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The Barrel :Those who observed it
talk about the trends at CERAWeek


Eight different Platts journalists have been at the CERAWeek meeeting since Monday, some the entire time, others in and out. We've all been running from press room to briefing room to panel to the food table. There's been a lot of information to digest; here is our attempt to report on some of the most significant trends we heard about. 

_________

Although I already knew that the industry has plenty of investment options, I was surprised to hear the degree of the money available as explained by three high-powered investment bankers on a panel about industry financing sources. One called the availability "unprecedented" and said that a "wall of money" is ready to come into US shale operations from national oil companies. A private equity expert said that segment of the investment community also seeks more E&P options, citing the high rate of success in this new era of tech-savvy exploration as a clear risk-reducer. They agreed that a lack of financing should not curtail industry growth .-- Gary Taylor

A few notable conclusions from this meeting: one, the big brewing battle from 1-2 years ago about the disclosure of fracking fluid components is basically dead. The industry consensus has swung so far in favor of full disclosure that anybody arguing against it is going to be a cross between an outlier and a pariah. Two, the shale gas revolution in the US is going to stay a US phenomenon for some time. Multiple caution flags were thrown up that this is not going to be migrating around the world at a rapid speed. Three, the US will become an LNG exporter, but there definitely were some people who didn't believe it would become an enormous supplier. The reason for that is because of optimism that the revival of US manufacturing led by a natural gas price far less than the rest of the world will suck up an increasing amount of that gas that might otherwise be exported. And oh, yeah, they talked about oil too. It's tight, and it's going to stay tight for awhile. Forever, maybe, until there are major technological changes in transportation fuels, or the rest of the world sees a fracking-driven revolution like that which is pushing US output higher .-- John Kingston

Speaking of LNG: there were those at the meeting who expect there will be significant LNG exports from the US. But there could be an overreliance on US LNG exports to boost domestic prices. Despite it being a political morass, despite it being at least three years away, despite the stiff competition from Australian LNG, the vast majority of executives were talking up US LNG exports as the next best thing to sliced bread. Guess coal-to-gas switching is so last year.-- Samantha Santa Maria

Talking about redeveloping mature fields at first may sound about as exciting as watching paint dry, but here are a couple of eye-opening statistics that came out of one presentation at CERAWeek: about 70% of current production comes from fields more than 30 years old, and energy consultants IHS CERA estimate 25% of current global oil capacity comes from fields that have seen more than half of their original reserves depleted.  That information came from Bill Scoggins, president of the Colorado School of Mines, at a CERAWeek presentation Wednesday.  With all the talk of "new" shales and unconventional plays--many of which are located at deeper horizons of old fields--it's worth remembering that there is a horde of hydrocarbons yet to be dusted off and produced by continually-developing technology. And a great deal of it will come from places where geologists were operating half a century ago.  So there's still a lot of life in the old dogs yet.-- Starr Spencer

What struck me the most was the increasing focus on the world's simplest hydrocarbon---methane, or CH4---as potentially playing a liberating societal role. Some countries, such as Poland and Ukraine, hope to break the economic stranglehold that Russia has on them by rapidly developing their shale gas resources, and hope to start commercial shale gas production as early as 2018. The governor of a Rust Belt state, Ohio's John Kasich, was at CERAWeek because shale gas production there could be the force behind the economic boom it is longing for. The Us, which is developing an unexpected energy independence through the shale gale, hopes to capitalize on its technological prowess by becoming a major LNG exporter in the coming years, after having spent billions thinking it would need to import LNG. There is more and more talk of using natural cars to power cars and truck. With the uncertain fate of nuclear power, high oil prices and the bad economics of renewables, methane may be king for a long time .--Ron Nissimov

What was notable to me how little general commentary there was on oil under the weight of the all-encompassing topic of gas. This feels like a gas conference, exclusively. Granted, oil came up vis-à-vis the geopolitical discourse over Iran. And there was a downstream oil session. But, the main pulse of the CERAWeek is gas, which is no accident. In past years, it felt like a Big Oil conference.-- Katharine Fraser

On the power front it is clear how the "new abundance" theme is playing. Gas-fired turbine manufacturers are revitalizing their product lines in anticipation of new orders, primarily from US power generators.  While the French firm Alstom said it doesn't expect to sell many of their new GD-24 turbines in Europe, they've invested $300 million in a new Chattanooga, Tennessee, facility to serve what they think will be an expanding US market. The generators, of course, are acutely aware that their future build-out will be almost exclusively gas-fired capacity. There is the question of when to build, because generators now face low demand. More harmful, however, are the low power prices. Numerous power generating companies are today right on the razor's edge in terms of profitability because of low prices, which are, of course, heavily impacted by low natural gas prices. The observation was rife that low power prices are good for consumers, but obviously, over time, a real threat to power companies. While there doesn't appear to be any shortage of financing for many types of energy projects, a shortage of financing for new power projects is reflective, one executive said Thursday morning, of bankers' concerns with investing in new power generation when so many companies are struggling with cash flow.-- Jeffrey Ryser

There was a lot of talk about the growing production of North American crude oil over the next decade and how the infrastructure will need to try and keep up. There was also talk about how the US is facing declining demand for oil and its impact on refiners. But there was no discussion in any of the sessions that I was in, or in any I could see on the schedule, that focused on the retail price of gasoline and how that impacts the US economy and the energy industry. The pump price may concern a retailer much more than a producer or a refiner, but gas prices are a big concern to the general public and will help shape the mood of the country toward the energy industry's future plans, like Keystone XL, more fracking and additional infrastructure.-- Jason Lindquist


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Petroleumworld News 03/13/2011

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