At this time of Thanksgiving we can be grateful that a tectonic shift in America's dependence on imported energy is beginning to take hold. In the last weeks a number of major events have taken place that are beginning to shift the balance of energy in significant ways.
Last month the Chinese government owned energy company CNOC (you will recall CNOC's failed bid to take over Unocal in 2005) committed over a billion dollars to take an important stake in the Eagle Ford, shale gas acreage in Texas. In doing so they joined the Norwegian state oil company, Statoil, that had made an earlier investment in the Eagle Ford field as well.
Major oil companies such as Exxon, Shell, Chevron and myriad other foreign entities have joined American gas producers such as Chesapeake Energy to invest tens of billions of dollars these past years to develop a stake in what is becoming a treasure trove of natural gas ranging from Texas and Louisiana to the vast Marcellus field of Western Pennsylvania, Ohio, West Virginia and upstate New York. With new drilling techniques the proven gas reserves of the United States have skyrocketed from bare subsistence levels by a factor of five and counting, with the shale play still in its infancy. It has turned a market of shortage with circa $14 MMBTU prices quoted on the NY Mercantile Exchange in 2008 to a market of product glut, currently hovering around $4 MMBTU. At that price natural gas delivers a BTU equivalency comparable to that of oil priced in $20/barrel range. Today oil is selling at $80 plus/barrel.
Of particular significance this Monday, Macquarie Energy and Freeport LNG announced plans to jointly develop a $2 billion project to liquefy, market and export 1.4 BCF gas/day. Mr. Nicholas O'Kane, Sr. Managing Director of Macquarie Group (an Australian company) was pointedly quoted, "Recent developments in shale gas technology have transformed the U.S. gas market. The U.S. has developed significant natural gas resources and is able to meet projected domestic demand and a surplus for a long time to come."
Clearly the future of the natural gas industry could play a preeminent role in liberating the nation from its dependence on energy imports. In that natural gas, as feedstock, is significantly less polluting than coal in coal burning energy plants, natural gas would play a major role in containing polluting emissions.
That being said, the natural gas industry will still be hard pressed to develop to its full capability because of an oil and coal influence-addled Congress; please see my piece "Our Lob(otomized)bied Congress' Energy Bill Excludes Our Most Efficient, Cleanest, Newly Plentiful Energy Source: Natural Gas", from a year and a half ago -- I believe the title speaks for itself.
Further more, the asset play of shale gas is likely only boosting stock prices and will
never be developed.
By any economic standard, drinking water is far more valuable than natural gas, and it's delusional to endanger a water supply to boost gas production.
Gas prices did not fall from $14 in 2008 because of newly discovered reserves or because of hydrofracking. The story is too long for here, but prices shot up because of manipulations by hedge funds and exchange traded funds. Ordinarily, spot prices are tied to the balance between actual production (plus gas available from storage) versus actual consumption.
http://hsgac.senate.gov/public/_files/REPORTExcessiveSpeculationintheNaturalGasMarket.pdf
http://www.cnbc.com/id/31410847/Natural_Gas_Prices_True_Demand_or_Market_Manipulation
http://www.investingblog.org/archives/513/cftc-could-remove-or-limit-commodity-etfs-exchange-traded-funds/