Shale gas is quickly becoming the most abundant source of natural gas in the U.S. It now supplies about a quarter of U.S. natural gas production and by 2035, half of U.S. natural gas will come from the rock, according to the U.S. Energy Information Administration. The boom in shale gas, up from just two percent of the total in 2000, has cut gas prices to record levels, reduced energy imports, and set the country on a path to energy independence. It’s also a major force driving the job market. American chemical companies, for example, are using ethane, a liquid gas derived from shale gas, as raw material to produce everything from toys, to trash bags and pantyhose. The American Chemistry Council estimates that a 25 percent increase in ethane supply would lead to 17,000 new jobs in the chemical industry, 395,000 manufacturing and other jobs elsewhere, and add $132 billion to the economy.
Bankers are listening. “We’ve been investing in energy for more than 30 years, and we’ve been in all parts of it,” says Alex Urquhart, president and CEO of GE Energy Financial Services, GE’s energy investing arm. He says that shale still “needs an enormous amount of infrastructure to gather gas from wells and treat it so that it can be put into a pipeline and moved to market. We’ve been making those investments,” he says.
So far, GE Energy Financial Services has invested approximately $3 billion in 43,500 miles of pipelines, storage tanks, oil and gas terminals, and other “midstream” energy assets.
Here’s how it works. Urquhart and his team of oil and gas financiers look for projects with proven reserves producing natural gas and lucrative “wet” gas, natural gas laced with valuable liquids like ethane.
Last month, Urquhart and his team invested in a company that will develop pipelines through the Eagle Ford shale in Texas. “The pipelines are kind of like a set of roads through a neighborhood,” Urquhart says. “If a builder builds a bunch of houses and you build all the roads that connect the homes to the main street, you’re pretty certain that everybody’s going to pay to use your roads.” This makes putting capital in pipelines a smart investment.
These roads to market are also roads to jobs. Last week, a study by the New America Foundation said that natural gas has been a “factor in the revival of American manufacturing.” The report said that “abundant resources of domestic natural gas, particularly ethane, could lead to a boom in manufacturing, as domestic natural gas replaces imported oil in the production of polymers and petrochemicals.” Urquhart and his team are paving the path to this future.
