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Permalink Reply by Les Bamburg on November 11, 2010 at 4:57

Natural gas is primarily used for:

- Residential & Commercial (heating, cooking, water heaters, boilers, dryers, etc)
- Industrial (boilers, furnaces, engines, turbines, etc)
- Power Generation (steam boilers, gas turbines)
- Chemical Feedstock

A smaller amount is currently used for transportation - CNG & LNG

There is plenty of existing infrastructure for moving natural gas between states and delivering to consumers. Some additional pipeline capacity is needed from time to time due to growth in new gas supply areas like the Haynesville Shale.

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Permalink Reply by 221caribbean on November 11, 2010 at 5:32

Thanks Les for the reply. Lots of people I have talked to over the past few days seem to think that this is the beginning of the end for production and drilling in this area and we are going to see a pullout soon like we did in the 80s with oil. Because of a huge surplus and weak market. I know I don't have a grasp on the big picture but how do you see things?

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Permalink Reply by Les Bamburg on November 11, 2010 at 9:37

I believe you will see a ramp down in the drilling activity over the next year to a lower rig count. How much ramp down (25%, 50%, 75%) is still unclear and will be a function of how quickly gas supply rebalances and prices recover. Some level of drilling will continue to occur even in this current low price environment.

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Permalink Reply by The_Baron on November 11, 2010 at 11:24

I imagine drilling in the core areas will continue unabated until all the core is HBP. The real question in my opinion is when prices will be high enough to justify development wells.

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Permalink Reply by Les Bamburg on November 11, 2010 at 13:08

Baron, a large amount of today's drilling is for development rather than HBP purposes. So some companies have the discretion to reduce/shift rig count as contracts expire.

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Permalink Reply by Greedy Landowner on November 11, 2010 at 13:21

I think baron is correct. Core acerage is too valuable to let go of, and thus far they have continued to drill no matter what the price does. Once hbp happens it surely will slow down and then operate as a function of pricing. I personally can't see any other course for it to take unless many many people convert to CNG instead of gas. That possibility will be dictated ultimately by the price of oil. So if you follow that logic you find us again at the mercy of the Saudis by way our own unwillingness to invest in transportation means that utilize domestic resources.

We can't shed too many tears for the operators though...many have percentages of production hedged at $6.

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Permalink Reply by Michael Evans on November 11, 2010 at 14:06

Guys,

I have been a shaler for over a year know, first post though. I am from NELA and have been working in the HS (on the drilling contractor side) since 08'. I have been involved in many of the wells you all discuss here. My point is... I have appreciated the conversations on GHS.com. I have learned alot about how the local folks feel about my business and try to pass it along to others. The talk in the field agrees both with Baron and Les B. Different operators = different agendas. Some are holding leases for the future and some are trying to sale a little NG. Either way, rig count will drop due to both agendas. It is my opinion, that most operators are within the next year of holding their leases. NG prices have us all in the beginning stages of depression. If we are in the last year, it has been very educational here with you guys. I find my self following GHS.com, rather than local news. We have worked very hard to accomodate and respect the landowners.

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