A study released on 7/30/08 by Amercan Clean Skies Foundation and Navigant Consulting states that U.S. unconventional natural gas deposits are sufficient to supply 118 years of U.S. demand at 2007 levels. Newly developed fracking and horizontal drilling techniques have made it possible to recover enormous quantities of gas from tight sands, coalbed methane, and gas shale formations, reports the Oil & Gas Journal (8/4/08)
On the demand side, some leaders are starting to advocate the use of NG in lieu of petroleum to power cars. Two Congressmen, Rahm Emanuel (D-IL) and Dan Boren (D-OK) have introduced legislation to push NG into use for cars. “We’re going to have a paradigm shift in the automobile business. You don’t often get a hat trick in politics,” said Emanuel. “Natural gas vehicles solve three problems: the environment, the economy, and energy security,” he said.
Emanuel is one of the canniest politicians going, so I would not discount the possible effectiveness of his enthusiasm, particularly since he seems to be right. Of course, the problems of evolving a distributing network for CNG, of making cars available, and of providing retrofits that meet safety and insurance standards are not small. It seems unlikely that NG could take much market share from oil in the short term. But if a concerted effort, especially one that is coordinated at the national level, is made, NG might have a significant impact in, say, five years.
In the meantime, it would seem that a super-abundance of NG - U.S. production is already said to be increasing at an 8% annual rate - would have a negative impact on the price of the commodity and possibly on companies in the business of producing it. But it should have a positive impact on land drillers and any company involved in bringing NG to use in vehicles.
Natural gas is finding more demand from electric utilities. It is fairly cheap and easy to create and operate a natural gas facility for generating power, not to mention the environmental advantages over coal. Considering all these factors, a new super-abundance of gas may hinder efforts to promote solar, wind, and other renewable forms of electrical generation that may need subsidies to make them competitive with gas.
Stepping back, it seems likely that it will take some time for all of the implications of a new NG super-abundance paradigm to make themselves understood in both the investment and political realms. It will be fascinating to see just how significant this development will be.
