Companies profiting with cheap natural gas
As crude oil prices continue to meander around $50 per barrel, the drilling rig count and drilling permits also decline. But one segment of the petroleum industry continues to move forward because of low prices and that is liquefied natural gas (LNG) exports.
A recent story in the San Antonio Business Journal, with the headline of “They’re finding big money amid low prices,” pointed out that natural gas producers in the Eagle Ford Shale of South Texas have put all of the pieces together to find profitable uses for natural gas.
The story focuses on a Houston-based company, Stabilis Energy that opened a liquefaction plant in the town of George West, which is about 70 miles south of San Antonio just off Interstate 37 to Corpus Christi.
The plant can take 8.5 million cubic feet of natural gas, remove its impurities and convert it into 100,000 gallons of LNG each day.
What makes this high-tech facility profitable today is the low price of natural gas, which was selling for around $2.60 per thousand cubic feet (Mcf), and the environmental benefits.
LNG powered truck engines, formerly powered by diesel, can operate at a fraction of the cost of diesel even with crude oil prices at $50 per barrel.
Even though demand for LNG as an energy source for trucks and automobiles continues to grow in the U.S., the demand is even greater in Mexico and Europe.
The story states that estimates put Mexico imports about 40 percent of the natural gas it consumes.
Natural gas is in demand in Europe, Latin America and Asia, and the federal regulatory agencies have approved construction of LNG export terminals in Maryland, Louisiana and Texas (one in Freeport and another in Corpus Christi) and another facility is in the permitting process at the Port of Brownsville.
Natural gas production in Texas and especially in South Texas in the Eagle Ford Shale give these facilities a competitive advantage because the gas reserves are so close to the export facilities.
The Corpus Christi was originally designed to be an import facility, but when natural gas prices dropped in 2008 everything changed.
Total supply this week fell 0.2 percent from last week, according to data from Bentek Energy. Dry natural gas production increased 0.1 percent week over week, and was 8 percent greater than the same time last year. Natural gas production in the Eagle Ford was 5.042 billion cubic feet per day compared with 4.009 in the Haynesville (East Texas) and 3.985 in the Barnett (North Texas).
Total natural gas consumption fell by 1.7 percent week over week, with declines coming in all sectors except power. Residential/commercial sectors fell by 5.2 percent, while industrial consumption fell by 1.1 percent. Power consumption increased 0.7 percent for the week, but was up more than 26 percent over the same period in 2014.