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Page added on December 23, 2015
America’s Top Shale Gas Basin in Decline
The natural gas drilling frenzy is grinding to a halt, as the industry struggles with excess supply.
Natural gas prices have plunged to their lowest levels in more than a decade this month, dipping below $1.80 per million Btu (MMBtu).
The shale gas revolution is an old story at this point, one that everyone is familiar with. But the revolution never really ended, even though the media moved on to focus on the tight oil boom. Natural gas production continued to rise over the past decade, reaching record heights in 2015.
However, demand has not kept up, despite the rise in the natural gas power burn. Gas-fired power plants are replacing coal for electricity generation, but not quickly enough to soak up all of the extra supply coming out of U.S. shale.
Natural gas storage levels, meanwhile, are overflowing due to the unseasonably warm weather across much of the United States. For natural gas producers, this is a nightmare situation with Henry Hub prices falling to levels that are extremely difficult to turn a profit. The low prices forced the iconic Chesapeake Energy, the U.S.’ second largest natural gas producer, into a debt swap to push out maturity dates for its debt. Chesapeake’s stock price has plunged 80 percent over the past year, and has dropped by 20 percent since the beginning of December.
There is a bit of hope for the market, as natural gas prices surged by 8 percent on December 21 because colder weather is starting to appear over the horizon, pointing to higher demand. But that will only nip around the edges of the nation’s glut in supply.
There is another bit of positive news for natural gas prices, which comes from new predictions of production declines from the EIA. The forward-looking predictions for shale production in the EIA’s Drilling Productivity Report – which show production declining in major shale areas – are not as reliable as the retrospective monthly production figures, which point to rising output through at least September.
The glut in gas has crashed prices, which, in turn, has forced a dramatic pull back in drilling. Reuters recently reported that new drilling permits for the Marcellus declined to just 68 in October, which was a dip from the 76 issued in September. But, those figures are vastly down from the peak of 600 per month routinely seen at the height of drilling five years ago.
Some companies are even “choking back” production instead of selling what they can. “It is better to choke back than to sell into this market,” Matt Henderson, a spokesman for Inflection Energy, told Reuters. Inflection Energy has reduced production from 50 to 70 percent of its gas wells. Other companies in the Marcellus are doing the same.
Prices are so low that drillers are shutting in production, a once unfathomable development. This suggests that prices could be at an absolute bottom. Still, that is not to say that prices will rebound substantially anytime soon. The supply overhang will likely linger with storage levels at such highs. “There is just too much gas,” Justin Kastner of Global Land Partners, a company that finds oil and gas leases for drillers, told Reuters. “I expect to see a downturn for the next two years.”
The drilling slowdown is hurting the economy in and around the core of the Marcellus Shale region in Pennsylvania. Foreclosures in Lycoming County, PA, hit their highest levels in almost a decade in the first six months of this year. Parts of Pennsylvania enjoyed the boom times from the shale gas revolution a few years ago, but now they are suffering from the bust.
53 Comments on "America’s Top Shale Gas Basin in Decline"
rockman on Wed, 23rd Dec 2015 10:58 am
The key question is how much of the production decrease is natural depletion and how much is due to lower then expected demand given our rather warm early winter. But by next summer we should have a clear picture.
ghung on Wed, 23rd Dec 2015 11:40 am
Where’s marmitard to defend his ‘Mighty Marcellus’?
Pennsyguy on Wed, 23rd Dec 2015 1:39 pm
I suggest a new motto for America:
It Was Fun While It Lasted.
Or for the classically minded:
Non Semper Saturnalia Erunt.
Peace and joy to all and may the sun return.
marmico on Wed, 23rd Dec 2015 2:24 pm
Still jerking off the rutabagas, eh ghung.
So you are going to put Marcellus (Pennsylvania) gas in seasonal storage to go with the record storage levels or push back Canadian imports in Eastport, Idaho, Port of Morgan, Montana, Sherwood, North Dakota or Sumas, Washington. The export pipes to Mexico are full.
Nony on Wed, 23rd Dec 2015 4:21 pm
Marcellus prices have been ~$1.20 for the last year:
http://www.naturalgasintel.com/data/data_products/weekly?location_id=NEATENN4MAR®ion_id=northeast
That indicates not enough market, versus depletion. The App region is limited in takeaway. If the region were geologically depleting, then prices would rise. They are stuck based on a limit to storage and based on a warm winter.
