by Bruce Fenton

A looming natural gas shortage is beginning to look like the 500-pound monster in the forest of economic recovery. When oil prices spiked and gasoline rocketed far beyond $2 per gallon, it seemed that “winning the war” would add stability and lower costs to the energy picture. This may not be the case . . . and it has little to do with Iraqi oil.

Energy prices remain stubbornly high. Natural gas prices in particular remain inflated in comparison to historical standards. With natural gas accounting for nearly one-fourth of the nation’s energy consumption and gas imports on the rise, these higher prices, if sustained, will be an impediment to the much-anticipated economic rebound.

Higher prices for energy act as a tax on consumers and businesses. Unfortunately, it is the lower wage earners who will pay a disproportionately higher price for the energy they use.

President Bush has called for a renewed emphasis on gas exploration, but in a consumer friendly fashion. He stated, “We’re a technologically capable nation. We can explore for natural gas and protect our environment.”

Natural gas is a colorless, odorless fossil fuel that gives off a great deal of energy with few harmful by-products when burned. It is distributed from vast underground storage sites through a nationwide system of pipelines. Unfortunately, like all extractive resources, exploration for natural gas draws the attention and the ire of environmental activists.
But President Bush may have a point. The natural gas industry has made major strides in using technology to advance its exploration efforts. According to their website, www.naturalgas.org, new technology has allowed the industry to increase exploration and production to meet rising demand without materially increasing the stress on the environment.

Among the factoids on their website:

• 22,000 fewer wells are needed on an annual basis to develop the same amount of oil and gas reserves as in 1985.
• Drilling wastes have decreased by as much as 148 million barrels due to increasing well productivity and using fewer wells.
• The drilling footprint of well pads has decreased by as much as 70% due to advanced drilling technology, which is extremely useful for drilling in sensitive areas.
• By using modular drilling rigs and slim-hole drilling, the size and weight of drilling rigs can be reduced by up to 75% over traditional drilling rigs, reducing their surface impact.
• Had technology, and thus drilling footprints, remained at 1985 levels, today’s drilling footprints would take up an additional 17,000 acres of land.

The importance of technological advances in this industry cannot be overstated. New technologies and applications are being developed constantly to improve the economics of producing natural gas, allow for the production of deposits formerly considered too unconventional or expensive to develop, and ensure that the supply of natural gas keeps up with steadily increasing demand.

Sufficient domestic natural gas resources exist to help fuel the U.S. for a significant period of time, and technology is playing a huge role in providing low-cost, environmentally sound methods of extracting these resources.

Hopefully, environmental activists and the industry will find some middle ground that will allow us to continue to develop natural gas resources as an alternative to the use of coal, oil and nuclear energy to provide the energy resources our growing nation needs.

Bruce Fenton is a financial consultant, a writer, and the Managing Director of Atlantic Financial Inc. Bruce welcomes inquiries, comments, and questions. He can be reached by contacting The Fenton Report.