Overseas natural gas prices are even much higher than here. Thus the exports. Mexico border-crossing pipes are still well below capacity. But they are building more internal Mexico lines and his has allowed the usage of the border crossing pipes to increase (but still have more capacity available). MX is cutting LNG imports (mostly from the US) as the pipe gas is cheaper. But the LNG gas then moves to other markets (plenty of demand out there).
I do think the slow increase in drilling is not so much due to "discipline" but is a result of the political landscape. Not just the direct lease bans and pipeline approval hurdles. But the signal they send to industry that oil and gas is not politically favored in the US. Causes hesitancy to invest in large projects. Don't want to end up like the companies that bought shale gas lease rights in NY! Biden owns this natural gas and gasoline price rise.
1. Yes, the price differential (domestic vs export) is quite incredible. The big story here is how investors seem to be missing this story.
2. Discipline: I agree with you. I don't like the word "discipline" when it comes to drilling in unconventional shale. That's a nice word for OPEC+ when looking at quota "discipline" but not for US shale.
3. I can't talk for the rest of the oil patch, but in North Dakota, the long pole in the tent is not the number of active rigs. There is no reason for operators in North Dakota to add rigs: there are not enough frack spreads; fracking can't keep up with drilling. Those operators who have not already contracted frack spreads (or have their own in-house frack spreads) are late to the game -- costs have gone way up. Drilling new wells in the Bakken now is adding an unnecessary expense (see below).
4. In addition, in the Bakken, takeaway capacity is a concern. The DAPL remains at risk.
5. I don't have the ability to run the stats, but it's pretty obvious that North Dakota operators have been able to maintain production not through new drilling (newly drilled wells are immediately turned to DUCs -- except for maybe CLR, a couple others); not through DUCs (haven't seen many DUCs producing much when they come off the confidential list, BUT THROUGH BRINGING WELLS BACK ON LINE THAT WERE TAKEN OFFLINE IN CY 2020. I've been posting so many examples, especially Slawson wells, that it has become boring to post any more.
Overseas natural gas prices are even much higher than here. Thus the exports. Mexico border-crossing pipes are still well below capacity. But they are building more internal Mexico lines and his has allowed the usage of the border crossing pipes to increase (but still have more capacity available). MX is cutting LNG imports (mostly from the US) as the pipe gas is cheaper. But the LNG gas then moves to other markets (plenty of demand out there).
ReplyDeleteI do think the slow increase in drilling is not so much due to "discipline" but is a result of the political landscape. Not just the direct lease bans and pipeline approval hurdles. But the signal they send to industry that oil and gas is not politically favored in the US. Causes hesitancy to invest in large projects. Don't want to end up like the companies that bought shale gas lease rights in NY! Biden owns this natural gas and gasoline price rise.
1. Yes, the price differential (domestic vs export) is quite incredible. The big story here is how investors seem to be missing this story.
Delete2. Discipline: I agree with you. I don't like the word "discipline" when it comes to drilling in unconventional shale. That's a nice word for OPEC+ when looking at quota "discipline" but not for US shale.
3. I can't talk for the rest of the oil patch, but in North Dakota, the long pole in the tent is not the number of active rigs. There is no reason for operators in North Dakota to add rigs: there are not enough frack spreads; fracking can't keep up with drilling. Those operators who have not already contracted frack spreads (or have their own in-house frack spreads) are late to the game -- costs have gone way up. Drilling new wells in the Bakken now is adding an unnecessary expense (see below).
4. In addition, in the Bakken, takeaway capacity is a concern. The DAPL remains at risk.
5. I don't have the ability to run the stats, but it's pretty obvious that North Dakota operators have been able to maintain production not through new drilling (newly drilled wells are immediately turned to DUCs -- except for maybe CLR, a couple others); not through DUCs (haven't seen many DUCs producing much when they come off the confidential list, BUT THROUGH BRINGING WELLS BACK ON LINE THAT WERE TAKEN OFFLINE IN CY 2020. I've been posting so many examples, especially Slawson wells, that it has become boring to post any more.