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« From the Top. It's Secret - Josh 246 | Main | A right royal showdown »
Friday
Nov292013

Counting the cost

The theme of this morning seems to be shale gas, and what effect it's going to have on prices, and there is still a distinct lack of clarity about which shale plays are being discussed in relation to the European market.

Lord Browne, former head of BP and now the chairman of Cuadrilla was offering up his views on the subject in London last night, saying that shale is not going to reduce prices in the UK. This is a view that we hear a lot, and seems to be based on the Poyry report that was discussed here a few weeks ago. However, as I understand it, this report looked at the effect of exploitation of the Bowland on UK gas price, concluding that because the UK is connected to mainland Europe by a number of gas pipelines the benefits of the gas would be shared with our European friends. Prices would therefore only be expected to fall by 4%. 

Of course, as Tim Worstall noted at the time, a 4% benefit right across Europe is an awful lot of benefit, but to understand the effect of shale gas on the UK it would actually have made more sense to look at the effect of European shale on European gas prices. Fortunately that information was in another Poyry report which I mentioned here the other day, and which concludes that we could be looking at 11% price reductions.

Given that the government is betting the house on huge price rises, I think we need to look to our wallets.

In somewhat related news, Euan Mearns has picked up on a particularly vigorous comment thread here at BH and has been looking at the breakeven point for shale wells, concluding that it's currently somewhere above $4 per mmbtu, a figure that is well below current market prices in the UK. So there should be no shortage of people looking to exploit UK shale plays.

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Reader Comments (63)

…it would actually have made more sense to look at the effect of European shale on European gas prices. Fortunately that information was in another Poyry report which I mentioned here the other day, and which concludes that we could be looking at 11% price reductions.

Given that the government is betting the house on huge price rises, I think we need to look to our wallets.

This is sterling stuff. Cross-European sterling stuff :)

I've been waiting to read that 11%. We should bear in mind that, in the wise words of Tamsin Edwards combined with Niels Bohr, models are always wrong, especially about the future. But 11% certainly feels more like it. Think what a massive dent that could make in fuel poverty and what an increase in our competitiveness into the bargain. Sincere thanks for the questions you keep asking on this Bish.

Nov 29, 2013 at 9:26 AM | Registered CommenterRichard Drake

The biggest benefit of "our" shale, is to reduce dependence upon Russian methane.

But putting the monetary value that is challenging.

Nov 29, 2013 at 9:30 AM | Unregistered CommenterJoe Public

Sorry I'm with Chandra on this one. It's just more unverified crystal ball gazing.

Sure let those who want to get on and do it (without green interference) but don't try and pretend we know the state of play in 2050 (from your link) to anything like this precision.

Has anyone ever been successful looking that far ahead?

Nov 29, 2013 at 9:36 AM | Registered CommenterSimonW

Hi Andrew, I learned a lot from that thread, both about the way parts of society view the energy issue, but also towards the second half some posters provided a lot of useful information - which I hope I have taken into account in today's post. Consumers need to distinguish between unnecessary high energy prices down to government legislation and higher energy prices because the cheaper options have been used up (or their use banned such as coal).

With the current market, I don't see any economic obstacle to shale development in the UK. But I do wonder about the undue influence of environmental pressure groups.

My current take on US is that growth in gas supply has slowed (I could be wrong) and that prices will continue to rise there until some form of market equilibrium is reached. Personally I don't see LNG exports from the USA near term (I could be wrong) which is likely a good thing long term for the UK. Should UK prices be dumped by cheap imports then this could undermine the viability of indigenous developments.

I'll call by a few times over the next few days to answer questions. E

Nov 29, 2013 at 9:38 AM | Unregistered CommenterEuan Mearns

<B>SimonW: ... don't try and pretend we know the state of play in 2050 (from your link) to anything like this precision.
Has anyone ever been successful looking that far ahead?
<B>JK: That is 37 years into the future:
If you were predicting 37 years into the future in 1908, the year of Ford's model T, you predicted freeways before the first car was mass produced.
If you were predicting 37 years into the future in 1904, the year of the Fleming Valve, you predicted the first experimental TV broadcasts before the advent of electronics.
If you were predicting 37 years into the future, you would have predicted the advent of jet travel before the first jet engine worked.
If you were predicting 37 years into the future, your would have predicted the microprocessor before the first electronic computer.
If you were predicting 37 years into the future, you would have predicted the first commercial transistor in 1911 and predicted the integrated circuit before the invention of the transistor.
Bottom line: long range predictions are the product of the deluded

