The Oil Drum

57 comments on Concerning gas supplies and production analysts

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jkissing on January 19, 2006 - 5:48pm

As we approach peak you would expect to see all available rigs jump out of cold storage and drill for hydrocarbons. That has happened. More money will not provide the world with hardly any more rigs in the near term. Meanwhile, reduced production/ng well has resulted in high prices for ng, which in turn has distracted the US rigs such that 85%, up from 50%, are now drilling for ng. Higher oil prices will just compete with high ng prices for available rigs - total US production will continue declining regardless of price. The same situation exists all around the world - Saudi poached deep sea rigs from our gulf to drill in theirs.

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Gets IT on January 19, 2006 - 8:22pm

I'm pretty sure that if you ask a geologist why the number of rigs drilling for NG is relatively higher, she/he'll say that it is not because they had a choice between drilling either an oil well OR drilling a gas well, but that they (geologists) see a 5.67 times higher successful completion percentage (or would it be 5.67 x the # completions x expected profit/completion? Anyway...) in recommending that they try drilling for gas rather than try to drill for increasingly scarce oil with holes that have increasing probabilities of coming up dry.

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jkissing on January 19, 2006 - 8:31pm

Its simpler than this. ng companiew bid against oil companies for rigs, and can afford to bid more because ng has increased much more than oil over the bast couple of years.

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Nate Hagens on January 19, 2006 - 8:50pm

Actually that used to be true but now isnt. Since Jan of 2003, Nat gas has gone from $5.10 to $9.20 or up about 80% -(in November it was at $15.70+) During the same period WTI crude has gone from $32 to $68 or about $115%. If price is the switching impetus, expect the # of rigs drilling for gas to decline -

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Gets IT on January 20, 2006 - 5:57am

I thought that somebody would bring that up, which is why I included the semi-formula for maximizing expected returns if gas price had increased overproportionally to oil in recent times, rather than just having left it with the formula based on choosing X from the total available possibilities, so there was really no possibility of a wrong answer as I kinda' suggested both could be driving factors, but anyway... I know that there's a hellova' lot more gas fields than oil and its a long-held geologist's (shall we say) "superstition" that its always easier to hit a producer (oil or gas) near the ones you already know are winners. Usually they'll try that unitl its even plainly obvious to the investors that there just aint any more to be found here and they can't trust the geologist's recommendations any longer, 'cause the geologists are still saying to drill the next 40 acres right there, even if the last 10 came up dry. Nobody's more optimistic than a geologist. (I don't mean that in a poor way. I have much respect and know I don't have X-ray vision either. Just that the continously optimistic production forecasts made it real hard for me to optimize the gathering system when the wells would make 30 MMCFD for 30 days than fall off to 50,000 CFD in the next couple of weeks and stay there for the next 2 years. Granted, it wasn't the best producing formations they were drilling on either.)

I see there's another one that agrees.