Gas-Price Recovery May Be Slowed by Backlog of Unfinished Wells
December 23, 2009, 08:46 AM EST
By Edward Klump
Dec. 23 (Bloomberg) -- The recovery of natural-gas prices may be slowed by hundreds of uncompleted wells in North America that can be brought online quickly to meet increased demand for the heating and power-plant fuel.
As many as 1,500 gas wells were drilled and not completed as of an October estimate by Halliburton Co., the second-largest oilfield contractor. Those wells can start pumping gas once prices climb above $6 per million British thermal units, limiting further gains, said James Halloran, a consultant at Financial America Securities in Cleveland.
“The higher gas prices start to move -- assuming we have, say, a really cold winter and we see supply being drawn down very rapidly -- people are going to go and rush to try and complete these wells and bring them onstream,” said Allen Brooks, a managing director at investment bank Parks Paton Hoepfl & Brown in Houston. “I think that’s going to keep gas prices from going dramatically higher.”
New York gas futures, which tumbled to a seven-year low in September as the recession cut demand, traded as high as $5.93 this week amid below-normal U.S. temperatures. Wells brought online in the past 12 months typically drive one-third of U.S. gas output, according to WTRG Economics. Houston investment bank Tudor Pickering Holt & Co. estimates that there are 800 more uncompleted wells than usual in the U.S.
“You’re talking about the ability to add a percent or two to production,” said James Williams, an economist at WTRG near Russellville, Arkansas. “While that doesn’t seem much, the supply-demand balance is very delicate and 2 or 3 percent over or under supply can move prices significantly.”
Drilling Without Completing
The number of completions of U.S. gas wells dropped 49 percent from a year earlier in the third quarter, the biggest decline this decade, according to the American Petroleum Institute in Washington.
Producers may have pushed forward with drilling wells, even as they planned to hold off on pumping gas, because of rig contracts or lease agreements with property owners, said Gene Shiels, a spokesman at Baker Hughes Inc., which tracks rig data. He said operators could bring uncompleted wells online “relatively quickly.”
Completions are done after a well has been drilled and typically involve putting a production pipe down the hole and installing a valve system to control the flow of gas, WTRG’s Williams said. The well is connected to gathering lines to carry the gas away. Shale formations are injected with water, sand and chemicals to fracture rock and make gas flow...
http://www.businessweek.com/news/2009-12-23/gas-price-recovery-may-...
By Edward Klump
Dec. 23 (Bloomberg) -- The recovery of natural-gas prices may be slowed by hundreds of uncompleted wells in North America that can be brought online quickly to meet increased demand for the heating and power-plant fuel.
As many as 1,500 gas wells were drilled and not completed as of an October estimate by Halliburton Co., the second-largest oilfield contractor. Those wells can start pumping gas once prices climb above $6 per million British thermal units, limiting further gains, said James Halloran, a consultant at Financial America Securities in Cleveland.
“The higher gas prices start to move -- assuming we have, say, a really cold winter and we see supply being drawn down very rapidly -- people are going to go and rush to try and complete these wells and bring them onstream,” said Allen Brooks, a managing director at investment bank Parks Paton Hoepfl & Brown in Houston. “I think that’s going to keep gas prices from going dramatically higher.”
New York gas futures, which tumbled to a seven-year low in September as the recession cut demand, traded as high as $5.93 this week amid below-normal U.S. temperatures. Wells brought online in the past 12 months typically drive one-third of U.S. gas output, according to WTRG Economics. Houston investment bank Tudor Pickering Holt & Co. estimates that there are 800 more uncompleted wells than usual in the U.S.
“You’re talking about the ability to add a percent or two to production,” said James Williams, an economist at WTRG near Russellville, Arkansas. “While that doesn’t seem much, the supply-demand balance is very delicate and 2 or 3 percent over or under supply can move prices significantly.”
Drilling Without Completing
The number of completions of U.S. gas wells dropped 49 percent from a year earlier in the third quarter, the biggest decline this decade, according to the American Petroleum Institute in Washington.
Producers may have pushed forward with drilling wells, even as they planned to hold off on pumping gas, because of rig contracts or lease agreements with property owners, said Gene Shiels, a spokesman at Baker Hughes Inc., which tracks rig data. He said operators could bring uncompleted wells online “relatively quickly.”
Completions are done after a well has been drilled and typically involve putting a production pipe down the hole and installing a valve system to control the flow of gas, WTRG’s Williams said. The well is connected to gathering lines to carry the gas away. Shale formations are injected with water, sand and chemicals to fracture rock and make gas flow...
http://www.businessweek.com/news/2009-12-23/gas-price-recovery-may-...
Tags: Wells, backlog, gas, prices, uncompleted
Views: 56
Replies to This Discussion
-
Permalink Reply by jffree1 on
-
So, we should see a further reduction of gas in storage on the next report?
-
Permalink Reply by sesport on -
Sounds like demand could be reduced, which could mean that supply decreases slowly? essay, what is the usual/average supply reduction percentage? 80)
-
Permalink Reply by essay on
-
well whether or not overall demand is actually down next year pretty much is going to rely on industrial demand, and everywhere i turn i'm reading about how it's recovering so we'll see
rig counts dictate the certainty that supply will also be down significantly, as far as average for that report i have no idea http://www.eia.doe.gov/emeu/steo/pub/contents.html (short term energy outlook)
-
Permalink Reply by essay on
-
last i saw the EIA's average draw prediction was 178bcf for tomorrow, which i do believe to be over the average for this week... last week was a similar prediction which missed by 15% due to colder than expected weather
-
Permalink Reply by intrepid on
-
We need CNG as a primary transportation fuel in this country - NOW. We also need an increased emphasis on natural gas as a electric generation fuel. Obama should wake up and put the batteries and solar and wind on hold and get the country back on it's feet with a plentiful and reasonably priced domestic fuel supply. But he won't.
- ‹ Previous
- 1
- 2
- Next ›
Support GoHaynesvilleShale.com
Top Content
Blog Posts
The Lithium Connection to Shale Drilling
Shale drilling and lithium extraction are seemingly distinct activities, but there is a growing connection between the two as the world moves towards cleaner energy solutions. While shale drilling primarily targets…
ContinuePosted by Keith Mauck (Site Publisher) on November 20, 2024 at 12:40
Not a member? Get our email.
Groups
-
San Augustine, TX
386 members
-
Miller County, Arkansas
27 members
-
Sabine Parish, LA
455 members
-
South Caddo Parish Group
440 members
-
Natchitoches Parish
400 members
-
Bienville Parish, LA
244 members
-
Fayetteville Shale
149 members
-
North Caddo Parish
358 members
-
Central Texas Gas
63 members
-
Cass County, TX
119 members
© 2024 Created by Keith Mauck (Site Publisher).
Powered by
