Lemons to lemonade

Don Stowers  

I've always wanted to start off one of these columns with a joke, so here goes: The petroleum industry isn't entirely happy with President Obama.

Okay, now that everyone has had a hearty laugh, I don't think it's necessary to list all the reasons oil and gas people are disenchanted with the White House. Suffice it to say they are numerous. When Obama took office in January 2009, people in the oil and gas business were concerned that he would show favoritism for renewable energy development over fossil fuels like coal, natural gas, and oil. With the complete shutdown in the Gulf of Mexico for many months in the aftermath of the Deepwater Horizon disaster and Obama's failure to endorse the Keystone XL Pipeline, the President has lived up to his detractors' expectations.

As I write this, Obama delivered his annual State of the Union speech to Congress and the American people last night. For the second consecutive year, he has had good things to say about clean-burning natural gas, although he refuses to mention any fossil fuel without also championing alternative forms of energy such as solar. Unfortunately, neither the President nor anyone in his administration seems willing to admit that solar and wind energy may incrementally grow in power generation, but they will not work as transportation fuels except in high school and college science projects.

While it may not be apparent to the White House, it's obvious to those of us in the oil and gas industry that natural gas is the transportation fuel of the future for commercial vehicles and eventually for passenger cars. It's cheap, it's clean, and it's abundant. Infrastructure is being built, and the market will eventually sort this out with or without the help of government.

As I alluded to earlier, Obama did mention natural gas in his speech, and this elicited a comment from Bill Cooper, president of the Center for Liquefied Natural Gas.

"President Obama's remarks about America's growing energy prospects are correct. Natural gas development has transformed this country. However, for the US to reach its full energy potential, including the creation of thousands of jobs, billions of dollars in GDP growth, and greater revenues for state and local governments, the administration must allow LNG exports to move forward. Expediting the permitting process at the DOE will provide Americans the full benefit of our energy abundance. I urge the President to empower Energy Secretary Moniz to quickly process these applications to allow American projects to compete in the global LNG marketplace."

In my view, these applications should be fast-tracked. The sooner the United States starts fully exploiting the bounty that is natural gas, the better off we are as a country. Gas prices have been chronically depressed, so here is an opportunity to open up other markets to US gas in the form of LNG. Everyone in the natural gas chain wants this to happen from producers to end-users — from the wellhead to the burner-tip, as folks in the industry say. Why should the government be an obstacle to commerce, particularly when that commerce creates jobs, creates wealth, and reduces our trade deficit with our overseas trading partners?

I may sound a little negative, but I'm really not. I expect everything to work out for the best and believe this is just a little political football being played. Before agreeing to move forward expeditiously with permitting for LNG export facilities, the administration is going to want something in return from the oil and gas industry and its supporters in Congress. In other words, Obama will give us what we want — which is really what it wants, too — but not until a deal has been cut on another front. This is the way the game is played in Washington.

Speaking of optimism, the professional services firm BDO just released its annual survey of 100 US oil and gas chief financial officers. According to the survey, 71% of the CFOs polled feel better about their company's ability to access capital and credit in 2014, as compared to 2013. This represents a 20% increase over the number expressing the same sentiment last year.

Driving the enthusiasm is a significant improvement in the capital markets, as well as healthy demand for US resources. In fact, 64% of CFOs anticipate that global demand for natural gas will grow in 2014, and 65% expect a similar increase for oil.

Charles Dewhurst, who heads up the natural resources practice at BDO, remarked, "Oil and gas executives can feel relatively secure in their finances this coming year as the US energy industry continues to gain momentum. Not only is our economy improving, but with demand exploding worldwide, new doors are opening for increased revenue. We are seeing significant foreign investment flowing into US assets, as well as a growing need for US oil and gas globally — and the price differential is quite favorable for us."

On that cheery note, I'll say goodbye until next month.

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