Warm day in the fall. Cold winter days are on the way. Steve called and told me his Ballard Petroleum check was in. He says that they have drilled sixteen new producers this quarter and that the check was up 500% this month. Said Ballard was wanting to continue drilling and add about 60 wells the next 9 months to the lease.
He was estatic. It set me to wondering. I drove west of town toward Grand Junction last night past Rifle to the gas fields located around Rulison where the atomic bomb was exploded in the sixties to fracture the gas field. What I saw astounded me. Every twenty acres to forty acres is a well head. I counted 11 drilling rigs working last night in the full moon. Gas flaring was occuring in 7 locations and the enormous yellow flames shot into the air 50 to 100 feet marking the location of another well about to be valved off and hooked to the pipeline.
Then I found this.
biz.yahoo.com
Now I am wondering...... How much gas is there ??????
How high can the price go????
Do the people in the cities have an idea of the price of gas going up and oil at an all time high?
Or
Are they too busy watching, "Survivor" to see that the show may be in their town this winter.
I am not a doomsayer, BUT......
$50 oil and $7 gas could make this scenario possible.
both up today..... Oil up .37 to $34.39, NG up .056 to $5.251
Report from eea-inc.com
Gas Prices
Natural gas has entered a relatively high price regime during the past year. The primary reasons
are a tight gas supply/demand balance; the year-over-year decline in storage inventory; and
relatively high oil product prices, with which gas competes. The tight supply/demand balance
has arisen because of:
Declining gas supply deliverability, resulting from low drilling activity caused by the 1998
collapse in oil prices. Low oil prices caused a “cash crunch” for producers, reducing their
expenditures for gas and oil drilling during 1998 and 1999. Unlike world oil productive
capacity, most of the connected gas productive capacity in North America is in use most of
the time. There is no unused source that can be quickly “turned on”.
Increasing gas demand, mostly a result of increasing power generation gas demand. Power
generation gas use is increasing as new gas-fired capacity is added to satisfy growth in
electricity demand. Power generation gas use is also up in response to recent declines in
hydro generation. A rebound in industrial gas demand after the Asian economic crisis is also
contributing to increasing demand.
The declining gas deliverability and increasing gas demand have increased deliverability
utilization upwards of 98 percent. At these utilization levels, and given relatively high oil prices
and low year-over-year storage inventory, EEA projects that the Henry Hub gas price will
average over $3.30/MMBtu throughout 2000-2001 1 . Critical to this conclusion is an assumption
for near-normal winter weather rather than the warmer-than-normal winter conditions over the
past few years 2,3 . The high gas price persists even as E&P companies ramp-up gas directed
drilling activity. However, upward pressure on gas prices should abate in 2002 as the impact of
gas supplies developed in response to the high prices is felt.
After 2002, EEA projects that deliverability utilization will continue to remain above 98 percent,
as gas demand growth, largely a result of sustained increases in gas use by power generators, will
press gas supply. Given the continuation of high deliverability utilization, EEA projects an
average Henry Hub price of over $2.80/MMBtu for the remainder of the decade. The price in
the later years of the decade, although high, is below the 2000-2001 price because of lower oil
product prices.
1 All prices presented in this report are 1999$/MMBtu cash prices at major supply and market area hubs in the North
American gas transmission system. 2 The Base Outlook assumes the 1970-1999 average of heating and cooling degree-days for the future. 3 EEA’s Gas Market Data and Forecasting System provides modeling of different weather conditions. The fall issue
of the Gas Market Compass will present results of a much warmer-than-normal winter weather scenario and a much
colder-than-normal winter weather scenario, showing the impact of weather on gas demand, prices, supply, and
storage activity. Also, EEA’s Monthly Gas Update subscription service presents weather-based probability
distributions for natural gas prices. |
