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Murkowski : U.S. Needs to Deal from a Position of Energy Abundance

In its reluctance to share its natural gas resources with the world, the United States is operating in a scarcity mode, which is at odds with today's abundance, Alaska's Sen. Lisa Murkowski said Tuesday.

While the United States has undergone a "tectonic shift" underground with the shale revolution, that shift has failed to translate to attitudes above-ground, she told a crowd of more than 900 from around the world attending the Energy Information Administration Energy Conference in Washington, DC.

"I think part of the problem that we're dealing with is almost psychological. So many of us grew up in an era when energy was viewed as scarce. So we're looking at the energy world from a position of scarcity...We need to now reckon with the fact that we are dealing from a position of abundance" when it comes to natural gas," said Murkowski, the ranking Republican on the Senate Energy and Natural Resources Committee. Murkowski's state currently is putting together an export project to send Alaska's share of the overabundant resource to Pacific Rim countries.

The industry has confidence in that abundance, Southwestern Energy Co. Vice President Jim Tramuto said. As evidence of that, he is seeing a growing amount of natural gas being transported under firm service agreements. Southwestern is the largest independent producer in the Fayetteville Shale in Arkansas. Its current production is 2.2 Bcf/d, of which 2 Bcf/d is delivered to key liquid points on six interconnecting interstate pipelines that serve the Midwest and Northeast.

"I think this is a shift and a major change that you're seeing...when you look at interstate pipelines" and see a lot of firm capacity on the lines from shale plays. "That's a real strong message on how much confidence we have in the shale plays that we are in."

In 2005, "we were looking at what do we need to do to import gas because we were...in a mindset that we were going to be short...Now we have an abundant supply here right below our feet," Tramuto said. "That is a significant shift," and involves changes in policy in Washington, the states and at every company.

Southwestern is here to stay in the Fayetteville play, Tramuto said. The company is vertically integrated; it has its own water company, sand company, well completion firm, hydraulic fracturing company and its own drilling rigs.

The company has already drilled 3,000 wells in the Fayetteville and plans to drill another 385-400 this year. Tramuto said the company's average drilling time is five days. He added that it drilled 25 wells (each 4,000 feet deep) over a period of two and a half days.

He also expects the Marcellus Shale play in Pennsylvania to continue as a key growth area. "The wells coming out of Marcellus are some of the most significant wells our company has seen." Southwestern Energy holds 336,000 acres in the Marcellus, and has a current production rate of 490,000 MMcf/d, all of which is connected to interstate pipelines through firm transportation agreements.

As for exports of liquefied natural gas (LNG) Murkowski said the decision should be easy. "To me, deciding to export gas should be easy: either we have a surplus of natural gas that can be sold abroad or we don't. And if we do, we can add LNG exports the record levels of natural gas that we're already exporting via pipeline to Mexico," she said.

A "more complicated debate" will be over crude oil exports, Murkowski said. "We're not going to see this debate this summer," she said, and added if LNG exports aren't handled correctly, "then there's little hope that we're going to be able to tackle a hot button issue like crude oil exports."

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