Replies to This Discussion

Permalink Reply by The_Baron on August 4, 2010 at 4:59

the price you will receive is the price paid at the wellhead. Most likly when it is sold into the pipeline owned by LA Midstream.

The henry hub price is a good benchmark, but not the price you will ever receive.

Your gas may never even go to the henry hub....

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Permalink Reply by JD on August 4, 2010 at 5:07

Baron,

I think you hit the nail on the head. If the price is set at the wellhead, who watches over Louisiana Midstream to make sure they pay a fair price to their "affiliated" company, Chesapeake, that pays the royalty owner???

JD

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Permalink Reply by Les Bamburg on August 5, 2010 at 1:50

JD, it is likely Louisana Midstream is only transporting the gas but not purchasing. I would just ask Chesapeake where the gas is being "sold" - at the delivery into LM or some point downstream.

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Permalink Reply by Henry on August 4, 2010 at 5:23

Baron,
Just to be clear for uninformed people like me... Would you please define "wellhead?" Where is it?

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Permalink Reply by Kat Bloomfield on August 4, 2010 at 6:40

wherever the operator deems it to be.

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Permalink Reply by The_Baron on August 4, 2010 at 6:51

Typically it will be at the meter where the gas is turned to sales.

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Permalink Reply by Henry on August 4, 2010 at 12:40

Baron,

Thanks for your expertise on this, and many other topics. But I'm still confused. By your definition of the wellhead, have the contaminants (H2S, water, CO2, etc) already been removed?

And, typically, how far from the well site is the gas "turned to sales." Is it sold when it goes into some major pipeline? Or is the point of sales a gazillion miles away?

Can you offer an explanation/tutorial on how gas is sold? And when it is sold, to whom is it sold? For example, when the gas leaves my well, it goes into a gathering line, right? And this gathering line might have gas from several different operators, right? So what happens after the gas goes into the gathering line? This is a mystery to me.

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Permalink Reply by Les Bamburg on August 5, 2010 at 1:59

Henry, see my post below that gas can be "sold" (first sales) at almost any point along the flow path from the unit to some point downstream where gas is delivered into an interstate gas pipeline (or even further downstream).

This sale can occur before treatment (to remove contaminants) or downstream after treatment.

Joint owners in a unit can each market their share of production independently (and receive different prices) or elect to have the operator market all the unit gas.

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Permalink Reply by Les Bamburg on August 5, 2010 at 1:52

Henry, I would define it to be at the unit since unit produced volumes have to be measured before being commingled with other production.

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Permalink Reply by JHH on August 4, 2010 at 13:52

so the operator can sell the gas from the "wellhead" to it's own marketing company for below Henry hub price.... say $3 as an example... and then the marketing company sells it at the Henry Hub price... say $4? is that legal... or a bigger question... ethical...? what am i thinking..."click"...duh! thanks, jhh

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Permalink Reply by FXEF on August 4, 2010 at 14:34

I can see where CHK has devised a way to cheat mineral owners and in the end turn a huge profit for the company. Is this common practice with all operators or just CHK?

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Permalink Reply by JHH on August 4, 2010 at 14:47

i don't know if chk is doing this... or any other operator. i was just thinking... following the discussion... is this what's happening? the truth is out there somewhere... thanks, jhh

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