Monday, September 29, 2008

USA Natural Gas Surplus?

Crisis. What crisis?

Lost amid persistent worries about the price of crude oil and gasoline is a little-understood reality: There is more natural gas under our feet than we know what to do with.

Indeed, natural-gas production is growing at such a rapid rate in this country that it’s threatening to outrun demand — driving down prices and prompting producers to ponder capping wells or exporting the excess to Asia.

Industry figures show that more gas wells were completed in the United States during July than in any month in history. The Energy Information Administration now expects gas production, which remained essentially flat from 1999 to 2006, to surge 8 percent in 2008.

“It caught everyone by surprise,” said Kobi Platt, an analyst for the federal agency. “It’s been the one bright spot.”

In the near term, the boom in natural-gas production could save money for consumers who use it to heat their homes.

Over the long haul, though, the natural-gas boom could have profound implications in a country that now imports more than 60 percent of its crude oil — fueling a major rethink of how we generate electricity and move our cars and trucks.

A big plank in billionaire investor T. Boone Pickens’ much-touted energy plan is to use more natural gas for transportation as a way to reduce oil imports. The surge in natural-gas supplies makes the plan more feasible, although other obstacles remain, such as building an infrastructure that would dispense the fuel into cars and trucks.

Others would rather see more natural gas used to generate electricity. Natural gas is now used to generate about 21.5 percent of the nation’s electricity, while coal is still used to generate nearly half.

Sharon Buccino, a director at the Natural Resources Defense Council, said that a push for more natural gas in generating electricity would reduce our reliance on coal, which pollutes more than natural gas. The resulting electricity, in turn, could be used to charge batteries for electric cars, which would help reduce oil imports.

She said a long-term energy policy, however, needs to rely more on solutions such as energy conservation and renewable energy. Natural gas is still a fossil fuel, and there can be environmental damage in producing the fuel, she noted.

But “bottom line, it’s a good thing” that there is a good supply of natural gas, Buccino said.

Automakers such as General Motors Corp., which plans to introduce the Chevrolet Volt in 2010, also are looking ahead as they plan to sell electric vehicles.

GM spokesman Kyle Johnson said the automaker is collaborating with the Electric Power Research Institute to ensure that the electric grid will be able to deal with a growing number of electric vehicles.

“It’s a very important element in our plans,” he said.

Growing domestic supplies have already played a role in softening natural-gas prices, a trend that some analysts say could continue for another couple of years. The price for 1,000 cubic feet of gas on the New York Mercantile Exchange has been trading at just below $8, down sharply from a peak of $13.57 in early July.

Skip Horvath, president of the Natural Gas Supply Association, said that he expected supply and demand for natural gas to climb over the long haul for electric power generation and other uses.

“But that doesn’t mean there won’t be short-term fluctuations in price as a result of temporary imbalances between supply and demand,” he said.

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