The rapid development of US shale natural gas resources has created an opportunity for the nation to establish a new energy paradigm, provided that the proper energy policies are put into place, speakers at the North American Prospect Expo said in Houston said Wednesday.
Jim Tramuto, vice president of Southwestern Energy, pointed to his company's success at tapping into the Fayetteville Shale in Arkansas, as an example of what shale gas producers in basins across the country have been able to accomplish in a few years.
"We have finally cracked the code," he said. "We are now up over 2 Bcf/d in the Fayetteville Shale. We've already produced over 2 Tcf of gas and this year alone we have drilled 450 wells in the Fayetteville Shale."
But he said the exploration-and-production industry's success in boosting US gas production has cut gas prices to a level that is unsustainable.
"We can produce it, but if we can't sell it and it's not used, we won't realize the return we all are expecting," he said. State and local politicians need to implement policies that serve to encourage the production of and foster the creation of markets for shale gas, he added.
The increase in US gas production has also led to the rebirth of the domestic chemical and manufacturing sectors, Ken Bromfield, North American commercial director with Dow Chemical, said.
"We have an unprecedented opportunity with shale gas to push the reset button on the US energy economy," he said.
"Manufacturing is back," he added, saying industry has announced plans to build about $80 billion of projects in the next five years, as a result reasonably priced natural gas. Dow alone has announced $4 billion of new manufacturing projects, Bromfield said.
But he warned that this rosy scenario could be ruined by a rush to build new terminals for the export of liquefied natural gas. He said he favors policies that would encourage the use of gas to produce manufactured goods, which then could be exported at eight times the value than exporting the gas alone would bring.
On the sidelines of the conference, he told Platts that an effort to begin exporting large volumes of LNG could slow down the manufacturing renaissance.
Bromfield said Dow doesn't think that restricting LNG exports will hurt producers' profits. "We think that there's a demand [from] manufacturing that is already in progress and more is coming; that there can be an equilibrium point and we can have it all."
Tramuto, however, said the market, rather than regulators, should decide which LNG export projects get built.
"I think the market does a very good job of putting a cap on it. These facilities are very expensive. They are all project financed, which means that you've got to back-to-back your deals. You've got to have your markets lined up and you've got to have your supplies lined up and they've got to match," he said.
Investors have become leery of financing LNG projects in the wake of the recent spate of construction of LNG import facilities, most of which are now underutilized, Tramuto said.
"On Wall Street they don't forget the haircuts they take and there were a lot of haircuts dished out. To get one of these projects in the ground and working it's going to take a sound deal and I think that will dictate how many get built, much more so than a regulatory policy that says "I'm going to cap it at such-and-such," he said.
