America's Natural Gas Journey Is Only Beginning

10/03/2013 04:15 pm ET Updated Dec 03, 2013

As someone who's lived through the whipsaw impact of a total overturn in outlooks for the energy sector in the U.S,. I am constantly searching for holes in the new natural gas consensus. In less than a decade, we've gone from running out of an essential fuel to placing a century-plus of anticipated supply at the heart of our economic future.

We've proved quite clearly that as an analytical community we thoroughly lack for imagination when picturing what the world of energy will look like. Looking at the smoothed-out pricing and supply lines in presentations at this week's North American Gas Forum was as much an exercise in forgetting the volatility of the past 20 years as it was in imagining how domestic and global markets might adjust to the potential plethora of supply.

The problem may not get easier as the gas market does tend toward globalization. At least OECD countries generally produce reasonably reliable and comparable data (when their governments aren't shutting down, sigh). When major markets for natural gas open in Latin American and Asian nations that don't have in place the same variety of statistical gathering structure, bets on serving those markets would need to be hedged as often through securing political access and anti-competitive guarantees rather than through market mechanisms or financial instruments.

But try as I might, real skepticism about the future promise of the natural gas resource in North America all too quickly turns into paranoia. Unless companies are deliberately lying about their reserves, their technologies and the investments of their clients -- and I cannot convince myself they are -- we are seeing a degree of access to a clean(er), reliable fuel source that is, to use the over-used term, game-changing.

The darkest cloud on the horizon for gas that I can see is political risk. Governments have a remarkable ability to render investment in otherwise promising markets unprofitable, and that holds doubly true for sectors like energy that require extensive long-term infrastructure investment. FERC Commissioner Tony Clark had some promising things to say about the Commission's approach to the fuel's infrastructure needs at the Forum, but the fate of the Keystone Pipeline (amusingly referred to by one panelist as "the pipeline that dare not speak its name") is a perfect demonstration of how logic, the gravitational pull of billions of dollars and even strict regulatory compliance fail to serve as even reliable predictors, much less guarantees, of success for individual projects.

I wrote quite a bullish piece from the Forum's opening day for Breaking Energy:

"Expect the promised benefits of natural gas to really begin hitting the North American economy in the second half of this decade, said Chevron Vice President of Supply and Trading Greg Vesey at the North American Gas Forum in Washington, DC this week.

It will take two to three years to complete construction of manufacturing facilities predicated on cheap and abundant natural gas supply, at which point industrial needs should dovetail with growing awareness among domestic customers to drive a demand boost. That increased demand, which Vesey conceded could result in a bump in prices as natural gas suppliers race to catch up, would mark the start of further additions to employment and a staved-off increase in energy costs that the sector has predicted since the extent of the continent's shale gas resource became apparent a few years ago."