Nov 29, 2013 at 10:10 AM | Unregistered Commenterjim Karlock

Different people will glean different points from the Euan Mearns essay that The Bishop referenced. As an Australian who used to work in resources, in the context of what GB should do, I would emphasise that –
1. The best assessors of the economics of shale gas from GB are the intending producers.
2. As EM noted, “the profitability of individual companies will depend upon the quality of their overall portfolio”. Of course, projected profitability is a major go/nogo. There are some large unknowns that can badly upset economics and portfolios, such as Sovereign risk and future warfare.
3. GB could do worse than study the USA examples and plan with a lag of a few years to mimic the best patterns. Take advantage of factors like coming equipment availability such as EM notes “(in the USA) there are signs that the sharp slowdown in shale gas drilling is beginning to feed through to a slowing of gas production rate”.
4. Armchair estimations are disadvantaged because of imperfect information. For example, if an activist like greenpeace floats a cost analysis, it’s best to junk it because these guys are really underinformed as well as having a negative agenda. We just used to tell them to go away.
As for Lord Browne, read the unpleasant bio details and ask yourself how much trust is warranted.
Related indirectly, how Shetlands region fields at Foinaven, Schiehallion, Clair & Magnus going?

Nov 29, 2013 at 10:18 AM | Unregistered CommenterGeoff Sherrington

Nov 29, 2013 at 9:38 AM | Unregistered Commenter Euan Mearns "Consumers need to distinguish between unnecessary high energy prices down to government legislation and higher energy prices because the cheaper options have been used up".
Yep, this is a point I've been stressing for 30 years with regards to peaceful use of nuclear energy. Australia has no electricity from nuclear. The 'social cost' that you mention is too often factored into analyses as if it was immutable. So now I tell people to look at the cost of reactors in China, where they have a different understanding (DU) about how to treat unhappy activist people.
It comes down to politicians putting the state of the nation before the state of their election prospects.

Nov 29, 2013 at 10:27 AM | Unregistered CommenterGeoff Sherrington

Very well said Geoff.

Nov 29, 2013 at 10:27 AM | Registered CommenterRichard Drake

One of the biggest cost reductions for the general public is that HUNDREDS OF BILLIONS OF POUNDS of our hard earned money would not be extorted from us to pay for windmills, mirrors and ground unicorn horn power generation.

By all means let's assume shale leaves prices as they are for uk consumers. We would still be making savings of two or three hundred pounds a year EACH in our energy bills because we aren't being charged for The Great Green Con (tm)! Imagine the impact an extra three hundred quid in your pocket would have on our real economy?

Drill baby, drill!!!

Nov 29, 2013 at 10:30 AM | Unregistered CommenterMailman

If the 'benefit' of Bowland shale gas were to be spread across Europe, doesn't that imply that we would be getting a massive boost to the balance of payments from all those exports?

Nov 29, 2013 at 10:32 AM | Unregistered CommenterBloke down the pub

Price of gas will depend on taxes/licences the gov decides to charge
- If I am wrong will someone please explain why.
- The stuff comes free out of the ground, if production costs turned out to be very cheap the gov would bump up the tax in such a away to keep gas corp incentivised.
- if production costs turned out to be very expensive then that is the gas corps problem.

- The main people who have a worry are those whose biz is dependent on fossil fuels getting more expensive... like Ed Davey, MAD-DEC & the wind subsidy corps.. They have a problem if gov didn't tax up shale gas.

- If you had money invested in the energy subsidy farming biz you'd be going all out to get fracking stopped.
- and on the flipside if you are government then if you allow fracking then there is possibility of increased $$$ coming in and possibility of setting taxes in a away that retail energy prices fall.
- That's what new business is about not the certainties ....but the POSSIBILITIES

Nov 29, 2013 at 10:39 AM | Registered Commenterstewgreen

@ Geoff "how Shetlands region fields at Foinaven, Schiehallion, Clair & Magnus going?"

From memory, Foinaven and Schiehallion both getting fresh water (as opposed to seawater) injection to boost recovery (enhanced oil recovery - EOR). Schiehallion getting / just got a new FPSO - floating production storage offloading vessel. Clair, they are in process of adding two new platforms, production + 150,000 bpd or that order. Magnus getting gas from Foinaven Schiehallion for EOR. But in general UK oil and gas production is in free fall.

