Oil and gas set for "bumpy" recovery

US Oil and Gas Market

Don McClure, an executive US oil and gas company EnCana Oil & Gas, has said that, at the current time, there are more oil and gas operations-related legislative initiatives that could impact the industry than any time during his three-decade tenure in the energy sector.

Currently working their way through Congress are bills related to hydraulic fracturing, air emissions, climate change, low-carbon fuel standards, federal land access and more, in addition to lesser-known concerns at a federal level about over-the-counter derivatives and incremental drilling cost taxes.

The recession hit the industry hard as companies took measures to cut production and save costs, and although there are some signs of recovery the industry has a long way to go until it returns to any kind of normality. The future for oil and gas remains uncertain mainly due to the fact that America's energy future in general remains unclear, with huge developments such as the cap-and-trade bill yet to make an appearance.

"Impactful headwinds from a political, legislative and regulatory perspective"

Don McClure, vice president of government and stakeholder relations and legal, explained this by saying, "In my 30-plus years that I've been associated with this (industry), I've never seen such a collection of such impactful headwinds from a political, legislative or regulatory perspective than what we've seen today."

For these reasons the gas industry's recovery will be "slow and bumpy" due to a number of factors, primarily the much-deflated price of natural gas. Gas reached toward $14 per million British thermal units in summer 2008, but now is closer to $4.25 per MMBtu, as reported by the FWBusinessPress.com.

Demand for gas remains weak

But more worryingly, demand for gas remains weak and storage is at record highs with no clear sign of where the upper end actually is.

What's more, the Barnett Shale rig count, which peaked in September 2008 at 188 rigs, now is down to about 70 rigs.

But with global potential for "unconventional" shale gas increasing, the US and Canada can remain at the forefront of the world's gas market and their economies can work towards independence from off-continent oil.

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