Platts, May 26, 2011
Shale gas pioneer Chesapeake Energy is confident unconventional gas plays would support proposed US LNG export projects, and believes the US could produce more than 90 Bcf/d of gas at prices are "not that high," a company executive said Wednesday.
"We have a very strong mandate from our CEO to export (LNG from the US)," Bill Wince, vice president of transportation and business development at Chesapeake, said during a panel presentation at CWC’s Americas LNG Summit here. [...]
Chesapeake last year signed a preliminary agreement to supply as much as 500,000 Mcf/d to Cheniere Energy’s proposed LNG export project in Louisiana, which aims to start exporting in 2015. Chesapeake is also talking to the proposed LNG export project in Freeport, Texas, Wince told Platts on the sidelines of the conference, declining to comment on the relative merits of the two proposals.
Current US production stands at 64-65 Bcf/d, Wince said during his presentation. [Also, please see my post "Natural Gas Production/Consumption Retrospective 2010." -- D.R] [...]
The Marcellus play needs a price of only $2.45/Mcf to provide a 10% rate of return, according to a slide he [Wince] presented. The Haynesville play needs a $4.25/Mcf price to provide the same rate of return, while the Fayetteville play needs a price of $4.70/Mcf and the Barnett play needs a price of $5.05/Mcf, the slide showed. [...]
Current production from four major shale areas is 15 Bcf/d, he said, adding that the advent of low US gas prices in recent years coincided with shale production gains. [...]
US shale production is greatly reducing basis differentials in the US market, which historically have been caused by transportation costs between producing and consuming regions, Wince said.
"We crush the basis,” he said about Chesapeake, which ranks as the country’s second-largest gas producer [after ExxonMobil -- D.R.], producing 2.7 Bcf/d in the first quarter. [...]
A significant amount of LNG import infrastructure was built last decade before the shale boom was well understood, as industry players expected LNG to make up for projected decreases in domestic gas production.
Shale gas crowds out Yemen LNG
Yemen LNG was primarily designed to sell significant LNG volumes to the US, but "the market disappeared,” Jean-Pierre Cave, head of commercial and shipping at Yemen LNG, said at the conference. [...]
Based on last week’s ruling [May 20] by the US Department of Energy authorizing Cheniere to export US-produced LNG from Sabine Pass [please see my post "Cheniere Gets OK to Ship LNG Overseas," -- D.R.], Bill Cooper, president of the Center for LNG industry group, said he expects other proposed US export projects to get similar approval. [...] [Read full]
(According to the U.S. Energy Information Administration/EIA, in the past 10 years, U.S. shale gas production has increased more than 12-fold from 0.39 trillion cubic feet/tcf in 2000 to 4.87 tcf in 2010. In 2010, U.S. shale gas production constituted 23 percent of total U.S. natural gas production---please see here. In 2009, the U.S., with its big shale gas resources, even surpassed Russia as the world's largest natural gas producer---please see EIA's data, here. -- D.R.)