Nov 29, 2013 at 10:43 AM | Registered CommenterEuan Mearns

If those pesky Europeans want shale gas then they can exploit their own. Oh, sorry the French, or rather Holland, will not frack because he thinks it's dangerous. I do not see why we have to ''share'' our gas since we paid for it to be exploited. We could ''sell'' it to them but at the prices that Moscow charges, or slightly below.

Nov 29, 2013 at 10:48 AM | Unregistered CommenterJohn Marshall

@ mailman

Option 1: shale gas - CCGT - consumer
Option 2: shale gas - CCGT balancing wind - CCS - consumer

Option 1 could easily deliver cheaper / much cheaper electricity. Option 2 probably more expensive than now.

Nov 29, 2013 at 11:00 AM | Registered CommenterEuan Mearns

Eaun: 'Personally I don't see LNG exports from the USA near term (I could be wrong) which is likely a good thing long term for the UK. Should UK prices be dumped by cheap imports then this could undermine the viability of indigenous developments.'
The first US gas export terminal at Sabine Pass is scheduled to start operations in 2015.

Nov 29, 2013 at 11:06 AM | Unregistered CommenterEddy

Perhaps Lord Browne has an eye to his shareholders when he says that he does not think gas prices will go down with the shale revolution.

Nov 29, 2013 at 11:11 AM | Unregistered CommenterColin Porter

Coastal Oil and Gas sent their representative to give a presentation to the good folk of the Dover area some weeks ago. It was appalling. He was unable to answer questions related to the impact of drilling and how it might affect the locals. I went into the meeting totally on the side of methane extraction in the area but left with a very bad taste in the mouth. For God's sake he couldn't even answer the question about how the gas was to be transported from the wells if exploratory drilling was successful. Coastal Oil and Gas consist of three people.

Nov 29, 2013 at 11:20 AM | Unregistered CommenterPaul

As a retired chap I still can remember my basic economy lessons at school: When an increase in supply outperforms an increase in demand of say a commodity, its unit price will fall. This appears to be a universal law which has yet not been falsified to my knowledge. So far so good. There however are two kinds of people in the world, and I mean not the classical left and right divide, who are impacting on the performance of this law. The first, can be designated as the "free traders" operating as more or less equivalent partners to achieve things despite all the human imperfections, in efficient and effective ways as possible. The second group can be designated as "agenda pushers and traders" operating in not equivalent ways (e.g. from moral high grounds) to counteract the downward free trade price pattern through often "cooked-up"regulations and control. As the second group is hooked on siphoning off societies accountable resources (let's keep it legal) I will be amazed when UK gas prices fall.

Nov 29, 2013 at 11:23 AM | Unregistered Commenteroebele bruinsma

Eddy, thanks for info. If you look at my chart based on US EIA and Baker Hughes data you'll se that it appears growth in US supply has been flat for around 24 months - not surprising with the vast migration of rigs away from gas to oil.

http://www.euanmearns.com/wp-content/uploads/2013/11/US_gas_plus_rigs.png

And US still imports gas from Canada, so I'm not sure where the surplus will come from on current trend. Of course US may have a deal to buy gas from Canada at $3 and hope to sell on to Japan and S Korea at $16 / mcf. The price disparities are currently huge, and speed of evolution of shale drilling so rapid, it is difficult to see the future. Its possible that shale production picks up sharply again in the months ahead. Have they started to build Sabine Pass?

Nov 29, 2013 at 11:35 AM | Registered CommenterEuan Mearns

Mrs B subscribes to "down to Earth", an excellent geology magazine. With regard to fracking, it laments the fact that "the media choose to inform themselves from the protestors more than anyone else".
The November issue also features the photo of hypocritical Balcombe protestors surrounded by things made from oil, and the Josh "Frack off" cartoon. I hope Josh gets paid fror the copyright.

Nov 29, 2013 at 11:46 AM | Registered CommenterPhillip Bratby

Thanks Euan for your contribution here and on your own site. As the QC said to the judge, I may be none the wiser but at least I am better informed.

Nov 29, 2013 at 11:50 AM | Unregistered CommenterDavid S

Euan, There is huge activity in LNG export projects in the US. Nick Grealy recently posted a Citi presentation which listed 20 such schemes. OK some of those will not get off the drawing board and some were multiple phases on the same site but the caption was "US LNG exports could surpass Qatar and Australia by 2020". That is only 6 years away.
In addition there are several export projects in Canada of which Kitimat is in the lead and a couple more in Alaska are being discussed. The Canadian gas industry is very aware that exports to the US are controlled by geography and pipeline capacity which is changing very fast.
On the economics, exports from the US will, my guess, set the floor price for UK production. Liquefaction, transport and vapourisation is widely quoted as adding about $3 to the unit price so that gives potential UK projects a hefty cushion while still being well below current market prices.

