Some of the people, such as Powers, who are realistically pessimistic about natural gas, have somewhat of a green agenda. They regard cheap ng as an impediment to increased renewable energy use. In their minds, renewable energy sources would be more attractive if ng was more expensive.
While they are correct about cheap ng being an impediment to renewable energy use, what they are missing is that the real winner to more expensive natural gas is coal -not renewables.
It is doubtful that there will be technological breakthroughs to make wind or solar competitive with fossil fuels, specifically coal, for power production. At least not until we run out of coal.
This blowout withdrawl of 162 is just another week of larger than expected withdrawls. The question is why. Obviously larger withdrawls are the result of either more ng being used or less natural gas being produced.
Cadmium has been saying for a long time that EIA data is bogus. The EIA relies heavily on data from Bentek. Bentek is the number one cheerleader for ng and their numbers and forecasts are suspect.
If you look at weekly changes in ng production as supplied by the EIA one finds a production decline in ng of 1.6% in 2012 and a production decline in ng of 2-3% in 2013.
My suspicion is that the long anticipated decline in ng production has already begun. As soon as the Marcellus joins the party and shows declining production we are going to have a train wreck.
Assuming that brighter days are ahead for coal with PRB coal going higher, ng being exposed as neither cheap nor plentiful and that idiot oBummer being a lame duck joke - the following scenario may play out.
Coal may be a little late leaving the station but when it starts it will be hard to stop.
One other issue I forgot to mention. Correct me if I am wrong.
To keep total natural gas production stable, production from shale plays has to increase. Staying stable is not good enough.
This is because ng gas from conventional plays has been declining since 1971. Conventional natural gas still produces over 60% of total natural gas.
When shale natural gas production starts decreasing, or even is stable, along with the built in production decreases from conventional natural gas - we are going to have a train wreck.
Cadmium is correct about data from the EIA. Also, data from Bentek is suspect. Bentek is the number one cheerleader for natural gas.
For example, the EIA had a recent report where they listed the ng production from about 8 shale natural gas fields. They were trying to show that natural gas production was stable.
Sure enough, some fields like the Marcellus were increasing production and others, like the Haynesville, were decreasing. The one field that they did not include was the Barnett.
The Barnett is the oldest ng play and still the third largest producer of shale ng. The Barnett is an example of what is happening to mature ng plays and what will happen to newer ng plays as they mature. The ng production from the Barnett is falling like a rock. From well over 6 billion/day in 2011 the Barnett is now under 5 billion/day. No wonder the EIA omitted the Barnett. Including the Barnett would have ruined their rosy scenario of increasing ng production
Also interesting was that associated gas produced from oil plays such as the Eagle Ford and the Bakkens did not amount to much.
I have seen this movie before. Wait a few years and PRB coal will be priced much higher. The global warming nonsense will be replaced by global cooling. Wind and solar power will be considered to be high priced frauds. Natural gas will find its niche at $6-7. Met coal - who knows - mainly because the world economy is dead as long as we listen to the greenies.
Relax, take a deep breath and watch what unfolds.
Boone Pickens worked his first fracked well in 1952. He knows this business.
In the summer of 2012 when NG was in the 2 dollar range he said NG would be $4.50 within a year. Everyone thought he was blowing smoke. Within a year NG was $4.40
Now he says that, natural gas will be $5 this winter.. In 2015 his prediction is $6 natural gas.
You can listen to pantywaists from GS or wherever, who don't know the difference between a horizonal well and a vertical well, or you can listen to someone who has made a fortune getting his hands dirty working the fields.
Natural gas is going higher.
Now you need to decide whether this will benefit coal companies.
It is really difficult to get a handle on natural gas production. Just ask the people waiting for royalty checks who depend on accurate natural gas production numbers..
The one figure that might be accurate is natural gas storage. They must know how much natural gas is in storage - you would think.
If natural gas production is increasing which is what the natural gas companies claim while ng for power production is decreasing which is what the eia says - you would think we would have smaller ng storage withdrawls. More ng being produced and less ng being used euals more in storage.
That is not happening. I suspect ng production is exaggerated which would explain the healthy ng storage withdrawls.
I have a hot job tip for you. Just send him a list of your posts and Jim Cramer will hire you on the spot.
ACI mentions that acreage on their profile on Yahoo. It is not a secret.
Of course ACI has acreage. If ACI has 5 billion tons of coal reserves they have the acreage to go along with it.
Does this acreage have any NG value? Who knows. NG producers are cruising for a bruising. Wait until NG is at $6-7 and maybe NG from fracking will be profitable. It is not profitable now.
