Mmarrkk

Shale Gas Companies: All Talk, No Walk?

I find the quoted cash operating cost of $3/mcf extremely high. I think it is more like $1/mcf. Throw in $0.50/mcf basin differentials to HH and again that much for overhead and transport, you get to maybe $2.

Looking at some of the reported monthly production numbers for Haynesville wells, there are several that are averaging well over 10 MMCF/day for the first few months, not hours.

Plus, many of these shale players have gas hedged at $8-9/mcf through the middle of 2010. At the rate the wells produce, they can get the drilling costs payed out during this period of high hedged prices and when the go unhedged, they are only incurring the operating costs.

I think the shale model CAN work if folks get their costs down and avoid escalation in drilling costs.

Where is the North American Natural Gas Market Headed?

I believe your engineering on the coalbed methane (CBM) is off a bit. Yes, the rate increase initially as the coal de-waters and the pressure is reduced. However, CBM wells also experience hyperbolic decline like shale gas wells and eventually decline to a very small flow rate. Now, that flow rate will last for a long time, but it will be very very low. The plot shown in the EOG study includes CBM wells, a lot of them as CBM has been a major producing source for many years. BP, ConocoPhillips and Burlington (now part of COP) have been producing CBM in the San Juan basin for years. But the wells have high decline rates too. Get your reservoir engineering straight. Natural Gas is in tight supply and the land owners fight like hell to keep us from drilling for it. I've worked 3 projects involving CBM and only one of them has been economical. The others were fraught with delays and rapid cost increases due to land owner and greenie weenie fights against us.