Nov 29, 2013 at 12:07 PM | Registered Commentermikeh

I really do believe that anything 'Lord' Browne says should be treated with the utmost suspicion. He is, after all, the man once widely described as 'Tony Blair's favourite businessman'.. What greater warning could there be?

Just because he is hated by the anti-frackers does not mean he is to be trusted.

Nov 29, 2013 at 12:09 PM | Unregistered CommenterUncle Badger

Mikeh - I've not followed the US LNG discussion in much detail, but will do some reading now. A commenter on my own blog pointed to EIA forecast of 20% expansion of shale gas production by 2018 - I'm guessing most of that will get chewed by decline in the conventional gas stack. But I'm quite sure that producers would like to clear the US "surplus" and push prices higher and sell more gas at higher price everywhere. It will be interesting to watch how US gross gas production moves in the next 6 to 12 months.

Of course the US can always build another 1000 rigs.

Nov 29, 2013 at 12:20 PM | Registered CommenterEuan Mearns

AI suspect that anyone looking to do LNG export would have to have a strong stomach for risk. Someone mentioned $3 per million BTU for liquifying and transport and I've heard close to $5. In either case, you are shipping into regions with large untapped reserves of shale gas. You could very quickly finding yourself selling into a market with rapidly falling prices. When shale gas was being developed in the US, do you think any of the exploration companies expected the price of gas to fall by 70%? Of course not, who is going to loan money to extract gas at a loss? Anyone making predictions about where natural gas prices are headed in the face of shale development is either not telling the truth or has pricing power through government fiat or a monopoly market position.

Nov 29, 2013 at 12:52 PM | Unregistered CommenterSean

The most telling Comment of all came from Euan at Nov 29, 2013 at 9:38 AM | Unregistered CommenterEuan Mearns

I quote "(or their use banned such as coal", how much coal do we have under us. 250 Years worth wasn't it. This is strictly a EU/GOVERNMENT problem.
While we for Fracking to to get the go ahead we should be doing what Germany is doing digging coal for all it is worth, building and un-moth-balling Coal Fired Power Stations. It is the cheapest option for Britain.

Nov 29, 2013 at 12:59 PM | Unregistered CommenterA C Osborn

A few people are saying it is difficult to forecast gas prices. I suggest they talk to the Bishop and his friends at Poyry about using their magic model. The model can forcast prices 37 years ahead with an accuracy of a few percent. The Bishop has reported on this twice this week so he seems pretty smitten by it. Maybe he knows the recipe to their model's secret sauce and so trusts it.

EuanMearns, the Bishop is using a $4 figure from your report (I can't see the figure $4 in the report, but as he says "somewhere above $4" the price is clearly not constrained on the up-side) as a basis for optimism in the UK. How do you think your estimate translates to the UK scene?

Nov 29, 2013 at 1:07 PM | Unregistered CommenterChandra

As an extension to what Jim Karlock is saying (above) about '37-year projections': I tend to bore guests senseless at the dinner table with the following:
'This year (2013) the music industry is celebrating 50 years since the first Beatles album. Fifty years before THAT - the First World War hadn't even started..!'

(But - hey - the UK Met Office knows what the global temperature will be in 2100...)

Nov 29, 2013 at 1:21 PM | Unregistered CommenterSherlock1

If price is that inelastic
1) fracking companies can be sure of a continuing higher price unlike in the US. This means the investment opportunities are far greater and business risks far lower so guarantees a much larger shale industry here, if the political parasites allow it..

2) Every £s worth of shale recovered here means a direct cut in our import/export deficit by 96p

Nov 29, 2013 at 1:23 PM | Unregistered CommenterNeil Craig

Euanmearns,

Exactly, The Great Green Con (tm) in option 2 means we are all being extorted hundreds of pounds a year directly through our energy bills to support a theory that doesn't stack up in the real world!

Another long and cold winter will be yet another nail in the coffin for Mann Made Global Warming (tm). Although sadly cheaper energy prices will not come in time for the THIRTY THOUSAND off people whol will die between now and March due to cold related illnesses.

Mailman

Nov 29, 2013 at 1:37 PM | Unregistered CommenterMailman

Chunder is correct to question 37 year predictions. And I'm sure he is equally sceptical towards the IPCC and Mystic Met projecitons, right?

