There was a public hearing about the natural gas fired power plant that is proposed for Harrison County, WV.  The projected operation date is sometime in July, 2020.  This would be a good thing for West Virginia royalty owners, and West Virginians as a whole.  Instead of shipping all our gas out of state as a raw material, we can add value here and then ship it out at a higher price.

South Jersey residents will see a reduction in their power bills, in part because of the low cost of Marcellus Shale gas.

The Wall Street Journal is saying that natural gas is finally a global market.  I don’t agree that’s true quite yet, but I think we’re awfully close.

The U.S. is the worlds top producer of petroleum and natural gas, and has been for five years straight.

Mexico is buying up a lot of U.S. natural gas.  Exports to Mexico have quadrupled in recent years.

Volvo is making a push towards building more electric vehicles.  All new models from 2019 on will be either full electric or hybrid.

Shale drillers in Pennsylvania have drilled twice as many wells in the first half of this year as they did in the first half of last year.

Saudi Arabia is warning that there’s not enough investment in oil drilling, and that in the next five years we’re going to see a serious drop in production.  Seems that would be in their best interest, and American shale producers should be licking their chops if that’s really the case.

The cracker plant in Ohio is coming a little closer to reality.  A final decision has not been made, but PTT Global Chemical announced the purchase of land for about $130 million.

Rig counts in the Marcellus-Utica region remain steady after a slow but steady increase in the last few months.

Watching how the oil and gas supply industry is going is a pretty good way of knowing how the oil and gas industry is going.  Recently, suppliers of frac sand have taken a hit by investors, meaning there’s not confidence that demand for frac sand will grow.  That said, demand is up considerably year over year already, so the industry isn’t doing poorly.

China’s national gas developer plans to double natural gas production in the next three years.

The Trump administration has appointed some new commissioners for the FERC, but they have not been approved.  The CEOs of some major pipeline companies are saying that if they aren’t approved by August the investment money for those projects may disappear.

Now that Nigeria and Libya are back to producing large amounts of oil, OPEC is going to force them to curtail their production.

President Trump stumped in Europe for U.S. natural gas.

CNN Money doesn’t think gas powered cars are going away any time soon, in spite of Volvo’s move to electric.

France won’t be developing oil and gas any more.  American fracking companies are happy.

Investors are hesitant to throw more money at the oil and gas industry right now.  That’s good for the time being.  We don’t need more development at the moment.  More investment will be needed when prices start to climb towards $4.00/MMBtu.  That may be a while.

July 17, and gas prices have moved a lot in the last month but they’re back at about $3.00/MMBtu.  Oil prices are at $46/bbl, but have been moving around a lot as well.

Currently, it seems that energy prices are going to be relatively stable for some time.  Natural gas production is about right to put us at about the right amount of gas storage before winter, so we’ll see the usual bump in price this winter.  Oil prices could nosedive if OPEC decided to open the spigots but they appear to be committed to keeping prices up until at least the IPO for Saudi Aramco, and American fracking is not yet producing enough oil to drive prices down.

The price of oil and natural gas have taken hits in the last few weeks.  Oil is down below $45/bbl and natural gas is hanging out around $3.00/MMBtu.  It’ll be interesting to see where things go as the summer progresses.

This article at Energyfuse.org suggests that shale drilling is hitting a ceiling as far as productivity per well is concerned.

Some drillers are ready to slow down activity if prices continue to decline.

Wind and solar electricity generation exceeded 10% of U.S. total for the first time in March, according to the EIA.  We expect that growth trend to continue for the next few years at least.  It seems that renewable power generation has reached a critical mass of sorts, and will continue to grow regardless of the price of fossil fuels.

Russia believes that oil markets will rebalance by the time the current OPEC/Russia production cut agreement is over.

OPEC says rebalancing is happening slower than expected.

Fracking technology has improved significantly over the last few years.  Companies are getting more product from each foot of lateral than they used to.  Now they are going back and using current techniques on older wells and getting increased production.  It’s called refracking, and it’s going to add significant supply at very little additional cost in the way of money, time, and environmental impact.

One reason oil prices are declining is that Libya and Nigeria have begun producing more oil.  They are excluded from the OPEC/Russia production cut agreement because their production has been tiny due to civil war.

