There is no question that shale gas has transformed the U.S. energy supply picture.
It began with George Mitchell, the “father of shale gas,” and the Barnett Shale. And in retrospect it almost looks inevitable.
But if you’ve heard the story, you know it was anything but easy. It took patience and persistence, new technology and scientific understanding, and no small amount of guts to produce the natural gas in the Barnett. It was the accumulation of small advances through trial and error that opened an entirely new play concept.
In his book, “Why We Hate the Oil Companies,” former Shell President John Hofmeister describes “energy time,” and the reality that energy development and transitions operate on a decadal time scale.
In fact, Mitchell’s achievement in opening the Barnett play is often described as an overnight success, 20 years in the making.
But that success has ushered in a new era in petroleum exploration and production, with natural gas growing as a percentage of the U.S. energy portfolio.
The first stage of this new era was dramatic growth in natural gas reserves and supplies. The principal driver was the relatively high price of natural gas, which attracted the investment needed to develop reserves and increase supply. This increased supply, in turn, drove prices down – way down.
Low natural gas prices are currently fueling the second stage of this new era: growth in demand for natural gas, both for power generation and as a transportation fuel.
The United States is a laggard when it comes to using natural gas in transportation – but that situation is changing.
For instance:
♦ As we discussed last month, a coalition of 22 states is asking Detroit automakers to respond to a request for proposals for fleet vehicles fueled by compressed natural gas.
♦ Similarly, in late September a group of over 800 people met in Houston for the first ever Natural Gas for High Horsepower Applications (HHP) Summit. The meeting focused on efforts to shift high horsepower engines to liquefied natural gas (LNG). The applications discussed were principally off-road applications, such as marine, mining, rail, construction and earth moving.
“We’ve decided to go all-in on gas,” said Joel Feucht, Caterpillar’s director of gas engine strategy for the energy and power systems businesses, at the HHP Summit. “We are going to invest because we see a global market long term.
“Large engines are going gas,” he said. “It’s not debatable; it’s our conclusion.”
♦ During that same week in September attendees at the AAPG’s Eastern Section meeting in Cleveland had the opportunity to hear a keynote address by Thomas O’Brien, managing director, president and CEO of TravelCenters of America (TA) on its plans to install LNG fueling facilities at its truck stops.
TA is the largest operator of full-service travel centers in the United States, with more than 200 facilities located across the interstate highway system. Its principal client is the long-haul trucker. And these interstate motor carriers move over 70 percent of all domestic U.S. freight tonnage, according to the American Trucking Association.
They are increasingly looking at natural gas as a fuel source.
According to the plan first outlined in June and still under development, TA would cooperate with Shell to install more than 200 LNG fueling lines at 100 of its facilities. The first lines would be operational in 2013.
“Using natural gas for transport gives truck fleet operators a new strong advantage, because it’s abundant and affordable and a viable alternative to diesel,” said Elen Phillips, vice president, Shell Fuels Sales and Marketing North America.
It’s a new era. These changes won’t happen overnight – they never do in energy.
But they’ve started, beginning with significant growth in natural gas supplies. And they’re continuing with the development of technology and infrastructure needed to support a fuel switch of fleet vehicles, long haul trucks and high horsepower engines for off-road applications.
Natural gas is increasingly a viable option for all of these modes of transportation – and the pieces are falling into place for accelerating adoption of these new engine technologies.