It has taken a couple of years for the energy industry to acknowledge a new reality: Natural gas availability is soaring in contravention of forecasting models that have been in use for decades, and the fuel is set to transform everything from power generation and transport to chemicals and even the trade deficit.
As old operating realities have been thrown out the window, as major oil players increasingly become natural gas companies, as billions of dollars of investment in proposed export terminals is argued over inside the sector and out, the strategic arm of this most strategic of industries is racing to catch up.
“I take relief in the fact you cannot be wrong twice in the same way in both directions,” Cheniere LNG International President Jean Abiteboul said in discussion at the North America Gas Summit in Washington, DC recently. He punctuated his speech with qualifiers and claims of ignorance as to where the sector is heading, echoing the wider admissions by other natural gas company executives and sector-watchers that the fundamental shifts in the business had caught them off guard and scrambling for a new model.
“The shale gas and tight oil technology story is only beginning, with much yet to be written,” Energy Information Administration economist Aloulou Fawzi told the conference, organized by The Energy Exchange. The EIA, part of the US Department of Energy, is set to release a new outlook for energy use in the coming weeks that could significantly revise its earlier and already higher forecasts for natural gas production in the US, Fawzi said, echoing comments from EIA Administrator Adam Sieminski at the US Association for Energy Economics conference earlier in November.
“We’ve gone so rapidly from being a country that is facing declining oil and natural gas development to one that is considering expanding it,” Environmental Defense Fund Chief Counsel Mark Brownstein said at the North America Gas conference. He pressed the industry to expand data collection and improve transparency from operations, both as a way to alleviate environmental concerns and to improve the entire sector’s forecasting.
The lack of a working consensus economic model for natural gas has put increased pressure on officials to produce promised research that can guide industry and investor approaches to the sector. The Department of Energy is currently waiting to release a report on the economics of liquefied natural gas exports it commissioned from a third party, and Center for Liquefied Natural Gas president Bill Cooper said the industry needs to see the delayed report while it still has time to take advantage of development opportunities. With countries around the world taking advantage of their own natural gas resource and racing to expand exports, delays could see the US trying to sign long-term contracts for natural gas exports just as the demand side of the market is overwhelmed with availability.
“Certainty is important, but this is a key policy decision for the US,” DOE Deputy Assistant Secretary in the Office of Oil and Natural Gas Christopher Smith said in response to questions about the report. He said that the report – which is expected to address the degree to which LNG exports might impact domestic US natural gas price forecasts – is “not a policy decision” but one aspect of a “measure twice, cut once” analysis process.
The scale of the challenge for the energy sector matches the scale of the opportunity for the US economy and its allies, multiple speakers said at the North America Gas Summit. “A better-functioning global gas market is essential for continued economic growth,” Sempra LNG President Octavio Simoes said. “There is a cost to the US economy associated with regulatory delay and ambiguity.”