Natural Gas Price wall.
http://www.reuters.com/article/2012/05/24/column-natgas-idUSL1E8GO8...
U.S. natural gas futures have posted an impressive rally since briefly trading below $2 per million BTUs earlier this month, but the upside is increasingly limited by coal prices and the prospect of more gas from now unpopular dry shales.
The more than 40 percent rally in natural gas prices has come even as major producers like Chesapeake Energy have seemingly not cut output by as much as the market had hoped. A string of better-than-expected weekly storage reports has, at least temporarily, allayed fears that producers would be forced to dump lots of unwanted gas on the spot market due to storage limitations.
Increased switching away from coal by power utilities has further helped, propping up natural gas demand.
Barclays Capital estimates that 7 billion cubic feet per day of natural gas has displaced coal from the U.S. power sector.
Some of this switching is due to utilities moving away from coal and into gas due to tougher environmental legislation, but the bulk of this incremental gas burn is due to economics. Gas is simply cheaper right now. That in turn has forced coal producers to cut output by 8 percent, according to BarCap. So far, so good for gas. But here's where the problems for gas bulls mount.
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Replies to This Discussion
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Permalink Reply by Bobi Carr ("parker") on
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Not liking the sentence.......So ultimately gas faces a few years at least of relatively cheap prices.
......but have been reading it EVERYWHERE I look. Grrrrrr.
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Permalink Reply by Les Bamburg on -
Bobi, it is unclear what natural gas is required before companies will move drilling rigs back into dry gas plays such as the Haynesville and Fayetteville Shale or the dry areas of the Marcellus, Barnett and Eagle Ford Shale. This varies by operator as it depends upon each company's list of available development plays that would support their earnings growth objective.
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Permalink Reply by Krkyoldhag on
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At my age thinking is tricky..takes me awhile to separate out "stuff".
I wonder how much the drop in refinery revenue from dry gas had to do with the drop in NG? Not sure how that would work..But I do know that NG is "ready to go" doesn't need the refinery to go online. The refineries were losing money..no business.or big drop in business..The ones that converted to separating liquids got back some share..
So how badly were the refineries hurt with dry gas? I do know that the one in Waskom is sure happy to be having the liquids coming in and products going out.
Nobody has addressed this so far as I know.
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Permalink Reply by Les Bamburg on
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KOH, I assume you are referring to natural gas processing plants rather than oil refineries.
Yes, the transition to rich gas and oil drilling has been a major boost to the natural gas processing and natural gas liquids transportation and fractionation business. Several new processing plants are currently being constructed in South Texas to handle rich Eagle Ford Shale gas production. The same is occurring for the Marcellus Shale and Bakken Shale.
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Permalink Reply by kittycatmama on
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Ok Les, let me show my ignorance. Is there a technology available that can convert dry gas to liquid gas or is that what the new Cheniere plant proposes to do.
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Permalink Reply by Clyde T. Williams on
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I will try to do double duty reply -
"Dry" "natural" field gas will have some wet gases with the CH4 and can be transorted carefully by pipeline to a local separator then wets are trucked out and very drys go to transmission lines... = Unassociated Gas - but $2.50/MMBtu Operators need $3.50 to make any money
Associated Gas - Oil production with lots more wets (C2+H+) from oil and some dry gas (CH4) - separation at the pad - so need clusters of pads to do it safely/effecctively - Oil separated for trucking out - if enough wets then a pipeline for transport and in the same trench a dry gas line (OR flare it)
Problem - more oil production needs more wets processing and ethylene production for plastics etc or that needs to be sold off to someone elsewise the oil production needs to be throttled back - in order to get the oil out best - needs lots of users/good prices for the dry and wet gases = export the drys, process the wets for plastics feedstock, and sell the oil at a good price = profits on three produced resources and pump the water back in somewhere...
Any dry gas liquefier needs a wets processor along side because even at 2-5% wets the 2-5% needs to be sued immediately adjacent to the liquefier eslewise you have to burn it off for power for the liquefier and the LNG system doesn't make the profits...bad economics...so wherever you have a oil fracking ops you need some good oil, condensate, and "dry" gas pipelines, an LNG liqufier, and an ethylene plant. In Dubai, we were to get 15% wets and couldn't take it without building a plastics industry to use dry gas for 5000MW power plant...
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Permalink Reply by Bobi Carr ("parker") on
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kittycatmama,
If this works out, they will convert dry gas to gasoline, but since Chesapeake is 50% owner, I have to wonder.
http://www.thetowntalk.com/article/20120523/BUSINESS/205230330/Sund...
It makes sense that they would invest in this technology. I remember reading about a plant that converted Natural Gas into diesel in Qatar.
........I would believe it more if it were backed by HPB, ECA or some other gas company that BP.
I'M HOPING IT'S THE REAL DEAL AND NOT JUST ANOTHER MARKETING TOOL TO INCREASE STOCK VALUES.
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Permalink Reply by Clyde T. Williams on
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The SoAfricans were/have been doing it for decades during the boycott but converting from a rich wet coal gas to gasoline
They tried for almost a decade with the Qataris but dry gas ain't good to start with and since they haven't made it commercial probably I doubt if even with american genius we can make it commerrcially competitive with light crudes even if the feedstock is <$3/mmbtu...easier to ship LNG or run trains and otherr freight on LNG.
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Permalink Reply by El Theo on
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Better yet is this previously reported article about Shell Oil's Qatar plant does and how they plan to migrate this to the southern US.
They want the Gulf South. They need infrastructure of a large shale in place. Shell is EXCO, if I ain't mistaken. EXCO bought a huge piece of property in DeSoto Parish from Scotty Moran. I may be dreaming, but I would dig it if a hunch paid off.
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Permalink Reply by Skip Peel - Mineral Consultant on
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EXCO's Haynesville partner is British Gas (BG). As far as I am aware Mr. Moran sold his mineral rights. It is possible he sold some of his surface but I don't think it was a huge piece.
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Permalink Reply by Spring Branch,mineral owner on
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It was my understanding that Scotty Moran sold both surface and minerals.
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