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Permalink Reply by P.G. on November 9, 2010 at 2:44

Is it really good for mineral owners if the same companies who also own the bulk of petroleum production and marketing to which natrual gas would be in competition with to also own so much of the natural gas production and marketing?
I mean would their interest be so much in it's production or control over it?

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Permalink Reply by Skip Peel - Mineral Consultant on November 9, 2010 at 2:57

In the short term, likely not. In the long run, yes. Oil majors will be compelled to drill wells to HBP undeveloped leasehold that they value for the future. However, they will not have to drill uneconomic wells beyond that to maintain cash flow and fund debt. as the leveraged independents must. The long term value of Majors holding a large stake in shale gas assets is that they can probably bring to bear sufficient political clout to overcome the Coal Lobby and pass a national energy bill that is favorable to increased use of natural gas. That's probably what it will take to get a decent well head price that will support steady development, reasonable corporate profit and a fair market revenue stream for lessors. Considering that the independents are already dropping dry gas leasehold left and right and laying down or transferring rigs, IMO the sooner all the Majors acquire significant shale gas positions, the better.

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Permalink Reply by P.G. on November 9, 2010 at 3:11

So as petroleum re-approaches that $150/barrel mark, you believe it would be good that they control the production of the only reasonable alternate product that could interfere with that..
Somehow, that makes me nervous..

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Permalink Reply by Skip Peel - Mineral Consultant on November 9, 2010 at 3:32

You haven't checked the price trend of crude today. Have you? The uses of oil are quite different from that of natural gas. And crude is a world-wide commodity and nat gas a domestic commodity.

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Permalink Reply by P.G. on November 9, 2010 at 4:03

Yes they are different but ng has the only potential to go head to head with protroleum use in the transportation market and directly effect it's price..
It would be in their best interest to be able to control just how much those two products would be allowed to compete against each other. (certainly not a free market situation) I also doubt if those companies care where their products are produced (terrorist countries) or about the US's independence from foreign sources of energy when it comes to money.
NG is not a threat to petroleum use yet but could be if access to it were adequate. What they are going to do with such control should be of concern. Will they develop ng as a transportation fuel or keep it where it is now, competing with coal..

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Permalink Reply by Skip Peel - Mineral Consultant on November 9, 2010 at 4:14

The market for CNG as a vehicle fuel is quite small and even in a best case transportation scenario is not a significant threat to crude. CNG is only suited to fleet vehicles that leave from and return to the same location on a daily basis. Small, consumer vehicles fueled by CNG will be few in number because of storage constraints. Electric cars will be more effective in that niche. The best fit for nat gas is electrical generation as a replacement for coal. And as a major ingredient in fertilizer, plastics, etc., in other words products that will increase in demand as the global economy recovers.

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Permalink Reply by P.G. on November 9, 2010 at 4:45

NG is no threat to petro now but just wait when gasoline runs back up to $4+. NG could very well become competition for the petroleum industry as consumers start whining about gasoline prices. The only thing holding back CNG demand is access. The only ones who can afford access so far are fleet owners but that could change unless someone keeps their foot on it.
My concern is it being controlled by those who are making their money off petroleum.
Should NG ever become a meaningful transportation fuel, that's a cat the petroleum companies could not put back into the bag! Looks like they are moving to not allowing that to happen.. Why else would they be so interested in investing in a product that has become such a loser for so many drilling companies. I doubt if coal will be regulated away. Consumers will not allow their electric rates to skyrocket nor will any politician survive who tries doing it to them.

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