DUG Eagle Ford: South Texas Macroeconomics

Hart Energy: In a world of physical commodities, South Texas is location advantaged, What does that mean from a macroeconomics standpoint?

Tom Petrie: It means they can really help a whole lot of sources of American fossil fuels find the new markets that are out there internationally and they have a natural advantage as a deep water port. It's been really good leadership developing the ability for shippers both oil and gas to reach those markets and those markets are both in the Atlantic Basin and in the Pacific Rim. By virtue of the expansion has already occurred down in Panama in the Panama Canal. The ability to ship from the Port of Corpus Christi through the Panama Canal now and access many of the growing markets of Asia is phenomenal. In addition to that, there are geostrategic reasons why U.S. fossil fuels both oil and gas, want to be able to reach Europe and provide optionality for consumers of those feels in Europe as well.

Hart Energy: Corpus Christi has seen an infrastructure boom. Essentially becoming an energy export star. Can you share your thoughts there?

Tom Petrie: Let's look at liquefied natural gas first (LNG) because there was a very large build, a world-class facility built up at Sabine Pass and now it's operating virtually at capacity. When you look at that big build it could be replicated and is in the process of very possibly being replicated in Corpus Christi. The first several trains are now underway and starting up and there's more room as I understand it for those facilities to be further expanded. It's going to be just a major source of gas that would otherwise be a problem for producers. The competition for natural gas being developed in the Eagle Ford and the competition between the Eagle Ford and the Permian Basin for associated gas being developed is such that if you don't have that ability to export the gas, the gas itself is not an asset, it's a liability. That's what the case was a year ago but now with the new facilities going on opening up we have a situation where that discount on gas has all but evaporated. It's very small today very manageable. But, with more production being developed from those new sources the associated gas needs ongoing growth and its output.

Hart Energy: It looks like there are positive times to come for those moving business through Corpus Christi. Is that what you see?

Tom Petrie: Yes, there will be some domestic uses of that gas in manufacturing and other ways as well, that is right.

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