Nony on Wed, 23rd Dec 2015 4:25 pm
Also consider the continued growth of the Utica region (OH per DPR):
https://www.eia.gov/petroleum/drilling/pdf/utica.pdf
There is some gas on gas competition in the Northeast. So development of one resource comes at the expense of the other, if market is limited. And market sure as heck is limited in the App at $1.20.
coffeeguyzz on Wed, 23rd Dec 2015 5:42 pm
Today’s price at the Dominion South transfer point out of the Marcellus was 59 cents per mmbtu.
The Texas Eastern M-2, 30 transfer point was 63 cents per mmbtu.
Rockman, the site Marcellusgasdotorg has a tremendous amount of production data from the Pennsylvania unconventional wells (7,000 at the moment).
The depletion is not a factor as even the deep Utica wells are showing exceptionally strong results, with the notable exception of Range’s Claysville 11H. A sister well on the same pad targeting the Utica, the Claysville 9H, has increased its output from 11.5 to 12.5 MMcfd on restricted choke.
In addition to Inflection Energy curtailing output (as cited in the above article), Stone Energy is shutting in over 100 million CFD production due to low pricing.
As the article indicates, there are several companies also curtailing output.
makati1 on Wed, 23rd Dec 2015 7:24 pm
Permian oil article probably includes the NG situation also. Rockman? Short?
“Many believe that U.S. shale and tight oil plays are commercial even at current low oil prices. This belief is apparently founded on a relentless faith that technology and American ingenuity can somehow circumvent the laws of physics and economics.”
“There are many “monster” wells in the Permian basin plays. This does not change the fact that average wells for top operators in the best parts of the plays are not commercial at current prices–even using the latest technology at the lowest cost and highest efficiency.”
“None of the Permian basin plays evaluated in this study are commercial at present oil and gas prices.”
http://www.artberman.com/less-than-2-percent-of-permian-basin-is-commercial-at-30-oil/
What happens when it drops to $20? $10? Less?
Nony on Wed, 23rd Dec 2015 8:26 pm
Natural gas and oil have a big difference in market. 90%+ of US gas is both produced and consumed within the US. If you look at the US+Canada as a system (and traditionally for gas they have been), then it’s an even higher percentage. So, it’s a closed system. So gas price will move and both supply and demand will adapt capacity so that eventually things balance. Yes, it sucks to be CHK right now. But the market will balance (even if there are BKs and new operators of assets) so that demand is supplied. And given the shale gas revolution (more powerful than oil), large volumes will be produced at relatively low prices. Probably not $2. But also probably south of $4.
Oil is different because it is essentially world priced. Yes, there are minor differences from transport bottlenecks. But it’s MUCH more of a world commodity than gas. If Saudi Arabia goes off line, world prices will skyrocket and that’s both Brent and WTI and LLS and all that! If Qatar (gas) or Russia (gas) dropped into a black hole, Henry Hub wouldn’t give a shit. The markets are disconnected.
What all this means is that US LTO may be in for more of a world of hurt than shale gas. If Iran/Iraq/SA really pull out the stops and pump like crazy, LTO assets (acrage, not flowing bbls) will get shut down and not developed.
Davy on Thu, 24th Dec 2015 4:11 am
NOo, BS on Henry Hub and a major overseas disruption. There is something called a global economy Henry lives in and if that global economy crashes so does Henry. You make me laugh with your simplistic, naive but highly intelligent comments. I love incongruous juxtaposition.
electrorail on Thu, 24th Dec 2015 4:18 am
Good analysis Nony.
Here ‘s a question for you and anyone else out there.
I’m wondering, what sort of impact would it be if the Bakken (ND and SK) LTO resource had an outlet to Asian markets by way of the Alaskan supertanker port of Valdez?
By 2020-22, that purpose-built AB to AK railway will benefit from having a more flowable product to be injected into the near empty TAPS, rather than the cost of keeping 100% bitumen hot enough to flow in the TAPS either batch to co-mingled with the declining ANS oil, now down in 500K bpd range…rail bit at 90/10 would work also but eliminating diluent is a major cost reduction factor over pipeline transport (as not many people recognize).
Based on our feasibility study (due out in Q1 2016 due to regime change in Ottawa) and an initial 1 M bpd minimum bitumen delivery into Valdez, we would need as much as 500K bpd to create a new product; we might call it ANS-BakkenBit, a 25-25/50% ratio blend that could now go anywhere by supertanker.
