The old ways of looking at energy no longer apply, speakers told a standing-room only-crowd at Rice University Thursday.
“This will be the redefining global phenomenon, from a finite world to a surplus world,” said Ken Hersh, co-founder and CEO of NGP Energy Capital Management.
He spoke at the 2012 Rice Energy Finance Summit, a day-long session on the economics of energy security organized by students in the university’s Jones Graduate School of Business.
Texas and the United States led the way to a world of surplus energy with the shale oil and gas boom, Hersh said. But he said discoveries have since been found around the world, especially of natural gas.
And he suggested the changes will be profound.
Producers — producing nations, as well as individual companies — no longer will hold all the power, Hersh said.
When the United States was more dependent on imported oil, exporting nations had no need to market their oil.
The United States still imports oil, although increasingly from Canada, and Ralph Eads, chairman of energy investment banking at Jeffries & Co., predicted all Middle Eastern imports may end by 2020.
The big change, both said, has been in natural gas.
Eads, especially, predicted the growth of natural gas as a transportation fuel, although he acknowledged it will take time.
Hersh said current estimates place U.S. natural gas reserves at 100 years.
“At a fair price — $3 to $6 —there is no shortage,” he said. “That doesn’t mean it is easy.” U.S. Natural gas has been trading at the low end of that range, about $3.50 per million British thermal units.
Add reserves elsewhere in North and South America, he said, “and all of a sudden, there’s shale everywhere.”
Low-cost producers will win, he said. But in a world where energy is no longer in such scarce supply, getting along will matter more, too.
Russia’s Gazprom is discovering that. In the past, Gazprom has cut off supplies to Europe in pricing disputes, but now European countries balk at doing business with it as new sources of natural gas become available, Hersh said.
“This is a new world, brought to you by the U.S. shale industry.”