West Virginia Senator Capito has introduced a bill that would expedite permitting for a gas storage hub, and Senators Capito and Manchin have introduced a bill that would make it possible for West Virginia to get a loan guarantee from the federal government for the project.

Whew!  Five days later than usual.  I’ll stick with the “business is booming” story for now.

Libya says it has exceeded 800,000 barrels of oil per day recently, with the possibility of hitting 1MM in the near future if they can get some contractual issues ironed out.

The EIA expects the U.S. to produce more gas this year than it previously thought.

A new study suggests that re-fracking can bring so much new production online from an old well that it’s just like drilling a new well.  It doesn’t mention whether re-fracking makes it possible to extract gas that otherwise would remain trapped in the formation, or just speeds up the extraction of gas that would come out anyways.

Sabine Pass continues to increase exports of LNGs.  The plant took in 2.3 Bcf per day in the second week of May, up from 2.1 Bcf per day in the first week.

A recent trade deal will make it possible for the U.S. to export LNGs to China.  Nice.

Some think that OPEC can’t just extend their production cuts, they need to double down on them.  There’s no other way to chew through the surplus.

Mexico has been increasing its reliance on natural gas.  Interestingly, it has a shockingly small number or drilling rigs running.  Good for the U.S., weirdly bad for Mexico.

This article discusses what OPEC is trying to accomplish by cutting production.  It’s pretty interesting, but even more interesting is the fact provided in the article that U.S. oil production is expected to hit 9.3 million barrels per day this year, and 10 million barrels per day next year.  That’s a lot of new production, and all thanks to OPEC and Russia cutting production.  They’re playing a dangerous game, and at some point they’ll probably have to start producing at full speed or they’ll just create a behemoth in the U.S.

This article goes into just how much money OPEC has “lost” since their announcement in November of 2014 that they would flood the market with cheap oil.  It also briefly mentions that Saudi Arabia has explored using fracking in its own oil fields, with little success.

There aren’t enough frack crews.  This was one of the factors that I thought might slow down the growth of the oil and gas industry when the price of oil and gas started to recover.

On top of that, somebody crunched the numbers and decided that the Marcellus/Utica region needs an additional 45 drilling rigs (and corresponding frack crews, of course) to fill the new pipelines that are going to be completed in this area.  There are only about 50 rigs running in this area right now.  There used to be a lot more than those two number combined, back in the boom before 2014, so if the crews could be found the rigs could be run and the gas produced.

Both oil and gas prices are down again.  Oil is down in spite of OPEC and Russia extending the production cuts for another nine months.  This article says the extension is going to have the desired effect and oil prices will go higher again.

Natural gas prices have gone down in part because some power producers are switching back to coal.  This leads me to think that we’ll probably be pushing the limits of natural gas storage at the end of injection season this year, just like last year, with the associated low price of natural gas.

Marcellus drillers aren’t drilling a lot of new wells compared to other oil or natural gas plays.  They’re completing DUCs.  There’s a lot of drilling that needs to be done in the near future, and they’ll have to bring on some new rigs soon.

The EPA issued a report last year that said the natural gas industry was leaking methane (natural gas) like crazy.  However, it was based off spreadsheets, algorithms, and estimates.  This year, the EPA has done a field test and found that last year’s report overestimated methane leakage by 97%.  Think about that for a minute.  Now, it’s just one test, and science needs to be repeatable to be reliable.  But when the numbers are that different it’s extremely likely that last year’s report is wildly incorrect.

It’s been quite a while since anything has been said about the possible cracker plant in Parkersburg, WV.  The Parkersburg News and Sentinel has a very short editorial which we link to here because we’d like to see more people talking about it.  A cracker plant would help West Virginia avoid the problem that it’s had for over 150 years of pulling natural resources out of the ground and shipping them out of the State as raw materials.

The price of oil has taken a real dip lately, today’s bump up in price notwithstanding.  The reason for that dip?  American frackers have been ramping up production like mad.

Rig counts dropped by one each in West Virginia and Pennsyvlania in the first week of May.  Hopefully that means drillers are slowing down a bit on purpose, which means they think that we’re producing as much gas as we can get out of the region and into storage for this year.  That’s healthy, smart thinking, if it’s on purpose.  If.

