Natural gas is becoming too plentiful and cheap

L

Leftwith

500+ Posts
Looks like the natural gas folks are getting too big for their britches, threatening to derail Dear Leader's green energy (pipe) dreams with their dirty, damn cheap domestic energy. Nice try, you evil, capitalist ********, but not on Barry's watch.
In reply to:
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Okay, here is the thing. The Federal Gov't has always regulated the industry on federal and Indian land. This is nothing new. By encouraging the use of natural gas transportation he is actually trying to help the natural gas industry by providing new markets beyond the electrical sector (plant conversion from coal to natural gas is about our only growth sector right now).

The natural gas industry did this to ourselves. The hints were there. Storage is virtually full, and we are heading into the slower time of year. Most companies are shutting in natural gas right now and shifting rigs to shale oil plays. Unfortunately the associated gas with these shale oil plays is enough to supply most of the growth and to offset declines in natural gas wells right now. The natural gas industry is in for a bad time for the next few years due to low prices. There is nothing new in this legislation and actually it helps to put the brakes on natural gas development so hopefully we get sustainable prices.

Just to let you know, I work in play assessment for one of the top 3 natural gas producers in North America. My team completed a North American study last September that defined that we have around 100 years + supply of natural gas in this country at current usage rates and that prices would plummet from $4-$5 to $2 which it has done. This has been a perfect storm coming since 2006.
 
You both want higher natural gas prices - albeit for completely different reasons - so you form a temporary alliance with the devil. A devil who, in the end, wants you dead.

In the meantime, for the rest of us, our only hope for affordable energy in the near future was just pulled out from under us.

Just great.
rolleyes.gif
 
What about peak oil? I remember the so-called "experts," including a few of the left-wing parrots that hang around here, telling us that we are running out of the stuff.
 
LOL. well if Shiner and Leftwith agree on an anti-Obama position that's good enough for me. No need to read the post of the sooner who is, oh I don't know ... Actually in the industry? Classic.
 
I did not make any statement to contradict SkySooner. The point is, we have usable, plentiful and cheap energy available in this country right now. Wind and Solar are fine as a political statement to keep the greenies like BI happy. Unfortunately they just don't make economic sense. As for supplying real energy in the U.S. natural gas is the way to go. We have a lot of infrastructure issues to address but the energy is here and available and cheap. Any Chango I am in the industry so thanks for caring.
 
Electric vehicles make a lot of sense for certain people and certain businesses. The best method we have (in the US) for generating electricity is natural gas.
 
How great would it be if the President of the United States would formulate a sound energy policy that makes good use of the plentiful resources at our disposal while not wasting precious resources on energy ideas that make no sense?
 
My main point is that the President should be astute in playing the hand he's been dealt. He has said repeatedly that he inherited a terrible economy. This is true and it can be debated whether he's made it better or worse. However, there is no doubt that Obama's been handed a pair of aces when it comes to energy in the resurgent oil and natural gas production in the U.S. and Canada. So far, he is not playing this hand particularly well. Seems like he's working on a pair of 3's in touting solar, wind, white roofing and tire inflation.
 
Here is something that wasn't handled well. Keystone XL pipeline was delayed. It is arguable whose fault it was although Obama did delay it for political reasons. This single pipeline delay will cause infrastructure development of heavy oil sands in Canada which will cause a reduction in the demand for natural gas over the next two years. This single delay will cause a natural gas price lowering of $0.10-$0.15/MMBTU which is huge given our marginal cost of supply is about $2.50 right now and prices are at $2 or below.
 
Agree that this was an absolutely terrible decision. I expect him to reverse the decision prior to the election at the time they consider to be the most opportunistic but you are right that the delays are going to cost us greatly. The fact remains that we need oil and our friendliest and closest ally wants to supply it to us. In this day and age it is really a pretty simple decision for someone who understands energy at all.
 
Given how easy gas is to use and how cleanly it burns, you'd like for the natural gas price to be at least high enough to encourage more drilling. At current prices it's an incredible bargain and you'd like for usage/displacement of dirtier fuels to proceed at a pace that creates a price equilibrium more favorable to producers.
 
Why cant/wont BO be more proactive on NG? I'd convert all govt/miltary domestic vehicles to NG right now. Give some private company (or a combination of several) incentives/contracts to build re-fueling stations accross the country.

It is hard to find exact figures, but the govt buys about 20 M gallons of gas per day, give or take. if we use current fuel cost averages of $3.50 for gas and $1 for CNG it is a savings of $2.50 per gallon. So converting the entire fleet would save about $50 M per day for the govt. The math is easy. In one month the potatential savings are $1.5 B. One month.

