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No Major Gas Price Dampening in Sight: Calpine Executive Says

No Major Gas Price Dampening in Sight: Calpine Executive Says

Reflecting similar sentiments expressed around Wall Street, a Calpine Corp. executive indicated last Tuesday that declining wholesale natural gas prices are not likely to happen anytime soon, and in the longer run, imports of liquefied natural gas (LNG) and eventual Alaskan supplies won't necessarily dampen prices as many industry observers have been predicting.

"I think LNG for sure is going to happen, but I don't think it is going to impact significantly the cost of gas," said Bill Berilgen, Calpine's executive vice president for oil/gas operations in an interview last week with NGI. "Even if you get 12 Bcf/d of LNG in this country in late 2009 or 2010, that is still less than 15% or 20% of the country's total gas needs. I still think gas prices will be based on what we can produce and deliver in North America."

In the midst of much political, environmental and economic debate surrounding the tapping of North Slope Alaskan supplies, Berilgen said he did not see any significant amounts of Alaskan gas finding their way to the Lower 48 states for lack of an infrastructure or a resolution to what minimum future natural gas prices could be.

At this point regulatory and political issues are daunting on the question of North Slope gas supplies, Berilgen said.

"I'm thinking it will take a 10-year program into the early teens (2012-13)," Berilgen said. "There are so many hurdles and you're looking at a $30 billion investment before you bring natural gas over here (from the North Slope). The potential reserves are not going to be developed until the project is further along. There are only 30 Tcf of proved reserves -- 15 months of U.S. gas demand.

"There is so much more gas to be found, but it is all in the hands of the major oil companies, and they are not going to go through development until there is a certain floor on gas prices, so you need some sort of government guarantee before a $30 billion investment is made. And that is the part I can't answer. I don't know what the politics ultimately will be."

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