The United States government says 2018… optimists say sooner, and the skeptical impolitely disagree.
When it comes to putting an exact date on when the U.S. will become a net natural gas exporter, it seems that every soothsayer has a prediction.
It’s not that we’ll never become a net exporter of natural gas (we will, trust me), or that shipping our LNG to Europe would be even more valuable should Russia decide to flex its energy muscles and turn off the taps. Remember, Russia supplies the EU with nearly one-third of its natural gas supply, and Putin knows he’s holding a straight flush against a pair of twos.
There is, however, a slight snag in rescuing Europe from the Putin’s clutches… we may not be the natural gas savior that most people think we are.
Storage Wars
Believe me, I didn’t need to be reminded of the bitterly cold weather again. Yet sure enough, the moment I stepped out outside, I knew it was going to be another winter wonderland day in Baltimore.
The harsh winter, however, won’t go quietly into spring, and has forced the Energy Information Administration to revise it’s own storage estimates, which it now projects will end the season below one trillion cubic feet for the first time in a decade.
The eternal war for balance, however, is an ongoing fight, and this year’s record withdrawals will inevitably lead to a huge injection season. Typically, the injection season is between April and October. Based off of EIA estimates, the U.S. will need to inject up to 2.5 trillion cubic feet of natural gas this year.
Fortunately, demand is expected to be relatively flat this year around 71.3 billion cubic feet per day (this is not to mention that gas demand during the winter months averaged 91.2 billion cubic feet per day). Next year, the EIA is expecting U.S. gas consumption to decline by less than half of one percent.
To give this a little more perspective, just remember that natural gas demand in the European Union, along with Norway, Switzerland, Turkey, and several Balkan states is only a little more than five billion cubic feet per day.
But surely the natural gas boom underway is enough to help.
Actually, a better question to ask is whether we’re really in the middle of a gas boom at all?
Backyard Boom or Bust?
I told my readers earlier this month that, like it or not, there’s only one reason that gas production in the United States is steadily rising: shale gas wells.
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And yet, this doesn’t come close to telling the whole story, and the real devil is in the details.
First, understand that six regions accounted for practically all of the growth in U.S. gas production in 2011 and 2012. You have undoubtedly heard some of their names on the pages of Energy and Capital before: the Bakken, Niobrara, Haynesville, Eagle Ford, and Permian Basin.
But despite the fact that gas production grew in four of these areas in 2013, something really stands out…
The Marcellus alone accounted for about 75% of natural gas production growth in the six regions.
Back in 2012, output in the Marcellus averaged 6.5 billion cubic feet per day. A year later it rose to 10.4 billion cubic feet per day.
Today, more than 14 billion cubic feet of natural gas flows out Marcellus wells on a daily basis.
Virtually nowhere else are companies more efficient than the Marcellus. Since 2010, the amount of production per rig in the Marcellus has far outpaced the pack.
Taking a look at the rig data from Baker Hughes, you’ll find that rigs running in the Marcellus are not just producing more gas, they’re drilling more wells. The average Marcellus rig drilled 6.7 wells during the fourth quarter of 2013, topped only by operators in the Barnett and Fayetteville.
Unlocking natural gas profits, however, means more than simply having a tremendous amount of natural gas underground.
For investors looking to find that edge in these burgeoning shale plays, keep in mind that the name of the shale game from here on out is efficiency.
Until next time,
Keith Kohl
Check us out on YouTube!A true insider in the technology and energy markets, Keith’s research has helped everyday investors capitalize from the rapid adoption of new technology trends and energy transitions. Keith connects with hundreds of thousands of readers as the Managing Editor of Energy & Capital, as well as the investment director of Angel Publishing’s Energy Investor and Technology and Opportunity.
For nearly two decades, Keith has been providing in-depth coverage of the hottest investment trends before they go mainstream — from the shale oil and gas boom in the United States to the red-hot EV revolution currently underway. Keith and his readers have banked hundreds of winning trades on the 5G rollout and on key advancements in robotics and AI technology.
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