We’re on course to put record amounts of gas into storage again this year.  If you’ll remember, we did this same dance last year.  In the end, producers cut back and we ended up with less storage (still record highs) than what most experts predicted.  I imagine the same thing will happen this year.

Saudi Arabia is saying it will do whatever it takes to rebalance the oil market.  There’s dancing in the streets in Texas.

OPEC has been reduced to begging–begging American frackers to slow down production, that is.  If there was any question left as to who controls oil’s top end, it has been settled.

OPEC and Russia have reached a deal to extend the production cuts they agreed to six months ago.  Oil prices are pushing $50/bbl again for the first time in almost a month.

The FERC has a new date for review of the Atlantic Coast Pipeline EIS.  The final EIS will be made available on July 21, 2017.  After that, there will be 90 days for other federal agencies to make comments on the project.  The final approval will be on October 19, 2017.

The EIA expects natural gas to produce more electricity this summer by way of burning natural gas than by any other means.

North Sea oil output is expected to begin to fall in 2018.  This is probably one of those factors that the Saudis have been saying would happen because of decreased capital expenditures in traditional oil drilling project.

Iran is ready to join OPEC’s production cut.  This news ought to drive oil prices up.  Iran had previously expressed interest in producing well over 4 million barrels per day, but has not reached that point.  Perhaps Iran has more infrastructure issues than it had previously realized, and is willing to take a higher price for its oil in exchange for a larger share of the market.

Speaking of production cuts, Russia reduced its daily oil production by 1.6% by mid-April.

The scuttlebutt is that OPEC will extend production cuts and even cut more in an effort to offset U.S. production increases.

Citi expects OPEC to extend production cuts and predicts that consequently oil prices will push $65/bbl by the end of the year.

The U.S. Geological Survey has “discovered” the latest largest continuous natural gas deposit in the country.  It stretches across Texas and Louisiana.  It includes the Haynesville and Bossier shale formations.  The word discovered is in quotes above because this reserve was already known, it’s just that new technologies have made a lot more of it recoverable.  It’s also just the most recent; as continued exploration and technological innovation occur, others will be “found”.  Not meaning to downplay it–it’s still an awful lot of natural gas.  Here’s to being energy independent!

Energy demand will grow in 2017, but not as much as it has previously.  That will probably keep the price of oil down a bit.

The Washington Post sees a murky future for oil prices.  However, the murkiness is focused on a way up to $60/bbl oil, not doom and gloom.

India’s economy is growing like mad, and India’s government wants to make natural gas a larger percentage of the energy used in the country.  Most of that gas will be imported.  Most of that gas will come from the U.S.

Production of both oil and gas is expected to increase in May due to healthy prices for both products.  That will drive the price of both products down.

A survey of oil and gas borrowers and lenders shows that there’s going to be more money flowing around the oil patch this year.  Confidence in oil and gas is back.  Lets just hope it’s not over-confidence.  Too much spending will lead to too much drilling will lead to too much gas/oil will lead to low prices again.

The 2016-17 heating season is over and we have almost 15% more gas in storage than the five year average.  This cold snap we’ve had the last few days will not be enough to make a big dent in that number.  We still have quite a bit less gas in storage than last year so we should see reasonable natural gas prices through the rest of the year.  Those prices will hopefully not be reasonable enough to encourage over-drilling.

Coal executives have warned the natural gas industry that it’s next on the environmentalist’s hit list.   As long as natural gas is ridiculously inexpensive compared to renewables, it’s safe.  But once renewables become competitive with natural gas we’ll see a shift to renewables.  That could be a long way down the line.

May 1, 2017: Oil prices are at $48.74 per barrel, and natural gas prices are at $3.23/MMBtu.  Not bad for natural gas, not great for oil.  Those are good prices to keep us out of a boom but in reasonable drilling activity.

And some people are saying that OPEC will extend its agreement to cut production.  The next meeting is May 25th.

Alternative energy is coming on.  It’s going to be quite a while before it really challenges fossil fuels for supremacy, but it’s definitely growing.

One thing I’ve wondered about in the last year or so was whether the industry would be able to attract the workers that it laid off during the last bust.  This article says that at least some previous oil and gas workers are not coming back.  That should slow down the next boom a bit.

