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Page added on June 10, 2015
Nat-Gas Glut Means Low Prices Here to Stay
The supply glut from the shale drilling bonanza meant that May was another month when U.S. natural gas production from the Lower 48 states stayed strong.
As per the latest report from Bentek Energy – the forecasting unit of Platts – May natural gas production edged down less than 1% from the record highs of April to 72.6 billion cubic feet per day (Bcf/d). In fact, the May output was 7.2% higher year-over-year.
Thanks to the emergence of major shale plays yielding impressive results, Bentek analysis further suggests that average domestic natural gas supply will climb to 73 Bcf/d in 2015. To put things in perspective, U.S. production was averaging just 55.1 Bcf/d in 2009, only six years back.
The Shale Revolution
Over the last few years, a quiet revolution has been reshaping the energy business in the U.S. The success of ‘shale gas’ – natural gas trapped within dense sedimentary rock formations or shale formations – has transformed domestic energy supply, with a potentially inexpensive and abundant new source of fuel for the world’s largest energy consumer.
With the advent of hydraulic fracturing (or fracking) – a method used to extract natural gas by blasting underground rock formations with a mixture of water, sand and chemicals – shale gas production is now booming in the U.S. Coupled with sophisticated horizontal drilling equipment that can drill and extract gas from shale formations, the new technology is being hailed as a breakthrough in U.S. energy supplies, playing a key role in boosting domestic natural gas reserves.
As a result, once faced with a looming deficit, natural gas is now available in abundance.
Growing Demand Supply Imbalance Pressurizes Price
While May becomes another month in terms of robust natural gas output, the commodity’s demand has failed to keep pace with this rapid supply surge. In the past, winter weather has played a factor in boosting prices with demand for domestic natural gas exceeding available supply. But with no dearth of new supply, even this association is becoming more and more obsolete.
The Result: Prices Continue to Suffer
From a peak of about $13.50 per million British thermal units (MMBtu) in 2008 to below $3 now – sinking in between to a 10-year low of under $2 in 2012 – the plummeting value of natural gas represents a decline of around 80% over seven years. In the absence of major production cuts, we do not expect much upside in gas prices in the near term.
Limited Upside for Gas Producers
This translates into limited upside for natural gas producing companies. In particular, those with Zacks Rank #4 (Sell) or Zacks Rank #5 (Strong Sell) like Northern Oil and Gas Inc. (NOG – Snapshot Report), Penn Virginia Corp. (PVA – Snapshot Report), Contango Oil & Gas Co. (MCF – Snapshot Report), Parsley Energy Inc. (PE – Snapshot Report) and Sanchez Energy Corp. (SN – Snapshot Report) look to be in the most trouble.
31 Comments on "Nat-Gas Glut Means Low Prices Here to Stay"
coffeeguyzz on Wed, 10th Jun 2015 8:24 pm
Last week I talked with a woman at a CNG filling station on the grounds of San Francisco airport as she filled her converted Honda Civic. The fuel price was $2.25/GGE (gal gas equiv) and she said she drove about 200 miles before getting an 8 buck fill up. Repeated this twice a week.
My companion was so excited, she started googling and found a Honda dealer who offered new CNG Civics for 26k … 6k more than a regular Civic. She promptly made an appointment to pursue the matter.
Thing here is twofold … there is an off-the-charts amount of natgas in the Utica/Marcellus formations. The price of energy equivalence in natgas versus oil is – and apparently will remain – a small fraction of oil. Transportaion modes (cars/trucks) will continue to switch to CNG/LNG more and more readily as the distribution system is built out.
GregT on Wed, 10th Jun 2015 10:25 pm
Two questions Coffee,
I have read that we may have a 100 year supply of natural gas, at present rates of consumption.
1: What happens to the number of years worth of supply, when we use 10 times as much?
2: What happens to the price, when there is 10 times the demand?
Plantagenet on Wed, 10th Jun 2015 10:28 pm
First fracking in shale produced the glut in natural gas. Then fracking in shale produced the current glut in oil.
Here a glut
There a glut
Everywhere a glut glut
Heat your house
Fly your plane
And drive your little put put
Here a glut
There a glut
Everywhere a glut glut
NG is cheap
And so is oil
Their prices have been cut cut
Jeff T on Thu, 11th Jun 2015 12:39 am
Greg T,
Good questions. You brought up the question about using 10 times more natural gas than we do now. That just isn’t going to happen.
The reason that prices are so low is that production is growing exponentially (over the last 5 or 6 years) while demand only grows incrementally.
The largest use of natural gas is the heating of homes and buildings. Homes and buildings only increase a couple of percent per year. Most new homes and buildings are very energy efficient, meaning that for each old building replaced with a new one, less nat gas is used.
