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US Shale Oil and Shale Gas Drilling Activity: Rig Activity Trends and Maps Deep Utica Dry Gas:  Emergence of a "super" shale gas play.
Permian Basin:  King of the Oil Shales (includes detailed frack history of perforating depths, pressures, and volumes by stage for a 50 stage well) Economics of US Shale Plays
Global LNG Supply/Demand Balance Saudi Arabian Oil and Gas Industry
Fracking Technology, Demand and Economics Oil Supply/Demand Fundamentals
   
 
US Natural Gas Supply/Demand Fundamentals
(Demand, Production, Import, Exports, and Price)








 
US Natural Gas Storage Levels
(Storage Levels Updated thru November 13, 2020)
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2020 US Natural Gas Storage Levels
2020 US Natural Gas Storage Levels
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2020 US Natural Gas Storage Rate of Change Comparison 2020 US Natural Gas Storage Rate of Change
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Reported Natural Gas Production for the Main US Unconventional Gas Areas
Reported Natural Gas Production for the Main US Unconventional Gas Areas
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Reported Natural Gas Production for the Appalachia Basin (Marcellus and Utica)
Reported Natural Gas Production for the Appalachia Basin (Marcellus and Utica)
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Reported Natural Gas Production for the Haynesville Area

Reported Natural Gas Production for the Haynesville Area
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Approximate Gas Related Rig Activity Reports
Approximate Gas Related Rig Activity Reports
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Approximate Marcellus and Utica Areas Horizontal Rig Activity
Approximate Marcellus and Utica Areas Horizontal Rig Activity
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Approximate Haynesville Area Horizontal Rig Activity
Approximate Haynesville Area Horizontal Rig Activity
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US Temperature Information
 
One Day Look Ahead: High Temperatures for the US
One Day Look Ahead: Projected Temperatures for the US based on NOAA data
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Day Look Ahead: Low Temperatures for the US
Day Look Ahead: Low Temperatures for the US based on NOAA data
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Natural Gas Market Driver:  USA 1 Week Termperature Outlook
Natural Gas Market Driver:  USA 1 Week Termperature Outlook from NOAA
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USA: 7 day Temperature Outlook
Natural Gas Market Driver:  USA 30 Day Termperature Outlook
Natural Gas Market Driver:  USA 30 day Termperature Outlook from NOAA
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US Natural Gas Supply Summary

In this section we provide a brief overview of the US natural gas supply situation.  As illustrated on the following two charts, US nat gas supply, after strongly rebounding from the 2016 pullback, has been falling in recent months.  The initial driver for the recent production pullback was low prices for natural gas due to strong supply growth post 2016 getting ahead of demand. More recently the measures put in place to combat the coronavirus negatively impacted demand, which excerbated the supply/demand imbalance.  And, as one might expect, as nat gas prices fell, natural gas related drillilng activity pulled back, reducing new supply. The second chart in the section provides a estimate of how the conventional regions are faring, and it shows that while these regions had experienced a signifcant production falloff since the middle of the previous decade, rates in those areas are also stablizing.

The second row of charts in this section presents the results of the USGS resource assessments for nonconventional resources in the Delaware Basin and Midland Basin regions of the west Texas and southeastern New Mexico, which are collectively known as the Permian Basin.  The USGS estimates that the nonconventional resources in the western part of the Permian  Basin (the Delaware Basin) have about 270 TCF of gas, which, when combined with the estimates for gas  for the eastern Permian Basin (the Midland Basin), gives a total of 285 TCF.  For perspective, if we were to consider the Permian a standalone country, its nonconventional gas resources would rank 6th in the world.  It's a big number, and has the potential to dramatically swing the focus of the natural gas supply story in the USA away from Appalachia and onto west Texas.

The reason it has this potential is that much, if not most of the Delaware Basin gas, is associated gas, so its coming to market almost regardless of price, because operators have to produce and handle the gas to produce the oil.  In previous commentary, I mentioned that operators may increasingly treat natural gas in the Permian the same way they treat water produced with oil, i.e. as a waste by–product.  In practice, this means shoehorning the gas into the market using aggressive price discounts and, if necessary, negative pricing.  This price chart at the end of this section show that these practices are, indeed, having an impact on the market with recent Henry Hub prices being reported in at around $1.75/mmbtu.  For comparison purposes, the price chart include the forward strip from three other time periods:  late 2014, mid-2016 and mid-2018.  Clearly the shale revolution is resulting in "lower prices for longer" due to the relative abundance of shale related natural gas.

