Production is up, storage is waaayyyy up, and we just had the 4th warmest American winter on record. So, does anyone out there have the knowledge using production numbers, withdrawal numbers, decline rates, and cutbacks from majors like Chesapeake to make us feel better about pricing??
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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.
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.
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.
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.
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.
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.
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.
Go to your local Ford dealer, and order your pickup.
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.
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.
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…
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