The 2nd largest source of nat gas demand is for the generation of electricity. Nat gas and coal are the cheapest ways to generate electricity. Even if all coal fired generation were replaced by natural gas units, that would only add about 25 BCF (billion cubic feet) per day of demand.
Between March 2014 and March 2015 the US grew production 8 BCF per day. Almost all the new production came from the Marcellus shale region (PA, OH, and WV).
It would take 10 to 20 years to replace all coal fired generation with gas fired generation. We can add the gas production capacity, necessary to replace all coal, in three years (at last year’s growth rate). There is not currently a way to grow demand for natural gas as quickly as we can grow the production base. As such, gas prices will be depressed for the foreseeable future.
These shale resources are incredible blessings for our country. The oil and gas industry has had a few good years, it’s about to have many lean ones.
GregT on Thu, 11th Jun 2015 12:56 am
Jeff T,
You forgot about the natural gas that Coffee is talking about. The natural gas to be used to replace oil in our transportation fleet. 253 million passenger vehicles alone, in the US, and counting.
You are also forgetting that natural gas is a fossil fuel, and fossil fuels are adding to climate change. According to many recently peer reviewed scientific papers, natural gas actually adds more of the greenhouse gasses responsible for warming, than coal.
Fossil fuels are not a blessing, they are the most stupid thing that mankind has ever exploited. They are killing our planet, and in all likelihood, are going to kill off each and every single one of us.
You are way off in la-la land Jeff, either that, or you are an industry shill.
Plantagenet on Thu, 11th Jun 2015 1:06 am
@grgr
Obama claimed in 2012 that the US had a “100 year supply of natural gas”. Obama said nothing about It being at current rates of consumption, so lets take him at his word and assume we’ve got plenty of NG in the US , and the current NG glut and low NG prices will be with us for a long long time even if we ramp up out use of NG.
Cheers!
GregT on Thu, 11th Jun 2015 1:15 am
The U.S. Energy Information Administration estimates that as of January 1, 2012 there were about 2,266 trillion cubic feet (Tcf) of technically recoverable resources of dry natural gas in the United States. At the rate of U.S. dry natural gas consumption in 2012 of about 26 Tcf per year, the United States has enough natural gas to last about 87 years. The actual number of years will depend on the amount of natural gas consumed each year, the amounts of natural gas imports and exports, and additions to natural gas reserves.
http://www.eia.gov/tools/faqs/faq.cfm?id=58&t=8
Cheers! Idiot.
Northwest Resident on Thu, 11th Jun 2015 1:51 am
Inverted totalitarianism is a term coined by political philosopher Sheldon Wolin in 2003 to describe the emerging form of government of the United States.
Wolin believes that the United States is increasingly turning into an illiberal democracy, and uses the term “inverted totalitarianism” to illustrate similarities and differences between the United States governmental system and totalitarian regimes such as Nazi Germany and the Stalinist Soviet Union.
In Days of Destruction, Days of Revolt by Chris Hedges and Joe Sacco, inverted totalitarianism is described as a system where corporations have corrupted and subverted democracy and where economics trumps politics.
In inverted totalitarianism, every natural resource and every living being is commodified and exploited to the point of collapse as the citizenry is lulled and manipulated into surrendering their liberties and their participation in government through excess consumerism and sensationalism.
I believe that Planter is an agent working for the powers that seek to impose inverted totalitarianism on all of us. He brings distraction, twisted half-truths, misdirection, absurdity and interruption of legitimate discussion to peakoil dot com, and wherever else he goes under whatever moniker, no doubt.
If Plant isn’t a paid agent working for those powers, then he is an even bigger fool than he appears to be, because in that case he is doing their bidding for free.
GregT on Thu, 11th Jun 2015 2:35 am
Interesting NWR,
I remember reading a few years ago someone using the term ‘planted agent’. I kind of laughed it off. I’m not laughing anymore.
I’m calling you out on everything now planter, I’ve never been a big Obama fan. Your game is up bud.
Davy on Thu, 11th Jun 2015 5:56 am
Jeff, I am a doomer and a prepper. I preach a consistent and redundant doom rants here on PO. I have repeatedly said I want the cornucopians and BAUtopians to tell me the good news so I can believe. I want to change my outlook.
This gas supply is intriguing and interesting but I believe over rated on all levels from resource to the possibilities of substitution for other fossil fuels. In other words too good to be true and a case of the cake and eating it.
My life is great not easy but great. When the weather is good I work my ass off 7 days a week 10-12 hours a day doing what I love. I am doing permaculture agriculture revolving around, habitat restoration for wildlife and management intensive grazing with goats and cattle. I will soon have chickens and rabbits. I have an orchard, grapes, and large garden. I am on 400 acres with a bounty of wildlife to harvest and natural berries and plants.
