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Friday, December 23, 2011

Unintended Consequences for Natural Gas as Drillers Turn to Oil

Link here.

The US is awash in natural gas, and the price for natural gas is incredibly low. Oil and gas producers are increasingly turning to more profitable oil. The only problem: they keep finding more natural gas.

A bit from the linked article above:
With U.S. natural gas prices maintaining a significant discount to crude oil, producers have every incentive to redirect both capital and drilling to oil and liquids-rich gas plays. And while that shift is paying off for corporate bottom lines, the domestic production mix has failed to turn as quickly as anticipated, putting further pressure on an oversupplied U.S. gas market.

Figures from the Energy Information Administration (EIA) show that gas production from the U.S. lower 48 reached a record 66.2 billion cubic feet per day in September, up 10.5 percent from the same month in 2010. That growth more than offset year-over-year declines in the Gulf of Mexico and Alaska.

The uptick in domestic gas production comes even as the number of rigs directly searching for gas in the country has slipped 6 percent since the start of the year, to 856, and the number of horizontal gas rigs has flatlined since late 2010, Baker Hughes data show. As such, growing lower 48 production has instead been the consequence of associated gas volumes produced by rigs targeting oil as well as improved recovery rates at the "liquids-rich" gas plays whose natural gas liquids (NGLs) offer producers robust economics even as gas prices languish.
Wow, it would be great to have an administration that was pro-growth. The domestic energy picture is incredible. We are in the process of extricating ourselves from two wars. We've extended the payroll tax break putting $40/month (as much as $80/month for many) back in the pockets of the average American (for two months). It could be morning in America if we just had a Reaganesque outlook.

2 comments:

  1. THE BENEFITS OF BEING "ON THE PIPE" (NATURAL GAS PIPELINE SYSTEM) BASICALLY THE "BENCHMARK" NATURAL GAS IS IN 1,000 CUBIC FEET OR TEN THERM.
    +++++++++++++++++++++++++++++++++++
    Fuel oil: $2.58
    LP gas (leased tank): $2.23
    LP gas (owned tank): $2.19
    Natural gas (MGE rates and charges): $0.86
    +++++++++++++++++++++++++++++++++++

    http://www.mge.com/about/gas/pricefaq/

    Residential Natural Gas Prices FAQ

    Read the Commercial Natural Gas Prices FAQ
    How do natural gas prices compare to other home heating fuels?
    What prices can we expect for the upcoming heating season?
    What can customers do about high natural gas prices?
    For more information
    Home heating oil and propane (LP gas) prices have been at record levels during recent years, although they have fallen significantly from their mid-2008 peak levels. Natural gas prices continue to be lower per therm than fuel oil and LP prices in the region, however.
    Average local prices per therm
    as of Dec. 1, 2011
    Fuel oil: $2.58
    LP gas (leased tank): $2.23
    LP gas (owned tank): $2.19
    Natural gas (MGE rates and charges): $0.86
    For Reference: 1 therm = 100,000 Btu (British thermal unit). One Btu is the amount of heat energy required to raise the temperature of one pound of water one degree Fahrenheit. The average MGE residential gas customer uses about 840 therms per year.

    ReplyDelete
  2. I just noticed the final line: "The average MGE residential gas customer uses about 840 therms per year."

    THE MATH:
    Fuel oil: $2.58 X 840 = $2167.20
    LP gas (leased tank): $2.23 x 840 = $1873.20
    LP gas (owned tank): $2.19 x 840 = $1839.60
    Natural gas (MGE rates and charges):
    $0.86 x 840 = $722.40

    ReplyDelete

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