We would require a short rail spur from ND to the Regina SK area and the massive potash resource that can now go out of Port Mackenzie AK and relieve the pressure on the congestion of the duopoly CN and CP Rail track & west coast ports of Vancouver and Prince Rupert…
The BHP Jensen mine could then JV with Bakken producers and build the rail spur to the Hardisty main rail terminal for loading those 200 unit train sets – destination Pacific tidewater, acrimony and drama free with social license available…
But its’ just an idea…as we all know, pipelines are safer and cheaper and blah blah blah…so it goes they say…but as our PFS ppt concludes on last slide …
Go ahead KM, ENB and TC (for 2)….build them then.
Davy on Thu, 24th Dec 2015 6:27 am
Electro, my thoughts are the declining economy will end your proposed “northern route”. The key point is deflationary spiral. We are going to have gluts of resources in a transition period of global economic decay. This may be one long economic descent or a cycle of economic conditions in a declining gradient of deflation. Your thinking is 20th century and reflects a time of real growth not the faux growth we have today.
Gluts represent the unhealthy and uneconomic just as much as shortages. The are related by the common denominator of economically dysfunctional markets. This is a marker for a destabilized economic system. Shortages may be in the offing too but our current situation is clearly excess from years of malinvestment in capacity and development.
Kenz300 on Thu, 24th Dec 2015 9:35 am
Boom…..Bust………..
Banks stopped lending……………..
Bankruptcies continue……………………..
Production declines……………………………..
The small guys go broke…….
The big guys pick up the pieces cheap……..
ennui2 on Thu, 24th Dec 2015 10:37 am
“That indicates not enough market, versus depletion.”
That’s your answer. And peakers won’t accept that, of course.
Nony on Thu, 24th Dec 2015 1:16 pm
electrorail:
Seems like you have sketched the factors out well, but would have to look at the numbers (volumes, price differentials, capital) as well as the permitting hurdles.
If you want a comparable, consider to look at the Beaumont terminal recently built to take Canadian heavy oil. I know some of the firms involved in that.
FWIW, I think Bakken can supply 500M bpd, no problem for a long time. Just needs to be price competitive versus East Coast rail, but should not be a problem to get the volumes. Even assuming gradual decline of ND because of world pricing, that place will have several years of production.
The rest of it (potash, etc. just needs to be looked at.) Maybe you can get the PotashCorp to invest in some of the infrastructure or give guaranteed volumes contracts or the like, as they are getting a win out of making the freight more competitive.
marmico on Thu, 24th Dec 2015 2:02 pm
Tidewater distances don’t make sense.
Bakken —>Valdez equals ~2500 miles with no infrastructure.
Bakken —>Houston equals ~1500 miles with infrastructure.
shortonoil on Thu, 24th Dec 2015 2:02 pm
“That indicates not enough market, versus depletion.”
That’s your answer. And peakers won’t accept that, of course.”
The reason that it is not generally accepted is that a few of them can add, and subtract. The average decline rate of a Shale Gas well is 70% per year the first year. That means that to maintain production over the next year 39% of the wells that are presently producing have to be replaced next year. With drilling rig counts now down by a least 70% from their highs, that is just not going to happen. The insistence that otherwise can occur can only be the result of sheer blatant ignorance. The numbers stand for themselves, and there can be no argument with them!
Apneaman on Thu, 24th Dec 2015 2:03 pm
Nony, still getting a stiffy and jerking off to all the fossil fuel numbers. All the answers to the meaning of life are there alright – just like the bible code. Say merry christmas to marmi and papasmurf, fuctard;)
New infrared video reveals growing environmental disaster in L.A. gas leak
https://www.washingtonpost.com/news/energy-environment/wp/2015/12/23/new-infrared-video-reveals-growing-environmental-disaster-in-la-gas-leak/
“Unstoppable” California Gas Leak Now Being Called Worst Catastrophe Since BP Spill
http://www.zerohedge.com/news/2015-12-24/unstoppable-california-gas-leak-now-being-called-worst-catastrophe-bp-spill
marmico on Thu, 24th Dec 2015 2:37 pm
sheer blatant ignorance
That would be you. Kindly demonstrate that it takes 48,900 British thermal units to refine one gallon of oil?
rockman on Thu, 24th Dec 2015 2:59 pm
In addition to how ever much Marcellus production is being reduced by the mild winter so far it continues to be hampered by a lack of pipelines. There was never an adequate system in place to handle the surge in production. There bigger question at the moment is to what degree current low NG will stalled any of the planned transport projects:
During 2015 about 40 pipeline projects are in various stages of development for receiving natural gas from the Marcellus and Utica shales, including six that came on line in 2014. All together, the projects represent more than 33 Bcf per day of capacity and about $20 billion of investment, if all are ultimately built.