I am prepping for short term which is basically finished. I am prepared for 6 months to a year of serious societal disruption. This preparation is at several levels with food/water, security, shelter, and trade and barter. I am prepping longer term for a postindustrial society. I am looking to gear up for a hybrid of 18-19th century living with some of the technology and knowledge of today.
I am under no illusions of my survivability. That is a crap shoot and depends on my local which has pluses and minuses. The primary minus is an American culture dependent on overconsumption with no clue of that danger for required adaptations. I have a NUK plant 2 hours north and a military base an hour southwest. The military base would be hit in NUK war and NUK plant could go critical in a collapse. The pluses are good water, food production potential, and low population density.
My longer term prep will only be as good as the regeneration of a sustainable local culture. It takes a community to survive. If security deteriorates I can only survive a small attack by raiders. The fact is even with all my preparations I am not prepared. I still go to town to buy supplies. I still go to Lowes for maintenance supplies. I will need labor when my equipment has no fuel in a collapse. 19th century farms had big families to run them.
That was a quick story of where I am. I hope this gas situation proves a blessing but then I see all the other predicaments of climate change, pollution, overpopulation, systematic breakdown, and peak oil. Let’s face it oil is depleting. Gas will not scale to replace oil. Gas may make a dent in coal but not oil.
We don’t have the time nor the money to make a transition even if gas could substitute. This is a situation of multiple predicaments many of which are catch 22’s. This is an end game of a story that is over and it is not a happy ending. This will be an ugly, painful, and deadly ending is my reading of the situation.
Jeff, I don’t want this to be so bad. The false promises of the cornucopians green and brown are being proven wrong daily. All they have is promises with nothing concrete. AltE and gas will never scale. The only way to mitigate carbon is destroy the economy. Overpopulation is a train wreck with no solution. Then there is pollution, ecosystem destruction, systematic breakdown, and geopolitical conflicts. All these are worsening. No Jeff, gas is not going to save us. It may buy some time and let’s be thankful for that.
Boat on Thu, 11th Jun 2015 6:24 am
http://www.eia.gov/naturalgas/crudeoilreserves/pdf/table_17.pdf
And a year later the estimated dry nat gas proved resources is up to 338,264. Seems the more we use the bigger reserves there will be. So unlike Greg T some of us applaud the switch from coal and oil to nat gas. As for the US haters, so sorry it will help compete with all that cheap labor overseas.
Boat on Thu, 11th Jun 2015 6:40 am
The false promises of the cornucopians green and brown are being proven wrong daily.
Davy, who is making promises to you. Certainly not me. I just look at mush of the news and trends and come up with different conclusions. Though I will not discount the possible destruction of the world by many ways I tend to believe the human race will muddle through and adjust. There are hundreds of trends showing humans adjusting and adapting. It may not be fast enough for your liking but BAU is constant fast change and humans can and will do it.
Davy on Thu, 11th Jun 2015 8:46 am
Boat, we see endless accounts of new technologies and efficiencies that are going to keep the growth train going. These technologies and arrangements are going to solve climate change, overpopulation, food productivity drops, and water stress.
It is endless Boat and it is both from greens and capitalist. We see endless hopium that every problem will be solved as it was in the past with the same tools. Those tools are now failing us and we will not muddle through and adjust forever. I have seen no news that gives me hope. I see nothing but cheerleading for a broke system morally, economically, and socially.
I do not believe that we will change. Change is what we need to do and are not doing. The word change reminds me of my 25 years in corporate world. I have been to so many stupid management training seminars that hyped destructive change is good. I have done the 6 sigma and the Dale Carnegie stupidities.
Free market capitalism is a hollow failed system that is leading us to an early death. There is probably nothing we can do about it so maybe it is best to just have the hopium and the false beliefs. I am honest and realistic and can’t do that. When I see a black horse I call it black. I want good times to last but nothing anywhere is giving me any real hope. It is mostly a fake optimism, lies, corruption, and ecological destruction.
Boat on Thu, 11th Jun 2015 9:20 am
Davy, I don’t see a growth train, in fact just the opposite. The US for example would be losing population if it were not for immigration. The population is adjusting, our leaders have yet to catch up. Population birth rates follow their economies in developed countries. Has nothing to do with greenies or capitalists IMHO Here is just another small example of human change for the good. Check just 30 years ago and look at how much the US recycled as compared to now. Why? It is cheaper to recycle. There is money in it. An entire industry has grown from waste.
GregT on Thu, 11th Jun 2015 9:27 am
Where do you believe that waste comes from Boat?
Davy on Thu, 11th Jun 2015 9:37 am
Alright Boat, how about an optimist and a pessimist agree to disagree and we can leave it at that. I can’t buy into your reasoning.
GregT on Thu, 11th Jun 2015 9:50 am
“I don’t see a growth train, in fact just the opposite.”
