Natural gas seems like it should have huge potential, but the prices remain too low to encourage additional production. In this post we will look at a few recent graphs and their implications.

This is a graph of US natural gas production. One can see that production increased by about 8% during 2008, but there was a huge dip as the result of the September hurricanes. Production in the first part of 2009 is up a little under 4% above production in the first part of 2008. (All graphs are based on EIA data.)

Figure 1: Future gas production based on final rig count drop
Source: Chesapeake Energy
-Click to Enlarge

"The fix is underway" says Chesapeake Energy in their April Investor Presentation. What they mean is that natural gas prices are going back up this winter. The number of rigs drilling for natural gas is going down. Fewer rigs means fewer new wells and eventually less natural gas and higher prices for consumers.

This is the third article investigating the possibility of a spike in natural gas prices during early 2010. In this article we look at the scenarios Chesapeake has created based on the how low the drilling rig count goes (shown in Figure 1). And we dig a bit into the other factors that could increase or decrease demand for natural gas.

[There follows a comment made by Undertow in Friday's Drumbeat that I felt deserved some broader exposure and debate. We are not certain that all the figures presented here are correct - so if anyone disagrees please let us know in the comments.]

This week's European Gas Storage figures are out. I decided to put the figures in the form used by the EIA. Keep in mind that European Union storage is about half that of the US.

Working gas in storage was 534 Bcf as of Monday, March 9, 2009, according to estimates. This represents a net decline of 61 Bcf from the previous week. Stocks were 280 Bcf lower than last year at this time.

Switching back to metric. Stocks are now approximately 8 bcm below last year (last week was 7.2 bcm lower than the same week last year - get the picture here...). European storage is now down to about 30% as compared to about 46% this time last year. Storage continues to decline at a rate of around 100 mcm/day faster than last year and has done so ever since the Russian production collapse.

This is one of my favorite posts by Nate, from back in 2007. I often think about it when people talk about how a large amount of wood can be used to create cellulosic ethanol for our cars. Nate mentions in this article that we are already using virtually all of the wood growth increment each year for home heating and other uses. Wood is not really a very expandable resource, without the USA becoming like Easter Island in not very long.- Gail

A short fifty years ago, people heated their homes in winter with coal. A hundred years ago and before, people living in cold climates largely stayed warm in winter with firewood. Today, in a country (and planet) with vastly more people, we heat homes in northern climates largely with high quality fossil fuels, specifically natural gas, heating oil, and propane. Trees, a less energy-dense form of stored sunlight than oil and gas, have recovered a good part of their former % of landcover in the US, despite being still used for paper, wood, furniture, pulp and some heat. Below is an analysis of how the US residential sector heats its homes, how large are our forests and how much they grow and how much wood we could use for heat, after fossil fuels decline.

US direct fossil fuel use for heating Click to enlarge.