• E-mail
• Print
• Comment
• Font Size
• Digg
• del.icio.us
• Discuss article

Energy Expert Cautions That Era of Cheap Fuel is Over

Posted on: Saturday, 29 October 2005, 00:00 CDT

By GEORGE HOHMANN

Henry Harmon says U.S. has been consuming 'like a drunken sailor'

Energy prices will remain volatile, but the days of cheap fuel are over, said Henry Harmon, president and chief executive officer of Charleston-based Triana Energy Inc.

Harmon said Hurricanes Rita and Katrina damaged 70 oil and natural gas production platforms in the Gulf of Mexico and Rita did extensive damage to gas pipelines. He said about 60 percent of natural gas production in the gulf is still shut in because of hurricane damage.

Consequently, U.S. markets will be at risk over the next 24 months, Harmon said. Natural gas prices could soar and it could be difficult to provide the Northeast with adequate supplies if the region experiences an especially cold winter, he said.

Harmon spoke Thursday at an investment symposium sponsored by the West Virginia Investment Management Board at Embassy Suites.

He said some people have compared the recent increase in energy prices to the 1973-74 Arab oil embargo. But the two situations are different, he said.

In the '70s, people who used oil to further a political agenda caused the oil embargo and artificially forced prices higher, he said.

In contrast, the current increase in energy prices is the result of a perfect storm caused by increasing domestic and worldwide demand and supplies restricted because of hurricane damage, environmental concerns and closed societies that aren't responsive to market forces, he said.

"It's all about advances in the rest of the world," Harmon said. "We're not going back to $20-a-barrel oil, $2-a-dekatherm natural gas and $1-a-gallon gasoline. We're moving on."

He said the United States "consumes energy like a drunken sailor," and the world's developing countries "want our standard of living and, frankly, there's no looking back."

"The only solution put forth by our leaders is to import more," Harmon said. "That's not really a solution, in my opinion."

Harmon is not convinced that the conversion of coal to gas or liquid fuels is a viable solution. Coal conversion plants might be profitable at today's prices but it is highly unlikely investors will commit millions of dollars to such plants because prices are so volatile, he said.

Also, if it requires as much energy to turn coal into an alternative fuel as the alternative fuel itself is worth, "you haven't really done anything" by building a coal conversion plant other than "increase the market for coal," he said.

The world is not running out of oil but the cost of extracting it is going up, Harmon said. "Now we're drilling not on the sweet spots but on the fringe."

Harmon believes that long-term, the world's economies will shift to natural gas.

This will happen because it will become possible to tap vast fields of gas hydrates that are locked under water on continental shelves, he said.

"It may be a while before this becomes feasible but when it does, it will become instantly dominant" because natural gas is such a flexible fuel, he said.

Earlier this month Harmon's company, Triana Energy, sold Columbia Natural Resources of Charleston to Chesapeake Energy Corp. of Oklahoma City for $2.2 billion. Triana Energy made a $1.87 billion profit on the deal, which is expected to close before the end of the year.

Before forming Triana Energy in 2000, Harmon worked for Columbia Energy Group for 22 years. He serves on the board of directors of the Fifth District Federal Reserve Bank of Richmond.

Contact writer George Hohmann at business@dailymail.com or 348- 4836.

Source: Charleston Daily Mail

More News in this Category