Natural gas will be the ‘bridge’ or transition fuel as the global economy moves from fossil fuels to renewable and alternative energy over the next century, said Chesapeake Energy Corp executive vice-president Marcus Rowland yesterday. The company is the third-largest natural gas producer in the United States.
Speaking to The Straits Times during a visit to Singapore, Mr Rowland said the long-term growth prospects of the energy source is reflected in the investor interest the company has received recently.
Natural gas is a fossil fuel containing mostly methane, which burns more cleanly than other fossil fuels - it emits 44 per cent less carbon dioxide than coal. Singapore relies heavily on natural gas, which powers 80 per cent of its energy needs.
Sovereign wealth funds from Singapore, China and South Korea and two private equity firms last month agreed to invest a total of US$900 million (S$1.25 billion) in New York-listed Chesapeake. Out of this, Singapore’s investment firm Temasek Holdings has injected a total US$600 million, disclosed Mr Rowland, who is also the firm’s chief financial officer.
Mr Rowland said yesterday that energy firms are increasingly wooing Asian investors as the region’s appetite for resource investments appears unquenchable. And as the world population increases and emerging economies develop, energy prices will only go up in the long term, he noted.
Even in the US, demand is set to rise as dirtier fuels such as coal get replaced. Natural gas accounts for 23 per cent of US electricity generation, while coal still provides 50 per cent, he said.
‘Countries like China and India are aggressively investing in resources because as energy prices rise around the world, their investment becomes a natural hedge against that.’
Natural gas is trading at about US$4.50 per 1,000 cu ft, a sharp drop from the US$14 levels it traded at in 2008, just before the world financial crisis, he added.
‘Prices won’t go back to those levels for a long time, but it has potential for growth as demand for the fuel grows. The fuel is abundant at reasonable prices and as the world moves towards renewables and other technologies, it will be a bridge fuel - here to stay for at least the next five generations.’
Chesapeake, with annual revenues of more than US$7 billion, started talks with Asian investors only six months ago but has managed to raise US$1.5 billion in capital from investors in the region in that short time, said Mr Rowland.
Most of the capital raised went towards paying the company’s debt, accrued from the aggressive expansion over the past five years in shale gas sites.
Mr Rowland was in town to speak to Singapore-based banks in order to extend the firm’s credit facilities into the region. The firm is shifting its focus into oil and natural gas liquid production to complement its natural gas business.
Compressed natural gas, for example, is regarded by industry analysts as having tremendous potential. Besides being relatively safe to transport, it also reduces the environmental impact.
In the longer term, the company may also look into exporting liquified natural gas (LNG) as demand around the world increases. Singapore, for example, is building a $1.5 billion LNG terminal in a bid to diversify its energy sources.
This article first appeared in The Straits Times.
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