Friday, February 18, 2011

Ruble Machine

For a really contrarian view on shale gas development worldwide, the head of Russia's Gazprom (which would be the largest natural gas producer in the world btw) recently likened shale gas to the "internet bubble".  Sounds a bit like sour grapes to me, but still an awfully strong perspective to put into the public record like that. From the world's ultimate natural gas insider. I'd at least pay some heed to the reference to the "rational and logical size" prognostication.

Still, I think making sense of what the real impact to all of this is an awful lot more complicated, or nuanced, than people want to make it..  An interesting story on the economic impact of Marcellus Shale in the region was in the Trib earlier in the week focusing on the indirect impact from pipeline manufacturing.  Headline sounds like it is talking about the big economic impact.  Yet if you read it, its main points say a) US Steel tubular production is down a decent chunk of late,  and b) a new plant being built for pipeline production is out in Loraine, OH.. so Cleveburgh close, but still out of the region and even so is said to generate all of 100 new permanent jobs when completed. That is about the size of net new job creation on the 5th floor of Presby this coming year I suspect. 

It does point out there is one full shift working hard at a new pipeline plant in Ohio owned by TMK IPSCO.  That is some solid impact and some incidental work in Beaver County.  Yet if you recall our history which includes how a generation of steel barons spun off their new wealth locally and gave their name to just about everything.  Not quite sure that will happen in this case where the new profit from those plants has long been making more news in Russia than here.

I really wonder if the subtle message in that story was at the end where it pointed out the reference the industry is making to past natural gas booms in the region. Might not have been intentional??

For the ultimate insight into what the industry itself expects for its future, note the story about how the folks like Chesapeake are hedging 96% of their output for 2011. (I didn't believe that myself, but see page 28 of Chesapeake's own investor presentation) That is the type of thing more insightful to my inner energy analyst than anything else out there. So the folks most in the know are pretty much shouting that prices are going to be plummeting. 

Maybe ebay is more efficient a market than some give it credit for.. still no offers on the Marcellus rights on our NY State ebay listing.  I need to give that listing a name, sort of like NPR's 'Toxie'. We will have to see if anyone makes a bid before it expires in a few days.

Update...  A new name.  Ben the intern says I should name the real estate in NY Marcel the Shale.

Finally.. not sure why this didn't make news here, but it looks like Gulf Oil's return to Pittsburgh had shareholder approval yesterday.  A big deal in the Marcellus biz in the state.


Anonymous Anonymous said...

If I had spelled poorly, this might have been topical. The city is finally cleaning the rubble from Duck Hollow.

Friday, February 18, 2011 9:03:00 AM  
Anonymous MH said...

That was me.

Friday, February 18, 2011 9:03:00 AM  
Blogger C. Briem said...

I would have named it "Rubble Machine"... but folks would have assumed it was my bad spelling and not a phonetic allusion.

Friday, February 18, 2011 9:29:00 AM  
Anonymous The Wiz said...

No doubt gas prices will remain very low this year. There have been hundreds of millions of dollars invested in leasing land across the region and companies are scrambling to get some wells drilled in order to extend those lease by production, thus they are drilling even if they will just break even. With that scenario, gas prices will remain low.

However, some insiders that I talked to are predicting some increase late next year as the economy picks up, industry converts to cheaper gas, and the wells in the Gulf begin to deplete. We get 25% of our gas from the Gulf and the moratorium on Gulf deep water drilling shows no sign of being lifted. And even if it is lifted soon, the permitting process is going to take longer so it will be some time for them to get up to speed.

As for the job count, those pipe mill shave been running at a high capacity in spite of the recession. Who knows how many would have been laid of with the gas play keeping them going. And add another 350 for the new pipe mill in Youngstown along with whatever portion of 500 that work at the neighboring mill that will supply the pipe mill with raw material.

I saw that EQT, headquartered in Pittsburgh, announced they are going to drill 12 horizontal wells in Cameron Co this year and 18 more next year.

And last, the Pegula family, founders and principle shareholders of Atlas, donated $88 million to Penn State to build a hockey arena and start a Division I hockey program. Guess they made out ok.

Friday, February 18, 2011 1:40:00 PM  
Anonymous The Wiz said...

MH; litter and dumping is a capital offense in my world.

Friday, February 18, 2011 2:25:00 PM  
Anonymous MH said...

I think the new IHOP got the ball rolling for keeping Duck Hollow clean. I'm still not sure what to do about South Oakland, but this winter has just be horrible. I don't think the kids are even bothering to put the trash in a container before they put it to the curb.

Friday, February 18, 2011 2:44:00 PM  
Anonymous The Wiz said...

There's a dump site a mile from me. I'm gonna see about using those trail cameras that deer hunters use to see if I can catch them in the act. Hopefully, get some license numbers.

Friday, February 18, 2011 3:16:00 PM  
Blogger C. Briem said...

Wiz is right, I concede I tend to overlook the economic impact of the hockey arena in State College. My bad.

Saturday, February 19, 2011 1:22:00 PM  

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