Saves lots of money. Better for the environment. Provides lots of money for US companies. Cuts our dependence on foreign oil. Cuts our deficits. Helps the auto indisutry. Creates lots of construction jobs.

In the meantime, keep working on perfecting electric cars and in 10-15 years when the fleet needs rolling over, start to convert to electric.

Does anyone have a negative to this?
 
I'm just going to guess that there's not enough union labor involved with the Natural Gas industry. I could be wrong but it sure seems that Barry is pretty much of a one trick pony. He's owned by the unions.
 
Skysooner, you seem to be the only person providing good information on this thread. Too bad you didn't advise KKR when they bought out TXU.
 
That's one thing I didn't know about. I used to know quite a bit about the utility side, but I don't work in that arena anymore. I do believe KKR paid too much for Samson Resources unless they intend to break them up in a couple of years.

Either way, we need natural gas prices to come up soon. My company is in a bit of a bad position right now due to low cash flow coming up in 2013 when our NG hedges roll off.
 
SkySooner,

Being from Oklahoma, I'm guessing you work for Chesapeake. I've read a little about them and that instead of focusing exclusively on natural gas plays that they have shut in a lot of wells and are looking for condensate/oil plays as well to diversify their reserves. Some of the folks that I know who work in the gas trading business are getting real nervous for their jobs and are not sure what's going to happen next.

I'm a geologist, but have been in the environmental consulting for years, but I keep up with some of the O&G news when it is pertinent to me. I've read about a lot of these gas plays going like gangbusters for the 1st year or two, but that a lot of plays show their production curves dramatically dropping off.

Just curious, do you have any experience dealing with production data in the Marcellus, Barnett, Bakken or Eagle Ford that show comparisons between these plays?
 
Actually I live in Denver now. I guess I haven't updated my profile. I used to work for Devon, and I certainly know Chesapeake. Aubrey McClendon is a genius negotiator and salesman. They have some wonderful technical staff on the operations side, but the reservoir management side they lack. They bet on natural gas just like we did but went way beyond their capacity to support drilling and holding the acreage when they were buying land. When gas prices dropped, they didn't have the cash flow to support drilling, so they have been joint venturing most of their plays. They do have some really great land though. My company is also shutting in natural gas (right now about 15% of our base) and not drilling any dry gas beyond what we have to under obligations. It is going to be touch and go, but I think we will survive it. I work in a supervisor role in what is called play assessments.

Basically we look at every play in North America and look at the statistical production profiles to determine cost to extract, resource base, etc. We feed the teams in the company that do full blown looks at pricing for oil and natural gas based on rigs, pipelines, refining infrastructure, politics, growth etc. I also work along with the groups that do our A&D, cash flow projects and I also am working on a Excel version of Markowitz portfolio theory.

You asked about the Marcellus, Bakken, Barnett and maybe the Eagle Ford? Bakken is wonderful except their oil is stranded at the end of a long transportation corridor which knocks their netbacks back. It isn't as ubiquitous as everyone wants to think, but it is one of the top plays in the US. Barnett only has a small part that is feasibly economic anymore and that is what is called the "oil" window but is really more of a wet gas area in the north part of the play. This could extend big time, but it is still early.

The Eagle Ford is great in the wet gas and parts of the oil window. This one looks to be stellar as well. It takes some more technical smarts to be successful here.

The Marcellus has 4 distinct areas. The southwest wet gas section is economic at this point. Large parts though are barely break even at this point at $2/MMBTU gas.

Watch out for the Utica oil play in Ohio. This one is still early but has all indications of being great too. There are 3 or 4 others that are either emerging or on the verge of being great as well.
 
Thanks for the response SkySooner. A lot of good information there. You understand the business well. I wish I was still working in oil and gas. Timing wasn't good for a BS Geology in 1986. Worked offshore mudlogging for 2 years then worked for Core Lab doing reservoir analyses, but got let go in 1992 and transitioned in the environmental consulting. I remember driving up to Palo Pinto back in the late 80s to pick up 120 feet of core from a couple of Mitchell Energy wells. They were drilling the hell out of that area back then.

BTW, how do you like Denver?
 
I graduated from OU in 1988 with a BS in Geology. Finished up with a MS in Petroleum Engineering in 1990. That was a direct result of what you said. Things in '90 weren't much better, and I was laid off a couple of years later. Still I had a job a week or so later in Kansas. It has been a great run, and it keeps getting better. Denver is one fantastic place to live. It was 45 this morning and comfortable in short sleeves. I'm in Dallas today at the local office here. Corporate jet down and back on the same day. That is the only way to travel. It is true. I'm getting spoiled.
 
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