| | | Great response, thoughtful analysis & good question. The depletion issue on a well by well basis is well understand as in individual wells in your Marcellus or the deeper Utica which is in your back yard. From what I have seen & heard, current US Domestic NG production declines by between 22-24%/year. The historical Conventional NG production declines @ 12-14%/year. This % decline as a fact has been well documented by EOG because of the interest of the now departed CEO. Today Conventional & Unconventional NG production are on par, that is, each are contributing ~33.5 BCF/day. If the overall Domestic production base is declining @ 22-24%/year that strongly suggests Unconventional Domestic NG is declining@ 32-34%/year. Now an example, a new Marcellus pipeline bringing a new 0.5 BCF/day to the market place on 1/1'14. Fifty wells, each producing 10 MMCF/day on day one, also 1/1/'14. One year later, that pipeline is transporting ~150 MMCF/day, the 70% decline rate for the individual wells. Thirty five (35) new wells need drilling in the corridor served by our new pipeline, simple right! Well on 1/1/'14, ~12.5% less rigs were working the Marcellus & I'll complicate our new pipeline. It is located in the dry gas window of the Marcellus. Guess what, few if any new wells are being drilled in the dry gas portion of the Marcellus in 2014.
& I suspect you will say, never say never & you are 100% correct, as you usually are. To quote, "There are always mitigation factors that emerge that are not apparent at the time when things look bleak." Which is appropriate here as applied to my simple model.
In closing, you already know by mid-year '14 Domestic NG production needs to increase by >3.0 BCF/day by all possible venues. Eventually the Marcellus inventory of already drilled wells waiting on pipelines-WOP!-will evaporate & then bad things will happen. I believe we will muddle through, but that will take a NG strip of ~$6.00/MCF/day for 18-24 months. |
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