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Shale Gas 'Game-Changer' in Pacific Northwest, Official Says

Natural gas from shale plays has become a major factor in integrated energy planning in the Pacific Northwest. This fact was reiterated last Friday by the head of the Northwest Gas Association, Dan Kirschner, speaking in Seattle at Law Seminars International's conference, "Buying and Selling Electric Power in the West."

"Today gas is the fuel source needed to balance various loads in the system [created by the rush to renewables for power generation]," Kirschner said. "And shale gas -- particularly in western Canada -- is the real game-changer." He cited a statistic from the national Potential Gas Committee that increased the potential reserves in North America by 40% just in the past year.

One of the side benefits in the region from the increased amount of shale gas is that the steady supplies are "likely to dampen the volatility in gas prices that we have seen in recent years," Kirschner said. "I can't guarantee that will happen, though. If I could I would be out trading gas supplies. But instead of having these huge peaks and valleys, we think that could moderate somewhat."

Kirschner cited at least a couple of reasons he thinks this is a likely scenario. The nature of shale gas is that once the producer turns it loose, a large supply is released in one big gulp (about 70% of a given well's volume), but after that the remaining 30% of the supplies can be produced on a very measured, long-term basis.

"We've found through the experience at Barnett Shale [in Texas] that the 30% production goes on forever, or at least seems to," he said. Secondly, Kirschner said producers can do their horizontal drilling and get the wells ready for production and then hold off on the necessary well stimulation with hydraulic fracturing until the market is right for an onslaught of production.

"They can get it ready and then wait until prices are right, and then bring that gas to market very quickly," he said. "At least that is what the producers are telling us. Shale is definitely the game-changer because a year and a half ago, I would have sat up here and told you that we really needed to get after gas supplies in the Pacific Northwest, but today we still need to keep our focus on supplies, and for the most part they are there; gas is abundant."

Although the gas utilities and pipelines in his association support the three proposed liquefied natural gas (LNG) receiving terminal projects in Oregon, that support is much "quieter" than it had been just last year. This new mindset was exhibited somewhat by Kirschner as he answered questions on the subject.

"The economics of LNG are a global calculation," he said. "Producers overseas are looking to match receiving capacity with liquefaction capacity, so in the time frame of 20013-2014 with liquefaction additions in Qatar, Indonesia, Australia and elsewhere, there will be a surplus of liquefaction capacity compared with receipt gasification capacity. So the economics driving LNG developers are different than the economics driving domestic, onshore gas development. Basically, I don't have a good answer, other than to say that international developers are continuing to invest in these liquefaction projects, so they must see some economic viability in LNG."

Kirschner reiterated that his association is supporting the development of gas infrastructure in general in the Northwest, including the Oregon LNG projects, but he was not sure that his counterparts in the electric industry had a position regarding LNG for the region, although gas is becoming an ever-bigger factor in electric generation.

"From the standpoint of the two combination utilities I work with in the region [Puget Sound Energy and Avista] they're taking the attitude that if it happens, it will be a benefit to the region, but they are not actively involved except that they would be interested in discussing participation if a terminal gets built. At this point, their interest doesn't go much beyond that."

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