the media are going on and on about a glut of natgas and all analysts are certain of oversupply for years, driving drilling and production cutbacks... yet, power plants are switching from coal to nat gas at unprecedented rates; new trucks that run on natgas coming out from GM; manufacturing has been one of the bright spots in u.s. economy and highly depends on natgas across a range of industries; farming season and use of fertilizer, also dependent on nat gas; lng will be coming on line over next several years; .... it's a perfect storm for swing to a natural gas shortage and b 2013, ECA's call to curtail hedges will be hailed as contrarian genius.
800BCF is less than two weeks of demand. A hot summer will burn that off quickly. Demand looks like it's going up 10% this year while production will be down 10%. That's a gap of 5 TCF. With only 1TCF of excess inventory, there's still a 4 TCF gap. Even if the gap is half that much, we are going to have a big price shock.
A lot of the shale plays are loaded with NGLs and so where ever they exist there will still be a lot of drilling. US produces over 2.2 million barrels a day and number is rising. When you drill in wet plays gas is more like $8 - $10 per 1000 cu/ft than $2.40. All the pipelines and midstream companies are gearing up. They will be spending billions of dollars in this area.
It's real simple: growth at 10%. Production flat. Oversupply of 1 TCF is 2 weeks of demand. As you say, we will be in shortfall by 2013 and prices going into the new year will need to be radically higher with bigger production cuts coming. You can't take a year off from drilling nat gas wells and not see production fall off a cliff!