UPDATE:Chesapeake CEO Cites Abundance To Promote Natural Gas
(Updates with meeting between CEO McClendon and House Speaker Pelosi)
By Siobhan Hughes
Of DOW JONES NEWSWIRES
WASHINGTON -(Dow Jones)- The chief executive of natural gas producer Chesapeake Energy Corp. (CHK) on Wednesday tried to broaden the market for natural gas by appealing to political concern over the U.S.'s energy crisis, telling Congress that the fuel can provide a solution to both high gasoline prices and climate change.
Chesapeake Energy Chief Executive Aubrey McClendon started his day by presiding over the release of a new report showing that the U.S. has enough natural gas supplies to meet more than 100 years of demand at current levels.He ended with a private meeting with House Speaker Nancy Pelosi, D-Calif., and other House Democrats for more than an hour. In between, McClendon told a U.S. House committee that the country could build more natural gas vehicles and gas- fired power plants without raising prices for fertilizer, chemicals and other products that are made with natural gas.
"Three years ago I would have said no," McClendon told Rep. Ed Markey, D- Mass., chairman of the Select Committee on Energy Independence and Global Warming. Markey had asked whether natural gas supplies were enough to reduce the nation's reliance on coal-fired plants to about 35% of electricity from 50% currently, without raising natural gas prices. "Today, I say yes," said McClendon.
The pitch comes amid skepticism from companies that use natural gas and regulators who are currently focused more on high natural gas prices. This summer, regulators warned that high natural gas prices will mean higher summer electricity bills. Dow Chemical Co. (DOW), a major chemical maker, told Congress on Wednesday that it was wary of government policies that might increase demand for natural gas, saying that the U.S. may not be able to handle higher demand for natural gas without putting further strains on manufacturing, a heavy user of the fuel.
"We are concerned that adding new uses for natural gas such as in transportation will create new and relatively inelastic demand that we may not be able to meet without high prices," Rich Wells, a Dow Chemical vice president, said in prepared testimony.
Recent discoveries in northern Louisiana and Texas, along with discoveries in an area that stretches from western New York to Virginia, are changing that, the industry argues. A new report financed by The American Clean Skies Foundation - a group started and now chaired by McClendon - on Wednesday said that the country has more natural gas than previously thought. U.S. reserves total some 2,247 trillion cubic feet, according to the study by Navigant Consulting Inc. The country consumed more than 20 trillion cubic feet of gas last year.
McClendon had been invited to Capitol Hill to talk about natural gas vehicles as Democrats explore ways to reduce oil prices, which in spite of recent price declines are up more than 20% so far this year. But when asked about the role for natural gas in electricity generation, he wasn't shy. "Gas is there," McClendon said. "It's clean and affordable."
Cars that run on compressed natural gas generate 25% fewer carbon-dioxide emissions than cars that run on conventional gasoline, according to the U.S. Environmental Protection Agency. Natural-gas fired plants emit about half as much carbon-dioxide as coal-fired plants.
"What these guys have to fully grasp is that all the things they'd like to do - deemphasize coal, deemphasize foreign oil - it's all built on one hope which our industry is delivering today, which is more natural gas year after year after year," McClendon told a reporter during a break in the hearing. "I know these shales are so prolific that we can deliver on the promise of natural gas."
He was referring to fields known as the Haynesville Shale, the Marcellus Shale and the Barnett Shale. A relatively new technique known as horizontal drilling that allows access to gas embedded in the shale - or rock layers - has led companies to buy up mineral rights. Chesapeake Energy alone has estimated that its reserves in the Haynesville Shale total about 44 trillion cubic feet, almost twice the amount the U.S. consumed last year.
McClendon's message that natural gas is cleaner than other fuels, such as coal, is familiar to state and local officials. In Texas two years ago, he funded a group called the Clean Sky Coalition that ultimately helped fight plans by Texas power company TXU Corp. to build 11 new coal-fired power plants. The company ultimately canceled most of those plants.
Although McClendon has softened his tactics, his opinion remains unchanged, and no less of a threat to the coal industry. On Wednesday, the National Mining Association, which represents coal interests, put a fine point on it, noting that natural gas power plants still emit their share of carbon dioxide. "You can't get to the CO2 reductions Markey and others want and still use natural gas," said Carol Raulston, a spokeswoman for the group. She said that is why developing technology to inject carbon-dioxide emissions underground is "so important."
Tension with the coal industry reached a peak earlier this year, when the mining group warned the natural gas foundation in a letter that it had violated the cardinal rule of the energy lobby: not to denigrate competing fuel. Mindful of the unspoken agreement, McClendon tried his best to stick to a topic that has the most immediate chance of resulting in new laws: tax credits to encourage the purchase and manufacture of natural gas vehicles.
McClendon said he told Pelosi that "we're entering a new era of American natural gas abundance and as a consequence of that we can reframe many of our energy policies and environmental policies." He told her that natural gas was cleaner to use than gasoline. But when asked whether he had discussed broadening the use of natural gas in power plants - something that could pose a threat to the coal industry - McClendon was brief. "You should ask her office about that."