Eclipse Resources holds the world record for a horizontal well at 18,500 feet.  This year they plan to drill 11 extra long wells.

Add another one to the list.  An old coal fired power plant is going to be replaced by a new combined cycle natural gas power plant.  It’s in southwest PA, not too far from the West Virginia border.

Canada used to be the largest purchaser of U.S. crude at around 7 million barrels, but China bought a little over 8 million in February.

The Dimock ruling has been overturned by a federal judge.  It’s somewhat unusual for a judge to overturn a case for “weaknesses in the plaintiff’s case”.  Usually appeals courts are looking at things like incorrect jury instructions, the lower court’s understanding of the law, misconduct by the lawyers, that kind of thing.  Appeals courts don’t overturn jury decisions often, but that’s what happened here.

Natural gas storage volumes are going up.  In 2014 and 2015 the increase was negligible, but in 2016 it was significant.

April 10, 2017: Natural gas prices are at $3.23/MMBtu.  That’s a healthy price.

U.S. oil producers increased investment in 4Q 2016 — by a lot.

Cheniere Energy’s Sabine Pass LNG export plant has it’s third train ready to produce LNG.

This is news I did not expect to hear.  The U.S. has been producing more energy every year for the last six years.  Even during the downturn of 2014 and 2015 production went up.  OK, increased production caused the downturn.  But that’s part of the reason why I figured our energy production was still growing.  But, turns out energy production fell in 2016.  The big loser was coal (at -18%), and the “big” winner (at 7%) was renewables.

Shale drillers have driven their breakeven prices below $40/bbl.  Some say it’s because of increased efficiency.  Others say it’s because oil field service providers have drastically reduced their prices.  It turns out that non-shale projects have also driven their breakeven prices below $40/bbl.  This supports the argument that it’s the cost of oil field services that is behind the lower breakeven price.

In spite of the title, this article says that the supply of oil is going down and the price of oil is going up in the next few years.

Oil service companies have started hiring again, in spite of having fired over 1/3 of their workers during the downturn.

One of the cool things about natural gas is that it’s cleaner than coal or oil.  Energy related CO2 emissions fell by 1.7% in 2016, mostly because we’re using less coal, partly because we’re using more gas.

April 17, 2017: Tax Day!  Both oil and gas prices are at what I consider healthy levels for U.S. developers, oil is at $52.76 and gas is at $3.20.  It’s going to be interesting to watch the prices going forward as things seem to be somewhat stable for the moment but something always happens to upset the proverbial apple cart.  It’s anybody’s guess what that will be.

The Cheniere Energy gas liquefaction plant in Sabine Pass, Louisiana is selling it’s product overseas for about $7.50 MCF.  They have two of four “trains” online, with the other two expected to come online this year.  At least some of the gas being sent down there is from the Marcellus/Utica area.

March 21: Oil prices have been below $50/bbl for about two weeks.  OPEC is curbing production, but Libya is about to start shipping more oil and American producers are taking advantage of reasonably high prices.  The real question is, will American producers continue to produce and drive oil prices down?  Put another way, will banks continue to lend money to producers until they go bankrupt again?

Most of the major banks believe that oil prices will continue to go up throughout the rest of this year.  This is mainly due to their belief that the market is slowly working towards balance in production and consumption.

Goldman-Sachs thinks we’ll be back in an oversupply situation in 2018-2019, as shale drilling and new mega projects will bring lots of oil online in that time period.

We should end up with less gas in storage this year than we did last year.  That’s good for royalty checks.

This guy thinks that the major gains in efficiency in the American oil and gas industry are actually from the service companies slashing their prices, not from technological increases.

A study suggests that the Marcellus/Utica area could provide enough natural gas to supply a total of five cracker plants.  That’s a lot of gas.

Right now, most of the gas produced from the Marcellus/Utica is used in power generation and industry.

The guy who predicted the oil market crash (when most other people weren’t) is predicting oil will hit $60/bbl by the end of the year.  Everybody can be wrong, but it’s worth reading why he thinks that way.

Here’s a breakdown of oil production around the world, and some focus on oil production in the U.S. fracking fields.  The really short takeaway is that we have lots of oil in the U.S.  The same is true for natural gas.  The article actually points out that most of the rest of the world’s production is in decline, but it seems that the U.S. is going to be the producer that the world begins to rely on more and more.

