Cold, Hungry and in the Dark: Exploding the Natural Gas Supply Myth (Anglais) Broché – 30 mai 2013
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That said, the other half of the book is spent on making the case that the U.S. will face a natural gas shortage. The case in this half of the book is weak and not as well supported as the other. After reading this portion of the book, I wasn't necessarily opposed to the idea that the US could face a shortage of natural gas, but I was far from convinced. Some of Mr. Powers arguments in this portion are lacking. For instance, Mr. Powers cites the decline in production in the majority of shale plays from 2010-to-date as evidence that the plays have already "peaked". While I don't necessarily disagree with his conclusion, the argument itself is wanting. My immediate reaction was to question if the producers that weren't forced to drill due to lease holdings and/or interest payments were shutting in wells and refraining from drilling in an attempt to hold out for higher natural gas prices. Mr. Powers never addresses this obvious question. A similar case arises when Mr. Powers conclusively indicates that U.S. demand for natural gas will increase because manufacturing is coming back to the U.S. Again, while I do not necessarily disagree with the assumption, there is never an incredibly strong and conclusive case. Several such quick assumptions are made to support the conclusion that the U.S. faces a gas shortage. While I'm not in disagreement with Mr. Powers, I'm far from convinced of his case.
I award the book four stars. The case against the EIA and the depth of the play-by-play production data are truly class-act and compelling. I knock a star off for the weak and sometimes wanting case for an imminent U.S. gas shortage.
For those more interested on reserves and the development of production, I recommend Cold, Hungry and in the Dark. Of the two books, it was slightly better both on content and readability, and if you are still hungry for more shale or maybe a bit more interested on a neutral view on its environmental effects and problems, I recommend Shale Gas - the Promise and the Peril.
The book is jam-packed with data and takes several reads just to begin grasping the broad picture, especially for someone who is not a professional in the oil and gas industry. Consider that the notes full of sources (the stuff at the end of the book) span 44 pages. This is excluding the list of figures, tables, bibliography, and the index. Bill Powers provides several trillion cubic feet (no pun intended) worth of reports, charts, etc., to the point where the reader cannot help but appreciate the vast amount of knowledge that Powers has accumulated leading up to writing this book.
Bill Powers takes no prisoners. He not only takes on the natural gas superabundance myth from a fundamental supply & demand perspective, but also points out the conflicts of interests of the various companies, consulting firms, and individuals who are propagating the myth. Just one curious example is that of T. Boone Pickens, who has been a major proponent of H.R. 1835 and S. 1408, known commonly as the Nat Gas Act. It just so happens that as of December 31, 2011, Pickens owned 16.5 million shares of Clean Energy Fuels Corp. (NASDAQ: CLNE), one of the largest providers of natural gas refueling stations in the US, which would greatly benefit from the passage of the act.
The book starts off by taking the reader back in time in order to explain how the natural gas market in the US developed into what it is today. During and after WWII running up to the 1970's, the natural gas market was subject to price-controls using the byzantine system. The result of several decades' worth of artificially low prices was overconsumption and a natural gas crisis that materialized in the 1970's.
Bill Powers goes into detail when it comes to the 1970's gas crisis, and points out a curious development of rising prices yet falling production. Since natural gas is a finite non-renewable resource like oil, rising prices themselves could not offset the material reality that the easily accessible supplies had already been consumed. So what was the inevitable result? Demand destruction. Yet, unlike today, the US economy was nowhere near as reliant on natural gas, thus the pain is bound to be harsher this time around. The situation was so bad at one point that President Jimmy Carter attributed the shortage of natural gas to the loss of 500,000 jobs and to the closure of thousands of factories.
Bill Powers proceeds to describe the 1984 - 2000 period as the era of price stability and deregulation. Yet, a large part of this period of seeming tranquility was due to a massive increase in natural gas imports from Canada, which concealed the maturity and terminal decline of America's natural gas supplies. This is one thing that most people fail to appreciate: that the US is and has been a net importer of natural gas for decades. It is hard to imagine a country that has a superabundance of natural gas as a net importer. We do not see Qatar importing natural gas or Saudi Arabia importing oil on a net basis.
In terms of economic supply, the vast amount of data that Bill Powers presents is clear on the matter: US natural gas production peaked in 1973 at 56.53 billion cubic feet per day, which was 4 decades ago! Since then, the number of rigs and wells has increased exponentially, but still no new peak in natural gas production. So why on earth do people believe we are the next Saudi Arabia? The hope is that shale gas with the combination of fracking will save the day. However, shale gas production goes back to 1821 in the United States. Moreover, fracking began as early as the 1940's.
While the likes of Aubrey McClendon, CEO of Chesapeake, believe we have over 3 thousand tcf of natural gas, or approximately 125 years of the stuff at present rates of consumption; Bill Powers comes to a more sober estimate of 132 tcf, or only 6 years of the stuff at present rates of consumption. Powers arrives at this estimate by carefully analyzing past production and reserves state by state, and play by play in painstaking detail. McClendon, on the other hand, seems to pull his figure out of thin air. The most bullish estimate out there excluding that of McClendon seems to be by the consulting firm INTEK Inc., which compiles its information from the investor presentations of the various natural gas companies out there, including Chesapeake. INTEK Inc., estimates come out to a total of 750 tcf, which is certainly closer to the estimate of Bill Powers than Aubrey McClendon, and this is from the most bullish consulting firm out there.
Bill Powers goes on to provide lots of other information, including how the macro-economy will likely shift and several investment ideas. Overall, I think the man is rather objective, sober, and in some ways actually downplays the severity of the supply crunch that is looming ahead. One thing is certain: Be prepared for higher electricity bills!