5 With prices currently well below their 2008 peak, producers have cut back on new drilling activity to avoid oversupply in the natural gas market. 4 The New York Mercantile Exchange (NYMEX) natural gas futures closing price, which hit $8.39 on August 27, 2008, plummeted to $3.47 by October 29, 2012-a decrease of 58.5 percent. In September 2008, the natural gas rig count peaked at 1,585 rigs but by November 2012, the total rig count fell 73.4 percent to 421 rigs. In turn, lower prices can erode incentive for drilling, which eventually results in decreased production.” 3 Since 2008, this has held true for domestic rig counts. The EIA notes that, “increased natural gas supply tends to dampen prices. 2 Eventually, effects of oversupply took hold. As natural gas prices peaked in July 2008, drilling activity (as measured by rig counts) hit an all-time high. However, data indicate that increasingly higher natural gas prices during the first half of 2008 lured additional shale gas to the market. Since shale gas has been a key player in domestic natural gas production for only a few years, and because it has been tracked over a relatively short period (since 2007) by the Energy Information Administration (EIA), analysts find that it is difficult to quantify precisely the effects that shale gas has had on natural gas prices. Bureau of Labor Statistics and the Energy Information Administration. “It’s not so easy to increase drilling, even if Europe needs the gas.Producer Price Index (PPI) for natural gas and natural gas domestic production, January 2007–December 2012 Month “Well costs are going higher, inflation is rampant, margins are going to be crushed,” Gillick of Enverus said. Rising operating costs were another deterrent to a boost in supply, analysts said. The amount of cash from operations reinvested by shale companies this year would be just 26 per cent, compared with more than 70 per cent in previous years. But their capital spending would rise only 11 per cent to $286bn. Research firm Rystad Energy said publicly listed shale producers this year would increase free cash flow - income left after subtracting for outflows and asset maintenance - 70 per cent this year, to a record high above $830bn. “Producers are not responding because everyone is so focused on capital discipline,” said Rosenthal, who added that a “Covid hangover” was still causing labour shortages and late winter outages in areas such as North Dakota were also hindering drillers. “However, the administration must also consider the potential increase in cost to American families because of higher export volumes.”īut shale gas companies have been slow to boost production despite higher commodity prices. “We understand there are geopolitical factors and global and regional markets to consider,” the senators wrote. In February, a group of senators wrote to US energy secretary Jennifer Granholm urging her to take “swift action to limit US natural gas exports”. Some Democratic politicians have also urged a rethink of foreign sales of US gas that flows on LNG tankers and in pipelines to Mexico and Canada. Fertiliser, paper, cement and glass manufacturers were among those most exposed, he said. “But for LNG, the price of Henry Hub would be $3.50 a million Btu,” said Paul Cicio, president of the Industrial Energy Consumers of America, a trade group that has long criticised US LNG exports.Ĭicio said some of his group’s member companies had been trying to expand manufacturing capacity but could not because of higher natural gas prices. This is most likely due to being offline or JavaScript being disabled in your browser.Ĭonsumers in the US are feeling the pinch. You are seeing a snapshot of an interactive graphic. Combined with sluggish production growth from shale gasfields, it has left US gas stockpiles at their lowest seasonal level in three years and well below the five-year average. The extra LNG demand comes as US electricity consumption is on the rebound, driving domestic gas consumption. The US and EU recently signed an agreement in which the US would to ship 50bn cubic metres a year of added LNG to Europe by 2030, almost 50 per cent more than the US’s current export capacity. US energy infrastructure companies NextDecade and Energy Transfer this week announced long-term gas sales contracts for two proposed projects in Texas and Louisiana, respectively. The disparity creates an incentive to add more export plants. Gas in the US remains far cheaper than in Europe, where prices were almost $37 a million Btu this week, or in Asia, where they were $23.5. The Energy Information Administration forecasts LNG exports, which began on the Gulf of Mexico in 2016, will increase another 25 per cent between 20. More shipments are anticipated this year as Cheniere Energy expands an export plant in Louisiana and rival Venture Global opens one in the state.
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