Mmarrkk

Natural Gas: Grim Outlook Through Late 2010

Larry: I've looked at hundreds of shale wells production curves. Believe me, there are only a handfull that are "only" declining at 50% in the first year. Most are in the 70-90% range; the new play, the Haynesville, is running 80-85% UNLESS people are choking back the wells due to low prices and/or pipeline constraints. In those cases you will see very low to zero decline for a few months but that's not a good thing either.

Scary is probably too gentle!

Related to EOG's comments: maybe they believe gas prices are going up but they are funnelling more money to their "oily" plays. Actions trump words! Plus, why wouldn't the CEO pump gas prices? He owns a gazillion stock options that stand to benefit if people BELIEVE prices are going up!

Natural Gas: Grim Outlook Through Late 2010

Mad: Beg to differ with you...we have visited $2 this century. In fact, it was only a few years back when prices were below $2! And that's at the Henry Hub index. In the Rockies, we were selling gas at $0.50/mcf at the well head.

Natural Gas: Grim Outlook Through Late 2010

Ferdinand: NO THEY ARE NOT REALY 50%.

They are in fact more like 80% in the first year!! I don't have a link but Range Resources just issued a decline curve with their last quarterly review and it shows the numbers for many of the shale plays. In the Marcellus, month 1 rate is 5000 MCF/day. Month 13 is 1100 MCF/day. And those are averages across the month. The actual Initial Production rate on Day one is much higher than the Month One average of 5000.

So yes, these wells decline very quickly!


On Aug 18 09:03 AM Ferdinand E. Banks wrote:

> Interesting and very informative article. Are shale decline rates
> really 50%? I heard something lower, but if they are 50%, that changes
> a very great deal where the gas supply in the US is concerned.

Not Calling Crude Oil Prices a Bubble For Now

I love the idea of using nat gas for autos. HOWEVER, our supply of nat gas is not as unlimited as you seem to indicate. We IMPORT a lot of nat gas from Canada and used to from LNG. However, since the price of nat gas in the Far East is much more than here, almost all of the LNG has been diverted. That supply is growing too, but so is demand for Nat gas. With all of the drilling that's going on, we are still well behind last year in terms of nat gas storage. And, all of the new shale plays have wells that come on like gang busters but by the end of the first year, are producing only 30% of what they originally produced. So, its a treadmill that eventually will run out.

Also, as we use more nat gas for transport, our electric bills will start to rise as it is a huge source of incremental power fuel. In fact, this winter the "big news flash" will be how "outrageous" our utility bills are. We are putting gas in storage this summer at $12-13/mmBTU. Last year we were putting it in at $7-8. Guess what's going to happen to home heating bills this winter???? When grandma's gas bill doubles, the Dem's will be screaming again!

Again, I love the idea of nat gas; I'm a big investor in many companies focusing on nat gas. But it will not be a single solution to our problem.