This was the message underlined by guest speakers at the Eagle Ford Task Force meeting on Dec. 11.
The Eagle Ford Task Force was created under the directive of Texas Railroad Commissioner David Porter in 2011 to promote economic activity and establish best practices across the play.
Porter welcomed guests and introduced guest speakers at the meeting.
“I think we are going to find out a lot about areas where we can improve the use of natural gas in the state of Texas, to develop more markets – to use up some of that abundant natural resource that we are producing in abundance right now,” Porter said.
“LNG (Liquefied Natural Gas) Exports” was the topic addressed by the first speaker, Bobby Gaspard, vice president of LNG Marketing, Freeport LNG.
In his introduction of Gaspard, Porter noted that while five to 10 years ago, everyone was talking about the huge need for the U.S to import natural gas, but the facilities designed to import natural gas, are now being turned around to export natural gas from the U.S. to markets around the world.
Gaspard talked about Freeport LNG’s Liquefaction Project, a facility which is currently under development and is designed to liquefy and export natural gas.
The project’s anticipated cost, Gaspard explained, is $10 billion and when complete is expected to generate hundreds of thousands of new jobs, tens of billions of dollars of new investment and impact the current U.S. Trade imbalance in a positive way.
“There are a number of things that you need to get this project going,” Gaspard said. “The largest, major thing, is to actually get authorization from the U.S. Department of Energy to export the commodity.”
“We have already received authorization to export 2.8 Bcf (billion cubic feet) per day to countries with free trade, and then we have also received conditional authorization to export 1.8 Bcf a day to non-free trade countries,” Gaspard said, noting that this will allow the project to move forward.
Gaspard said that currently, in Asia, LNG prices are $15 per MMBtu (one million BTU), but the cost to liquefy and ship LNG from the U.S. To Asia, is estimated at only $10, which would give American exporters a significant advantage. The $10 figure includes $3.50 for the gas itself, plus $3.50 to liquefy the gas and then an additional $3 to ship the LNG from the U.S. Gulf to Asia.
Among the benefits of the project listed by Gaspard are total economic benefits between $4.3 and $6.2 billion per year and improvement of the U.S. Balance of trade of about $4.6 billion (almost one percent) per year.
The next to speak at the meeting was George King, a professional engineer who serves as distinguished engineering advisor for the Apache Corporation.
King talked with great excitement about new opportunities for energy companies to use natural gas in drilling, fracking and other operations, instead of other fuels, such as diesel, and thereby saving vast sums of money currently being spent on other fuels.
Apache, he said, has, for the past two years used natural gas for drilling of 30 wells and LNG and CNG for their fracking operations.
“This is a tremendous economic savings,” King said.
Energy companies can save about $1 million per year per rig by converting their equipment to use natural gas, King explained.
“The frack industry uses three billion gallons of diesel per year,” King said, noting that more than half of that fuel can be replaced with the use of natural gas.
Kits are currently available, that will allow operators to convert their equipment to use natural gas fuels, he said.
Microturbines, are another new option that will allow industries of all kinds, to generate electricity “on site” with natural gas at a cost of about two cents per kilowatt-hour.
One of the challenges to making such conversion is that Texas does not have a good supply of LNG at this time, but King said he expects that will change in the near future.
“It is coming in,” King said. “You’ve got clean skies, you’ve got low prices, and it is an American fuel. Quite frankly, I don’t see a downside.”
King said he is seeing operators get into use of natural gas, in a big way, because of the economic advantages.
“Right now it is a trend,” King said. “I want to see it become an avalanche. We are kind of at the tipping point. This thing could go very quickly in just a few months.”
The next speaker to address the group was Dr. Ken Morgan, director of the Texas Christian University Energy Institute.
Morgan talked about the potential of natural gas to fuel America’s future in transportation.
“Cheap energy,” Morgan said. “Everybody wins. How about if it is cheap, it is domestic, and it is clean?”
It is about energy, food and water, Morgan said, when it comes to the basic needs of people.
