"What they are signalling with this acquisition is that they understand the importance of gas in their future,'' said Amy Myers Jaffe, energy expert at the James A Baker Institute for Public Policy. "It's definitely the fuel of the future.''
Exxon's chief executive, Rex Tillerson, described it as a positive step towards energy independence for America – a goal of the Obama administration, which wants to wean the US off its dependence on foreign oil."XTO's strengths, together with Exxon Mobil's advanced R&D and operational capabilities, global scale and financial capacity, should enable development of additional supplies of unconventional oil and gas resources, benefiting consumers both here in the US and around the world," said Tillerson.With natural gas prices languishing at historic lows, the deal is a sign that Exxon sees long-term prospects in gas as an alternative to coal. Once the deal is wrapped up, Exxon said it would establish a new upstream organisation to manage so-called "unconventional" resources which were once regarded as too inaccessible to tap cost-effectively.
The acquisition extends Exxon’s bet that fossil fuels will remain a critical part of the nation’s energy supplies for decades to come. Natural gas is a cleaner-burning fuel than coal, with half the carbon dioxide emissions. For that reason, it is considered as a potential “bridge fuel” on the lengthy path to a renewable, carbon-free economy.
To be honest, I'm still trying to figure out what this might mean. Did Exxon grab XTO despite or as a result of the natural gas supply glut? If you read the entire NYT article, then you'll notice Exxon's spending spree during a time when energy stocks are low. Regardless of the machination, the position is evidently bullish on unconventional gas development.
How this evolves in SWPA depends a lot on oil. Despite waning US demand and increased domestic production, the price of oil is expected to almost double by 2035. Which brings me back to Briem's blog post and a bit of information that is news to me:
How new production will affect our relative prices in natural gas is really the big story that could develop from all this development. If we can just achieve parity in natural as prices it will be an improvement in our competitive position. Natural Gas is not the easiest to distribute. I know just enough on the expanding seaborne distribution of natural gas to appreciate that. But even landward distribution across the nation isn't the easiest and location matters to pricing. If we do boost local supply it really should translate to lower local prices which would be good for a number of industries. We still have a number of energy intensive local industries.
I'd add to that the relatively inexpensive cost of extracting gas from the Marcellus Shale. Might that translate into other energy intensive industries moving to Pittsburgh? Low prices for natural gas would seem to be here to stay while oil prices are predicted to climb. Pick your scenario, it should bode well for Pittsburgh.