Dar Foresees Transformations in Natural Gas Industry

THE JOURNAL RECORD, April 14, 1992 | Go to article overview

Dar Foresees Transformations in Natural Gas Industry


Vinod K. Dar, formerly of Hadson Corp. of Oklahoma City and now president of the Washington, D.C., consulting firm Dar & Associates, sees some transformations coming for the natural gas industry.

"In 18 to 24 months, the wellhead price of natural gas will be much higher and never look back," warned Dar.

"Next year, gas demand will surge and keep going into the millennium." Gas is a unique commodity in the energy realm, Dar asserts, and history is bunk. The changes taking place in the gas industry are far-reaching and nothing can stand in the way, he adds. It is nothing short of revolution, he indicates.

"It is impossible for an individual firm to completely forecast what the . . . great transformations will lead to," Dar admitted.

"Some outlines of the new order, however, are beginning to emerge." Basically, Dar foresees four major transformations taking place from now through 1998 in the U.S. natural gas business. A sketch of those changes includes:

From energy socialism where there was government price controls to a free market system, including production and return on investment.

From political guarantees for utility financing and public capital markets and, more recently, project financing through contract-based credits and private placement markets, to corporate financing through enterprise credit and a global capital market.

From government mandated vertical integration and consolidation to unregulated vertical reintegration and horizontal consolidation.

And, finally, from a state of relatively low intellectual capital that is value-added to very high intellectual capital that is value-added.

At the crux of Dar's observation is the premise of the metamorphosis of the worldwide economic reform taking place, which affects all business.

He acknowledges that the dramatic change in the role of capital in the gas business is not an isolated incident.

"The basic principle of economic activity now _ here and abroad _ is vigorous capitalism," Dar said.

"What is happening in the gas business is not an isolated phenomenon but rather a manifestation of endemic global change." Over the next six years and beyond, the key elements to bring Dar's predictions to fruition, as he sees it, are based on the following observations.

Natural gas will increasingly become an intermediate fuel and electricity will gradually, but inexorably, drive other fuels out of end use markets, including personal transportation. Electricity is the only final enegy form compatible with our rapidly evolving information, biotech and molecular engineering economy. It is universal, versatile, convenient and quiet and clean in its consumption.

The pipelines of the new economy will pump voice, text, data and images and be fueled by electricity, not hydrocarbons.

The real, inflation adjusted price of natural gas at the wellhead in 2000 may be no higher than in 1990 and could be lower; the nominal price of gas in 2003 may be lower than the nominal price in 1983.

Finding and production costs of natural gas will decline steadily in real terms as the productivity of the exploration and production sector soars.

This sector will be generally divided into four categories: pure science driven explorationists; pure natural gas manufacturing companies that concentrate on low cost extraction; divisions of fully integrated, non-regulated gas and electric companies, which are a new breed just now being hatched; and, subsidized U. …

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