Remember the mine example, once you dig up all the easy stuff it gets tougher and you can’t get it out as fast. ![]() This chart shows that to recover more natural gas, prices need to rise from $2.50/MMBtu to $5.15/MMBtu to recover another 60 trillion cubic feet which is 10 years supply - AT PRESENT RATES OF PRODUCTION. That flow rate is equal to 6 trillion cubic feet per year. This is the Haynesville shale field located in northern Louisiana and east Texas, presently making about 16 BCF/day of natural gas. In 2038, what will these 7 shale fields be making and the answer is a lot less than they are making now and that is a point that no one seems to be getting. The question has to be, what will these fields be making in another 15 years. People seem to forget than only 15 years ago, these same shale fields that are now over 80% of US natural gas production were only making 21 BCF/day and supplying less than a third of US natural gas. So we don’t have a problem? No, we have a problem, just not this year. It means that a higher price is need to sustain the required amount of drilling to keep production at 98 BCF/day and an even higher price is needed to increase production above that level. Does that means we are running out of natural gas - No. Which is about 645 active drilling rigs, and yep, in June we only had 616.īottom line - as long as natural gas prices are less than $3/MMBtu we are going to see a decline in US natural gas production. That is 3.3 BCF/day of production that needs to be replaced every month by new wells that need to be drilled. Most of that decline (47 rigs) occurred in shale fields that are predominantly gas suppliers.įourth - Shale fields have very high rates of decline, in one month without new drilling shale natural gas production will drop by about 3.4%. Third - that low price is discouraging drilling activity, US rig count in the shale fields has fallen from 699 rigs in January 2023 to 616 rigs in June 2023. Those high storage levels are keeping prices low. This is the result of a mild winter combined with very high levels of domestic production. Second - US Natural Gas Storage is running high, the EIA’s Weekly Natural Gas Storage Report indicates that stockpiles are 24% higher than last year and 14% higher than the 5 year average. That low price is not encouraging drilling operations. This is due to four factors -įirst - worldwide natural gas prices are low, $2.51 per million British Thermal Units (MMBtu) when they were in the $4 to $8 range last year. The Energy Information Agency ( EIA.gov ) is now predicting in their latest drilling productivity report that US shale production will plateau and will slightly decline in August 2023. Let’s understand that the seven major shale fields in the US produce 98 billion cubic feet per day (BCF/day) which is the massive lion’s share of US production. That is what we are facing in the shale natural gas fields. The problem is for the people you have been supplying, suddenly they are getting less product per day from you and that shortfall needs to made up from other sources or they have to reduce their demand to live with what you give them and either way that will drive up prices. You may still have 50% of the resource left in the mine, but you are going to need higher prices to get it out of the ground and you won’t be able to get it out as fast, so your rate of production will decline. ![]() Now once you have produced those areas of your mine, you are now left with the harder areas to extract and those areas that don’t produce as well. That is the super good acreage, the acreage that is very profitable. you don’t need to sell the product at expensive prices to make money. Part of the mine is easy to access, easy to drill out, and is extremely profitable, i.e. Because one of the most basic rules in the oil/gas industry is, not all acreage is created equally. Natural gas production is a balancing act between how much drilling we need to get the natural gas out of the ground, the price of the natural gas to support that level of drilling, and the quality of the reservoirs we are drilling. And using these, people are saying that we have years and years of production left, but that is missing the point. There are estimates from the Energy Information Agency and the US Geological Service about how much natural gas remains in the shale formations that America is presently drilling.
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