Replies to This Discussion

Permalink Reply by John Cooper on December 16, 2010 at 6:46

A very interesting discussion - I'm a consulting geologist here in DFW with pretty limited experience in the Haynesville, but much more in the Barnett and some other shale plays.  The bottom line is the economics of any play - yes, the price of gas may stay down, but if the price of leasing and drilling go down, then the whole equation changes.  What's interesting is these shale plays are their own worst enemies - huge reserves accessible only by expensive technologies, which in turn drives up supplies and drives down price.  In my opinion, things will remain fairly flat until demand increases, which in turn drives up price....

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Permalink Reply by Clyde T. Williams on December 16, 2010 at 7:37

Good topic - follow the $$$$ - I am a transplanted Central geologist now retired in sunny SoCalifornia...but I visit Abbeyville and SE Texas often...family

 

The Professor is probably right even though he is from LSU, but I am bias for USC and UCBerkeley Bears...

 

Unfortunately for Haynesville Shale NG, several factors atre involved....its the economy...low economic growth > low power use > low fuel use > more coal fired use - NG is still more expensive than coal -

 

Also Power/Fuel demand loads are not high in Gulf states although with the winter blast you have gotten they will peak for a week or a month.  

 

NY/NE US has a very high demand ratio of NG vs Coal and has lots of transmission lines and thereby the Marcellus sources are gaining strength as they get more collector pipelines and pump station injectors in place...so they can get better pricing for delivered gas to the power plant...

 

As the South/Central reduces coal fuels then NG prices for the Haynesville Shale NG will rise...but that is still at least 3-5 years away.

 

Tom

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Permalink Reply by Gone Fishin on December 16, 2010 at 8:10

I think you are all right and all wrong.  How bout that. lol  Obveously with the economy in the tank we are looking at all industries being less profitable than they could be in a booming market. Less energy demand means less need for fuel. However oil and gas in the ground is like silver in the mine. The hard part is finding it. China and other emerging countries have enormous need for fuel sources and are paying good money even in this horrible economic climate. The only thing holding back a boom in natural gas is lobbyist. We just need one big player with leverage to tip the scales in our direction and when the movement comes it will be big. Just Imagine for instance if natural gas had the subsidies of some of the other pet projects. Sounds far fetched i know but stranger things have happened.

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Permalink Reply by John Cooper on December 16, 2010 at 9:05

Tom (or Clyde) - when you mention that Natural Gas is more expensive than coal, do you mean on a per btu basis?

Good points in your post - bottom line it's so complicated that it's very tough to figure out.

Sorry for your USC/Berkely bias, though - that can be changed!!

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Permalink Reply by Clyde T. Williams on December 16, 2010 at 9:30

KW produced...= btu but even the Coal fired capital lands etc. when compared to fuel/operating costs need to be considered over the long term...which ain't no more...LACity plans to come off coal beginning in 2014 (contract expires in 2019, so I think they have cooked the books and will trade the 5years of coal for someone else's gas fired and/or nuc) and we expect a BIG rate increase...20% maybe or more...probably

 

It really ain't that complicated, I have used well-head gas at a very very low price but I prefer to pay the delivered price at the pump of now $3.20/gal -Same for NG shallow fields, existing meters/pumps-compressors/pipelines near BIG demands = more competitive pricing...in LA we have very old field with maybe 500psi field pressures and API 10 - some needs 115F to flow BUT still preferred by local refineries...short transmission thru existing pipes/meters/pumps

 

Still doesn't bode well for SETexas and western LA, sorry

Greatly enjoyed FQ-NO and Abbeyville in the October cold spell

 

Tom

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Permalink Reply by Mattie on December 16, 2010 at 7:00

