We’re a few days late getting this out. The following number are from April 15, 2021. The price of natural gas is at it’s high, $2.66/MMBtu, having gotten as low as $2.46/MMBtu; the rig count is at 432, up 30 from last month (cool it a bit, drillers); and natural gas in storage is 1,845 Bcf, right back at the five year average. It sure didn’t take long for gas storage levels to come back up to average.
Oil and gas producers are exercising restraint?! So are bankers?!?! This is a sign of the apocalypse.
There’s a bill in the WV House that will require a $2500 fee for modifying oil and gas well permits. This is good. The Office of Oil and Gas needs more money. Hopefully they’ll use it to hire more inspectors. UPDATE: It passed.
Governor Justice proposed eliminating the state income tax. Other sources of income will have to make up for it, and the severance tax (on minerals extracted from the ground) is one of them. You can imagine the oil and gas industry isn’t happy about it, and the coal industry is even less happy about it. As it’s proposed, I don’t see it actually increasing, as it’s a graduated tax, with a 5% tax on anything below $3.00 per MMBtu, and .5% increase on every $0.50 increase in price up to $9.00/MMBtu. The price will never get that high again under current natural gas industry conditions. In fact, it’s unlikely to get up to $4.00/MMBtu for any great length of time. This won’t help the State’s income, and it won’t affect most companies’ bottom line significantly.
One thing that has held up construction of the Mountain Valley Pipeline has been some people sitting in trees on the pipeline right of way. A court ordered them to leave. They stayed. Police brought in a crane and removed them from the trees. Construction will now proceed.
I don’t usually bring up bills that have only been introduced, but this one’s an important one. There are regulatory bottlenecks that hold up LNG exports. This bill would remove those. This is important because the LNG is exported to many developing countries. They need this source of energy. It’s cheap and it’s cleaner than the alternatives. Even environmentalists should be supporting this because the realistic alternative is that if developing countries can’t get LNG they will buy coal and oil for their energy needs, not wind and solar. This bill needs to pass.
Libya is bringing more oil and gas infrastructure online. I wonder how long before OPEC+ starts to impose production cuts on them? They need the cash to rebuild a war torn state, and cutting them back now would just be mean. But Libya will have to join in the cuts eventually.
That horrible forced pooling bill that was proposed this legislative session is apparently dead, thank goodness.
Investors are expecting oil and gas companies to be more disciplined. That’s great news. As long as oil and gas companies could get all the money they wanted, we were always going to experience boom and bust cycles with correspondingly ridiculous fluctuations in energy prices. Discipline will lead to consistency, and this is one business owner really likes the idea of consistent business.
The Suez Canal is back open, and there are about 18 LNG ships waiting to get through. While this doesn’t directly affect U.S. markets, the change in shipping will temporarily change prices.
Pipelines out of Appalachia are running at or near capacity. When that happens, the pipelines raise their prices, in effect reducing the price that producers get for their product. This reduces your royalty check. When the Mountain Valley Pipeline finally gets built, it will help with this problem.
No new LNG projects are expected to be announced this year. At least, there won’t be any final investment decisions (FIDs). There can actually be a lot of money thrown a these high-dollar projects before the final go/no-go decision is made, which is why there are lots of “little” investment decisions, and then a “final” investment decision.
We saw a build in natural gas storage levels. This is earlier in the year than usual, which indicates that producers are aware that we have lower than normal levels of gas in storage and are producing enough gas to make up the difference.
The EIA crunched the numbers and we officially used 7% less energy last year. They are also saying that natural gas prices will average above $3.00/MMBtu during 3Q2021. That would be nice.
The WV Legislature has passed a bill that would change how oil and gas wells are taxed. It will be interesting to see if this increases production and development or not.