Natural gas glut means drilling boom must slow

[Zippyjuan]

http://enews.earthlink.net/article/b...e-4a2a910d50d2

Shows the boom and bust nature of energy. If the price of oil were to drop significantly (which I don't expect though), the oil shale boom in South Dakota would go bust again too (like it did in the 1980's and 1960's).

JONATHAN FAHEY
From Associated Press
April 08, 2012 4:18 PM EDT
NEW YORK (AP) — The U.S. natural gas market is bursting at the seams.

So much natural gas is being produced that soon there may be nowhere left to put the country's swelling surplus. After years of explosive growth, natural gas producers are retrenching.

The underground salt caverns, depleted oil fields and aquifers that store natural gas are rapidly filling up after a balmy winter depressed demand for home heating.

The glut has benefited businesses and homeowners that use natural gas. But with natural gas prices at a 10-year low — and falling — companies that produce the fuel are becoming victims of their drilling successes. Their stock prices are falling in anticipation of declining profits and scaled-back growth plans.

Some of the nation's biggest natural gas producers, including Chesapeake Energy, ConocoPhillips and Encana Corp., have announced plans to slow down.

"They've gotten way ahead of themselves, and winter got way ahead of them too," says Jen Snyder, head of North American gas for the research firm Wood Mackenzie. "There hasn't been enough demand to use up all the supply being pushed into the market."

So far, efforts to limit production have barely made a dent. Unless the pace of production declines sharply or demand picks up significantly this summer, analysts say the nation's storage facilities could reach their limits by fall.

That would cause the price of natural gas, which has been halved over the past year, to nosedive. Citigroup commodities analyst Anthony Yuen says the price of natural gas — now $2.08 per 1,000 cubic feet — could briefly fall below $1.

More at link. Says some producers are shifting from gas to oil.

[Dforkus]

The discrepancy between nat gas and oil has never been greater.

If this keeps going, I think Nat gas will come on as a vehicle fuel. Fleet vehicles like garbage trucks and taxis are already going in that direction.

Makes sense when you can fill up at the equivalent of 1.00 a gallon.

Personal vehicles may go in that direction too. The nat gas civic is getting much better, they've got the range up to 250 miles which is very usable, now we just need more service stations offering CNG fillups. It's also possible to build a vehicle that can run on CNG or gasoline at the press of a button, but it adds a couple grand to the cost. Still, that's at current levels, economies of scale should help that.

The money is right just yet, for a cheap bastard like me that drives a 10 year old paid off econobox, but its going it that direction. A tipping point will be reached in the next few years I think.

There's also Japan and Europe which are racing to shut down all their nuclear power plants. That juice will have to come from somewhere, and natural gas is probably it. So there a good likelihood of an export market developing.

Just sayin, cramer and the usual gang of idiots are telling everbody to look at oil company's exposure to natural gas as a percentage of their holdings as a negative indicator. I think that is very short sighted. In fact, in the commodity world, I think going long on nat gas, at its current depressed levels, makes more sense then chasing previous performance elsewhere.
It may drop to 1.75 or so, but a floor will get in at some point.

[Jordan]

The discrepancy between nat gas and oil has never been greater.

If this keeps going, I think Nat gas will come on as a vehicle fuel. Fleet vehicles like garbage trucks and taxis are already going in that direction.

Makes sense when you can fill up at the equivalent of 1.00 a gallon.

Personal vehicles may go in that direction too. The nat gas civic is getting much better, they've got the range up to 250 miles which is very usable, now we just need more service stations offering CNG fillups. It's also possible to build a vehicle that can run on CNG or gasoline at the press of a button, but it adds a couple grand to the cost. Still, that's at current levels, economies of scale should help that.

The money is right just yet, for a cheap bastard like me that drives a 10 year old paid off econobox, but its going it that direction. A tipping point will be reached in the next few years I think.

There's also Japan and Europe which are racing to shut down all their nuclear power plants. That juice will have to come from somewhere, and natural gas is probably it. So there a good likelihood of an export market developing.

Just sayin, cramer and the usual gang of idiots are telling everbody to look at oil company's exposure to natural gas as a percentage of their holdings as a negative indicator. I think that is very short sighted. In fact, in the commodity world, I think going long on nat gas, at its current depressed levels, makes more sense then chasing previous performance elsewhere.
It may drop to 1.75 or so, but a floor will get in at some point.

I agree. Natural gas is the best thing we've got going in this country. It comes at a perfect time when capital is cheap, and therefore we have two tailwinds for capital intensive business coming to the United States. Three, if you count rising labor prices in the emerging markets.

Natural gas will become a transportation fuel. But first, the whole mess needs to be sorted out. There's no good indication for NG economics, no real consumers at scale, and no one has a good eye for the real cost of production at given price points. Natural gas exports could be HUGE for the United States. But exporting facilities are years away. I think the best outcome, and most likely outcome, is that natural gas gets converted to electricity for industry, which is just of the many incentives to start making stuff in America again. Fleet cars are certainty, too. But I find it hard to believe that there will be a big shift toward NG cars for consumers...too much infrastructure investment to necessitate such a switch, IMO.

[Zippyjuan]

It can certainly be done. I knew of some people who converted their car to run on natural gas in the 1970's. They do require more space for storage of fuel and have shorter ranges than petroleum cars- though much better than electric cell cars. http://auto.howstuffworks.com/fuel-e...fuels/ngv4.htm

[Simple]

Diesel vehicles can inject LNG as a fuel additive for better mileage. Its similar to the old propane kits, but LNG is much less likely to cause pre-ignition problems.

[fisharmor]

They put the surplus corn in gasoline... so does surplus LNG mean we have to eat it?

[Jordan]

It can certainly be done. I knew of some people who converted their car to run on natural gas in the 1970's. They do require more space for storage of fuel and have shorter ranges than petroleum cars- though much better than electric cell cars. http://auto.howstuffworks.com/fuel-e...fuels/ngv4.htm

I'm not doubting that it can be done. For example, all the taxis, city buses, garbage trucks, and city buses all run on natural gas. There is only one place where they can refuel, but it makes sense as none of vehicles are ever taken out the city. For natural gas to become a real alternative with consumers, the infrastructure necessary makes it a difficult alternative. In-home natural gas pumps for a nat-gas car are supposedly something like $10,000 a piece. I imagine commercial models for gas stations are even more expensive.