The projects that came on line in 2014 – including two that are not Marcellus related – added 3.5 Bcf per day of natural gas transportation capacity.In 2015, another 4 Bcf per day of gas pipeline capacity was scheduled to be completed. Some of these projects involve installing new pipe over relatively short distances, such as Transco’s Leidy Southeast, which in 2015 is slated to add 30 miles by looping existing pipeline. This will eliminate bottlenecks for Marcellus shale gas moving from Pennsylvania to reversed-flow pipes heading south to Mid-Atlantic states.
Other pipeline projects are more extensive, such as Kinder Morgan’s Tennessee Gas Pipeline Co. Northeast Energy Direct project. This project would involve more than 400 miles of new pipelines – including 135 miles of greenfield pipes taking gas from the producing areas of Pennsylvania and 177 miles of new and co-located pipe bringing the gas north to the Dracut hub near Boston. The in-service date is proposed for 2018.
Projects that do not require laying down long stretches of greenfield pipeline will likely move first. Most are intended to bring low-cost Marcellus shale gas to the growth markets in the Midwest, Northeast, Southeast.
A lot of the reverse flow projects heading to the Gulf are the lowest cost. The next tranche – likely years down the road – will get expensive, since it will require new long-haul greenfield capacity which will require new rights-of-way. The lowest-cost expansions – the low hanging fruit – are largely already in place.
Expansion in New England – The New England region is again facing severe constraints on pipeline delivery capacity and the ensuing gas price volatility and will need another 1.2 Bcf to 1.5 Bcf per day of pipeline capacity by 2020. During last winter’s “polar vortex,” the tight regional gas market drove spot wholesale prices to record highs, spiking wholesale electricity costs. Compounding the problem, the region’s electric power sector is increasingly dependent on natural gas as a generation fuel as older coal, oil, and nuclear plants are retired and replaced with gas-fired capacity.
But any relief for New England is two seasons away – the winter of 2016-2017 – when Spectra Energy’s Algonquin Incremental Market expansion project is scheduled to come on line. This project will add 342 million cubic feet per day through new segments largely along the existing right of way from the New York-New Jersey border, diagonally across Connecticut and into the Dracut hub. It is important to note, however, this incremental capacity will not completely alleviate the pipeline capacity constraints in the region, and additional capacity is still necessary.
An article recently appearing in the New York Times chronicled the electric rate shock hitting New Englanders as last winter’s wholesale costs are finally passed through in retail bills. The article also notes that there is vigorous opposition to the planned pipeline expansions from environmental groups.
There was a lag in transparency, and what happened last winter didn’t show up in bills until November 2014. Now, companies are saying bills could go up another 40 percent. People are starting to re-think this.
FERC Green Lights Two Projects – In December 2014 they granted a Certificate of Public Convenience and Necessity – essentially a green light to proceed – for the Constitution Pipeline, a 124-mile pipeline proposed by Williams Partners, and three other companies.
Constitution will move Marcellus shale gas production from northeastern Pennsylvania to the Wright Hub in upstate New York, crossing various other lines along the way, by late 2015 or early 2016. Wright also connects with the Algonquin and Iroquois lines into New England and Long Island, although that location will still be a bottleneck for northeastern-bound shipments because the take-away capacity is limited, which the Kinder Morgan Northeast Energy Direct project would help alleviate.
Spectra and Northeast Utilities in September also announced their planned Access Northeast project which could be another potential solution to the New England market. Access Northeast is envisioned as a complement to AIM and is targeted to be in-service by late 2018, bringing supplies directly to local distribution companies as well as numerous gas-fired power plants along its right-of-way.
More recently, on Dec. 18, FERC issued a Certificate of Public Convenience and Necessity to Spectra Energy’s Uniontown-to-Gas City Expansion Project. This line will provide bidirectional, firm transportation service by late 2015 from the Marcellus shale gas supply area near Uniontown, Pa., to the interconnection with the Panhandle Eastern Pipe Line system near Gas City, Indiana, for delivery to Midwestern markets. The capacity is slated to be up to 425 mm cfpd.
coffeeguyzz on Thu, 24th Dec 2015 4:57 pm
Rockman
In addition to all those take away projects, an unheralded 1 Bcfd increase was implemented just a few weeks ago when the Stonewall gathering system as well as the Broad Run metering reversal kicked in. Both located in West Virginia.
