RBN Energy: looking for signs of a natural gas production slowdown, part 2.
On Tuesday of this week the Energy Information Administration released its latest Drilling Productivity Report, projecting declines in US natural gas production volumes. Meanwhile, daily pipeline flow data shows gas production hitting record highs and gas storage fill could also be heading toward maximum levels. The CME/NYMEX Henry Hub natural gas price for the November 2015 is responding to these burgeoning supplies, settling yesterday at $2.518/MMBtu, near all-time lows for this time of year. Today we continue our look at the various sources of natural gas production data and what they tell us.
In the first part of this series we looked at the natural gas production data in EIA’s historical monthly report – the Natural Gas Monthly (NGM) – as well as two of its forward-looking monthly reports – the Short-Term Energy Outlook (STEO) and the Drilling Productivity Report (DPR). The September ending NGM published actual gas production volumes for July 2015 for the first time and showed that gas production rose to a record high in July, exceeding June production and also trumping prior expectations for July in the STEO and DPR data, both of which last month had predicted that July 2015 volumes would decline month-on-month. What’s more, the September 2015 STEO also raised its projections for August through December 2015 by about 100 MMcf/d.
The latest DPR released earlier this week (Oct. 13) revised its July 2015 gas production estimates up by a total of about 400 MMcf/d across all seven shale basins, and, further, it lifted its projections for August through October 2015 as well. Upward revisions were largest in the Utica and Permian basins. Unlike the STEO and NGM, however, the latest DPR continues to predict that the combined volumes from all basins declined between June and July and will continue to decline month-over-month through at least November.And look at this, something I've said from the beginning:
We explained last time that while the various EIA datasets are generally reliable for the historical periods, it isn’t unusual for the forecast periods to be revision-prone and underestimate growth in this environment where producers are rapidly adapting to lower market prices. In this case, standard model assumptions based on historical metrics, even recent history, become less accurate for predicting future production volumes. As we touched on last time, this is due to changes in producer productivity, including improved completion techniques and a focus on high-yield wells in “sweet spots” or increasing well completion rates, all of which can cause production to increase even as rig counts remain down. In effect this increases how much gas is produced per rig for new wells, an important metric if you’re trying to answer the question of whether production from new drilling is enough to offset existing wells’ natural decline rates. This measure is a key feature of the DPR, which provides historical “production per rig” for new wells and projects it forward for the three months after the last month of actuals published in the NGM. Because productivity is constantly changing, however, the forecast is subject to historical bias. But its “production per rig” metric does provide valuable market intelligence about the trajectory of efficiency rates by shale basin.
North Dakota celebrates $150 million solution to Williston traffic woes. The Bismarck Tribune is reporting.
A North Dakota coal testing plant near South Heart, ND, operated by GTL Energy, is moving overseas; can't win Obama's "war on coal." The Dickinson Press is getting out the champagne.
Two stories on US natural gas to Mexico (huge thanks to reader for sending me the links):
- Platts: Mexico to import 9 Bcf/d of natural gas from US under 5-year plan.
- Platts: Mexico invests bids for $10 billion of gas and power projects.
At least it's hard to catch. This is an interesting development.
No links; story everywhere: President Obama abandons plan to exit Afghanistan. Will maintain current level of troops; US troops will remain in Afghanistan even after President Obama leaves office (assuming he still plans to leave, January 20, 2017).
For those paying attention, and apparently the Obama administration was not, Russian military is using Syria as a proving ground; "west takes notice" -- New York Times.
Bible story: perhaps the most interesting story of the hour: earliest known draft of King James Bible found -- New York Times.
Bloomberg/Rigzone is reporting:
The world is awash in crude, but big oil companies are lining up to develop new fields in Iran even as they slash spending and abandon exploration elsewhere. One thing explains this paradox: cost.
The Middle Eastern country is one of the cheapest places in the world to tap new oil fields and pump from existing wells. The slump in crude prices makes Iran even more attractive to investors, assuming its nuclear deal with world powers leads to an easing of international sanctions, said the International Energy Agency.
“Costs are low because they have giant fields which produce economies of scale, the terrain is mostly straightforward and reservoirs are highly prolific,” Robin Mills, a Dubai-based analyst at Manaar Energy Consulting, said by e-mail. If prices stay low, production costs could drop even further in Iran and its neighbor Iraq, he said.
Cheaper barrels are a significant lure to companies as they eliminate jobs and defer expensive projects following a 40 percent plunge in oil prices in the past year. Royal Dutch Shell Plc abandoned its exploration campaign in the Arctic last month citing high costs, while Total SA reduced production targets after a fresh round of investment cutbacks. Both companies have dispatched executives to Tehran in recent months for talks with the National Iranian Oil Co.
While the cost of developing an oil field in Canada or the U.S. can range between $59 and $114 a barrel, the expense in Iran doesn’t exceed $31, the IEA said in an Oct. 13 report. The Persian Gulf nation has also worked up a “vastly improved version” of its oil contracts to attract international oil companies, according to the Paris-based adviser to 29 nations.