Our Discussion on Natural Gas with Tom Fowler (Business/Energy Reporter, Houston Chronicle)

Here is the trascript of our discussion with Tom Fowler. Again, I want to thank Tom and I want to thank you for participating and asking some good questions. The discussion was great and I am eager to have more of these.

Tom Fowler is a business reporter for the Houston Chronicle covering various aspects of the energy business, including pipelines, electric power and energy trading. He previously covered technology for the Chronicle and for the Austin Business Journal. He has a Master’s in Journalism for Columbia University in New York and was a Knight-Bagehot Fellow in Economics and Business Reporting at Columbia.

Keith "Haynesville" - Site Publisher - The last few days site members have been discussing your recent article regarding the effect LNG import could have on domestic shale gas production – like the Haynesville Shale. What keyed you in on that topic? And, is there anything that didn’t make the article that you would care to expound on?
Tom Fowler - I've followed the development of the new LNG terminals hear here (Freeport and Sabine Pass) for a while simply because it's so far for new energy facilities to be built these days. But both came on line at a really bad time. Analysts started dropping coverage of LNG importers toward the end of last year....Companies are scaling back projects all over, taking down rigs (and by all over I mean other shales around the country) but want to be ready to get back in should prices climb.

Judy Perry - Mr. Fowler - Do you have any idea when the HS will really kick off fracing wells?
Tom Fowler - No, not really. I've got to think any project that's not really close to that right now would prob. delay it for at least 6 months given where prices are and seem to be going.

LP - Those terminals were built for the purpose of importing LNG, were they not?
Tom Fowler - Yes, for importing, LP, but now they're trying to get export licenses so they can hold on to LNG cargoes for short periods of time... sort of as short term storage. They won't actually liquefy the gas themselves from U.S. sources. Forgive my sloppy typing, too much coffee.

Sam Smith - With the price of gas in Europe so much higher, will Louisiana gas be shipped in higher volume to Europe and if so, how much and when?
Tom Fowler - The notion of US gas being exported is still pretty slim, Sam and all the new projects in the Rockies, N. Texas, La. seemed to spell trouble for domestic gas prices for a while.

HMI - Mr. Fowler ... T. Boone Pickens recently made the statement that within 60 days oil would be back to $60.00 a barrel. If that happens where could we expect Natural Gas to be priced at simultaneously?
Tom Fowler - Natural gas has several times disconnected from oil on the pricing front. $60 oil will help natural gas prices but there's still a lot of production coming online here and demand is still low.

Brian Russell - Futures prices are $2 higher a year out from now. Doesn't that indicate an expectation in the market that prices are depressed now and will come back in the next 12 months?
Tom Fowler - The $2 higher futures prices does reflect that, but hardly guarantees. If demand stays soft prices should be on the lower side. One of the banks lowered their expectation for China's oil demand growth by 2/3rds today, so that's not great news.

Larry S - With Pres. Obama in the driver seat- will the US try to use of our natural gas for trucks, government vehicles and is there any potential home usage for refilling our cars at home?
Tom Fowler - Natural gas trucks and gov. vehicles are part of the House version of the stimulus package, but not sure what it will look like when the Senate is done with it. Regarding home filling stations for nat. gas: that's a lot of investment in new infrastructure. I wouldn't be too optimistic.

Sam Smith - What would be the prospect of moving coal-fired generating plants to being gas-fired? Does the cost of fuel favor this?
Tom Fowler - Sam Smith: regarding making coal plants into natural gas fired: that's a lot of capital investment to change. It would likely be cheaper to just add a gas turbine next to existing coal units.

Kcripper - What is your take on the push to use "Clean Coal" versus NG? It is my understanding "clean coal" is a misnomer; and good marketing by the coal companies. It doesn’t come close to NG.
Tom Fowler - As far as a push to get rid of coal all together: There are tons of environmental groups that flood my e-mail daily with just such calls. If coal can be made to match natural gas emission profile in a cost effective way I say we keep it around. But it will take time for that to happen. Regarding "clean coal" is a good bit or marketing, but if all the technology for coal gasification works and the carbon stream is captured it can match natural gas, from what I understand. But it's not cheap. There's a growing support on the fed and state level to get those projects moving and bring down the costs, however. Texas legislators are looking at such an incentive bill.