Finally, you’ve actually said something that makes sense Boat. -0.7% in Q1 2015 for the US. If this keeps up, you’ll be eating that waste that you are so fond of. After all, there isn’t much nutritional value in money.
GregT on Thu, 11th Jun 2015 9:55 am
Oh ya, and money will be worthless if the ‘growth train’ comes to an end. But of course money creation isn’t a subject that they teach people on the MSM evening news. Having an aware populous wouldn’t be good for ‘business’.
Nony on Thu, 11th Jun 2015 1:34 pm
David Hughes at 2006 ASPO, predicting US natgas to decline at 1.5 BDF/day and saying that he had already accounted for shale gas growth. Also predicting average production per well and per rig to drop.
https://www.youtube.com/watch?v=poRAEL7M9Ds
Uh…wrong, wrong, wrongitty wrong!
GregT on Thu, 11th Jun 2015 2:19 pm
J. David Hughes is a geoscientist who has studied the energy resources of Canada for nearly four decades, including 32 years with the Geological Survey of Canada as a scientist and research manager. He developed the National Coal Inventory to determine the availability and environmental constraints associated with Canada’s coal resources. As Team Leader for Unconventional Gas on the Canadian Gas Potential Committee, he coordinated publication of a comprehensive assessment of Canada’s unconventional natural gas potential. He is currently president of a consultancy dedicated to research on energy and sustainability issues.
http://www.postcarbon.org/our-people/david-hughes/
Nony, is a nobody.
Northwest Resident on Thu, 11th Jun 2015 2:38 pm
Nony is a frequently wrongitty and always uppity nobody
Nony on Thu, 11th Jun 2015 3:23 pm
Check out natural gas production from 2006-present. Pretty much the direct opposite of Hughes’s predictions.
http://www.eia.gov/totalenergy/data/monthly/pdf/sec4_2.pdf
GregT on Thu, 11th Jun 2015 3:27 pm
J. David Hughes is a geoscientist who has studied the energy resources of Canada for nearly four decades, including 32 years with the Geological Survey of Canada as a scientist and research manager. He developed the National Coal Inventory to determine the availability and environmental constraints associated with Canada’s coal resources. As Team Leader for Unconventional Gas on the Canadian Gas Potential Committee, he coordinated publication of a comprehensive assessment of Canada’s unconventional natural gas potential. He is currently president of a consultancy dedicated to research on energy and sustainability issues.
http://www.postcarbon.org/our-people/david-hughes/
Nony, is a nobody.
Nony on Thu, 11th Jun 2015 5:52 pm
“What’s worse, Hughes notes, is that North America only has 10 years of natural gas production remaining.” And that was in 2006. ZOMFG. one year left until we run out!
http://www.resilience.org/stories/2006-12-12/peak-oil-peak-gas-short-ride
Wrong, wrong, massively wrongitty wrong wrong.
P.s. Hughes is just another out of work geologist who likes acting important. The whole peaker movement is filled with underemployed old low ranking geologists who want to act way more important to the Internet crowds than they ever were in real life.
Davy on Thu, 11th Jun 2015 8:42 pm
NOo, you can change the names and the places and your last sentence fits you. If you are so smart why are you here?
Nony on Fri, 12th Jun 2015 12:11 am
I’m lonely.
GregT on Fri, 12th Jun 2015 12:44 am
We’ve been through this before Nony. This is not the place to find your soulmate. She is out there somewhere, everybody has one. The more time that you spend here arguing against something that you know deep in your mind to be true, the less the chances of finding her, and the more miserable that you will become. You are a smart guy Nony, stop playing the contrarian, get out there and find someone. It is not as difficult as you think that it is.
Davy on Fri, 12th Jun 2015 2:52 am
NOo, I like you man just moderate and find balance. The truth is somewhere in between our doom and corn. We will never find the truth but let us try to get closer to it together. I appreciate you cornucopian material. I am a doomer but only because that is basically what I see when I digest multiple outlooks. That is not to say I am not looking for optimism. You bring that to the table but you also bring an asshole agenda with it. I am an asshole and an asshole buster. That is why I bust your balls. Moderate and drink from the cup of doom to wash down your corn bread.
R1verat on Fri, 12th Jun 2015 8:17 am
“Moderate and drink from the cup of doom to wash down your corn bread.”
Davy there are days you really crack me up!
Kenz300 on Fri, 12th Jun 2015 10:18 am
How long will the energy supplies from Wind and Solar last ?
How long will supplies of oil and gas last?
Apneaman on Fri, 12th Jun 2015 1:19 pm
Kenz300 you cannot harvest the minerals needed to build solar and wind without diesel. Last time I checked there were only a couple of little pilot projects tinkering with small battery powered mining equipment. I’m not anti wind and solar, I say go for it if you can-while you can. I am anti techno utopianism and dead end hopiumisim.