Aug 4, 2008 by Jerry ShottenkirkE-mail Print Link

The Barnett Shale of north Texas is the still the king of the unconventional natural gas plays in the country, but Aubrey McClendon said another play could ultimately have a worldwide reach.

The Haynesville Shale area of northwestern Louisiana and far eastern Texas has been on the Chesapeake Energy CEO's radar for a while, and if all goes well, he says, the play could help power the world's fleet of 800 million cars.

A day after Chesapeake recorded a $1.6 billion non-cash loss due to hedges but was up 40 percent in operating income, excluding the one-time charges, McClendon said natural gas, the technology to secure natural gas, and the transportation of liquefied natural gas to other regions could make the unconventional shale plays even more valuable than they were first thought to be. Chesapeake officials have predicted the Haynesville play will become the largest discovery of natural gas in the country.

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"I'm trying to figure out a way to get it on a boat and get it to overseas markets as well," McClendon said during a second-quarter earnings conference call. He said natural gas would be worth twice as much internationally as it is here.

Chesapeake is a major player in the Barnett Shale and is the largest leaseholder in the Haynesville.

"The Haynesville is a fascinating play," he said. "It can do what the market needs it to do. If we get into the form of (compressed natural gas) for cars and the market takes off in three or four years, the Haynesville will really take off. I think the Haynesville will be there. If that market doesn't develop, the Haynesville won't develop as quickly."

Chesapeake on Thursday spent $263 million for approximately 13,000 acres of mineral rights. The company said it is now the largest producer of natural gas in the U.S.

"In decades ahead, our expertise will be exported," he said. "Natural gas will rise to make up for oil shortfalls. There are about 800 million cars in the world and only 8 million run on CNG. Gas shale (plays) around the world will be developed and we can move the transportation fleet to CNG."

McClendon said that by the end of 2008, his company will have 12 rigs to develop its 550,000 net acres of leasehold. He said he looks for a new Haynesville well every five days.

Company officials said they think the Haynesville shale will become known one day as the largest discovery of natural gas in the U.S.

Chesapeake is currently producing approximately 35 million cubic feet of natural gas equivalent net per day and expects to produce 70 million cubic feet per day by year's end. The company is acquiring leasehold with Plains Exploration & Production Co., its 20-percent partner.

"We are more and more confident about the Haynesville," he said. "The well results are exceptional and are only going to get better in time. It is an enormous gas resource and the tempo of development will be determined by the growth in gas demand."

McClendon said he believes the world isn't far away from peak oil.

"I took my show on the road this week," he said, referring to his trip to address a House committee in Washington, D.C. "There's plenty of gas in this country to begin to think about an energy policy with a clean sheet of paper."

Bruce Bell, chairman emeritus of the Mid-Continent Oil & Gas Association of Oklahoma, said natural gas in the coming decades could be what turns around the energy situation in the U.S.

"Now that we have such huge reserves, it's not impossible for the U.S. to turn around and be an exporting country," he said. "There are far more natural gas reserves in the new resource plays than what was originally thought."