achievable," said panelist David Biegler, CEO of Southcross Energy and the former chief executive of Enserch Corp. "The more supply you get, the less volatile the price becomes."
Ensearch was the parent company of the former Lone Star Gas, the natural gas utility known today as Atmos.
Tumbling prices
In futures trading on the New York Mercantile Exchange, gas fell 13 cents to $3.98 per million British thermal units in contracts for April delivery after a government report showed that U.S. inventories were larger than expected. Demand is expected to remain weak in coming months.
The many gas industry participants at the conference might have gotten some longer-term encouragement, however, from Bernard Weinstein, associate director of SMU's Cox Maguire Energy Institute, which co-hosted the event with the George W. Bush Institute, a nonprofit focused on research and practical solutions to issues such as education and economic growth.
"I don't think gas is going to stay at $4," Weinstein said. A rebounding economy and rising natural gas demand are likely to boost gas prices to "somewhere in the $7 to $8 range over the next two years," he forecast.
Natural gas producers say prices need to be about $6 to $8 for a substantial rise in drilling activity, which plunged along with gas prices in the latter half of 2008.
Prices had soared to more than $13.50 in July that year before taking a precipitous fall as a result of the severe national recession and excess supply of the fuel.
Power generation fuel
Daniel Yergin, the conference's keynote luncheon speaker and chairman of the prominent IHS Cambridge Energy Research Associates energy-consulting firm, forecast that the biggest growth in gas demand will come from electric power generation, both in replacing aging coal-fired plants and in serving as a backup source for wind- and solar-generated power when the wind isn't blowing and the sun isn't shining.
Yergin foresees the potential for significantly more use of natural gas as a transportation fuel, especially in commercial or government fleets such as trucks, taxis or buses.
In his opening remarks, Bush said that "technology is a game-changer in America," as evidenced by major advancements in gas drilling. The technological progress is "transformative in helping America become independent of foreign sources of energy," boosting the nation's security, he said.
Technological advances, including horizontal drilling, have had a huge impact in North Texas, where there are about 14,000 producing wells in the Barnett Shale, a geological zone that in 2008 became the largest natural gas producing area in the nation.
Biegler said estimates of a 100-year gas supply show that "it's time to think of natural gas as a critical component of our energy supply" for the long term, not merely as a "bridge fuel" to be used until greater supplies of alternative energy sources such as nuclear, wind and solar power can be developed.
The U.S. produces about 22 trillion cubic feet of natural gas annually, but 30 trillion cubic feet of production is "eminently achievable," Biegler said.
Source: Downstream Today
