Skepticism of conventional wisdom is rarely out of place, particularly in the energy patch. But when the oil and gas industry is dealing with consumers, citizens and landowners, sincerity is the order of the day.
IHS analysts speaking at the firm's World Petrochemical Conference 2012 in Houston Wednesday described how North American shale gas supplies have turned the industry on its head, making what was believed to be right only a few years ago clearly wrong.
"If you go back seven years, what we knew...was that the United States was going to have to import about 10 Bcf/d of natural gas, and there were terminals proposed such that it would be difficult to drive more than 50 miles down either coast of the United States without running into an LNG [liquefied natural gas] import terminal," said IHS Chief Energy Strategist David Hobbs.
Not many of the proposed import terminals were constructed, but a handful were, just in time to see the high domestic gas prices that spurred them crushed by the boom in shales.
"Whenever senior people in the industry know that something is true and it is backed up by incontrovertible evidence that it is going to be true, that is the moment we can be sure that conclusion is wrong..." Hobbs said. "When everyone agrees that is the future, they will restyle their investment programs to reflect that future, and so the background is affected by their investments."
When it comes to dealing with stakeholders who are neighbors of the shale gas patch, the industry has learned some lessons too late, Hobbs and colleague Nariman Behravesh, IHS chief economist, said. While both expect the United States to be an exporter of liquefied domestic gas, they said anti-export forces are selling their story in Washington, DC, in terms of energy and price security.
Hobbs said citizens living near shale development have been willing to put up with truck traffic, noise, etc., but when they find out that some of the gas might be exported, it gets their dander up. "'[Y]ou're telling me that I put up with all that construction so you can send my cheap gas to China,'" is how he characterized the sentiment. "Of course it's more complicated than that, but that's how it's playing politically."
Hobbs said now that hydraulic fracturing (fracking) has entered the public consciousness on a widespread basis, the industry could have prepared for the controversy better by taking stakeholder concerns more seriously earlier on. Because it didn't, "mythology," such as the anti-fracking film Gasland, has gained a foothold in the debate.
"The shale gale is really good news for the U.S. economy," Behravesh said. "The problem is managing the message, and losing -- for a while, although I think that's changed -- the PR war. Initially the industry did not take this seriously; they thought it would go away."