There is increasing pressure from the business communities in New York and New England to get these pipes in the ground as they are suffering from high power/heating bills compared to out of region competitors.
UGI, a big utility provider in southeast Pennsylvania, just notified their 400,000 residential customers to expect $70/month utility bills this winter … down from $152/month a few years ago.
Mr. Short
I just briefly checked that Marcellusgasdotorg site for average well depletion as they monitor that ongoing for 177 ‘sample’ wells.
They claim 69% drop in output after 36 months.
In Susquehanna county, however, their two dozen sample wells are still producing at 81% of their original output after three years online.
I may be missing/misinterpreting the data as I am not so keenly interested in that area.
However, you seem to place high significance on these numbers when you make your calculations.
I do know that Northeast Pennsylvania (Susquehanna/Bradford) has off the charts prolific wells … 8/10/14 Billion cubic foot output per well for many with 2 years or so online.
shortonoil on Thu, 24th Dec 2015 5:41 pm
“However, you seem to place high significance on these numbers when you make your calculations.”
Citi Group is saying that conventional gas production in the US is declining by 24% per year. WestTexas quotes this number continuously. David Hughes in Drill Baby Drill claims shale gas has a 70% decline rate.
“In Susquehanna county, however, their two dozen sample wells are still producing at 81% of their original output after three years online.”
I own mineral rights on wells in Monongalia county WV, and they are declining by about 60% per year. There may be a few outstanding wells in the Marcellus, as there are everywhere, but they would be the exception, not the rule.
Boat on Thu, 24th Dec 2015 9:50 pm
Nat gas production is growing fast in the US every year, so fast there is now a glut causing such low prices that production is finally slowing some. Here is the kicker though. All that nat gas is kept going with less than 185 drilling rigs vrs. over 1650 just a few years ago. The simple fact is wells on average are just much better. If that were not the case production would have dropped dramatically long before now as the drilling rigs left the field.
Apneaman on Thu, 24th Dec 2015 11:22 pm
That’s awesome boat. There’s so much that there will be a methane leak under every tree. Merry christmas boaty boat.
GregT on Fri, 25th Dec 2015 12:04 am
Yup,
Absolutely amazing Boat. The world is drowning in methane. Gives us all something to look forward to.
Merry Christmas!
makati1 on Fri, 25th Dec 2015 12:06 am
Ap, do you mean ones like this?
http://www.zerohedge.com/news/2015-12-24/unstoppable-california-gas-leak-now-being-called-worst-catastrophe-bp-spill
“Since initially reporting on California’s Alison Canyon gas leak, more details have emerged on the scale (and potential for no solution) of the problem as the infamous Erin Brockovich writes, “the enormity of the Aliso Canyon gas leak cannot be overstated. Gas is escaping through a ruptured pipe more than 8,000 feet underground, and it shows no signs of stopping,” as according to the California Air Resources Board, methane – a greenhouse gas 72 times more impactful in the atmosphere than carbon dioxide – has been escaping from the Aliso Canyon site with force equivalent “to a volcanic eruption” for about two months now.”
Not to mention the thousands of miles of gas lines under city and urban streets that are way past their expected useful lifetimes.
Davy on Fri, 25th Dec 2015 3:26 am
Rock as usual gives a deeper story. I will just mention that the US was one big energy retirement party just a few years ago. There was talk of natural gas falling off the cliff and look at us now. No matter how bad the situation appears the resources will likely get us through the short term before collapse.
Once in an unknown of collapse in regards to degree and duration, it is unclear if resources will even have significance. Resources must have a functioning economy to have an effective resource. We just don’t know how a post descent economy will function.
No where have I see a good model. There are none. That said we can easily point out locations and industries with no future. We can speculate on what type of employment has a future. We know food is vital. These things are a short list of the known’s. There are so many unknown’s.
US shale gas bought us some time. It will see us through a few more years. After that I don’t care where you are at and what resources you have uncertainty is the name of the game. We have no narrative for descent. We have no branch of economics concerned with it. Science and industry are not planning for it. We are a ship a drift thinking we are moving towards a destination but actually we are lost.
shortonoil on Fri, 25th Dec 2015 8:42 am
“That would be you. Kindly demonstrate that it takes 48,900 British thermal units to refine one gallon of oil?”
