An excellent analysis of U.S. natural gas supply prospects and recent history has been posted at The Oil Drum.  It fleshes out a much discussed conclusion that new finds of unconventional gas combined with better extraction techniques could yield much higher NG production.  In fact production has recently been increasing - by as much as 8% according to this article. My sense is that there are two potentially large new sources of demand that could ultimately cause NG prices to rise again.  One is transportation.  A lot of new …

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A study released on 7/30/08 by Amercan Clean Skies Foundation and Navigant Consulting states that U.S. unconventional natural gas deposits are sufficient to supply 118 years of U.S. demand at 2007 levels.  Newly developed fracking and horizontal drilling techniques have made it possible to recover enormous quantities of gas from tight sands, coalbed methane, and gas shale formations, reports the Oil & Gas Journal (8/4/08) On the demand side, some leaders are starting to advocate the use of NG in lieu of petroleum to power cars.  Two Congressmen, Rahm …

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The following Wall Street Journal story points out that some IOC’s are starting to buy North American gas reserves partly because they can’t find or buy enough oil in or out of North America.

This trend toward greater investment in nat. gas will tend to increase gas production over the next few years.  It’s possible that nat. gas supply could outrun demand for a while, although there should also be increasing demand from new electricity plants and some conversion from oil to gas in both transportation and heating.  

It’s also possible that …

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http://www.stockmarketnotes.blogspot.com/ Wednesday, May 7, 2008 Gazprom Releases Official Projections of Natural Gas Production: Is It Realistic That Gazprom Increases Output Through 2030? Gazprom, Russia’s largest company and the world’s largest natural gas producer, has released projections for future expected production of natural gas until 2030 on its website, which overall show moderately growing production and comfortable maintenance of gas export capacity. Gazprom’s projections stand in contrast to doubts raised by several analysts (the reports of whom will be discussed below) as to whether or not …

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  By Ayesha Daya   July 2 (Bloomberg) — Natural gas, trading at a 40 percent discount to crude, may rise to reach the record price of oil as demand for cleaner-burning fuels increases, according to energy ministers from Qatar, Algeria and Iran. U.K. natural gas sells for 71.35 pence a therm, or the equivalent of $85 a barrel based on its energy content, compared with $141 for Brent crude. British natural gas rose 38 percent this year, lagging behind the …

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The Economist reports that Shell has at least temporarily withdrawn from the Iranian NG project to integrate the South Pars field with an LNG processing plant.  The withdrawal reflects both political objections specific to Iran and more general global conditions of higher costs for capital projects that are causing many cancellations and delays. This report seems to confirm the reasoning behind concerns in Europe and Japan in regard to the adequacy of natural gas supplies and possibility of shortages starting in 2010, as discussed in an earlier post.  …

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Since natural gas is more of a regional market than oil, which is more global, we Norte Americanos tend to estimate future gas prices with reference to factors such as likely Canadian supply and local inventory levels.  But imports of LNG are increasingly important to our continent’s gas price.  To obtain LNG deliveries, our terminals bid against those in Europe, Asia, and elsewhere.  Recently our gas prices have been lower than some abroad thus diverting some LNG shipments away from the the U.S.   In Europe and Asia these days …

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The largest Russian natural gas producer, Gazprom, apparently has heard the concerns of its European customers.  While they have been worrying that there will not be sufficient gas supplies, and while Gazprom’s production has been falling, the company has been spending it’s funds on investments that do not increase gas production.  All that is about to change, according to the following report:

International
Gazprom’s New Focus On Production
Oxford Analytica 04.24.08, 6:00 AM ET

Russian gas export monopoly Gazprom plans to increase investment in gas production and …

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One of the things I love about the Financial Times (the “pink” paper) is that their articles are short and to the point and they do not bleed from one page to another.  Anyway, the following piece from today’s paper puts further flesh on the bones of my recent LNG post to the point that U.S. natural gas prices are under pressure from the higher prices extant in other countries because U.S. ports are being outbid for LNG shipments.  This piece highlights Asian demand factors.  It also describes changing …

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An in-depth report on the market for natural gas in today’s Wall Street Journal focuses on the competition between the U.S. and Europe for LNG.  The price of gas over there is around $20 per mmcf, nearly double that here.  So there is good reason to suspect that over time the two prices will come closer as either supplies loosen up there or prices rise here in order to attract more LNG.  Most of the fundamentals that I have notice recently suggest prices will more likely remain high in …

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An area 775 miles northwest of Calgary in B.C., the Muskwa shale in the Horn River Basin, could become one of the largest gas fields in North America.  Companies with leaseholds include EOG Resources, EnCana,Nexen, Deven, and Apache.   News of initial drilling successes has moved some of the stocks substantially higher.  While the find is being compared with the Barnett shale in scope, the gas may be more difficult to extract and transport.  Moreover, native tribes control much of the surface rights and permits are required. 

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There seems to be much less discussion and analysis of the supply and demand dynamics for natural gas than for crude oil and other liquids.  Here is a link to the web site of the Natural Gas Supply Association, an industry trade group, that is replete with data and information about supply and demand vectors. This web site maintains that unproven NG reserves in the U.S., according to several sources that are presented, are about 6 - 9 times the proven reserves.  If such reserves become …

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Ukraine’s Naftogaz Ukrainy says Gazprom has cut shipments by 35 pct 03.03.08, 9:42 AM ET KIEV (Thomson Financial) - NJSC Naftogaz Ukrainy said OAO Gazprom has cut natural gas supplies to Ukraine by 35 pct, 10 percentage points more than the supply cut announced this morning, Interfax reported. ‘According to the latest statistics from Ukrtransgaz, supplies have been cut by 35 pct, or by 46 million cubic meters per day,’ a Naftogaz Ukrainy spokesman said. A spokeswoman …

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An enormous discovery of natural gas fields in the northeastern Horn River Basin area of British Columbia has caused several stocks to take a vertical price trajectory.  The new fields are made feasible to develop thanks to new horizontal drilling and subsurface fracturing techniques.  On the other hand, the cost of drilling such wells is huge.

Here is a more complete report:
Huge discoveries in northeast ignite ‘massive land grab’ for drilling rights
DAVID EBNER

From Monday’s Globe and Mail

March 3, 2008 at 4:03 AM EST

CALGARY — The remote and rugged northern fringe of …

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According to a report in The Oil and Gas Journal (2/18/08), the Nigerian government has declared that natural gas producers must sell an increasing amount of their production into the domestic market at less than market prices.  Such a policy is obviously a form of taxation or confiscation of the private companies by the government.  While the policy is understandable, it also is having the predictable affect of limiting the interest of foreign companies in investing in gas production efforts in Nigeria.  Thus, Nigeria has a sort of …

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