Vehicular CNG just got another big boost.
What was the Pickens Plan is now Aubrey’s Agenda.
That’s Aubrey as in Aubrey K. McClendon, CEO and chairman of Chesapeake Energy Corp., the No. 2 independent US natural gas producer.
Just as T. Boone Pickens launched a major media rollout to promote his “Pickens Plan” to replace natural gas burned in power plants with wind power and then divert that gas to vehicular CNG, Chesapeake kicked off a big multimedia campaign dubbed “CNG Now!” Televsion and print advertising and a snazzy new website are said to serve as a “public education campaign.”
In fact, McClendon and Chesapeake talk up the Pickens Plan quite a bit, with McClendon declaring, “My good friend Boone Pickens and I agree about compressed natural gas—CNG is the best fuel to reduce America’s addiction to foreign oil.”
(I would like to take a moment here to recommend a 12-step recovery program for anyone who can’t stop referring to US oil consumption in the context of a heroin habit.)
In case there were any doubt about the Urgency for Our Nation’s Security of switching from gasoline to CNG, here’s a quote from Pickens that appeared in the Dallas Morning News:
“When we finally get this story told, you’re going to be unpatriotic if you’re using foreign oil when you don’t have to. If you have a domestic alternative, and you’re not using it, you’re unpatriotic.”
Hmmm. Guess I’ll have to go all CSI forensic on the family flivver’s gas tank to trace those cracked crude molecules back to their country of origin. I wouldn’t want to face rendition for my treasonous gasoline-swilling ways, although I hear Gitmo is lovely this time of year—assuming it hasn’t been swept away by Ike by now.
Pickens isn’t the only one in this CNG push who knows how to play hardball. McClendon wasn’t wearing kid gloves when he recently took on utilities seeking to install coal-fired power plants in Oklahoma, Kansas, and Texas. Chesapeake funded local opposition groups and spent more than $1 million on advertising to decry the construction of what the ads termed “filthy” coal plants in states where there is suddenly an embarrassment of natural gas riches to fuel those power plants now for a long time.
I’m not sure how Aubrey and his good friend Boone are going to reconcile their differences over whether natural gas or wind energy will keep all those power plants humming. Maybe McClendon just needs to show Pickens the Navigant Consulting study that really jacked up estimates of US natural gas reserves in the wake of the booming gas shale plays: 2,247 trillion cubic feet (tcf), or a 118-year supply at 2007 demand levels. The American Clean Skies Foundation, of which McClendon is chairman, funded the Navigant study. McClendon also told Oil & Gas Journal this summer that the Navigant study, if correct, “takes a lot of pressure off us to open more of the OCS.” I’m not sure how much pressure there was on Chesapeake in that regard, since it has no OCS holdings.
Shale gas production growth has been so successful that it’s turning around the US natural gas production profile—so much so that Freeport LNG Development LP last month requested permission to re-export LNG imported into its Freeport, Tex., terminal. The culprit: lower gas prices and increased domestic production from the shale gas plays.
Is it conceivable that the much-ballyhooed North American LNG boom could fall victim to the explosion in shale gas? Or will the US still need all of that foreign gas as well to feed all the gas-fired power plants (as backup to Boone’s erratic wind power) and CNG vehicles?
Evidently McClendon is so bullish on the prospects for natural gas that he told analysts in August that Chesapeake is looking at ways to invest in US LNG export facilities because natural gas in global markets can sell for twice what it does domestically. Oops. That didn’t raise the Homeland Security threat level to magenta, did it? Don’t tell Boone.
A key part of the CNG Now! agenda is to lobby for a host of government incentives in the form of tax credits to automakers, consumers, and fuel retailers and mandates for CNG refueling pumps at all service stations owned by major oil companies. These would be designed “to incite the purchase, usage, and sale of natural gas vehicles,” according to the CNG Now! website.
Whatever the pros and cons are for vehicular CNG—and it stacks up better against gasoline than some other alternatives—it is clear that the fuel cannot compete with gasoline and increase market share without government mandates and incentives. And those mandates and incentives come with taxpayer costs—none of which are spelled out by CNG Now!
It’s no secret that Chesapeake’s core strategy is to assemble a dominant position in unconventional natural gas, notably the shale plays. Just how dominant does the company want to be? Just how much commercial shale gas is really there?
My good friend—and widely respected reserves evaluation consultant—Dr. Rafael Sandrea, who developed his own study of future oil and gas supply (yes, I’m slipping in a plug; check out the study at http://www.pennenergy.com/index/resourcecenter/reports/new_future_global.html), is still scratching his head over the Navigant numbers. The best Rafael can come up with for remaining US gas conventional and unconventional reserves is 554 tcf. Not bad, but now we’re looking at about 30 years of reserves at 2007 consumption rates—but those rates could double or triple with all these CNG vehicles and extra gas-fired power plants. So we’re down to, what, a decade or two now?
And shale gas ain’t cheap. Some of these shale plays require a gas price of more than $7/MMBTU to be economic. A show of hands, please, for anyone who can remember the gas bubble and sub-$2/Mcf gas.
So let’s review: Shale gas dominance. Check. Decline in competing gas supply from LNG imports, with possible upside for LNG exports of domestic gas. Check. Decline in competing domestic oil and gas supply from the OCS. Check. Government-mandated taxpayer support for new and expanding natural gas markets. Check.
That appears to be Aubrey’s Agenda. How does it jibe with yours?
