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224 comments on DrumBeat: November 30, 2006

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fireangel on November 30, 2006 - 9:45am Permalink | Subthread | Comments top
We recently had a great article on the oil drum about the natural gas treadmill.
While officials in high ranking positions and most brokerages seem to be sanguine about the prospects of north american natural gas supplies, one voice of reason has come from a surprising source. Raymond James.
http://www.raymondjamesecm.com/industry_1300_main.asp?indid=71
Click on above link and then on Energy Stat of the week. Direct link does not work.
Raymond James paints a picture that is even worse than that depicted here.
Specifically it hits on Branett Shale gas production. This was surprise to me as Raymond James says "First Year Decline rates are about 65%!!!" Mind you this is supposed to be the average.
There is table out there which shows decline rates in some cases exceeding 70%!!.
Raymond James analysts believe rig counts will rise 12% in 2007 utilizing every existing rig and still gas production will be down about 2% in USA.Although RJ points out some scary stats the "down 2% production " is actually based on very conservative numbers i.e. overall decline rates of 2004, mobilizing of every possible rig and very little rig migration.
The supply demand in our friendly neighbour is no better. Barring last week's canadian NG storage data, there were 21 weeks of decreased injection/higher withdrawal compared to 2005. Canadian storage is now 10% below last year.
One nasty winter and things could get pretty bad.
 
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Dave Cohen on November 30, 2006 - 10:29am Permalink | Subthread | Parent | Comments top
Thanks for the Raymond James link.

This also ties into the India natural gas shortages story Leanan posted above. They passed-up some opportunities to get some LNG long-term contracts at what they considered "inflated" prices -- now they are paying dearly for that. The future U.S. natural gas supply will also depend on LNG to make up future shortfalls. There's no time like the present to start lining up that supply. Thinking ahead is the only way to go here. We Americans are not noted for our long range planning abilities, however. See Iraq.

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Darwinian on November 30, 2006 - 11:41am Permalink | Subthread | Parent | Comments top
The latest data is just out from the EIA on natural gas inventories. There was a draw of 32 billion cubic feet. That was way above what was expected. Prices jumped on the news.

Ron Patterson

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RickD on November 30, 2006 - 2:33pm Permalink | Subthread | Parent | Comments top
How is that way above what was expected?

Last year it was -49 and the 5 year average was -40.

-32 looks like about normal to me...maybe even better than normal.

http://americanoilman.homestead.com/GasStorage.html

Rick

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ET on November 30, 2006 - 1:48pm Permalink | Subthread | Parent | Comments top

They passed-up some opportunities to get some LNG long-term contracts at what they considered "inflated" prices -- now they are paying dearly for that.

Highly reminiscent of the offer to Nixon by the Shah of Iran in 1969 for a 10 year contract for crude at $1/bbl. Nixon declined figuring that oil had to go down in price from its obviously too high $1/bbl.

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AlanfromBigEasy on November 30, 2006 - 11:30am Permalink | Subthread | Parent | Comments top
My quite limited undertsanding of "tight shale" is that produces a flood of gas at first and them settles down to a long term trickle.  -75% Year One, -5% Years Two, Three, etc. is my understanding.

So, mature tight shale wells are a good long term source of NG.  Better than most others.

Alan

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ET on November 30, 2006 - 1:53pm Permalink | Subthread | Parent | Comments top
It is significant, I think, that energy sources like these trickling NG wells and 'stripper' crude wells are gradually approaching the same kind of 'trickle' of energy flow that one gets from PV installations. If we are destined to have to live on a trickle of energy, rather than drilling 1,000,000 gas wells we should be installing energy extracting devices that have a limitless reservoir to draw from.
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oilmanbob on November 30, 2006 - 12:08pm Permalink | Subthread | Parent | Comments top
  The Barnett Shale does have those huge decline rates in the first year-approaching 75%. But then, the wells level out and are supposed to last 30 years at commercial rates of production. They have to be re-fracked every 5 years too with massive (10,000 bbl) freshwater frac jobs. The gas is very expensive to produce-the gas must be dewatered- and the city of Ft. Worth and all its suburbs/exurbs sit on top of the play. So there is lots of conflict over pipelines, compressors, water trucks, drilling noise-its a landman's and lawyer's dream come true.
   Its a perfect example of the kind of prospects that we will see developed in the post-peak era-expensive, and not productive at commercial rates with old prices Operators are buying pipeline right ofway in people's backyards, using the common carrier statutes to condemn what they can't buy. Its so crazy its almost funny.
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224 comments on DrumBeat: November 30, 2006

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