Q&A on Natural Gas with Tom Fowler (Houston Chronicle Energy Reporter)
Here is a discussion I thought you might be interested in..pass it on!
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.
Q: What led you to write about the effect LNG imports could have on domestic shale gas production – 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.
Q: - 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.
Q: - 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.
Q: - 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.
Q: - 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.
Q: - 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.
Q: - 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.
Q: - 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.
Q: - 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.
Q: - 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.
Q:- 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.
Q: - 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.
Q: 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.
Q: - 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.
Q: - 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.
Q: - 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 - 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.
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.
Q: What led you to write about the effect LNG imports could have on domestic shale gas production – 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.
Q: - 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.
Q: - 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.
Q: - 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.
Q: - 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.
Q: - 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.
Q: - 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.
Q: - 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.
Q: - 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.
Q: - 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.
Q:- 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.
Q: - 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.
Q: 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.
Q: - 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.
Q: - 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.
Q: - 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 - 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.
Views: 416
Replies to This Discussion
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Permalink Reply by Brian Day on
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While I don't agree with some of Mr. Fowler's views on how such a vast, world-class field asthe Marscellus Shale could be marginalized in the near future of the Energy industries plans, I do agree that things probably won't turn around dramatically in the next six months. Two years is probably a more reasonable time frame. In some respects this setback is a good thing if land owners can afford to wait. A depressed economy weeds out the weak drilling companies and allows time for land owners to become well informed and savy about dealing with the land men that eventually will show up on their doorstep.
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Permalink Reply by Brian Day on
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Another point/opinion that I meant to add; I really don't have thatt much fear about LNG flooding our markets from overseas. Cost in shipping and handling this stuff can only escalate rapidly, no matter how cheaply it is purchased overseas. There will just be too many middlemen and speculators wanting a percentage of the profit in such an extended supply chain. Domestic gas will be cheaper and politically and economically safer (as recent history has proven) than LNG. Like them or not, the voters who elected Obama will determine energy policy in the future. Their piers have been to war in the Middle East. Their world will depend on the energy choices that they make. Domestic natural gas is a reasonable transition fuel to run our country with available, reasonably simple technology (much cheaper than coal gasification) for many decades to come. Energy companies will provide the infastructure to run the huge market of transportation on natural gas - at their pace and profit margin. One of the differences in this infastructure is that a car owner can fill his/her vehicle tank at the home site. That echnology is available to almost anyone right now, as we speak. A minor problem is that natural gas pressure is regulated way down before it enters a home to safely use in the current appliances available. Were a seperate regulator installed upstream to take advantage of the higher mainline pressure, accompanied with the proper billing meter of course, a person could fill their tank much more rapidly. Again, this hardware is basically already available and has been for quite some time. If this happens throughout the world as well as in the US, we could be exporting LNG from these new terminals instead of importing it. We could be providing compitition for the Middle East and Russia.
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Permalink Reply by smittydw43 on
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I agree with you. This is a critical time in WV in the O&G industry. As a surface and mineral rights owner with unsigned standard leases in hand, I think the slump in gas prices is a blessing. The WVSORO (West Virginia Surface Owner Rights Organization) has been successful in pressuring the state legislature to give surface owners greater bargaining power with the drillers. WV seems to be behind times and needs to catch up. Changes need to be made regarding well-spacing, pooling and a whole myriad of issues that need to be addressed. Those with ownership interest in either the surface or the minerals of WV property, if you haven't already done so, I encourage you to go to the website of WVSORO at www.wvsoro.org and join. Drilling companies, large and small, have been taking advantage of surface owners, but especially the small ones since they would unlikely have the resources, capital, etc. to treat the surface owners fairly. A good example can be read at this website: http://www.post-gazette.com/pg/06113/684429-85.stm
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Permalink Reply by Brian Day on
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Although I own land in Northeast PA, I actually live in Sheridan, Wyoming on the edge of the Powder River methane gas fields. People have been dealing with oil and gas companies here for years and in Wyoming for decades. Proceedures and support for dealing with these people of questionable moral business practices are already in place. I have many friends, aquaintances, and connections wiht the drilling companies. I will NOT claim to be an expert, but I would be glad to share with anyone what I have had to learn fast. Luckily, I had many human resources at my fingertips. Incidentally, due to the faltering economy, much of the methane industry has shut down here like a snuffed out candle. This time of year is always slow for them, but I wouldn't be surprised to hear before long that some of this equipment will be headed for the east. Some of the oil people have already headed up to the big oil fields to be fracked in North Dakota and Eastern Montana.
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Permalink Reply by Gail Powers on
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I am one of many heirs to 46 acres of O&G in Upshur County West Virginia. Can you tell me what it going on there as far as the price they are getting for leases? It was my grandmothers and I just found out in October that her estate was never taken to probate in W.V. and she has been gone for 30 years. I have been tying to take it to probate since October and have ran into some obstacles. I'm beginning to think no one there wants us to. We could be totoally wrong, but our family suspect our royalties have been cheated the family over the years since it was never taken to probate. Also, I think there is a possibilty that there may be coal bed methane wells there on that 46 acres. Have they made a dicision on who that belongs to? I have heard that some counties have divided it among the land and mineral rights owner. In my case, the land owner sold it to another person but kept the coal rights. Me and my family owns the minerals, so who would the coal bed methane belong to?
Thank You G.P.
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Permalink Reply by Keith Mauck (Site Publisher) on
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No I can't sorry - join the West Virginia group and post there and maybe you'll find something
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Permalink Reply by Brian Day on
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Sounds like you need to gather up all of your paperwork and take it to a good mineral and lease lawyer, not just a lawyer who has decided to dabble in it. Good luck.
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You got any suggestions on a good lawyer? I had already been in contact with one but he was not doing anything, so I just recently told him he wasn't going to work out for us. I have another one that is helping with the probate, but would be up for suggestions on our other situation.
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