With success, natural-gas industry eyes exports

Companies look overseas as prices plummet at home

The Philadelphia InquirerSeptember 27, 2012 


Men with Cabot Oil and Gas work on a natural gas valve at a hydraulic fracturing site on January 18, 2012 in South Montrose, Pennsylvania. Hydraulic fracturing, also known as fracking, stimulates gas production by injecting wells with high volumes of chemical-laced water in order to free-up pockets of natural gas below. The process is controversial with critics saying it could poison water supplies, while the natural-gas industry says it's been used safely for decades. While New York State has yet to decide whether to allow fracking, economically struggling Binghamton has passed a drilling ban which prohibits any exploration or extraction of natural gas in the city for the next two years. The Marcellus Shale Gas Feld extends through parts of New York State, Pennsylvania, Ohio and West Virginia and could hold up to 500 trillion cubic feet of natural gas.


— The natural-gas industry is drowning in its own success.

Drilling companies are extracting so much natural gas from formations such as Pennsylvania’s Marcellus Shale that they want to export the fuel overseas, provoking opposition from some who say that American gas should stay at home.

At the Shale Gas Insight conference in Philadelphia last week, Jack Williams, president of XTO Energy, used the podium to promote the idea of exporting liquefied natural-gas ships.

“Just as we do with exports of grain, cars and other American products, by exporting LNG, we can create economic value that would not have existed otherwise,” Williams told the audience.

XTO has a lot to gain from exports. It is a subsidiary of Exxon Mobil Corp., the nation’s largest producer of natural gas, whose price has plummeted in the last few years because the shale-gas revolution is producing more gas than U.S. markets can absorb.

Exxon Mobil in August submitted an application to the Federal Energy Regulatory Commission to export liquefied natural gas, or LNG, from a terminal it co-owns in Sabine Pass, Texas. It’s one of seven facilities nationwide seeking federal approval to export.

Producers embrace the idea of exporting natural gas, which would increase demand, boost prices and spur more production. Exports would mean more American jobs producing gas. The income also would improve America’s balance of trade.

But proposals to build more LNG export terminals are controversial.

Some American chemical producers fear that shipping LNG to foreign consumers would make gas scarce here, just as the industry is undergoing a revival thanks to abundant supplies of natural gas, a principal raw material.

American Public Gas Association, the trade group for utilities such as Philadelphia Gas Works, has said that exports would produce “predictable and disastrous” results for household consumers.

Environmental groups such as the Sierra Club have opposed new export terminals because they would induce more drilling, causing more environmental impact.

The Energy Department is studying the economic effects of expanding LNG exports, but Reuters reported last week that the Obama administration delayed the release of the report until after the election.

In an interview last week, Williams said there is plenty of natural-gas supply to meet domestic demand and to export.

“The question is, do we want those additional jobs?” said Williams, a career employee with Exxon Mobil.

“The important thing is, we can do it all,” he said. “It’s not an either-or. We can support plenty of gas for American consumers in terms of electricity generation or heating our homes or our manufacturing sector, for niche applications in the transportation sector, and for export. We can do all that.”

Williams’ belief is based on confidence that the nation’s oil and gas reserves have grown dramatically because of the shale revolution. The combination of hydraulic fracturing and horizontal drilling has opened up huge reserves in “unconventional” formations previously thought unproductive.

“We have a hundred years of natural-gas supply in this country, and that’s a snapshot today,” said Williams.

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