• In 2003, Alan Greenspan, then chairman of the Federal Reserve, testified to Congress that North America was facing a potential shortage of Natural Gas. (June 10, 2003)
• Over 40 New LNG import terminals were announced for the U.S. and border locations in Canada and Mexico. − Nine new terminals were built bringing the current total to 13 (plus one more each in Canada and Mexico).
• Even as Greenspan spoke, the gas production industry (almost all mid-size to small companies) was making the breakthroughs in combining directional drilling with hydraulic fracturing.
• Current gas prices make the industry unsustainable except for liquid rich plays.
• This assumes no further increase in costs due to new well completion or frac water disposal regulations arising out of the EPA’s current review of hydraulic fracturing.
• For production costs numbers are all over the place, but all are much above 2012 market prices.
• Some sample estimates: −Aubrey McClendon, CEO of Chesapeake Energy (number 2 producer): industry unsustainable at $5.00/mcf. − Bernstein Research: cost of finding, developing and operating requires Henry Hub price of $7.50-8.00/mcf. − Wood McKenzie and EPRINC have developed supply curves for each play; Marcellus, Haynesville and core areas of Barnett are below $4.00/mcf; non-core areas of the Barnett and Fayetteville are in a range of $5.00-6.00/mcf.
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