By Siobhan Hughes
Of DOW JONES NEWSWIRES
WASHINGTON -(Dow Jones)- The chief executive of natural gas producer Chesapeake Energy Corp. (CHK) on Wednesday tried to broaden the market for natural gas by appealing to political concern over the U.S.'s energy crisis, telling Congress that the fuel can provide a solution to both high gasoline prices and climate change.
Chesapeake Energy Chief Executive Aubrey McClendon started his day by presiding over the release of a new report showing that the U.S. has enough natural gas supplies to meet more than 100 years of demand at current levels.He ended with a private meeting with House Speaker Nancy Pelosi, D-Calif., and other House Democrats for more than an hour. In between, McClendon told a U.S. House committee that the country could build more natural gas vehicles and gas- fired power plants without raising prices for fertilizer, chemicals and other products that are made with natural gas.
"Three years ago I would have said no," McClendon told Rep. Ed Markey, D- Mass., chairman of the Select Committee on Energy Independence and Global Warming. Markey had asked whether natural gas supplies were enough to reduce the nation's reliance on coal-fired plants to about 35% of electricity from 50% currently, without raising natural gas prices. "Today, I say yes," said McClendon.
The pitch comes amid skepticism from companies that use natural gas and regulators who are currently focused more on high natural gas prices. This summer, regulators warned that high natural gas prices will mean higher summer electricity bills. Dow Chemical Co. (DOW), a major chemical maker, told Congress on Wednesday that it was wary of government policies that might increase demand for natural gas, saying that the U.S. may not be able to handle higher demand for natural gas without putting further strains on manufacturing, a heavy user of the fuel.
"We are concerned that adding new uses for natural gas such as in transportation will create new and relatively inelastic demand that we may not be able to meet without high prices," Rich Wells, a Dow Chemical vice president, said in prepared testimony.
Recent discoveries in northern Louisiana and Texas, along with discoveries in an area that stretches from western New York to Virginia, are changing that, the industry argues. A new report financed by The American Clean Skies Foundation - a group started and now chaired by McClendon - on Wednesday said that the country has more natural gas than previously thought. U.S. reserves total some 2,247 trillion cubic feet, according to the study by Navigant Consulting Inc. The country consumed more than 20 trillion cubic feet of gas last year.
McClendon had been invited to Capitol Hill to talk about natural gas vehicles as Democrats explore ways to reduce oil prices, which in spite of recent price declines are up more than 20% so far this year. But when asked about the role for natural gas in electricity generation, he wasn't shy. "Gas is there," McClendon said. "It's clean and affordable."
Cars that run on compressed natural gas generate 25% fewer carbon-dioxide emissions than cars that run on conventional gasoline, according to the U.S. Environmental Protection Agency. Natural-gas fired plants emit about half as much carbon-dioxide as coal-fired plants.
"What these guys have to fully grasp is that all the things they'd like to do - deemphasize coal, deemphasize foreign oil - it's all built on one hope which our industry is delivering today, which is more natural gas year after year after year," McClendon told a reporter during a break in the hearing. "I know these shales are so prolific that we can deliver on the promise of natural gas."
He was referring to fields known as the Haynesville Shale, the Marcellus Shale and the Barnett Shale. A relatively new technique known as horizontal drilling that allows access to gas embedded in the shale - or rock layers - has led companies to buy up mineral rights. Chesapeake Energy alone has estimated that its reserves in the Haynesville Shale total about 44 trillion cubic feet, almost twice the amount the U.S. consumed last year.
McClendon's message that natural gas is cleaner than other fuels, such as coal, is familiar to state and local officials. In Texas two years ago, he funded a group called the Clean Sky Coalition that ultimately helped fight plans by Texas power company TXU Corp. to build 11 new coal-fired power plants. The company ultimately canceled most of those plants.
Although McClendon has softened his tactics, his opinion remains unchanged, and no less of a threat to the coal industry. On Wednesday, the National Mining Association, which represents coal interests, put a fine point on it, noting that natural gas power plants still emit their share of carbon dioxide. "You can't get to the CO2 reductions Markey and others want and still use natural gas," said Carol Raulston, a spokeswoman for the group. She said that is why developing technology to inject carbon-dioxide emissions underground is "so important."
Tension with the coal industry reached a peak earlier this year, when the mining group warned the natural gas foundation in a letter that it had violated the cardinal rule of the energy lobby: not to denigrate competing fuel. Mindful of the unspoken agreement, McClendon tried his best to stick to a topic that has the most immediate chance of resulting in new laws: tax credits to encourage the purchase and manufacture of natural gas vehicles.
McClendon said he told Pelosi that "we're entering a new era of American natural gas abundance and as a consequence of that we can reframe many of our energy policies and environmental policies." He told her that natural gas was cleaner to use than gasoline. But when asked whether he had discussed broadening the use of natural gas in power plants - something that could pose a threat to the coal industry - McClendon was brief. "You should ask her office about that."