Tiger Cdo - From your article you seemed to express imported gas would be a problem for the U.S. pricewise etc., do you think calling our congress reps for an import tax is a good idea?
Tom Fowler - I get the sense import taxes ultimately end up creating greater problems for the U.S. when it comes to other trade agreements. Also it would be hard for a Congressman to explain why he'd take actions that essentially help ensure higher energy costs. Given the role natural gas plays in Texas power prices, there are plenty here who would could benefit at home from the lower prices.

Sam Smith - Could I follow up on the "clean coal" myth and coal-fired generating plants? I was thinking it would be feasible to just burn NG in place of coal, rather than new generator. Would this type of retrofit not be possible at reasonable cost? We are just talking about boiling water, aren't we?
Tom Fowler - Sam Smith: yes, it is just that boiling water but coal boilers vs. natural gas boilers aren't really "plug and play." Usually when there's lower oil prices you'll first see oil substituted for coal at some power plants since there are a number of units that have that kind of dual-fuel capacity.

Keith "Haynesville" - Site Publisher - Forgive me as I may reveal my ignorance - You go to the store and pick up an Argentine Pear, you can put it down and go pick out an American Pear... Is the “right to choose” an option in the natural gas market?
Tom Fowler - While some states have retail natural gas choice (you choose who you buy you home gas from) ultimately is still a domestic U.S. product, although we do get some through Canadian pipelines too.

Keith "Haynesville" - Site Publisher - In the OGJ, Oil & Gas Journal, I read a column by Booz & Co. They suggested that the Unconventional Gas market could withstand this downturn through 1) Mergers and Acquisitions, 2) Expanding gas gathering/processing facilities in a given play, 3) Developing superior operational and technical capabilities – My question: Are you finding that companies are moving in this direction or are most staying course?
Tom Fowler - If they went into these projects un-hedged I would think they're toast. If any of them were older than 30 I would hope they had some memory of the 80s, or at least hired a couple of older guys to remind them not to get too far ahead of themselves.

Kcripper - It seems low Oil and Gas prices are not good for long term US energy independence. What is your thought on this?
Tom Fowler - But Texas practically made natural gas the equivalent of holy water about a decade ago and over built natural gas plants and made our power markets particularly sensitive to gas prices. We have seen some of the highest power prices here because of it. Relying too much on one fuel can be a bad idea. I would think the key word is patience for land owners. It will all come back, but it could be up to 2 years before we see steady $7.

Todd Atchison - Will we see a repeat of what happened in the 80s?
Tom Fowler - What part of the 80s, Todd? The price collapse? Possible. Company collapse? Seems companies were a bit more cautious in the build up. There's a reluctance to let go of too many geologists engineers etc. since so many left the business post 80s.

Keith "Haynesville" - Site Publisher - Who’s especially hurting out there versus those sitting pretty good in this downturn?
Tom Fowler - I don't keep tabs on diff. companies too closely, too much like picking stocks, I'm sorry to say.

Keith "Haynesville" - Site Publisher - Thank you Tom for talking with us. Would you please provide us with the URL for your blog?
Tom Fowler - http://blogs.chron.com/newswatchenergy. BTW, if folks want to e-mail me later I'm at tom.fowler@chron.com, but no guarantees. Thanks for having me. Good luck to everyone.

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Tags: gas, market, natural

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Comment by Roni Walker on February 11, 2009 at 9:55am
Thank you for the information! Great info!
Comment by Anna Mauck-Member Services on February 9, 2009 at 1:31pm
This is valuable Haynesville - thanks for doing this. Great chat! Who's next on your line up? Can you get someone from T. Boone's camp?

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