The oil and gas industry does all kinds of things to improve output and cut costs.  The strangest one we’ve run across that actually seems to work is testing the DNA of microbes that come from the well.  Who came up with that one?

April 3, 2017: Oil prices broke $50/bbl at the end of last week, and natural gas prices have been above $3.00/MMBtu for about 10 days.  Price wise, it looks like the oil and gas industry is doing well.  I don’t see drilling slowing down any time soon here in West Virginia.  We’ll be here for anybody who needs us to help them navigate the murky waters of those oil and gas leases, pipeline easements, and surface use agreements.

Natural gas is quickly becoming the power-generation source of choice.  That’s great news for West Virginia royalty and mineral owners.

U.S. oil producers are increasing production at a faster rate than they did during the last oil boom.  This OilPrice.com article gives four reasons why.  Nobody’s sure where oil production is going to go in the near term.  However, as production picks up, service companies are raising prices, which might slow the growth in production at some point.  The interesting thing is, OPEC’s production cut does not seem to have had quite the desired effect.  Prices have remained above $50/bbl, but haven’t reached $60/bbl.

This Bloomberg article says that natural gas prices aren’t going to go up much this year.  Most everyone was expecting natural gas prices to hang out around $3.50/MMBtu or so.  The recent warmer-than-average winter weather in the east during January and February really cut down on heating demand, and we now have about as much natural gas in storage as we normally do.  We were previously on track to have less than normal.  That should curtail some of the drilling and leasing activity we were expecting this year.  We shouldn’t experience a true bust, though, and that’s good.

One reason oil prices are going to stay below $60/bbl is that shale drilling is so fast to bring product to market.  The big boys have realized that that’s important, and are spending more and more of their development money on shale drilling.

Exporting natural gas is a new thing for the United States.  As we sell more natural gas overseas, the price of natural gas is going to go up.  Bad for consumers, but good for West Virginia mineral and royalty owners.  The Marcus Hook natural gas liquefaction terminal shipped almost six times as much natural gas last year as the year before, 34 cargoes vs. 6.  This year will probably be more.

Southwestern has finally drilled a well in West Virginia.  They’re happy with the results, but haven’t published any hard numbers.  They’ve had a presence here for years, but haven’t done much on the ground.  They will have two rigs running in West Virginia through the rest of 2017.

OPEC says it wants to see $60/bbl oil by the end of 2017.  Breaking News: so do American fracking companies.  In fact, many of them are perfectly happy producing above $50/bbl, and the link three paragraphs up includes a statement that the Permian Basin is now profitable at $40/bbl.  OPEC is giving Christmas gifts to U.S. producers early this year.

The International Energy Agency thinks that we’re looking at a shortage of oil supply by 2020, a mere three years away.  The IEA says that demand is continuing to grow, but that too many development projects were stopped during the 2014-2016 downturn.  The IEA expects demand to be at 104 million barrels per day by 2020.  We are at just over 97 million barrels per day right now.

ExxonMobil will be laying down some serious cash on oil projects in the Gulf Coast over the next 5 years.

The U.S. EIA (Energy Information Administration) makes a prediction each month about the coming month’s oil and natural gas production numbers.  March is expected to break records for natural gas production.  That’s going to drive natural gas prices down.  Maybe we will see another bust after all.  Sigh.

This article from ZeroHedge.com analyzes the current oil production landscape and concludes that regardless of what happens oil is stuck in the $30-$60/bbl range.

March 18, 2017: After showing signs of a complete collapse, natural gas prices have rebounded and remain just under $3.00/MMBtu.  Cold March weather has increased energy burn, but not enough for traders to decide that natural gas is worth more than $3.00.  We’ll be coming in to injection season with less gas in storage than last year, and with more gas in storage than the five year average.

Natural gas prices continue to plummet.  Today, Feb 21, prices have dropped 27 cents down to $2.57/MMBtu.  The reason is simple.  We haven’t used as much gas as investors expected.  The positive way of looking at this is that we’re still a dollar higher than we were this time last year, and we have less gas in storage than we did this time last year.  Andrew Hecht over at Seeking Alpha thinks that there is reason to believe that prices will be pretty volatile in the next few weeks.

