Bentek Sees U.S. Gas-Productivity Gain Displacing Imports, Coal
January 08, 2010, 09:28 AM EST MORE FROM BUSINESSWEEK




By Edward Klump

Jan. 8 (Bloomberg) -- Surging productivity from U.S. fields will end the need for natural-gas imports and provide enough additional fuel to run vehicle fleets and reduce coal-fired power generation, said consulting firm Bentek Energy LLC.

“We may very well be on the cusp of a completely different energy era than we’ve had for the last 30 or 40 years,” Bentek Chief Executive Officer Porter Bennett said yesterday in an interview in Bloomberg’s Houston bureau.

Bentek, which tracks gas flows across the nation, predicted in 2008 that output gains could push Canadian imports and liquefied-gas cargoes sent by tanker ships out of the U.S. market by 2020. That was before advances in technology that proved last year to invalidate old formulas for predicting gas output based on the number of active drilling rigs, he said.

“A drilling rig today produces about two to three times what it did a couple of years ago,” said Bennett, 57. He said productivity gains were driven largely by advances in exploiting shale formations, where drillers fracture rocks thousands of feet below the ground to unlock gas deposits.

Bentek, based near Denver, saw last year that U.S. gas production held up even as the number of active rigs slid, Bennett said. The firm, which developed an index to reflect new productivity parameters, is still trying to determine when output per rig will peak, he said.



Production Outlook



The average number of active U.S. gas rigs in the fourth quarter was 50 percent lower than a year earlier, according to a count by Baker Hughes Inc. U.S. gas production rose 2.1 percent in October from the previous month, a government report on Dec. 29 showed.

Output in 2010 “will probably look a little bit like it did last year, maybe a little bit higher,” Bennett said. Gas for February delivery fell 3.4 percent yesterday in New York to $5.806 per million British thermal units on concern temperatures won’t be cold enough to eliminate excess supplies.

Bennett said gas prices may average $3 to $5 this year, with weather-related heating demand in the next 60 days playing a big role. The U.S. is off to its coldest start to winter since 2000, according to AccuWeather Inc., which said cities such as New York and Chicago are on track for their lowest average temperatures in 30 years.

“If we continue to have this kind of intense cold across the country, particularly in the northern half, we’ll chew off the storage overhang that we had going into the winter and that will bring us back down at least to where it was at the beginning of last winter,” Bennett said.



‘Political Will’



Gains in gas productivity could allow the U.S. to reduce coal-fueled power generation, the biggest source of greenhouse- gas emissions, by at least 20 percent, Bennett said. He said there’s a good chance the country can produce as much gas as it needs with prices in the range of $3 to $6, and companies should be able to resolve environmental concerns over shale-gas drilling if opponents aren’t simply trying to stop production.

“If you want to reduce carbon, you use more gas and less coal -- it’s that simple,” Bennett said. “And that could be done tomorrow, if the political will was there.”

Bennett said last month’s agreement by Exxon Mobil Corp. to acquire shale-gas producer XTO Energy Inc. should reassure customers and utilities that new gas formations can play a larger role in energy use.

“As much as anything, it just legitimizes the whole concept,” Bennett said. “These are not just some crazy independents that are out there developing this. This is a real, long-term play.”




--With assistance from Reg Curren in Calgary. Editors: Tony Cox, Kim Jordan.



To contact the reporter on this story: Edward Klump in Houston at +1-713-651-4607 or eklump@bloomberg.net.



To contact the editor responsible for this story: Tony Cox at +1-713-651-4610 or acox3@bloomberg.net.


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