“We’ve got food and we’ve got water but we have been buying energy for a long time,” Morgan said. “Things are changing rapidly.”
Alternative fueled vehicles (AFVs) are one piece of the puzzle, Morgan said, of how to leverage the use of natural gas for all kinds of energy needs, including transportation needs through powering motor vehicles.
Morgan described Natural Gas Vehicles (NGVs) as the real “green vehicles” because emissions are greatly reduced.
Morgan said he drives an NGV he called the “frogmobile” all over the place and its tailpipe is “clean as a whistle.”
The vehicle gets 40 miles per gallon and he recently paid 90 cents per gallon at an NG station in Oklahoma, Morgan said. An NG gallon is equivalent to a gallon of gas in regard to fuel economy, Morgan said.
“This is pretty cheap fuel,” Morgan said.
The big fuel users are trucks, Morgan explained, the vast majority of which still run on diesel fuel, but he expects that will change soon.
“More trucks are coming online and more stations are being built,” he said.
A group of 24 state governors have signed a letter to truck and auto manufacturers in Detroit stating that they will convert their fleet of state vehicles to NG, if only Detroit will produce the NG vehicles.
“Detroit has been producing the three-quarter ton NG pickups for over a year,” Morgan said.
UPS is beginning to use NG delivery trucks in certain areas and other organizations are looking at use of NG for school buses, he added. A new NG Chevy Impala will soon begin rolling off assembly lines. The American military is interested in use of NG vehicles purely as a way to save money in fuel costs.
“This is the way we are moving,” Morgan said. “The companies that see the advantages are already making the inroads to do that.”
A regulatory panel discussion then began with State Rep. Jason Isaac, member of House Environmental Regulation Committee, and Amir Mirabi, director of small business and exports with the office of the governor.
Isaac said that his committee’s goal was to reduce emissions as a way to defend the state from federal regulation that can put the brakes on a very healthy Texas economy.
One of the inhibiting factors now, Isaac said, is that CNG vehicles currently cost from $7,000 to $10,000 more than gas powered vehicles. He said he hopes that grants will soon be available that will give individuals and businesses $2,500 to help offset the additional costs of the CNG vehicles.
Isaac said next November there will be a statewide constitutional amendment election to fund $1 billion for roads.
“I was asked, ‘What can we do to get more money into roads?’ I said, ‘Go out and buy natural gas powered vehicles and vote for the constitutional amendment in November of 2014.”
“Instead of putting 75 percent of the severance tax into the economic stabilization fund, we are going to put 37.5 percent into the economic stabilization fund and the other 37.5 percent into roads,” Isaac said.
“If you increase the demand for natural gas, you are going to increase the gas severance taxes coming into the state which will mean more money for the roads,” he said. “And natural gas vehicles pay fuel taxes, unlike electric vehicles. So go out and buy a natural gas vehicle. Then you will be contributing more money for roads.”
In conclusion, Isaac drew an analogy between the switch to natural gas as a transportation energy source and an old story about a Chinese bamboo tree.
“This Chinese bamboo tree – for the first year, you water and fertilize it and nothing happens,” Isaac said. “For the second year, you water and fertilize it and nothing happens. For the third year, you water and fertilize it and nothing happens. The same thing happens in the fourth year and then some time in the middle of the fifth year, over a period of six weeks, the Chinese bamboo tree will grow 90 feet.”
“So did that bamboo tree grow 90 feet over six weeks, or did it grow 90 feet over five and a half years?” Isaac asked. “We have been putting a lot of fertilizer and a lot of water out and I think it is time for this bamboo tree to grow 90 feet.”
“We need to convince people that now is the time to buy natural gas vehicles,” Isaac said. “Now is the time to invest in Texas fuel that is cleaner, that is cheaper, that is domestic. And really invest into our economy because it will wind up putting more money into our roads, it will create more economic opportunities which is one of the reasons we are leading the nation in job creation, and good things will continue to happen for the state of Texas.”