What will really be interesting is to watch the rig count in the Utica/Marcellus area.  Prices below $3.00/MMBtu will discourage new drilling.  Producers have been ramping up drilling in the last six months or so.  It will be interesting to see how quickly they slow drilling down.

Oil prices are doing well, which is unfortunate for natural gas prices. Oil production will continue to climb, and the gas produced with oil will compete with our Marcellus/Utica wells, keeping prices and development down.

RB Energy did an excellent breakdown of why natural gas prices have dropped so much and how the market compares to last year and the five year average.  Most of you don’t have a subscription to RB Energy, so here’s a very condensed summary: this winter hasn’t been cold enough.  That’s really it.  Production has been picking up a little, but not enough to make the difference.  Storage levels aren’t ridiculously high.  If you plug in last year’s winter weather into this year’s winter weather you end up with very low storage levels and, consequently, higher natural gas prices.  It’s that simple.

Oil prices remain above $50.00/bbl.  In fact, it’s better to say they are around $55/bbl.  The main cause is the production cut set in place by OPEC in November.  OPEC has said they have about 70% compliance with the agreement.  Pretty impressive, especially considering past performance.  More importantly, the non-OPEC countries that agreed to cut production were at about 66% compliance.

U.S. oil drillers, however, have increased production since last summer.  That increase is not as much as the decrease by OPEC, but you can bet there is a lot more U.S. production planned in the very near future.

Sorry for the late and short nature of this post.  I’ve been sick again this week.

Well, look at that.  Don’t pay attention to natural gas prices for a week or so (sick and catching up from being sick) and prices drop below $3.00/MMBtu.  That’s both good news and bad news.  How is that good news?  Well, because it’s bad news.  Let me explain.

Drilling has been picking up recently.  That’s the natural reaction of the industry when prices rise.  We got down to 404 total rigs in the U.S. in May of 2016 as a result of low prices, and we’re already up over 700 in the second week of February 2017 as a result of climbing prices.  When drilling picks up we get more natural gas of course.  More natural gas means lower prices.  Lower prices means less drilling and fewer rigs.  It’s a cycle that repeats itself constantly, with some extreme highs an some extreme lows.

The extreme highs and the extreme lows are bad for everyone.  During the lows workers get laid off, royalty owners are paid less, and consumers get excited about paying a little less for their gas.  During the extreme highs, workers go back to work, royalty owners get excited about bigger royalty checks and consumers hate looking at their monthly bills.  What’s better is to have slow and steady growth or at least lower highs and higher lows.

The fact that natural gas prices couldn’t break $4.00/MMBtu means that we probably won’t see really high highs in the near future.  If we don’t see really high highs, we won’t see a huge boom in drilling and development work.  If we don’t see a boom, we won’t see an oversupply of natural gas.  If we don’t see an oversupply we won’t see a bust.  No high highs, no low lows.

What will probably happen with gas prices at or below $3.00/MMBtu is that producers will kill some of the short-term programs they have planned.  That will bring less gas into the market in the near future, so we should see fewer new rigs, and maybe even fewer rigs overall.  That would result in less production and bring prices back up.

What I expect to see in the near future is that we’ll have something of a hard cap at around $4.00/MMBtu.  That cap will slowly climb due to population growth and liquefaction plants being completed.  Because drillers will start new drilling programs over $3.00/MMBtu, and it doesn’t take a long time to get new wells online, by the time prices hit $4.00 we’ll be looking at an oversupply of gas.  Drillers will stop new programs, supply will drop, prices will drop, but by the time prices get significantly below $3.00 everyone will start drilling again.  Hopefully the boom/bust cycle of natural gas will be greatly shortened.  The oil and gas industry is going to respond quickly to the market, instead of slowly like it used to.

***

Seeking Alpha is predicting natural gas prices will be $3.50/MMBtu in the next 8-12 months. That’s a good healthy price for the industry.

The rest of February is going to be warmer than usual.  Demand for natural gas is going to go way down.  We’ll have more gas in storage than we expected.

Gas prices have stabilized at about $2.84/MMBtu.  It will be interesting to see how prices change moving into the storage season.