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Random facts about Natural Gas

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October 18, 2011 – Comments (7) | RELATED TICKERS: GSX , EOG

I've talked to a number of people in the gas industry, and they all say that the so called "reserves" of natural gas trapped in shale is real and significant. However, the one thing people don't consider relative to such reserves is that typically shale deposits of natural gas often reside near drinking water aquifers. So, there is significant risk that when one goes after shale related natural gas that it could very well disrupt a source of drinking water (potentially contaminating it). So, while the cost of obtaining the gas would be cheap, the risk of a lawsuit is real to the point where it could very well wipe out any potential earnings for it.

I've also talked to people in the utility industry, that given the near limitless reserves of natural gas, why more power companies are not building more gas fired plants. The only true, clean electricity out there that is capable of generating the amount of power US needs, is nuclear. I'm told gas, while a realistic option that burns much cleaner than coal, seems to fluctuate too much for utility company's liking.

Many companies in the natural gas industry have capped their wells and just are not pumping - they say it isn't worth pumping. But as prices gradually recover, they will begin to re-open these wells with demand.

There seems to be a lot of speculative investment in natural gas. People in the industry are confident that this business is here to say and say that this pull back has been good for the industry - in a purification way. A lot of companies who were soly dependent on natural gas have diversified (gotten stronger) in order to stay in business (or got out of the business) - the consensus is that the companies that remain committed and have been able to weather the storm, see a bright future ahead.

EOG is one of the better managed resource companies that is highly respected in the industry for its quality management team, diversification, etc. GSX is not quite in EOG's class, but an example of an increasingly diversified smaller player who, like EOG sees a bright future ahead.

7 Comments – Post Your Own

#1) On October 18, 2011 at 3:27 PM, chk999 (99.99) wrote:

Drinking water aquifiers are usually less than 1000 feet deep.

The Haynesville shale lies at 10,500 to 13,000 feet in depth.

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#2) On October 18, 2011 at 3:56 PM, Teacherman1 (46.69) wrote:

"I'm told gas, while a realistic option that burns much cleaner than coal, seems to fluctuate too much for utility company's liking."

The utility which provides me with electricity is not concerned at all what the price of natural gas is. They bill based on the price of gas as it is set each month at the "Henry Hub" and then add a multiplier, which fluctuates with the amount you use and the time of the year.

They make the same whether gas is up or down.

The price of gas would of course go up if more utilities switched to it, but that would affect the consumer and not the utility.

BTW This same utility was at one time on coal, and then on nuclear, and is now almost exclusively on gas. The only exception is a very minor amount supplied by wind turbines, but is a special program that you can sign up for if you are into the "Green Movement". Naturally, it costs more.

I think there are other factors at play in the use of other sources of fuel rather than natural gas; such as the cost to convert a plant, the influence of suppliers of coal on the political system, as well as the cost of building an infrastructure to supply the plants: to mention a few.

I don't consider investing in natural gas producers as speculative, as long as they have the expertise to do it cost effectively. Not all do, and those are the ones you need to watch out for.

JMO and worth exactly what I am charging for it.

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#3) On October 18, 2011 at 4:15 PM, Frankydontfailme (< 20) wrote:

OK CHK. That's what the companies tell everyone. The benzene showing up in the water supply near natural gas pumping sites fatally contradicts this claim....

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#4) On October 18, 2011 at 4:20 PM, chk999 (99.99) wrote:

Franky, feel free to turn off your gas. There is usually a valve on the pipe leading into the gas meter. Give it a quarter turn so the rectangular metal tab is across the pipe.

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#5) On October 18, 2011 at 7:28 PM, Frankydontfailme (< 20) wrote:

I will do no such thing. And generally support the expansion of the natural gas industry.

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#6) On October 19, 2011 at 1:46 AM, traderbach (< 20) wrote:

"The only true, clean electricity out there that is capable of generating the amount of power US needs, is nuclear." 'Clean', you've got to be kidding right??!! How can anyone, after Fukushima, really buy that garbage. It runs on the most toxic substance known to humanity. Please look the Japanese parents of the children contaminated in the latest giant fiasco in the eye and tell them that. The only thing stopping us from developing an array of truly clean energy sources right now is the will to do it!!!

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#7) On October 28, 2011 at 11:20 AM, Akenai (< 20) wrote: