Rising Natural Gas Demand Turns Investors on to Shale Gas

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By Kerri Shannon, Associate Editor, Money Morning
Natural gas will become more important as the world slowly transitions to renewable energy sources, making shale gas reserves a hot topic in the energy industry.

A recent report from Canadian investment bank AltaCorp Capital Inc. said natural gas use could increase nearly 80% over current levels by 2050.

"In the move towards increasing use of renewables, natural gas will play a much bigger role than just 'bridge fuel,' we believe it will become the largest source of energy on the planet," AltaCorp analyst John Mawdsley wrote in the report. "We expect companies levered to natural gas, especially those with long-term unco

Buck

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Permalink Reply by jffree1 on April 9, 2011 at 2:27
Permalink Reply by Bacon on April 9, 2011 at 10:30
Thanks for the link.
Permalink Reply by J B Nabors on April 11, 2011 at 12:20

Anyone who foresees a near term increase in gas prices is probably smoking something prohibited.   We now have more than three large natural gas fields in production or soon to be in production.   (Haynesville, Fayetteville, Marcellus, Bakken, etc.)  Here in NW Louisiana, most leases have now been unitized and drilled.  For most lessors, that means that their minerals are Held By Production.   Nearly all of the gas wells are throttled or choked back.   And even though many companies have applied for and received permits to drill additional holes in units they hold, few of them plan to do so until the price of gas increases, or the original "unit well" is exhausted.   

 

Currently, we can see heavier leasing activity in Sabine Parish, as the companies lease, drill, and hold those minerals.   We can also see the evidence of multiple pipelines--including the huge 42" Acadian line to Napoleonville--throughout the area.  I do not anticipate any gas price run-up until the country begins to switch to NG fuel for automobiles, and begins to package LNG for export.  Right now, and for the immediate future, gas supply is coming on line faster than demand is increasing.   An equilibrium in that equation should take several years.

 

But not to worry.  The gas is still there.  If you don't get the benefits, your children or grandchildren will.

Permalink Reply by David on April 11, 2011 at 12:23
We may not see a near term increase in pricing, but we may well see an increase in drilling on existing acreage.
Permalink Reply by J B Nabors on May 23, 2011 at 3:56

Re:  "... we may well see an increase in drilling on existing acreage ..." 

I was told by a Chesapeake employee several weeks ago that Chesapeake currently plans to eventually drill eight (8) wells per section.  

 

That is sweet.   But the kicker is that word "eventually".   The original boom was to get the minerals leases done, and locked in with one producing well.   Additional wells can be drilled (or not) at any time after that is accomplished.  There is no hurry to do so, once a section is in production.  (Except for those few cases where a mineral owner may have negotiated a unique leasing clause.)  Even if they drill them, there is no hurry or need to produce additional wells until the market price is propitious--the drillers can simply shut them in until they deem it profitable to produce.  

Personally, I am willing to wait for higher prices before the oil companies begin to drill and produce my minerals.  

 

 

Permalink Reply by RC on May 23, 2011 at 5:50
There is an interesting narrative on Chesapeake's website under their latest presentation concerning the price of nat gas (beginning around page 28) - more bullish and it sounds like it's their strategy moving forward www.chk.comhttp://www.chk.com/Investors/Documents/Latest_IR_Presentation.pdf
Permalink Reply by ALongview on May 23, 2011 at 9:25
I would be curious to hear what people's personal definitions are of "near-term" and "longer term"?  I am not trying to be difficult here it is just that to a day trader "near term" is 2 minutes but to an investor it could mean 1-3 years.  Same goes for "longer term", to the first guy it is til tomorrow morning but the second guy sees it as 5-10 years.  I think in the Chesapeake presentation it is pretty clear they are looking at the out years of gas prices as 4-5 years and believe that the feeling about gas out there is too negative right now considering all the land already or about to be HBP(therefore no new need to drill) and the potential for Nat Gas transport legislation and export approval.
Permalink Reply by OLYMAN on May 23, 2011 at 17:20
Chesapeake may be on a slow roll, one well per sec but Encana is full blown gas factory mode

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