To do that would require a mathematical presentation, and we supply one: “Depletion: A determination for the world’s petroleum reserve” However, for the mathematically challenged, and the overtly lazy individual that breaks into a cold sweat when it becomes necessary to add 2+2 in their head, we have another suggestion. Visit a refinery:
At the refinery you will find about half a square mile of massive steel containers, and about 150 miles of pipe. This whole enormous piece of steel infrastructure is constantly heated up to as much as 850° F. That heat is coming mostly from the petroleum it is processing. It sits there day after day, and irradiates massive amounts of heat into the environment. If you have any doubts about that – grasp hold of one of the pipes coming out of the reactor. Don’t worry, they can graph your hide back on later. You will immediately understand where all of the energy is going.
After you have made your visit, and the skin graphs have taken hold, let us know what you have discovered. In the mean time put your brain back into its regular idle mode, and stop annoying us with your stupid questions. Your own personal experience will be sufficient to teach you what your mother forgot to instruct you about; don’t touch the stove. You will be acquiring knowledge that will “be very unlikely to ever grow dim or doubtful”!
http://www.thehillsgroup.org/
GregT on Fri, 25th Dec 2015 8:55 am
“You will be acquiring knowledge that will “be very unlikely to ever grow dim or doubtful”!”
The key word here would be “unlikely”. Never underestimate the power of stupidity.
rockman on Fri, 25th Dec 2015 9:45 am
“All that nat gas is kept going with less than 185 drilling rigs vrs. over 1650 just a few years ago.”
A little more detail from Baker: NG rig count down but not that high a % – 2014 avg: 333…2015: 228. Total US rig count: 18 Dec 2015: 709…not 185.
Total US NG production: nice steady increase prior to 2015. Not so much this year: from the EIA: Jan…2,771,470 mmcf – Sept…2,778,142 mmcf.
Nony on Fri, 25th Dec 2015 10:05 am
Rockman:
“A few years ago” is not one year ago. See this graph:
http://marcellusdrilling.com/wp-content/uploads/2012/05/Reuters-Baker-Hughes-Rig-Count-vs-NatGas-Futures-Price_thumb.jpg
Nat gas rigs were briefly at 1600 in 2008. That is what the commenter refers to. And between about 800 to 1000 from 2009 to 2012.
Nony on Fri, 25th Dec 2015 10:13 am
In terms of volume, natgas has been steady all of 2015. Some small variations month to month, but basically not growing or declining:
2015 monthly volumes, JAN-SEP:
2,771,470 2,515,257 2,822,438 2,746,028 2,779,603 2,699,036 2,790,240 2,794,072 2,778,142
However, it is still up substantially from 2014 volumes (monthly, JAN-SEP):
2,771,470 2,515,257 2,822,438 2,746,028 2,779,603 2,699,036 2,790,240 2,794,072 2,778,142
Average monthly volume (JAN-SEP) was 2.58 TCF/mo in 2014 and 2.78 TCF/mo in 2015. Production in 2015 is 7% higher than 2014, even though it is not growing from JAN to SEP during the year.
Nony on Fri, 25th Dec 2015 10:16 am
Given that natgas prices are at ~$2 (Henry Hub), and $0.5 to $1 lower in the Marcellus/Utica, that it should be pretty obvious that nat gas is restricted from lack of market (and in the case of the App, lack of pipes). Not geological decline.
Nony on Fri, 25th Dec 2015 10:29 am
Despite all the chatter about super rapid shale decline curves, we still managed to hold production steady at record levels (~2.7+ TCF/month) throughout 2015. And we did that with a very small amount of rigs drilling gas wells: 330 at year start, dropping to below 250 by spring and currently at ~170.
Look at historical rig counts.
http://www.energyeconomist.com/a6257783p/exploration/detail/US/graph/Gas.gif
Even during the very low gas prices of the late 90s, we still had 400+ gas rigs. Current rig count is record low and is producing record amounts of gas. So much for those shale decline curves.
This is kicking the Red Queen’s shiny red ass. These are HUGE IPs that compensate for percentage declines.
You may not believe in US LTO and the shale revolution there. But you have no choice on shale nat gas. It is mighty!
