Why Shale Natural Gas Players Should Invest in GTLWhy Shale Natural Gas Players Should Invest in GTL (GAS TOLIQUIDS)
Commodities/
NaturalGasJul 06, 2010 - 05:09 PM
By: Submissions
Maninder Singh Batra writes: Shale gas in the past few years, has emerged as a tough competitor to conventional natural gas due tothe massive increase in spot natural gas prices and advancement inhydraulic fracturing technology . But lately,since 2009 , there hasbeen a massive decline in the natural gas spot prices(Henry Hub) ,dueto massive glut in the natural gas market .
Most Shale gas players cannot make profit and maintain at ratesbelow 5$/Mcf , as proven by Chesapeake CEO’s Statement :
“McClendon admitted on the company’s February earnings call that $5.00per million BTU pricing on the New York Mercantile Exchange (NYMEX)equates to $3.50 gas at the wellhead, once differentials like gatheringand compression costs are included in the cost calculus. “Even $3.50gas at the wellhead does not create enough cash flow in the industry tomaintain today’s drilling price — even for the best-managed shaleplays,” he said.
Excluding takeaway-pipeline expenses (like gathering andcompression costs), Chesapeake posted, on average, production anddevelopment costs of $3.47 per Mcfe, according to the company’s 2009 annual earnings report.”
And currently , as the natural gas price chart shows that thecurrent prices are below 5$. The only reason why Shale Gas players had managed to earn profit in the first quarter of 2010,was due to hedging gains.
But , this cannot continue forever and ultimately ,the shale gasindustry will suffer losses ,if the natural gas spot prices continue toremain this low . But , there are better alternatives ,like convertingthis natural gas into synthetic diesel and Gasoline , or even syntheticlight crude using FT process to convert the gas into liquids.
Considering that the crude oil prices are hovering around 72$ ,itwill be very profitable to convert the gas into GTL Diesel, ATF ,naphtha . also there are several new GTL technologies and small scaleGTL plants coming up and these have conversion efficiencies and energy efficienciesmuch greater than conventional large scale GTL plants .
So, rather than just competing with natural gas , shale gas playersshould also invest in GTL .
By Maninder Singh Batra
maninder300@hotmail.com
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