It’s a topic that’s helped pave campaign trails and sparked the interest of energy buffs everywhere.
Even the ears of the less informed will perk to the tune of North American energy independence…
Because at its most basic level, energy security means lower prices.
And as the North American shale boom offers that promise, natural gas drilling is getting its fair share of attention.
Natural gas spot prices are up 70% since April.
Prices are still low, but this jump made analysts readjust their focus on drilling.
Baker Hughes’ weekly rig count showed natural gas drilling rigs fell to 518 last week — a 42% decline from 889 rigs a year ago — and demand is up, particularly with the scorching summer we’ve been having.
And yet production has somehow managed to increase over the past year — even though the rig count’s been reduced by close to half.
The EIA’s natural gas report for July showed output of 69.05 billion cubic feet per day (Bcf/d) in June, an increase of 3.16 Bcf/d from a year ago.
Not only that, but 518 is the lowest number of natural gas rigs since 1999 — well before the shale boom exploded.
But production is not expected to slow much at all…
Just take a look at the EIA’s predictions:
By 2013, natural gas production will be solidly above 69 Bcf/d and on its way up.
Wait a second… Rig count is at its lowest in 13 years.
Shouldn’t there be some sort of backlash?
Not according to the EIA…
And as with the entire takeoff of the shale boom, this all comes down to one thing: technology.
Improvements in hydraulic fracturing technology gave way to the North American shale boom not too long ago.
Fracking has been around for a while — just not in a form that’s provided so much opportunity.
Improvements in the extraction process are enabling the phenomenon we’re seeing as I write this.
Rig counts can hit lows not seen since the start of the shale boom without disrupting production…
And again, this is during a time of peak demand.
My colleague Keith Kohl has a new report out detailing one company’s technology that is contributing to this paradox.
Be ready for the next era of natural gas production.
Good Investing,
Brianna Panzica
Analyst, Energy and Capital
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