Obviously, selling gas at such large discounts compared to the historical norms is not optimal from a producer viewpoint, but from a bigger picture
perspective such practices could have the beneficial effects of 1) lowering spacing heating costs for much of the country; 2) lowering electricity prices; and 3)  significantly increasing US exports of natural gas via LNG. 
Reported Production for Main US Non-Conventional Regions
Reported Production for Main US Non-Conventional Regions
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US Natural Gas Production with Marcellus, Utica, and Eagle Ford Breakout


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USGS Light, Tight Oil (Nonconventional) Delaware Basin Resource Potential
USGS Light, Tight Oil (Nonconventional) Delaware Basin Resource Potential
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USGS Light, Tight Oil (Nonconventional) Midland Basin Resource Potential

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The Three Primary Regions of the Permian Basin

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Where Would the Permian Basin Rank Globally in Natural Gas Resources if It Were Considered a Separate Country?
Where Would the Delaware Basin Rank Globally in Natural Gas Resources if It Were Considered a Separate Country?
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Natural Gas Futures (Henry Hub) Comparison

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USA Natural Gas Demand, Production (Supply), Imports, Exports, and Price

As reported by the EIA thru late 2019
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The chart to the left provides a single page reference for USA natural gas market fundamentals.  The obvious trends since the advent of large scale shale gas drilling in the middle of the previous decade are:
1)  Declining natural gas prices
2)  Increasing demand in response to lower prices
3)  Falling imports and growing exports.


Go to this page for a discussion of the emergent Utica dry gas play, which might be the next "super" shale play.  Operators  have reported 24 hr IP's in excess of 70 MMCFD with flowing casing pressures (FCP) of 8000-10000 psi.


Longer term, development of the deep Utica, super shale is starting to rev up.  We currently estimate the resource potential of this play to be in excess of 400 TCF,  a significant portion of which may be economic at less than $2/mmbtu. As a reminder, three early wells in the deep, dry Utica in sw PA tested at 59 MMCFD, 73 MMCFD, and 63 MMCFD.  All three had flowing pressures of 8000 psi or higher.  See the following links for more details:  Scotts Run (73 MMCFD) well; Gaut4IH (63 MMCFD) well; and Claysville Sportsman's Club No. 1(59 MMCFD) well.

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US Natural Gas Demand Summary
In this section we provide a brief overview of the US natural gas demand situation. As illustrated in the first slide of this section, domestic demand growth over the past five years has been well above the levels of prior years.  This is due to a combination of growing use of natural gas in the power sector, as well as users taking advantage of relatively low prices to use more of the commodity for a variety of other purposes, including petrochemical feedstock, space heating, and transportation. Exports are also up substantialy, as both eastern Canadian and Mexican users have imported more of the fuel, and more recently, increasing volumes have been exported in the form of LNG.  However, though the demand story is strong and helped the market heal itself from the lows of 2016, for the recovery process to end well, domestic demand and exports need to continue to grow robustly to absorb the increasing amounts of associated gas out of the light, tight oil plays, such as the Permian Basin, Eagle Ford and the Powder River Basin in Wyoming.

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US Natural Gas Demand and Export Levels: 2001-2019
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US Natural Gas Demand by Major User Segment

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Year-on-Year Change in Daily Natural Gas Demand
Year-on-Year Change in Daily Natural Gas Demand
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US Natural Gas LNG and Pipeline Export Summary

US Natural Gas Trade (Exports, Imports, Net Trade Balance)

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US Natural Gas Exports to Mexico: A 20 Year Look

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USA LNG Export Report Card
(Thru December 2018)

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Proposed Southern USA LNG Projects
Proposed Southern USA LNG Projects
Recent and Historical Landed LNG Prices Reported At Selected Locales Around the World

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Sampling of Potential LNG Liquefaction Capacity Adds Thru 2025
Sampling of Potential LNG Liquefaction Capacity Adds Thru 2025

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US Natural Gas Drilling Activity

Over the course of 2019, US natural gas drilling activity has been decreasing in response to lower natural gas prices.

ECG Assessment of Horizontal Drilling Activity in Several Large Shale Gas Plays in the USA (February 2020)

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Map of USA Onshore Gas Drilling Activity
February 2019

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Gas Price Versus Gas Rig Count
(Feb 2020)


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Map of USA Onshore Drilling Active
October 2020

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Link to webpage with in-depth data and information about North America oil and gas drilling activity.

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Natural Gas and the US Power Sector


Another short to medium term factor in North American natural gas demand is fuel-on-fuel competition in the electric power industry.  So, while there is a secular, long term shift out of coal in the power sector (noted below, in the exhibit titled, "US Electric Power Generation ByType:  Coal Market Share is Declining"), the power sector has also become adept at short term, back and forth switching between between coal and natural gas fueled power plants.  The reason is to arbitrage relative price differences between the fuels.  Our research (see below) illustrates that once natural gas prices at Henry Hub move below $3.00/mmbtu, gas becomes increasingly competitive with coal for power burn, and vice versa.

Fuel-on-fuel competition between coal and natural gas for power generation fuel burn
Fuel-on-fuel competition between coal and natural gas for power generation fuel burn
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As this chart illustrates, once natural gas prices move below $3.00/mmbtu at Henry Hub, the cash cost of large scale power generation, mainly consisting of fuel and variable opex, starts to work in favor of natural gas.  As a result when prices fall to such levels, we see operators increasing the use of natural gas fired power plants to take advantage of the lower costs.  Obviously, the more natural gas prices fall below the $3.00 threshold, the greater the incentive to switch over to natural gas.  This has effectively placed a floor under natural gas prices at around $2.65/mmbtu.