Nov 29, 2013 at 1:38 PM | Unregistered CommenterFarleyR

Maybe with the fuel being exported to Europe the price will be uniform all over the place, but at least the UK will be getting the money both in selling price and in tax and will gain jobs.

Nov 29, 2013 at 1:52 PM | Unregistered CommenterBill Irvine

Bill Irvine: This is such a fundamental point and should be driven home every time. Combine with a 11% drop in price and the profound energy security benefits and we'd be barmy to delay even a moment.

Nov 29, 2013 at 2:01 PM | Registered CommenterRichard Drake

Nov 29, 2013 at 1:38 PM | FarleyR

Yes, and Chunder also seems happy to accept the LibCon government's projections of fossil fuel prices.

Nov 29, 2013 at 2:25 PM | Unregistered CommenterEvil Denier

Yes, it does sound a bit pricey. Maybe we should just walk past all these mmbtus.

Nov 29, 2013 at 2:26 PM | Unregistered CommenterAlan Reed

Why are anti-shale gas activists so concerned about the possible price? It's not going to change their opinion, is it?

Nov 29, 2013 at 2:32 PM | Unregistered Commenterkellydown

kellydown - if the anti-shale gas activists get their way - there won't be price for it AT ALL..!

Nov 29, 2013 at 2:41 PM | Unregistered CommenterSherlock1

Coastal Oil and Gas consist of three people.

Woo hoo! Big Oil!

Seriously, many projects are like that - some investors get together, raise some money, eventually engage contractors who know what they're doing. There's plenty of professional expertise out there for hire. It does make a mockery of the David vs Goliath image that protesters like to promote. I mean big bad Cuadrilla has 70 employees, but only if you count contractors too. Hardly enough to block a busy road.

Nov 29, 2013 at 2:57 PM | Unregistered Commenterkellydown

Euan
Consumers need to distinguish between unnecessary high energy prices down to government legislation and higher energy prices because the cheaper options have been used up (or their use banned such as coal).

Having a strategy based on high gas prices politicians will continue to cause consumers grief because politicians hate being wrong. They can easily ban more energy sources than coal, banning after all is only the ultimate legal sanction.

If the price differential between the USA and Japan (and the rest of the world for that matter) is so great and the reserves in the USA are so large then without politicians there will be a meeting in the middle in fairly short order, or is there a reason why not?

Nov 29, 2013 at 3:16 PM | Unregistered CommenterSandyS

The US shale industry looks to be repeating history.
So much of what is happening is a re-run of the early years of the US oil industry: companies over-reach in buying acreage; lease prices impose a hefty front-end burden; supply runs ahead of demand; product has to be sold at almost any price to get cash flowing; lease terms oblige companies to produce or pay penalties; early movers pay the costs of trailblazing; etc..
We can expect to see bankruptcies, consolidations, write-downs and so on alongside some stellar results as the industry matures. The big boys are mostly watching from the sidelines, letting the independents take the risks, ready to "farm in" once the figures are right - and rewarding those independents who survive.
Adding to the complexity, the whole industry is still on a steep learning curve. Drilling times, recoveries, decline rates and the rest are improving fast: we have heard some of this in those committee hearings.
Whatever is the real "break-even" cost today, it is certain to drop over time as technology, working methods and commercial terms all become more efficient and as one-time costs for infrastructure and development work through the system.
It is well worth reading Daniel Yergin's "The Prize" to see how this all happened before.

Nov 29, 2013 at 3:39 PM | Registered Commentermikeh

Good to see the scepticism of models spread to all sides posting here. I reckon we should adopt the slogan "It's only model" ©Brian Conley

Nov 29, 2013 at 3:49 PM | Unregistered CommenterSandyS

More gas means a gas market better for the consumer. Period.
The question shoud be more about prices not sky rocketing and availability becoming undependable.
Not about "how much will it fall"?
Since the developers are not using direct tax payer subsidy, their suffering in the market is not really important.
And since the Crown receives all royalties for gas produced, an important factor is how this will impact the tax payers. Unlike wind and solar, gas will prodcue positive flows into the national treasury.

Nov 29, 2013 at 4:06 PM | Unregistered Commenterhunter

Euan: "My current take on US is that growth in gas supply has slowed (I could be wrong)"

You are.

"Natural gas production in Pennsylvania averaged 6.1 billion cubic feet per day (Bcf/d) in 2012, up from 3.6 Bcf/d in 2011, according to Pennsylvania Department of Environmental Protection (DEP) data released in February 2013. This 69% increase came in spite of a significant drop in the number of new natural gas wells started during the year.

