Wall Street Journal
Gas and Gustav: Natural Gas, the Hurricane-Safe Fuel

Wednesday, September 03, 2008

Chesapeake Energy Corp. has been running advertisements promoting compressed natural gas as a cheaper, more environmentally sound and home-grown alternative to gasoline. The campaign's kicker is, "Rescue our dollar. Rescue our drivers. Rescue our environment."

Maybe they should add another reason: natural gas production is less vulnerable than ever to hurricanes that batter the Gulf Coast.

According to consultant and gas market tracker Bentek Energy LLC, the boom in shale gas is creating substantial new flows of natural gas - from ground to consumer - that avoid the storm-prone coast and Gulf of Mexico.

Bentek is tracking 75 pipelines in various stages of completion that draw gas from the Barnett Shale in north Texas, East Texas, Arkansas' Fayetteville Shale and the buzz-generating Haynesville Shale in northern Louisiana. The gas is generally flowing through northern Louisiana and connecting with Williams Cos.' Transco pipeline, which takes it up to New York City. All of this pipeline infrastructure is more than a couple hundred miles inland.

These expansions don't include all the new capacity in pipelines out of the Rocky Mountains and across the Midwest into the East Coast.

Natural gas is detouring away from the Gulf Coast in part because of rapidly growing gas production in northern Texas and Arkansas. But reliability is another factor, says Russell Braziel, managing director of Colorado-based Bentek. "Natural gas consumers want to avoid the risk of gas coming from the Gulf Coast," he says.

Natural gas production in the Gulf of Mexico has been falling in recent years and onshore gas production has grown quickly. Mr. Braziel says some traditional offshore supplies will be displaced by the new onshore gas.

Gustav doesn't appear to have done much damage to the Gulf Coast gas infrastructure, but hurricanes Ivan, Katrina and Rita did, and forced prices up.

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