Chesapeake Energy and CNG Cars
Posted September 24, 2008 at 3:00 pm 
Filed in: For the past few months, Chesapeake Energy has been running ads calling for policies to promote the use of compressed natural gas (CNG) vehicles. These are not the only such ads on the air. We have all seen T. Boone Pickens calling for the use of natural gas in cars to offset our demand for oil.
Given that Chesapeake Energy is among the largest producers of natural gas in the nation, we should not be surprised to see it promoting policies to help stimulate demand for natural gas. But a Monday press release issued by Chesapeake demonstrates that its interest may be more than simply trying to establish a new market (cars) for its product (natural gas).
Chesapeake announced that because prices have fallen nearly in half since mid-summer, it was reducing its drilling capital expenditures for the next 6 months by more than $3 billion, or 17 percent. It noted that while it expects demand to pick up in the long term as more cars are converted/built to run on natural gas, recent significant increases in domestic production have (among other factors) placed sufficient downward pressure on prices that some projects are no longer economical.
SAFE is putting forward policy proposals that, while not promoting natural gas cars, will stimulate demand for natural gas for power generation to meet demand for power for plug-in electric and pure electric vehicles. While we do expect that natural gas will be used to help power vehicles in the coming decades, it would be preferable for this gas to be burned in highly efficient central power stations, rather than in less efficient internal combustion engines.
That said, Chesapeake Energy is certainly right on a most important point: it is critical for the U.S. to develop and deploy technologies that enable cars to consume domestic fuels that are less exposed to the volatility of world oil market.
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