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Replies to This Discussion
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Permalink Reply by insomniacnla on -
Thanks for posting that!
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Permalink Reply by Dixie Gardens on
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By Jasmin Melvin
WASHINGTON, July 30 (Reuters) - The United States has over 100 years worth of natural gas supplies, and forecasters have consistently low-balled the amount of the clean-burning fuel trapped in unconventional places like shale rock, an industry group said on Wednesday.
Total U.S. recoverable supplies amount to 2,247 trillion cubic feet, or 118 years worth of supply at current production levels, according to a report funded by the American Clean Skies Foundation and completed by Navigant Consulting Inc.
The foundation is chaired by Aubrey McClendon, the outspoken chief executive of Chesapeake Energy Corp (CHK.N: Quote, Profile, Research, Stock Buzz), the third-largest U.S. natural gas producer.
"The size of these shale gas deposits is so enormous that they can no longer be overlooked," said McClendon, whose company is making big bets in shale gas plays like the Barnett Shale in Texas and the Haynesville Shale in Louisiana.
More conservative estimates peg U.S recoverable natural gas supplies at 1,680 trillion cubic feet, or 88 years of supply.
But such estimates ignore the potential of unconventional gas production from shale, tight sands and coal-bed methane, said Rick Smead, co-author of the report and project manager for Navigant.
Forecasts from the U.S. Energy Information Administration "have been significantly outstripped by actual behavior," Smead said.
Shale formations, sedimentary rock found across the United States that makes natural gas, were once untouchable.
But new technology like horizontal drilling and fracture stimulation in recent years have "liberated enormous amounts of natural gas," McClendon said.
A conservative estimate for sustainable production from just the "big seven" shale plays is at least 27 billion cubic feet per day -- half of current total natural gas production, Smead said. But many unconventional natural gas plays, especially in the West, are off-limits to drilling because of a congressional ban.
McClendon's Oklahoma City, Oklahoma-based company is spending $13.5 billion on drilling and leases in 2008, with the aim of being the biggest U.S. natural gas producer in coming years.
Chesapeake is the third largest U.S. natural gas producer, behind BP (BP.L: Quote, Profile, Research, Stock Buzz) and Anadarko (APC.N: Quote, Profile, Research, Stock Buzz), according to first-quarter data.
Other U.S. natural gas producers like EOG Resources Inc (EOG.N: Quote, Profile, Research, Stock Buzz), have taken a more cautious approach to securing rights to drill in unconventional shale plays.
U.S. natural gas futures prices have fallen about 30 percent since the start of July, and settled at $9.248 per mmBtu on Wednesday. McClendon told Reuters he expected prices to hover in the $10/MMBtu range.
"I think somewhere in that $9 to $11 range with an average of $10 is a pretty good price," McClendon said.
McClendon also declined to comment on a rumor that China National Petroleum Corp might bid for a minority stake in Chesapeake's shale gas assets. (Reporting by Jasmin Melvin; Editing by Chris Baltimore and Christian Wiessner)
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Permalink Reply by Donna Thornton on
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Good point. Already bought the Chesapeake stock. Preparing to sign with them.
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Permalink Reply by North LA on
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Oil = middle east
Natural Gas = U.S.A.
I want Shreveport and North LA to be the new Dubai and the new middle east.
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Permalink Reply by Natch N3 on
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just adding to the convo.....
a comment made last night
McCLENDON: We're highly confident. First of all, we're the nation's number one producer of natural gas. We're the largest driller of new natural gas wells and we believe we know more about shale formations than anybody else in the industry for that matter perhaps in the world. And so when we six months ago discovered this field called the Haynesville in northwestern Louisiana, subsequent drilling leads us to believe that this is the fourth largest gas field in the world and probably the largest gas field in the United States by a big number. In fact, we think in one accumulation, we found enough gas to supply the whole United States with gas for another 10 years. And so, through the American Clean Skies Foundation, we hired a consulting firm to come in and take a look at what the data we're seeing and see if you arrive at the same conclusion. There will be more studies. There will be government studies. There will be a lot of industry studies that we think will corroborate what this study found.
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Permalink Reply by Natch N3 on
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a little passage from aubrey on today's investors report.
Our most recent Haynesville Shale well, the Milton Crow 27-1H, is producing approximately 14 mmcfe per day on a 24/64 choke at flowing casing pressure of more than 5,800 psi. We have now completed 11 horizontal wells in the Haynesville Shale and our current combined gross production from these 11 wells is approximately 45 mmcfe per day. We are extremely pleased with the data points we have seen in the play to date and are eager to begin ramping up our drilling activity with our partner, PXP. By the end of this year, we anticipate using 12 rigs to develop our 450,000 net acres of leasehold in the play and, on average, should be able to complete a new Haynesville well every five days.
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