CERAWeek: The ups and downs of Natural Gas Day

Natural Gas Day (Wednesday) saw glasses half full and half empty, given the still-fresh memories of the U.S. unconventional gas exploration boom and the dim outlook for demand and prices for the next year.

mcclendon Chesapeake’s Aubrey McClendon. “Did I happen to mention I’m really, really pumped up about natural gas?”

Chesapeake Energy CEO Aubrey McClendon was ready to provide the upside, predicting the shale gas plays in the U.S. will continue to be big producers for many, many years.

“We think, in time, that natural gas will move into the transportation network,” McClendon said. “We think we will convince Detroit and Washington D.C. to move aggressively on this front, either directly through compressed natural gas vehicles or indirectly through plug-in hybrids.”

He also told reporters he’s fine with natural gas prices being $5 per million British thermal units these days after last summer’s spikes, but that it will probably take $8 to $9 per million Btu to get producers to meet demand once the economy makes a comeback.
And he as told the Chronicle:

“We believe in volatility. You can sell volatility. Volatility has value. Our company makes additional money when we sell those calls.”

Now, to the ‘half empty’ end of the scale.
William Gardner, an energy investment banker with Parkman Whaling in Houston, said the big topic in the last few year was whether the U.S. had enough storage to hold all the new gas production.

“This year, it’s ‘can I meet payroll this month?'” he said.

Come March and April, when companies report their reserve figures to banks and the U.S. Securities and Exchange Commission, there could be an ugly shift.

“We might see lenders slashing lines of credit because reserves aren’t worth what they used to be at these prices. But what happens if you’ve already drawn down that line of credit above that new amount? Things could get really ugly.”

But then there was some more of the upbeat news: there may be a lot more shale gas formations throughout the world, said Christopher Hopkins of oil field services giant Schlumberger.
A Schlumberger analysis estimates there are 30,000 trillion cubic feet of unconventional gas resources worldwide, though not all is economic to retrieve. In what he called a cursory study, Hopkins said there are more than 688 shales in 142 basins globally.
All right! That means boom years for international land drillers and producers are up ahead, just around the bend.
But a final dose of gloom came from Larry Makovich, CERA’s electric power guru, who has looked at some of the big “green energy” efforts that are afoot.

“What our CERA research shows is people have underestimated the cost of renewable, efficiency and decarbonization of power sources,” Makovich said.

Let’s see what Power Day 1 has in store. Up first, “The Environmental Case for Coal,” the morning speech by the Environmental Defense Fund’s Fred Krupp.

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