Nony on Fri, 25th Dec 2015 11:27 am
Correction: these are the monthly 2014 JAN-SEP gas production volumes:
2,593,572 2,346,387 2,629,607 2,563,743 2,641,938 2,561,425 2,617,227 2,627,523 2,620,737
(posted 2015 twice, earlier)
shortonoil on Fri, 25th Dec 2015 12:13 pm
There seems to be a massive amount of denial as to how bad the shape of the oil industry is; and there is lot more to come:
“http://www.zerohedge.com/news/2015-12-25/oil-bankruptcies-hit-highest-level-crisis-and-theres-more-come-fed-warns”
It is interesting that the industry cheerleaders continue to put up arguments that everything is well, and will soon be getting better. Their disconnect from reality grows larger every day. Even investment banks like Citi, and GS are admitting that there is a train wreck ahead. They are beginning to reiterate what we have been saying for almost two years. Depletion will have its say in the petroleum industry, just as it has, with every extractive industry in history.
Nony on Fri, 25th Dec 2015 3:04 pm
I am pro consumer. Not pro industry. $2 for an MMBTU of natgas makes me feel like a kid on Christmas!
http://www.eia.gov/naturalgas/weekly/img/20151217_NGFP.png
coffeeguyzz on Fri, 25th Dec 2015 3:51 pm
Mr. Short
On the financial side, Hilcorp – the independent e&p company that just awarded $100,000 bonus to each of its near 1,400 employees – just entered into a $1 billion financing deal with the Carlysle Group in anticipation of acquiring some of the assets from ZH’s article.
Magnum Hunter has some outstanding assets that may be ‘purchased’ on the cheap for savvy buyers/operators.
The big enchilada, however, may prove to be Chesapeake.
For all the criticism that former CEO Aubrey McClendon has sparked, his former company has amassed simply enormous amounts of hydrocarbon filled acreage that may prove valuable longer term to operators with less financial encumbrances and more operational savvy than McClendon exhibited.
On a more significant note, perhaps, is the entire decline rate of the unconventional wells.
This aspect has always puzzled me as sources such as Mr. Hughes and Mr. Berman have been consistently shown to in error when projecting future unconventional output. (Simply googling estimates made in the 2012/2013 time frame displays this.)
At present, approximately 90%+ of liquid hydrocarbons are NOT extracted by present methods.
Seeing the effects of EOG’s newer completion process – displayed in their record breaking Riverview 102 3H well in the Bakken, producing over 200,000 barrels of oil in its first 86 days (4,300′ lateral, no less), might prompt a discerning observer to think MORE rather than less output will arise in future wells.
How about the ‘halo effect’ on Bakken wells whereby increased formation pressure from newly frac’d wells increases output from nearby, older wells? It’s happening all the time.
How about water flooding unconventional fields like Crescent Point has been successfully doing for years just over the border in Canada? EOG just permitted a couple of water floods for the Parshall field and industry observers are awaiting the results.
Granite Oil – formerly Deethree Exploration – has been successfully re-injecting field gas in their Bakken field (Saskatchewan) since 2013.
Main point being, Mr. Short, we ‘Cornicopians’ continue to have a track record showing validation in the areas of gross production, technical enhancements, operational efficiencies etc., that more pessimistic contributors cannot own.
Sure, at $30 oil, $2 gas there will be ‘blood’.
Certainly, this finite resource of hydrocarbons will, by definition, be limited.
… but not for the present.
antaris on Fri, 25th Dec 2015 4:02 pm
Coffee from what you tell us, I hope you invest in oil and gas. They need more people like you to keep the bonuses coming.
shortonoil on Fri, 25th Dec 2015 6:03 pm
“How about water flooding unconventional fields like Crescent Point has been successfully doing for years just over the border in Canada? EOG just permitted a couple of water floods for the Parshall field and industry observers are awaiting the results.”
EOG lost $4.6 billion last year, and with prices still depressed they will lose that much, or more this coming year. This year is likely to see their cash flow go negative. There is not much chance the a few water flood permits is going to save them. EOG is one of hundreds of companies in the same situation. Technology does not negate low priced oil.
rockman on Fri, 25th Dec 2015 10:58 pm
Nony – You and I have somewhat different definitions of a “few years”: I don’t think of 7 years as a few years
Boat – “Nat gas production is growing fast in the US every year, so fast there is now a glut causing such low prices that production is finally slowing some.” And you and I have rather different definitions of “growing fast…every year.” In the first 9 months of 2015 US NG production increased 0.24% (0.32%/yr). Likewise you and I differ on what constitutes a “NG glut”: given that the US is still a NET NG IMPORTER (granted by only a little bit) it’s difficult for me to refer to there being a glut.
Nony on Fri, 25th Dec 2015 11:20 pm
Rock, that’s fine. But “a few” sure ain’t ONE!
