subject: Churches And Other Lease Holders Affected By Gas Reserves Vanishing [print this page] One of the biggest gas companies Chesapeake engaged an actor to advertise the long-term advantages of natural gas. Sophisticated investors were courted with talks about use of latest drilling technology. But the recession totally changed the picture with the companies cancelling lease orders, pulling down advertisements and getting embroiled in class-action lawsuits. The plunging of natural gas price by two thirds sent shivers down the industry.
Rev.Kyev Tatum of Southern Christian Leadership Conference (president of Fort Worth chapter) described it as ruinous. He explained that churches numbering dozens had signed leases after being promised of large sums. Now some of the churches are being told that the property could no longer be exempted from taxes; meanwhile no royalties have rolled in.
Deborah Rogers of Federal Reserve Bank of Dallas and a previous stockbroker with Merrill Lynch had started to study the data collected from shale gas firms. She had become doubtful about claims the firms were making to lure in investors and get government benefits. Energy experts as well as geologists began to look closely into the figures and the performances of the wells.
After being prodded by Ms. Roger, in 2010 a meeting was summoned by Federal Reserve Bank of Dallas to discuss this issue. One of the speakers was Kenneth B. Medlock III of Rice University (energy expert). He painted a rosy picture of the future of the shale gas industry but after his speech Rogers began to pepper him with queries. Will increasing worries about the environment hike up business costs? If the wells were vanishing faster than forecasted how many new drilling would be required to meet the targets?
Medlock admitted that the production (play in industrial parlance) had flattened and would in all probability soon start to decline. He tried to explain away the issue and said, Activity will shift toward other plays because the returns there are higher.
Personnel working inside the natural gas industry are raising doubts. A geologist wrote in an e-mail, Our engineers here project these wells out to 20-30 years of production and in my mind that has yet to be proven as viable. In fact Im quite skeptical of it myself when you see the percentage decline in the first year of production. In an earlier online mail he had written, In these shale gas plays no well is really economic right now. They are all losing little money or only making a little bit of money.
Another geologist from Conoco Phillips, a mega producer of natural gas warned that shale gas could become the worlds largest uneconomic field. He was contradicted by the CEO of the firm James Mulva.
