The Gas Boom Is Over

Natural gas storage tanks in the Marcellus shale fields. Photo credit: New York Times

By Peter Galuszka

The boom in shale natural gas is over, reports The New York Times.

The trend raises more questions about billions of dollars worth of gas-related projects in Virginia, including Dominion’s plans to build the Atlantic Coast Pipeline and other firms’ efforts to place two big generating stations near Charles City.

The boom in shale gas began a decade ago when hydraulic fracking methods went into wide use in fields such as Marcellus in West Virginia and Pennsylvania, Eagle Ford and Permian in Texas and Williston in North Dakota.

The results were profound as gas displaced coal as a major generator of electricity. A bump in exporting liquefied natural gas (LNG) loomed, as Dominion converted its Cove Point LNG facility to handle exports.

Independent firms such as Chesapeake Energy in Oklahoma led the way. Big energy firms such as Exxon Mobil and Chevron bought up smaller firms and invested billions in shale gas operations. Numerous pipeline projects were announced, including the Atlantic Coast Pipeline and the Mountain Valley projects in Virginia.

The result? Too much gas and resulting price drops.

In 2008, the spot price for gas was about $10 per million British Thermal Unit. It’s now about $2.45 per million BTU.

The Times reports:

  • The number of rigs operating in Pennsylvania dropped from 47 to 24 in the past year as gas prices dropped by half.
  • The number of gas rigs nationwide has from from 184 to 132 in a year.
  • Energy giant Chevron will write down $10 billion to $11 billion in assets involving shale gas holdings in Appalachia and a Canadian LNG plant in Canada.
  • Exxon Mobile has written down $2.5 billion in gas assets.
  • Oklahoma-based Chesapeake Energy had been a pioneer in fracking. Its stock sold for $60 a share in 2008. Now it sells for less than a dollar.
  • Russia and Qatar are flooding global markets with gas. S&P Global Platts warns that European prices could slide in 2020, further depressing prices.

These are ominous signs for The Atlantic Coast Pipeline that would take fracked gas from West Virginia through Virginia and into North Carolina. The controversial project has been stalled in court.

The Mountain Valley project in southwestern Virginia likewise has been slowed by regulatory concerns.

The trends must have an impact on plans to build the Chickahominy Power Station proposed by Balico.

True, the market for natural gas, as with any energy source, is cyclical and it could come back. But the natural gas and utility industries are a lot like the defense department. They are building weapons to fight the last war.