Energy industry and good news? Is that possible?
Stop the presses! There was some good news in the energy industry last week.
Never mind that it was buried in a oil-soaked sea of bad news, bankruptcies, layoffs and OPEC infighting. Forget about that for a few minutes and set aside your job search, resume updating or job re-training homework.
On Wednesday, Feb. 24, barely noticed among the news from the big energy conference – CEREWeek – taking place in Houston, something else was taking place, also on the Gulf Coast. The liquefied natural gas tanker Asia Vision left Cheniere Energy’s Sabine Pass export terminal in Louisiana with the first cargo of U.S. shale gas. The tanker, carrying 3 billion cubic feet, is bound for Brazil.
The Sabine Pass terminal is a testament to the dramatic shift in the U.S. gas market over the past decade. It began as the exact opposite of what it was – an import liquefied natural gas (LNG) terminal – supported by no less an authority than one Al Gore, former vice president and environmental guru. He backed it as a way to bolster the country’s then-dwindling energy supplies. But the site reversed course and was turned into an export site after hydraulic fracturing and horizontal drilling started unleashing more gas from shale formations than the U.S. could burn on its own.
“It’s definitely a big deal for North America,” said Jason Lord, LNG analyst for energy data provider Genscape Inc. “It’s going to make the U.S. into a net natural gas exporter in the coming years.”
It may, eventually, but don’t look for that to happen overnight.
The first U.S. export couldn’t come at a worse time for the country’s gas suppliers. Low crude prices are weighing on the global LNG market, as contracts for the fuel are often linked to oil.
Neal Shear, Cheniere’s interim chief executive officer, nonetheless described the first cargo as a “great American story.”
“It’s really awe-inspiring,” Shear said in an interview with Bloomberg at the CERAWeek energy conference last week.
It is awe-inspiring and Fort Worth and North Texas deserves a big pat on the back. This would not have happened without the developments in the Barnett Shale and resulting developments in other shale plays around the state and the country.
Before George Mitchell and Devon Energy began cracking the secret formula to removing natural gas – and later crude oil – from shale, the U.S. was on the way to becoming a natural gas importer. Their work changed that and not just a little bit.
Cheniere plans to build six 0.65 bcfd trains at Sabine Pass, allowing the plant to liquefy up to 5 percent of the current U.S. gas production. Natural gas has, until now, primarily been a fuel that is fairly local. If the gas can’t find its way to one of the major pipelines, it may never find a market. U.S. companies, led by Cheniere, have been spending billions of dollars on LNG export complexes where the fuel is cooled to minus 256 degrees Fahrenheit (minus 160 Celsius) to shrink it to 1/600th its volume so it can be shipped aboard ocean-going tankers. As a result, an international gas market is emerging akin to the long-established one for the more readily transportable crude oil.
Notes Jason Schenker, president of Prestige Economics LLC in Austin: “The bearish realities of this market are so big that this is like howling at the moon and expecting it to move.”
He’s right – for now.
But the energy industry often finds a way. Speaking at a Texas Christian University Energy MBA Board Forum last week, Bryan Wagner, owner and president, Wagner Oil Company, summed up a bit of the energy industry’s attitude to tough times.
“When someone tells me no, that’s just a starting point,” he said. “It doesn’t mean I can’t do it. You’ve got to be persistent and you’ve got to be smart. This business has been around a long time.”
So it may just be a footnote to the bad energy industry news flooding the market at the moment. Just wait. This footnote may be the real important energy news story of last week. – This report includes information from The Washington Post.