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Permalink Reply by Frank on February 9, 2012 at 13:06

 

CHK announced the potential choke on gas production could rise from 500 MMCF/D to 1.0 Billion today.  I discussed my perspective of what this volume means with a co-worker today.  It triggered my memory.

I worked on the Florida Gas Transmission system in the mid 80's prior to and during Enrons acquisition of them in the early days of Ken Lay with Houston Natural Gas.  I met the man.  He's probably the most intelligent one individual I have ever spoken with.  The FGT system gathered from McAllen, TX through Louisiana for delivery of gas to peninsular Florida.  They were the only interstate supplier.  Florida Power and Light was the biggest customer.  10,000 horsepower compressor stations were 70 to 75 miles apart pushing 725 MMCF/D through parallel 24" and 30" pipelines down the trunk of the pipeline.  Mainline stations were at Franklinton, LA, Wiggins, MS, Mt. Vernon, AL, Caryville, FL, and Perry, FL.  That was 50,000 HP pusing 725 MMCF/D across a bunch of miles through two tubes.  I'm sure someone will check my math on 75 mile centers.  I can't recall the trunk miles off the top of my head.

Expanding the line to 1.0 Billion CF/D in the early 1990's required pipeline loops and additional horsepower to push the mass.  CHK is prepared to cut that capacity of production to help turn the size of the gas bubble.  Just think about the fact that they will choke 138% of the gas demand for the state of Florida in the late 1980's.  That is a bunch of gas.  The government needs to learn how to burn it!  The storage forecast for end of 1st quarter 2012 is over 2066 billion CF.  That number looks like 2066,000,000,000 CF. It would take the state of Florida 7.8 years to burn the storage inventory of NG in the United States at 1985 rates of consumption. 

Other producers need to learn how to throttle to meet demand with CHK and keep the price reasonable for their operations and the landowners.  Production can't screech to a stop, but can be operated responsibly for all interests to profit.

 

Just my two bits.

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Permalink Reply by Parkdota on February 9, 2012 at 13:50

http://www.businessinsider.com/natural-gas-prices-chesapeake-energy...

 

Here is an article pertaining to the new Chesapeake capacity cuts.  Thanks for pointing out the new good news. 

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Permalink Reply by robert minton on February 9, 2012 at 14:00

Your two bits is valuable. Just remember that all gas wells decline within the first two years to what most royalty owners think is not good. This decline reduces the supply to meet demand, while demand stays the same, or increases. The projects/programs, already in the works, are to increase the use of natural gas, even to the point of export. However, Rome was not built in a day! Quite a few millions of dollars are being spent  in order to prepare for increase in demand, but caution is being exercised,i.e. drilling only wells needed to prevent leases from expiring, so as not to cause another glut of gas. If Exxon and XTO would make the same announcement as made by CK, HK, Encana and others, we would likely see $4.00 gas in a WEEK to ten days.

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Permalink Reply by Parkdota on February 9, 2012 at 14:58

ShaleGeo/Jay et al, I don't see how Chesapeake can survive at these natgas prices of sub $3.  If memory serves, they didn't hedge for ALL of 2012.  I understand they are moving more towards liquids but they've got to be hurting.  I am amazed that they could make this bad of a mistake pertaining to supply/demand in compilation with no hedging. 

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Permalink Reply by dbob on February 9, 2012 at 15:44

They also have some other advantages - particularly with ownership in NOMAC and in FracTech, which I'm fairly sure they can keep busy working for others.  

If anything, Low prices will make them leaner and more aggressive.

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Permalink Reply by Dion Warr, CPL on February 9, 2012 at 17:50

Jay:

Agree, they survived. Barely. They learned to derisk via JVs for this go-round, however.

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Permalink Reply by stroud on February 9, 2012 at 16:49

I understand the really big boys are not cutting production.  I suppose by keeping the price depressed it may force some small and intermedite companies, to experience cash flow problems, this could lead to loans not being renewed.  At some point a company, their reserves and infrastructure may be bought at a great discount.  The Exxons, BPs, etc. get bigger, price goes up.  Its a tough neigborhood.

However a lot of good old late cold weather would help for now. 

  

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Permalink Reply by Krkyoldhag on February 10, 2012 at 4:45

What will help is gas appliances and natural gas vehicles.. Come on you young undiscovered Steve Jobs types..invent us a NG system car in daddy's garage and refuse to sell the patent to someone who would bury it. 

I am going to buy the first NG auto/pickup that is appropriate for an old woman to drive.  Now just waiting for it to come on the market.

 

This isn't NG...but its interesting..in Waskom Tx you might see this little old Volkswagen tooling about (I usually see it visiting the auto parts store there)  It has this thing that looks like a big window sceeen on top of it.  Its some kind of solar power gizmo they invented.

Now if they will just get us a NG auto or pickup ready.

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Permalink Reply by robert minton on February 10, 2012 at 13:36

Go to your local Ford dealer, and order your pickup.

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Permalink Reply by Parkdota on February 9, 2012 at 18:19

BG Group Slashes Natgas Production

 

I guess we can now add BG Group to the natgas cutback.  Now on record we have Chesapeake, Statoil, Conoco, Encana, and BG Group all cutting back.

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Permalink Reply by cocodrie man on February 10, 2012 at 0:10

The political headwinds suppressing the development of natural gas as a bridge fuel to the future and the answer to energy needs today are strong.  I am surprised that forces for keeping the price of gas low seemingly come more from the right side of the political aisle (one article suggested the Koch brothers are amongst those who use political muscle to keep the price of nat gas low) than from the left.  The industry can and must make such adjustments as we are able, but we must also keep a keen eye on the political realities of the day.

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Permalink Reply by The_Baron on February 10, 2012 at 3:50

pretty soon we will start seeing curtailments as storage fills back up.

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