Lack of NatGas Investment Leading World Down Path to Energy Crisis
In something of a strange twist, the Bloomberg News service is sounding the alarm that the world is headed for a shortage of natural gas. Bloomberg hates fossil fuels and anything to do with them. Yet they now sense an impending shortage of natural gas and it’s causing the Bloomies some existential angst. Bloomberg reports natgas prices in Europe have “surged more than 1,000%” since May 2020 with no end in sight. Earth to Bloomberg: Europe has no one to blame but themselves. They don’t want our “fracked gas.” Let them buy Putin’s pipelined gas at extortionist rates.
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A new study prepared for Shell Chemical Appalachia earlier this year is just coming to light now. The study, researched by professors at Robert Morris University (RMU), calculates the impact on the Pennsylvania economy from the soon-to-be-completed Shell ethane cracker plant in Beaver County, PA. The numbers are staggering. Each and every year that cracker operates RMU projects the cracker will create $3.7 billion throughout the PA economy. Amazing! And it’s ALL private money–no government transfers from one taxpayer to another. Joe Biden should be jumping up and down and extolling this from the rooftops! Instead, he’s attacking fossil fuels.
What’s taking the shale oil industry so long to restart drilling in a big way? Shale oil production remains some 1.4 million barrels per day (15%) below pre-COVID pandemic levels despite oil prices reaching near three-year highs of $77 per barrel since the start of this year. When you dig into the numbers it becomes apparent what’s happening. A lot of shale drilling is now done by big, integrated major oil companies–the Exxons and Chevrons and BPs of the world. Shale production from the majors is 68% below pre-pandemic levels. If you look at the output of smaller independent, non-publicly traded oil drillers, their production is only 2% below pre-pandemic levels.
It’s getting far more expensive to drill a shale well of any kind according to analysts at Citigroup. Inflation overall is on the increase. You can’t keep throwing trillions of printed, made-up money into the economy (a la “stimulus checks”) without the inevitable inflation happening. Too much money chasing too few goods and services equal higher prices, i.e. inflation. Citigroup says the inflation rate for the shale industry could reach 12% by the end of this year. That’s massive.
Ellen Wald is a senior fellow at the Atlantic Council’s Global Energy Center, and president of Transversal Consulting, a global energy and geopolitics consultancy. She is the author of “Saudi, Inc.,” a history of Aramco and how the Saudi royal family controls this multitrillion-dollar enterprise. Ellen is one of our favorite Forbes authors. She recently published a fantastic editorial in The Hill (rag targeting DC swamp dwellers). Wald writes that President Biden’s plan that commits the U.S. to reduce its greenhouse gas (GHG) emissions over the next eight years to about 50 percent of what they were in 2005 is “impossible, unrealistic and insufficient.”
In July 2020, PA Gov. Tom Wolf signed into law House Bill (HB) 732, a bill that grants tax breaks to companies willing to build brand new petrochemical plants in the Keystone State–plants that use huge quantities of Marcellus Shale gas (see 
Anecdotally it seems as though there has been less drilling activity in the Marcellus/Utica over the past year. Some say it’s due to the coronavirus pandemic. Others say there’s more to it than that. If you’ve tracked public announcements by drilling companies, they claim to have pulled back on drilling and won’t increase current levels of drilling even when/if the price of natural gas increases. Why? They must turn a profit, or investors leaving for greener pastures (pun intended). But is there really less drilling happening in the M-U today than say one year ago?
In July 2020, PA Gov. Tom Wolf signed into law House Bill (HB) 732, a bill that grants tax breaks to companies willing to build brand new petrochemical plants in the Keystone State–plants that use huge quantities of Marcellus Shale gas (see 
One of the brightest of the bright spots in the Marcellus/Utica shale industry has been shale’s effect on local economies and jobs, as in more money and jobs flow to shale drilling counties. To counter all that good news left-leaning “media” outlets like the Pittsburgh Post-Gazette have run hit pieces, like this article in February: 
In a very gentle and diplomatic way, Pennsylvania State Senator John Yudichak (Independent from Wilkes-Barre) told Department of Community & Economic Development (DCED) Secretary Dennis Davin on Monday he’s not doing his job. Yudichak told Davin “site selectors” (people who work with companies to select sites for big manufacturing and other types of facilities across the U.S.) aren’t aware of the tax credits available as part of Act 66, a law passed last year aimed at building new petrochemical plants in PA.
The oil and natural gas industry has always been a “boom and bust” business. O&G cycles between times of “drill like crazy”, and “sweeping layoffs.” It is the nature of our market. Last year as the coronavirus pandemic set in and countries around the world shut down portions of their economies, particularly with travel all but ending, anti-fossil fuel zealots pronounced the death of fossil fuels (oil in particular). They said the race to replace fossil fuels with “renewables” had accelerated because of COVID (they were actually glad COVID hit). Antis could not have been more wrong about the prospects for oil and gas…
The KeyState Zero petrochemical plant project that includes natural gas synthesis and carbon storage (coming to Clinton County, PA) just gets more fascinating every time we read or hear about it. We spotted a new article with more details about the project, like the fact LNG is already being produced at the site. In addition to carbon capture, the new petchem plant will produce four products…
Kimmeridge Energy Management Company is a private equity investment firm focused on the upstream energy sector (drillers). Last week the firm published a white paper entitled, “Bringing Alignment and Accountability to the E&P Sector” (full copy below). The thesis of the paper is this: the alignment between drilling company executives and shareholders is “broken” and “a root cause” for the problem of poor earnings at drilling companies.