Nony on Fri, 25th Dec 2015 11:29 pm
You can have a “glut” if you are a net importer. CA gas needs somewhere to go, too. It’s not whether you are a 5% importer or 5% exporter that determines gluttiness, it’s the extra capacity over the market at price X (causing price t0 drop to Y, and filling storage). And the thing driving that is year over year growth. And, although JAN-SEP 2015 are flat, compared to 2014, volume is up 7%.
antaris on Sat, 26th Dec 2015 12:43 am
A few years ago (1952) the first commercial jetliner carried passengers. A few years from now the skies will be clear of jetliners. A few years is more than one Nony but not that many. A few years from now our children may be cold and wondering why the dumb assholes before burnt all the gas. Hand written pages found will have the word “Nony” associated with the wasteful burning of gas.
marmico on Sat, 26th Dec 2015 8:25 am
that would require a mathematical presentation
Your evasive and non-responsive shtick in empirics to validate the ETP model is getting long in the tooth.
After you have visited a refinery and written down your notes kindly demonstrate mathematically that it takes 48,900 British thermal units to refine one gallon of oil.
The extraction, processing and distribution energy costs for 2012, when summed do not equal 70,000 BTU/gal. The alleged “halfway point” is bullshit.
ennui2 on Sat, 26th Dec 2015 9:52 am
“The numbers stand for themselves, and there can be no argument with them!”
The Oil Drum was just as confident in its stats and look what happened to them. Your pushiness borders on trolling at this point, and it seems like nobody can point to any other source of end-is-nigh doom other than Zerohedge, which is by definition a fear-monger, so that doesn’t move me.
shortonoil on Sat, 26th Dec 2015 2:34 pm
“The extraction, processing and distribution energy costs for 2012, when summed do not equal 70,000 BTU/gal. The alleged “halfway point” is bullshit.”
Since all you have (or ever have had) is some bullshit that you pulled out of your ass as a rebuttal, we’ll stick with our assessment. If trolling is your primary source of income you had better find a different profession. You are really bad at this one.
marmico on Sun, 27th Dec 2015 5:39 am
Since all you have (or ever have had) is some bullshit that you pulled out of your ass as a rebuttal, we’ll stick with our assessment.
You forgot the words you wrote. Allow me to bold your own words from page 49 of your March 2, 2015, paper:
Empirical estimates, however, indicate that it is not far from the mark. One example is the EIA’s
estimate for petroleum refining energy costs, which they give as 16,300 BTU/$ of finished product. If
calculated at $3.00 per gallon for 2012, this produces 48,900 BTU/gal. With 48,000 fields around the
world under production, the industry is very competitive. It therefore follows that average extraction
costs are close to sale price. Employing the BTU/$ method, the 2012 production energy costs at the
well head can be estimated at 14,735 BTU/gal. Distribution costs of raw material, and finished product
are estimated at $42/barrel, giving 6,365 BTU/gal. The extraction, processing and distribution energy
costs for 2012, when summed, equal 70,000 BTU/gal
The ETP model fails the real world Btu empirical test. The ETP model is bullshit.
shortonoil on Sun, 27th Dec 2015 7:47 am
“The ETP model fails the real world Btu empirical test. The ETP model is bullshit.”
To burn 140,000 BTU of petroleum requires the production of at least 42,000 BTU of waste heat. If that production of waste heat did not occur the process would not go forward. It is required by the Second Law. You are really an ignorant, despicable little troll, and no one believes any of your bullshit!
By the way, we have had a number of comments from people in the industry asking if the Russians are following the Etp Model. Our response is that they probably came to the same conclusions as we did long before we published our report. Their intense interest in the model is only a confirmation of what they already knew. They are playing the end game, and playing it well!
http://www.thehillsgroup.org/
Apneaman on Sun, 27th Dec 2015 11:04 am
ennui2 says “The Oil Drum was just as confident in its stats and look what happened to them.”
What exactly happened to them? Are they all dead? Did their heads suddenly explode? Are they huddled around a fire in an old oil barrel under the overpass roasting rat meat on a stick? What horrors have befallen them due to their over confidence in statistics ennui? Since TOD ended Nate Hagens has earned himself another degree and is happily splitting his time between working his land and giving lectures. The Hooror! Gail Tverberg does not seem to be any worse for the wear either. In fact, I think all of them have moved onto other endeavors, just like people do everyday in cyber land. 8 years was a pretty good run. Let ennui’s warning be a lesson to you kids on what may happen if you get too confident with the stats.