I like it - there is a very old saying in the energy marketing and trading arena - holds true for a lot of other things as well....."When the last "bull" becomes a "bear", start buying.  The worm is going to turn soon.....yes, there will be some bumps in the road in 2011 and maybe early 2012.  The relatively "flat" NYMEX forward curve is an indicator that most of the "bulls" have left the marketplace.......that had to happen to slow producers down......that, along with less new sources of large capital.  The industry has already taken one VERY important 1st step in the "public-opinion process" by proving that NG has great potential to be a RELIABLE bridge fuel.  Without the resulting short-term "pain" of lower gas prices, politicians and the general public would have decried NG as nothing much different than another "oil industry" ploy.  The timing is now right, especially in a depressed economy that cannot afford higher cost, less efficient fuel alternatives - just wait til election year..... it will be the "big mo" platform for job creation, strategic long-term national energy security issues, and solutions to turnaround of the huge trade deficits of the past.  Price stability is a "must" for both producers and consumers - without it, no one wins.....NG will migrate back up to the $6.00 - $7.00 range not soon enough.  But, when that happens, the rebound will be fun to witness.   

 

 

 

     

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Permalink Reply by Alamo on December 16, 2010 at 10:44

Dr Scott's opinion is undoubtedly based on the current imbalance between supply and demand in the American

natural gas industry. While American natural gas is selling for $4.00 where our production sucesses have created a bloated supply; Europeans are paying 4 times or more for the identical commodity. 

 

We have enormous reserves of  gas and until we open up the market for it, its hardly a secret that the price will stay depressed. Its not a reach to think we are likely to see more and more wells shut in if the demand doesn't improve fairly soon.

 

This bleak outlet will change quickly if the Congress ever passes the NAT GAS Act....(HR 1835 and S 1408). Have you contacted your Congressman? Your Senators? Obama has expressed his support for natural gas, but he hasn't pressed the issue to the degree warranted. Boone Pickens continues to believe that the Act will get acted on but who knows? In an interview with Bloomberg Business, Pickens said that a big trucking firm ordered 150 Peterbilt trucks with natural gas engines which is encouraging. When the anchor man asked him why they did  this he (Pickens) said it was due to the fuel cost advantage that natural gas had over diesel.

 

With all the advantages natural gas has over crude....cost, environmental, national security, the American economy, it seems its just "a matter of time". Surely our policy makers will see the light that continuing to send 350 billion dollars out of this economy every year is not a great idea...especially so when we have a superior alternative. 

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Permalink Reply by Spring Branch,mineral owner on December 16, 2010 at 11:53

Fewer Rigs drilling in the Haynesville in 2011 and 2012, plus 50-80% year one decline rates, depending on who you believe, plus shift of rigs toward "oily plays" (everyone but Encana seems to be doing it), plus nat gas being a minor by-product of the "oily plays", plus environmental fever in the Northeast, plus other things I havent even thought of, will equate to gas price bouncing back sooner than most predict.  We'll all make plenty of $$$ at $6 or $7 gas.  In spite of the strong lobby, coal is dirty, dirty, dirty.  That fact can not be disputed. The fact that it is possibly cheaper to drill in the Marcellus does not mean that the second largest natural gas field in the US is just going to waste away.  I am continually surprised by the number of alternate unit wells that are being drilled RIGHT NOW in the Haynesville at current nat gas prices.

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Permalink Reply by JeffNParis on December 20, 2010 at 18:01

Spring Branch...so some of the wells are already getting second wells? In southern Caddo?

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Permalink Reply by Clyde T. Williams on December 20, 2010 at 18:18

Second Wells-different pad in same quarter??

OR redrilling first well in order to re-frac??

OR redrilling to oily play and get associated/wetter gas? 

             Putting up any water/oil/gas separators??

BUT

are you paid on year or production or both

Does it cause any problems or losses??

Tom

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Permalink Reply by Les Bamburg on December 21, 2010 at 3:44

Clyde, many units are getting multiple additional wells as operators are moving into the development mode.  These are being drilled from one or more pads sometimes in adjacent sections.

 

You do not redrill the same well and you cannot refrac.

 

There is no oily play in the Haynesville Shale.

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Permalink Reply by Les Bamburg on December 21, 2010 at 3:53

JNP, I assume you meant to say some units are getting second wells.  There have been some alternate wells drilled in the Elm Grove Field in southern Caddo but most of the activity is occurring in DeSoto.

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