Gas-Price Recovery May Be Slowed by Backlog of Unfinished Wells
December 23, 2009, 08:46 AM EST
By Edward Klump
Dec. 23 (Bloomberg) -- The recovery of natural-gas prices may be slowed by hundreds of uncompleted wells in North America that can be brought online quickly to meet increased demand for the heating and power-plant fuel.
As many as 1,500 gas wells were drilled and not completed as of an October estimate by Halliburton Co., the second-largest oilfield contractor. Those wells can start pumping gas once prices climb above $6 per million British thermal units, limiting further gains, said James Halloran, a consultant at Financial America Securities in Cleveland.
“The higher gas prices start to move -- assuming we have, say, a really cold winter and we see supply being drawn down very rapidly -- people are going to go and rush to try and complete these wells and bring them onstream,” said Allen Brooks, a managing director at investment bank Parks Paton Hoepfl & Brown in Houston. “I think that’s going to keep gas prices from going dramatically higher.”
New York gas futures, which tumbled to a seven-year low in September as the recession cut demand, traded as high as $5.93 this week amid below-normal U.S. temperatures. Wells brought online in the past 12 months typically drive one-third of U.S. gas output, according to WTRG Economics. Houston investment bank Tudor Pickering Holt & Co. estimates that there are 800 more uncompleted wells than usual in the U.S.
“You’re talking about the ability to add a percent or two to production,” said James Williams, an economist at WTRG near Russellville, Arkansas. “While that doesn’t seem much, the supply-demand balance is very delicate and 2 or 3 percent over or under supply can move prices significantly.”
Drilling Without Completing
The number of completions of U.S. gas wells dropped 49 percent from a year earlier in the third quarter, the biggest decline this decade, according to the American Petroleum Institute in Washington.
Producers may have pushed forward with drilling wells, even as they planned to hold off on pumping gas, because of rig contracts or lease agreements with property owners, said Gene Shiels, a spokesman at Baker Hughes Inc., which tracks rig data. He said operators could bring uncompleted wells online “relatively quickly.”
Completions are done after a well has been drilled and typically involve putting a production pipe down the hole and installing a valve system to control the flow of gas, WTRG’s Williams said. The well is connected to gathering lines to carry the gas away. Shale formations are injected with water, sand and chemicals to fracture rock and make gas flow...
http://www.businessweek.com/news/2009-12-23/gas-price-recovery-may-...
By Edward Klump
Dec. 23 (Bloomberg) -- The recovery of natural-gas prices may be slowed by hundreds of uncompleted wells in North America that can be brought online quickly to meet increased demand for the heating and power-plant fuel.
As many as 1,500 gas wells were drilled and not completed as of an October estimate by Halliburton Co., the second-largest oilfield contractor. Those wells can start pumping gas once prices climb above $6 per million British thermal units, limiting further gains, said James Halloran, a consultant at Financial America Securities in Cleveland.
“The higher gas prices start to move -- assuming we have, say, a really cold winter and we see supply being drawn down very rapidly -- people are going to go and rush to try and complete these wells and bring them onstream,” said Allen Brooks, a managing director at investment bank Parks Paton Hoepfl & Brown in Houston. “I think that’s going to keep gas prices from going dramatically higher.”
New York gas futures, which tumbled to a seven-year low in September as the recession cut demand, traded as high as $5.93 this week amid below-normal U.S. temperatures. Wells brought online in the past 12 months typically drive one-third of U.S. gas output, according to WTRG Economics. Houston investment bank Tudor Pickering Holt & Co. estimates that there are 800 more uncompleted wells than usual in the U.S.
“You’re talking about the ability to add a percent or two to production,” said James Williams, an economist at WTRG near Russellville, Arkansas. “While that doesn’t seem much, the supply-demand balance is very delicate and 2 or 3 percent over or under supply can move prices significantly.”
Drilling Without Completing
The number of completions of U.S. gas wells dropped 49 percent from a year earlier in the third quarter, the biggest decline this decade, according to the American Petroleum Institute in Washington.
Producers may have pushed forward with drilling wells, even as they planned to hold off on pumping gas, because of rig contracts or lease agreements with property owners, said Gene Shiels, a spokesman at Baker Hughes Inc., which tracks rig data. He said operators could bring uncompleted wells online “relatively quickly.”
Completions are done after a well has been drilled and typically involve putting a production pipe down the hole and installing a valve system to control the flow of gas, WTRG’s Williams said. The well is connected to gathering lines to carry the gas away. Shale formations are injected with water, sand and chemicals to fracture rock and make gas flow...
http://www.businessweek.com/news/2009-12-23/gas-price-recovery-may-...
Tags: Wells, backlog, gas, prices, uncompleted
Views: 56
Replies to This Discussion
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Permalink Reply by ALongview on -
I was wondering about that. You see a good number of wells choked back as well.
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Permalink Reply by jffree1 on
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I thought it was appropriate for discussion since there've been a number of questions (in Texas) about wells with status as "Unperfed Completions". I don't know if there are many (any?) with this status in La. but it's an interesting question.
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Permalink Reply by P.G. on
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All that NG and little use for it. Be nice if was being promoted for a transportation fuel for the mainstream public or at least for trucking. Too bad the industry isn't pushing for or installing the necessary infrastructure. An investment now could pay off big in the long haul.
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P.G., Encana is pushing gov. in Canada to get with the program. Now we need something like that to happen here.
Companies pressing government on incentives for natural gas vehicles
http://www.google.com/hostednews/canadianpress/article/ALeqM5gEQSW9...
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Permalink Reply by sesport on
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Keep in mind that consumption for transportation is about 10% (according to EIA). That could be bumped up a notch with an increased number of ng vehicles. But we also need one of the other consumers (residential, energy or industrial), or a combination of them, to make the move, too.
Plus, there's still a loottttttt of gas in storage. From the historical data I've looked at, I think prices start to climb back up as the gas is consumed during the winter.
80)
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You are correct that transportation will be a small part of demand but every little bit helps, IMO.
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Permalink Reply by sesport on
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Yep! I was also counting on grillin' MmmMmm to do his part, too. lol 80)
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Permalink Reply by intrepid on
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When the left gets frozen out and finally wakes up to the FACT that we are not having global warming maybe things will get better. ha ha
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Permalink Reply by sesport on
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Weellllll, and a good day to you, too. Ummm, I think the left stirred a little, the new catch phrase is now "Climate Change," isn't it? And, of course, the climate is always changing since the beginning of time. Now to see if we'll need ng to manufacture & run air conditioning or to manufacture & run heating systems. lol
Either way, we'll be using ng for residential purposes, which is good because that's a big chunk of the consumption pie. And if it means more AC use, that adds draw on the power grid, so we could use some more off-peak power plants powered by ng. Okay, that's another chunk of the pie.
Industrial ... hmmm ... are they looking at using more ng?
Happy Holidays, intrepid. 80)
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Permalink Reply by Henry on
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Blame SWEPI. They have not yet turned a horizontal well to sales. I guess when you're that big, you can afford to wait for higher gas prices.
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Permalink Reply by Spring Branch,mineral owner on
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Whoever is in charge of drilling for Swepi in the Haynesville should be embarrassed. Just about all their wells entail a fishingh job. I can't imagine why Encana would want them as a partner. They don't even seem to have come through with their deep pockets.
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