Its a interesting dynamic even if the shale plays don't result in a overall increase the cheaper prices here keep up out of the LNG markets. Also the drilling costs for shale I've seen set it above 5 at the well head so you have a very strong floor on prices. Drop to low and drilling in the shale plays will practically stop.

Long term what may happen is US NG prices continue at a fairly steep discount vs LNG however they may drift higher or lower the problem is if we assume that NG supplies will eventually turn downward the differential between US NG and LNG might be pretty large.

So you could go along for a while with fairly cheap NG in North America but see a large price increase the moment NG supplies are not adequate and potentially even more to attract LNG supplies.

If LNG prices go high enough you could even see significant exports of LNG from the US.

The dynamics are interesting to say the least since it seems like the shale plays have economic restrictions that are pretty tight. To much NG and they go unprofitable but the decline rates are steep so within a year or so you go from oversupply to a fairly big shortage. If you keep within the price range but LNG gets expensive export possibilities creep in.

The biggest problem that I still don't have a good answer for is whats the long term production from these plays. I've seen reports that the well lifetimes in total are about 5 years so a lot of the early wells put in in 2001-2002 are finally reaching the end of their life. So basically starting this year we are starting to see the effects of decline enter into the picture. So on top of expansion we also have to replace all the wells drilled in 2001-2002 then 2003 etc.

http://www.theoildrum.com/node/3673

The reason why I'm very interested is that assuming we are maxed out on rigs then effectively we are loosing a percentage of our early production each year going forward.

From the graph and assuming all of the 5Tcfa of unconventional developed in 2000 needs to be replaced in addition say 1-2tcfa of conventional decline we actually need 6-7 tcfa this year to stay flat.

This is really rough but the point is that we have reached the point that decline of older unconventional wells is now a major factor. The honeymoon period for unconventional is ending. Only a major expansion of the drilling fleet can keep gas production up.