The United States’ vast supply of natural gas, boosted by near ubiquitous shale formations, is generating all kinds of ideas for potential uses, from new power plants and petrochemical complexes to natural gas-powered vehicles and even exports, an LSU energy expert said Wednesday.
“There is likely, given today’s resource forecast, a lot of opportunity for everybody at this table,” LSU Center for Energy Studies Associate Director David Dismukes said. “But if something were to happen that made shale uneconomic, or if there were some kind of regulatory restriction or a backlash on this, this would have relatively significant implications for end users as well as producers.”
Dismukes spoke at the Center for Energy Studies’ Gulf States Energy Retreat.
He and other speakers discussed the impact of horizontal drilling and hydraulic fracturing. The combination has produced enormous amounts of natural gas and oil, created hundreds of thousands of jobs and billions in taxes and salaries.
However, fracking has come under fire, with critics saying the practice can contaminate surface water and water tables. There are also concerns about the enormous amount of water used in the process. For example, one well in the Haynesville Shale in northwest Louisiana needs as much as 1 million to 5 million gallons of water, and around 20 percent of that water might be recycled.
Still consumers in Louisiana and nationwide, not to mention domestic chemical and petrochemical manufacturers, have benefited enormously from cheap natural gas produced from shale formations, Dismukes said. Since 2008, Louisiana consumers have saved an estimated $418 million in lower utility bills, while nationally, the savings are estimated at $34.9 billion.
“That’s a lot of money going back into people’s pockets that otherwise wouldn’t have been there if not for these shales,” Dismukes said.
U.S. industrial manufacturers, particularly Gulf Coast chemical companies, have also benefited, he said. Companies have announced hundreds of millions and even billions in new projects. Royal Dutch Shell PLC and Sasol Ltd. are studying whether to spend more than $10 billion apiece to build plants in Louisiana that convert natural gas into diesel.
“You couple those with the $8 billion to $9 billion in capital investments for some of those export facilities .... You’re looking at a really big renaissance in new commercial and industrial construction activity,” Dismukes said. “You’re looking at a big renaissance in industrial development activity, and you’re looking at a big increase in three to five years.”
Finding a workforce to build those plants and work in them will be a big, near-term challenge, Dismukes said.
Meanwhile, although the oil and gas industry’s push for more natural gas vehicles and exports have drawn lots of attention, the biggest new use for natural gas will probably be utilities’ gas-fired power plants, Dismukes said.
In 2000, gas-fired plants produced about 16 percent of the country’s electricity, he said. By 2010, natural gas accounted for 24 percent of electricity production.
Coal-burning plants produce around 40 percent of the country’s electricity, but that percentage is expected to drop.
More stringent environmental regulations mean that, conservatively, an estimated 45 gigawatts of coal-fired power plants will be shuttered over the next five years or so, Dismukes said.
That’s enough electricity to power more than 26 million homes.
Natural gas is the likely replacement, Dismukes said. At less than $5 per thousand cubic feet, natural gas is cheaper than coal.
Dismukes said there are a number of barriers to converting the nation’s autos to natural gas, including the cost and the lack of fueling stations.
Proposed U.S. exports of liquefied natural gas have been controversial, but there is no guarantee the proposed plants will be built, Dismukes said. There is a lot of cheap natural gas worldwide — some countries can produce it for less than one-tenth of the current domestic price.
There are an estimated 6,000 trillion cubic feet of shale gas reserves outside the United States and 9,000 trillion cubic feet of conventional gas reserves, he said.
“It’s not a given that all this (U.S.) gas is just going to go rushing out of here,” Dismukes said.
But one big advantage liquefaction facilities along the Gulf of Mexico have is an established infrastructure — pipelines and processing facilities — to move the gas, Dismukes said.
Meanwhile, many of the other speakers at the retreat worried that overly restrictive regulations, particularly at the federal level, could also hurt oil and gas exploration and production.
Former Congressman Bob Livingston, who moderated one session, said the oil and gas industry is under attack from the Obama administration. Livingston, Patrick Martin, director of LSU’s Mineral Law Institute, and Texas Tech University professor Bruce Kramer cited a number of examples of the administration’s antipathy toward the industry, including:
- The ban on deepwater drilling, and the unofficial ban on shallow water drilling, that followed the BP Macondo disaster.
- Federal regulators, “mindless” prosecution of seven oil companies for the deaths of 28 birds. The companies face maximum penalties of $15,000 per bird and six months in prison, Martin said. Meanwhile, wind farms kill an estimated 440,000 birds each year and are not fined, he said.
Livingston said the Obama administration is seeking to exempt the wind farms from the federal law that protects migratory birds.
- The comments of Al Armendariz, former head of the Environmental Protection Agency’s South Central office, who compared his enforcement philosophy with the Romans’ method of establishing control: crucifying the first five townspeople they came across.