Financial analyst discusses fracking
WATKINS GLEN—Financial analyst and consultant Deborah Rogers was the featured speaker at a hydraulic fracturing presentation in Watkins Glen, Thursday, March 22. Instead of focusing on the possible environmental impacts of drilling for Marcellus Shale, Rogers spoke about the financial aspects of drilling and natural gas.
First, she told the nearly 45 people in the audience that one must understand the difference between resources and reserves. Rogers said gas companies claim there is “100 years of gas in the ground.” She added that while true, this is just the resources or total amount of gas beneath the surface. What is important is what can be drilled.
Rogers explained reserves refers to the amount of gas which can actually be extracted using current technology and at the current price. She added scientists have estimated there is about 11 years of gas available to be drilled using this definition.
She said that if shale is abundant, drilling will result in long-term benefits. Rogers added that some gas companies claim just that when starting a new well. The process is called “drilling for press releases.” She said when a large well is started, firms will release press releases about the initial production rate being so high. Rogers stated companies do this to get more capital and investments, even though some wells’ production eventually decline.
Rogers also covered price stability. She said natural gas prices are at a 10 year low, around $2.35 per gallon. She added at the start of this year some companies announced they would be decreasing the number of active wells and not completing already drilled wells. Rogers added that according to the Department of Energy, U.S. daily production of natural gas is nearly four times more than daily consumption. The price of natural gas is expected to decrease even more.
Rogers also said that there is a financial codependency between the gas companies and Wall Street. She said financial institutions and banks not tied with drilling companies are usually less enthusiastic about drilling proposals.
“All that rhetoric about energy dependency, it’s just that: rhetoric,” said Rogers.
When it came to prices, she said that other countries would be willing to pay more for natural gas. Rogers said in China, natural gas costs $16 per gallon. She explained some companies want to turn their receiving plants into shipping plants in order to sell gas to other countries. Rogers added some permit applications have stated doing just that.