The article "LNG imports needed to meet growing US gas supply deficit" (OGJ, Oct. 2, 2000, p. 28) is very timely, especially so when the US faces a big shortfall in production and supply of natural gas for heating, power generation, and industrial use. I like the points raised by Robert Allison, CEO of Anadarko Petroleum. But such comments do not go far and deep enough to tell the Washington politicians and American public in their eyes the simple "four truths" about the current status of the gas industry and high cost of home heating expected this winter, as well as the coming summer.
The four "true reasons" (shown below on priority basis) of gas shortfall are:
- Almost complete stoppage of capital from outside small investors - due to tax codes on passive investment and AMT.
- Most shallow gas fields are developed by independents, and under current environmental regulations it is difficult for smaller producers to meet and comply with the various paperwork load.
- EPA's demand for almost "abolition" of coal-fired and nuclear power generation,created an uncontrollable demand for natural gas that cannot be met overnight in spite of competition from low-cost Canadian gas production that is now freely flowing into the US markets.
- FERC's inability to develop long-term plans/goals to encourage partnership between pipelines, power generators, consumers etc., and independent producers.
I can perhaps cite even a bigger shocking news to your readers. The recent merger mania has created foreign mega gas-reserve holders in the US, like BP, who can dictate market pricing in one form or other. This is done under the current Clinton-Gore administration with no far-looking consideration of the effect on the future gas supply. No wonder Jack Golden of BP is so comfortable with the current high pricing and a projection of normalization timeframe of 3 years.
I invite investors, gas marketers, power producers, and the public to attend Houston Geological Society meetings, and find out how and where the entrepreneurial and technology-oriented American geoscientists, a dying breed under current philosophy in the oil industry (i.e., hire and fire), focusing their experience in finding and developing new and less-costly gas reserves within the Lower 48 States.
S.K. Bhattacahrjee(Kumar)
President