The other issue is the issue of sweet spots. In all of Pennsylvania, only 6 counties have NG which might be profitable. The rest of Pennsylvania, as far as we know, is marginal to worthless as far as NG goes. . And even the sweet spots are uneven. Dry wells are drilled next to productive wells. Who know if ACI has acreage in sweet spots.
You can get a pretty good idea where natural gas production is going by looking at capex spending.. Capex spending need to be stable to maintain current ng production.
Some companies like CHK are decreasing capex spending while others are increasing capex spending. Difficult to interpret because it is unclear whether capex expenses are going toward oil plays or ng plays.
Then there is the pesky problem of capped or unconnected ng wells being brought online.
Sooner or later ng production will mirror capex activity.
Time to disband the EPA and send them to China. They can have it for free - in fact, we should pay them to take it.
If enthusiasm and fairy tale dreams were all that were necessary - we would have a solar future. Unfortuneately these solar power cheerleaders are looking at a donkey and trying to call it a racehorse. That dog can't hunt. That horse can't get out of the starting gate.
Solar power has been around a long time and solar power has certain uses but baseline power production is not one of them.
Solar power produces 0.4% of our power. Very little energy at a very high price. The final nail in the coffin will be when we stop listening to the Al Gore's School of Meteorology and start listening to credible meteorologists who have always questioned climate sensitivity i.e. how much C02 influences climate.
It appears that C02 has very little influence on climate and the influence of C02 on climate decreases as C02 levels rise.
Thanks for your post. I have been very interested in how much NG is produced as a byproduct of oil/liquid plays. I know that 2-3 years ago only 2-3% of shale NG came as a byproduct of shale oil plays. That has probably changed because there is a higher interest in shale oil plays now and less of an interest in pure shale NG plays.
The Bakkens, which produce a lot of oil, are notoriously sparce in NG. The total estimated NG reserves in the Bakkens amounts to about 3 months of USA NG demand. The Utica is a mystery. Devon and Total pulled out of the Utica because they thought it was sparse in oil. However, the Utica does have oil production and liquid production in addition to NG. In the Marcellus, northeastern PA is mostly NG but the three counties around Pittsburgh have shale plays which produce NG/oil/liquids. The Haynesville in straight NG. Not sure about the different plays in Texas.
Even though conventional NG production is declining they still produce about 60% of our NG.
Anyway, I am interested in how much of our natural gas comes as a byproduct of oil/liquid plays. My guess has always been that about 10%, maybe less, of our shale NG now comes from oil/liquid plays. That would be about 5% of our total NG when you factor in NG from conventional plays.
However, I haven't seen any numbers to support that guess and it could be way off.
thanks. that number fits well with Cabots 3rd quarter numbers.
Now, if the NG producers could only get rid of those pesky capex expenses which, as Cadmium has stated, are much higher than $5 million per well.
The other issue is how does the average well produce. If you take Dr. engelder's numbers i.e. 3693 wells have produced 4.8 trillion or about 1.3 billion per well. However, as Cadmium has said, about 8000 wells have been drilled. Apparently one half of the wells were duds and have stopped producing. This decreases production per well by one half.
Sure, these wells will keep producing but at ever decreasing levels. More and more will be put out to pasture.
Obviously I am missing something because this is absurd.
I am not sure ACI is being manipulated. I think it is more of a question that mr market is missing the boat on aci.
ACI is the only coal producer in all major coal plays and 3 of those coal plays - PRB, bit coal in Colorado/Utah and the Illinois Basin, are profitable and their met coal holdings will soon be profitable.
Peter Snelgrove, billionaire stock investor, always claimed he made his money off the stupidity of others. Right now, anyone overlooking the value of ACI, is pretty stupid.
Good question. Chesapeake has said that pure gas plays make no sense under $6.50. That is about what my guess is but nobody knows.
At todays ng prices I do not know what CNX is doing. I have studied their balance sheets and to produce $200 million dollars in revenue from ng they have invested $150 million in capex expenses. It is no wonder CNX is doing what most NG producers are doing - selling assets to prop up losses from their ng operations - not to mention cutting their dividend in half.
But, the big picture is, NG is not going anywhere. Someday these ng producers will be making money but not until ng is priced at , who knows, $6-7. Even at $6-7 ng is a bargain when you look at global prices for ng.
Just a thought, my guess is that the price of ng will eventually be about $10. Once the ng producers have used up the sweet spots and are in the weeds - watch out. And this idea that ng producers have somehow found a way to more efficiently extract ng is, more or less, nonsense. You cannot get blood out of a turnip and there is only so much ng you can get out of shale.
Well, Jimjohn, if you believe that nonsense I have a proposition you will probably find irresistable. My buddy Bernie Madoff and I will sell you the Brooklyn Bridge. Just send us a certified check. Any amount will be accepted