Oil exports, coal woes lead energy trends

Dec 05 - Houston Chronicle

The prospect of U.S. oil exports and an increase in coal-related bankruptcies are likely to be major topics in energy circles next year, according to a discussion with lawyers from a leading firm serving the industry.

More oil drilling activity in West Africa also will create buzz, as will the changing resources of the U.S. electric grid, which could be affected by growing use of solar panels.

Driving changes across the global energy landscape will be the energy renaissance in the United States, which has led to surging production of oil and natural gas from shale plays and from the Gulf of Mexico, said Stephen Davis, a partner for the law firm Akin Gump Strauss Hauer & Feld, which hosted a conference call on energy trends.

That growth in U.S. production has already fueled debate over natural gas exports and will increasingly raise questions about whether the United States should export oil, Davis said.

Low natural gas prices also have undercut producers of electricity from coal, already coping with the additional costs related to emissions regulations.

Those costs have been overwhelming for many coal-related energy producers, said Ira Dizengoff, a partner with Akin Gump.

He cited Dallas-based Energy Future Holdings, the owner of TXU Energy, as an example of the problem. Energy Future Holdings was on the verge of bankruptcy this year, though the company avoided filing last month when it made a debt payment.

"I don't think coal is sustainable from an (internal rate of return) perspective." Dizengoff said. "I think you're going to see a lot more coal companies filing for bankruptcy."

West Africa will continue to be a hot area for exploration and production, with regions off the coast of Angola and other nations drawing intense interest.

"We've seen it become a real growth market and one of the reasons is that a lot of people geologically have compared it to Brazil's offshore reserves," said Akin Gump partner Sebastian Rice.

In the U.S. electricity market, increasing energy efficiency and growing use of home solar panels could cause problems for electricity providers already facing stagnant or falling demand, said another Akin Gump partner, Suedeen Kelly.

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