Replies to This Discussion

Permalink Reply by P.G. on June 22, 2011 at 2:03

Just doesn't seem right that there is not much more than a token push to use NG as an alternate to gasoline..The infrastructure across the country is practically in place for  access to natural gas supplies for transportation considering ng is already being distributed to so many homes and businesses through utility companies across the nation, it wouldn't be like starting from scratch...How hard would it be to tap into those as access points?

Perhaps doing what's right doesn't produce as many lobby dollars as doing what's wrong does..huh?

• ▶ Reply

Permalink Reply by Skip Peel - Mineral Consultant on June 22, 2011 at 2:23

My reason for posting the excerpt has to do with economics, not politics.  Many members are still trying to understand why the majority of Haynesville Shale E&P companies are no longer leasing new lands, allowing existing leases in certain areas to lapse and drilling primarily alternate unit wells.  The substantive differential in value between "dry" gas and "wet" gas is an obvious reason.  Couple that differential with a recognition of the tremendous debt that companies have run up in the rush to acquire Haynesville leasehold and it makes perfect business sense.  Profits from cash flow must be maximized to service debt.  And until natural gas prices improve, significantly, there is little reason to acquire more "dry" gas leasehold and drill step-out wells that require an expansion of infrastructure to place in production.

• ▶ Reply

Permalink Reply by jffree1 on June 22, 2011 at 2:28

Do you have an opinion on what the price (range?) needs to be before we see more leasing and step-out drilling?

• ▶ Reply

Permalink Reply by Skip Peel - Mineral Consultant on June 22, 2011 at 2:37

My crystal ball has its limits.  Under current conditions, I would guesstimate $6/mcf, or more.  In regard to the "dry"/"wet" differential, would the value of liquids go up also?  In other words, how long would a substantive financial price advantage accrue to liquids production?

• ▶ Reply

Permalink Reply by Skip Peel - Mineral Consultant on June 22, 2011 at 2:40

Excerpted from the San Francisco Chronicle, June 22. 

 

June 21 (Bloomberg) -- The collapse of Encana Corp.'s C$5.4 billion ($5.5 billion) joint venture with PetroChina Co. leaves Canada's largest natural-gas producer facing the prospect of slower growth unless it finds a partner to help develop millions of cubic feet of shale reserve.

Encana Chief Executive Officer Randy Eresman said on April 20 that the company was looking for more partners to help fund fuel extraction in British Columbia amid "unsustainably low" gas prices. The company's first-quarter revenue fell by more than half from a year earlier and net income dropped to $78 million from $1.49 billion.  (Added emphasis is mine.)

Read more: http://www.sfgate.com/cgi-bin/article.cgi?f=/g/a/2011/06/22/bloombe...

• ▶ Reply

Permalink Reply by Les Bamburg on June 22, 2011 at 15:39

Jffree, the answer varies significantly by individual company.  Someone like EOG may feel they have enough undrilled locations in places like the Bakken Shale, "oily" Barnett Shale and Horn River (gas to be marketed at near oil parity) to grow earnings without stepping out in leaner natural gas plays.  So their philosophy will not change in the US no matter what the natural gas price reaches (unless it approaches oil price, ~ $17/MMBtu).

 

On the other hand, EnCana & Petrohawk have less oil potential and could increase their earnings growth targets if natural gas prices move closer to the $7.00 - 8.00/MMBtu range. 

• ▶ Reply

Permalink Reply by jffree1 on June 22, 2011 at 16:09

Thanks, Les.  I'm going off to play poker but I'll probably lose since I'm thoroughly depressed now.  I guess it's a good thing it's only play money, LOL!

• ▶ Reply

Permalink Reply by P.G. on June 22, 2011 at 3:14

Skip, you hit the nail on the head..it doesn't make business sense to expand dry gas production with so little market price for it..and all you say is true and will continue to be that way until there is a serious use for dry natural gas...transportation use could turn this grim situation around for all with an interest in higher NG prices...look what transportation usage has done for petroleum prices....it could do the same for ng... it's going to take a national coordinated effort from someone...is it possible for any one private company to pull something like that off?..I doubt it...as you have pointed out, companies will sink resources in what will bring in the highest returns on their investments...and currently the Haynesville Shale isn't it....there's no end in sight to this low price ng market without some kind of government involvement to seriously move the US towards cng for transportation...how is saying so politics..?

It's depressing to read "why" I'm not going to have a well drilled in my section...something needs to change...

 

 

• ▶ Reply

Permalink Reply by Les Bamburg on June 22, 2011 at 15:31

PG, as said before - it is in the American consumers hands already.  If John Q Public wants a CNG fuelled car, he can buy one today and the home fuelling kit.  Same is true for a PHEV.  But you can't force people to buy what they don't want.  No one is lobbying against NGV's except the industrial gas consumers who are concerned with rising natural gas prices.

• ▶ Reply

Permalink Reply by P.G. on June 23, 2011 at 2:11

Excuse me Les, but I never implied anyone should be forced to buy anything...

(Of course folks now are forced to buy gasoline or diesel vehicles aren't they?)

Who's going to want something that can't be refueled other than at home..

This is much bigger than just consumer demand..Consumers can not demand something that doesn't exist...if access to cng was the same as gasoline and with the price differences, you can bet the demand would be there..The NG industry has only itself to blame for low prices if they refuse to expand markets for it...I wonder what the consumer demand would be for computers if there were no internet....

At the rate cng is being haphazardly made available to the consumer today, it WILL be 50 years before it will be looked at as a viable choice for most consumers...I'll bet the Arabs are laughing all the way to the bank..

• ▶ Reply

Permalink Reply by Les Bamburg on June 23, 2011 at 15:13

PG, CNG fueling stations are available all over Southern California but NGV's are still not selling because consumers are reluctant to give up their gasoline powered cars.  When consumers begin to show more interest in NGV's fueling stations would quickly spread across the country.  Again, the industry cannot force the public to switch to a new fuel just like they did not force people to switch from horses to automobiles.  The change has to be consumer led.

 

By the way, the big demand switch to PC's came well in advance of the internet.  Internet access for the public grew because consumers were already buying PC's. 

• ▶ Reply

Permalink Reply by P.G. on June 24, 2011 at 3:13

So are you saying the way it's got to work is folks will have to purchase NGVs (willingly of course) first and then wait on the Industry to get their act together so they'll have some place to purchase fuel for those pricy vehicles?....where's the incentive for anyone to demand such a vehicle under that circumstance?

And where do you keep coming up with someone forcing anyone to do anything?? Isn't it about choice...?

NG for transportation will never sell to the public unless it's reliably offered and vehicle prices are reasonable....and I don't mean in just selected areas where such vehicles using it are special purpose or limited use/range vehicles that only the wealthy or governments can afford..

I remember back in the seventies when gasoline prices jumped , and folks saying those little Japanese cars would never sell....well guess what..

 

If folks ever expect meaningful drilling activity to come back, there's going to have to be a significant market for dry gas...mainstream transportation usage would do that..

Otherwise we will continue to keep seeing these articles about why no one is drilling for our dry gas any more..

 

 

• ▶ Reply

• ‹ Previous
• 1
• 2
• Next ›
• Page