When the price is still not right
By Zain Shauk, Houston Chronicle : July 22, 2013 : Updated: July 22, 2013 8:34pm
mysanantonio.com
...But the price remains too low to be of interest for most producers hoping to make a profit, said James Sullivan, senior analyst for Alembic Global Advisors, which has been tracking natural gas prices.Natural gas prices probably would have to approach $5 to encourage more drilling since most companies do not believe they can produce it profitably for much less, Sullivan said, but the short-term price outlook remains low.
“In the shale era, the average value through the course of the year ... should be somewhere between $3.50 and $4.50,” Sullivan said.
Prices are staying low because of sweeping efforts to produce more oil from shale plays in the United States, including the Permian Basin and Eagle Ford in Texas.
Most of those shale oil wells also produce large quantities of natural gas, putting downward pressure on its price, Sullivan said.
“There is a fair amount of gas supply being added that is not reliant on the gas price,” Sullivan said. “In other words, oil and liquids-rich drilling in the Permian Basin and the Eagle Ford is producing as much as 30 percent, or in some cases 45 percent natural gas. That's natural gas that will be drilled at any gas price. As long as oil prices remain high, people are going to drill that.”
The only area that has seen growth in natural gas production, despite the low prices, has been the Marcellus Shale region in the Northeast. Companies still are drilling actively there because the wells are comparatively shallow and highly productive, making them economic, Sullivan said... |
