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The U.S. is beginning a natural gas "demand revolution" that will serve as an outlet for the tremendous amounts of gas coming out of newly unlocked shale-rock formations, Chesapeake Energy Corp. (CHK) Chief Executive Aubrey McClendon said Tuesday.
Chesapeake and other drilling companies using new drilling technology have unlocked natural gas from shale rock, areas once thought to be too uneconomical to drill. But the newly unleashed supply has brought prices for the commodity to below $4 a million British thermal unit, down from nearly $14 a British thermal unit in mid-2008.
Now that the supply side of the equation has been worked on, the demand side will follow, McClendon said. The U.S. currently consumes 65 billion cubic feet a day of natural gas, but that amount could grow by 2% a year for the next two decades as motor vehicles, power plants and chemical producers start to use more of the commodity, McClendon said.
By 2015, the U.S. could start exporting natural gas, McClendon added.
"We're now in the early stages of the natural gas demand revolution," McClendon said during a presentation at the World Shale Gas Conference & Exhibition in Houston.
McClendon said he expects the number of natural-gas powered vehicles to grow to 16 million by 2035, from 145,000 currently. The switch to natural gas as a fuel for vehicles will accelerate as more natural-gas liquid-fuel dispensers become available, with 70 expected by December, McClendon added.
Chesapeake, which accounts for 8.3% of U.S. natural-gas production, entered its first shale play in 2004.
As companies have rushed into shale formations, the availability of untapped acres has decreased. The most-promising areas will all be staked out by companies by the end of next year, McClendon said. The next rush will be to exploit shale-oil formations similar to the Bakken area of North Dakota, which is producing 450,000 barrels a day of oil, up from a trickle in the 1990s.
The push into shale oil could make the U.S. the number-one oil producer in the world, McClendon said.
"We're turning our gas factories into liquids factories," McClendon said of Chesapeake's drilling operations. "The U.S., now the number-three producer, could reclaim the title of number-one oil producer in the world."
-By Ben Lefebvre, Dow Jones Newswires; 713-547-9201; email@example.com