The left hand graph in the next row of exhibits, clearly shows the relationship described in the previous paragraph, i.e. as natural gas prices move up and down relative to coal prices, fuel volumes shift as well.  We intentionally used the same x_axis scale for the two charts, which allows us to directly compare the relationship between natural gas and coal prices and changes in the relative amount of power generated by the two types.

Year-On-Year Change in USA Terawatt-Hours
(Updated February 2020)

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USA Coal and Natural Gas Fired Terawatt-Hours vs Power Generation for the Renewable Mix of Solar, Wind, and Hydro
(Updated February 2020)
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US Electric Power Generation ByType:  Coal Market Share is Declining
(Updated February 2020)

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US Utility-Scale Electric Generating Capacity Retirements (2008-2020)
US Utility-Scale Electric Generating Capacity Retirements (2008-2020)
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Map Showing Location of US Power Generation Facilities by Type
Map Showing Location of US Power Generation Facilities by Type
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Comparison of the Cost of Power Generation for Different Technologies and Across Time On a New Build, Levelized Overnight Cost Basis Using EIA Data and Cost Estimation Methodology
Comparison of the Cost of Power Generation for Different Technologies and Across Time On a New Build, Levelized Overnight Cost Basis Using EIA Data and Cost Estimation Methodology
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Cost of Power Comparison By Technology for New Build Power Installations
Levelized CAPEX, OPEX ex Fuel, Sept, 2015, Est. Nat Gas Fuel Cost, Fall 2015


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Regional Price Variation Across the US Natural Gas Market

The spot price, trading hub maps presented below illustrate the price impact that plays can have on the underlying commidty price.  In this case, the Marcellus and Utica in the northeast USA are hi-lighted.  As shown by the spot price map of the northeast USA, prompt prices in the Marcellus/Utica area were about half or less that of Henry Hub/NYMEX pricing in January and February 2015.


Select USA Natural Gas Hubs
(These map locations should roughly correspond with the hubs listed to the right)

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The daily estimates of pipeline flows to the right was sourced from the useful
Natural Gas Intelligence (NGI) and Genscape website.
 Click here to go to the full page for all the information.



Reported January 2015 Natural Gas Spot Prices at Selected Trading Hubs in the United States:  This demonstrates pricing relative to Henry Hub
Map: Reported January 2015 Natural Gas Spot Prices at Selected Trading Hubs in the United States
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Reported January 2015 Natural Gas Spot Prices At Selected Trading Hubs in the Northeast United States
Map: Reported January 2015 Natural Gas Spot Prices At Selected Trading Hubs in the Northeast United States
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Reported Natural Gas Spot Prices At Selected Trading Hubs Across the United States as of March 2016
Reported Natural Gas Spot Prices At Selected Trading Hubs Across the United States as of March 2016
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Reported Natural Gas Spot Prices At Selected Trading Hubs in the Northeast United States as of March 2016
Reported Natural Gas Spot Prices At Selected Trading Hubs in the Northeast United States as of March 2016
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Shale Gas Technology and Productivity Trends
The rapid pace and magnitude with which shale play technology is improving is illustrated by the two plots below.  The one on the left is an example is from an early shale gas well with an initial rate of about 3 MMCFD, and an EUR of about 4.5 BCF.  As the horizontal drilling, multistage fracking technology improved and became less expensive, individual well rates and recoveries climbed.  After years of this dynamic, the industry is now developing super wells, which are capable of flowing as much as 60-80 MMCFD, and producing as much as 30 BCF from a single well. This 20-25x increase in rate, and 4-6 times increase in EUR, is accomplished with about a 2x-2.5x increase in well cost.  Such "super" wells are becoming increasingly common.  See map below for reported initial rates from Marcellus wells completed in NE PA in 2019. 





Rig Productivity Growth Within One Major Shale Gas Play
 
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How is this possible you might ask?  Well, this is one of our speciality areas, i.e. tracking new technology in the upstream oil and gas industry, and assessing how that technology "moves the needle" for companies and the larger industry.  Below is an example from an operator showing how over a few short years, it managed to increase average drilling penetration rates in a major shale play by a factor of almost three, from 2000'/day to almost 6000'/day.
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Northeast Marcellus Initial Rates Reported for One Operator
mid-2019
Northeast Marcellus Initial Rates Reported for One Operator
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Example of Early Shale Gas Well Production Profile

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Example of Emerging Super Shale Gas Well Production Profile

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As a result of this technological revolution, the North American natural gas supply curve (below), as we calculate it, has been dramatically pushed down, and flattened.  The implications are that large volumes of gas can be developed at lower breakeven costs.  Meaning the shale revolution is not likely to be a flash in the pan, but rather a force of positive change that has the potential to lower the cost of living for everyone.  There is no better example of this than what is happening in the deep, dry Utica in southwest Pennsylvania.

A North American Natural Gas Cost of Supply Curve
October 2015

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Top 40 Natural Gas Companies in the USA by Daily Output (NGSA)


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