Several factors contributed to the production increase. While accelerated drilling in recent years (primarily in the Marcellus Shale formation) significantly boosted Pennsylvania's natural gas production, increases were restricted by the state's limited pipeline and processing infrastructure. This created a large backlog of wells that were drilled but not brought online. As infrastructure expanded, these wells were gradually connected to pipelines, sustaining natural gas production increases through 2012 despite the decline in new natural gas well starts. Data from DEP show that a significant portion of wells that began producing in 2012 were drilled earlier."

Nov 29, 2013 at 4:06 PM | Unregistered CommenterBruce

@ mailman If you take a look at the top chart in this post you will see that the unilateral effort of Europe so far has made little to no discernible impact upon global emissions. The response to this can either be to breathe a huge sigh of relief that CO2 appears not to be so dangerous as we have all been led to believe or to redouble the efforts. Unfortunately at present it's the latter course that we seem to be following.

The Failure of Kyoto and the Futility of European Energy Policy

"Based only on data from the cherry picked time interval 1997 to 2012 one would conclude that EU energy policy has failed to address a non-existent problem."

Nov 29, 2013 at 4:15 PM | Registered CommenterEuan Mearns

Euan,

The problem IS the EU.

Mailman

Nov 29, 2013 at 4:20 PM | Unregistered CommenterMailman

Euan: "Of course the US can always build another 1000 rigs."

They don't need 1000 new rigs. They need the pipeline infrastructure to catch up to the drilling. There is no shortage of gas.

The operators are increasing the efficiency of their drill rigs.

http://seekingalpha.com/article/1777122-20-bcf-per-well-new-operating-standard-in-the-marcellus-shale

Nov 29, 2013 at 4:20 PM | Unregistered CommenterBruce

@ SandyS I'm not advocating a strategy based on high gas prices but one where the operating companies can make a profit and are supported in their endeavour by government and the people. You are right that if the US began exporting large volumes of LNG at $5+$3 (LNG premium) then the first place this would head is Japan, but it would relieve a very tight global LNG market and prices in Japan, Europe and USA would converge. At the moment I'm simply questioning if the USA has this bounty to export - not out of being bloody minded, but because if you look at the data (figure 5 in my post) you'll see that gross gas withdrawals are flat for the last 24 months - I'm simply the messenger. If you look at David Hughes' stack of shale production it is also flat for the last several months. This is not surprising given the migration of rigs away from drilling gas and the high decline rates. A curious thing for me is that the EIA have not reported shale production since the end of 2011 - maybe this is routine, but it makes me wonder why. Hughes buys data from a commercial source - its all available in State reports that take a great deal of time to through.

@ Bruce, see above and see figures 2 and 4 in my post. Figure 2 shows growing production in Marcellus but falling production in Barnett and Haynesville. Figure 4 shows on going decline in conventional dry gas production. Growing production in Marcellus is not enough to compensate.
Fig 2
http://www.euanmearns.com/wp-content/uploads/2013/11/hughes_shale_stack.png
Fig 4
http://www.euanmearns.com/wp-content/uploads/2013/11/USA_gas_type_perc.png

Nov 29, 2013 at 4:37 PM | Registered CommenterEuan Mearns

Chandra: "magic model"

What about actual results in the USA that you and others dismiss? Are you not using some sort of crude model to deny that UK production will be similar to the USA and Canada?

Nov 29, 2013 at 4:48 PM | Unregistered CommenterBruce

@ Bruce - thanks for the link, I added it to my news list for next week. Cabot have hit a hot spot in PA and so you need to be cautious about extrapolating this extremely good stuff into a new norm. And the EURs are just that, estimates.

There has always been a backlog of wells awaiting the pipelines to arrive, and so the key number that no one ever knows is how many at any point in time. If it is the case that the US is currently sitting on a record number of drilled wells awaiting hook up then you will be right. We need to wait and see what happens to US gas production in the next 6 to 12 months.

Nov 29, 2013 at 4:54 PM | Registered CommenterEuan Mearns

Euan, the Barnett rig count is down to 29 from a high of around 175.

http://www.energyeconomist.com/a6257783p/exploration/detail/barnett/graph/total.gif

The rigs are going where there are more liquids. But they figure even with only a few rigs, production will continue to at least 2050.

Nov 29, 2013 at 5:02 PM | Unregistered CommenterBruce

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