Items from this week:
Prices: Natural gas prices continue to decline. Below is a comparison of gas NYMEX futures prices with S&P 500 for the last year:
On August 14, futures for September delivery settled at $3.24/MMBtu, a 52-week low. Futures prices have declined about 65% from this time a year ago. The Energy Information Administration reports that gas in storage increased by 63 Bcf to 3.152 Tcf for the week ended August 7, compared to 2.65 Tcf a year ago, and well above the five-year average of 2.635 Bcf. Absent severe supply disruptions or a very cold winter, gas prices are likely to remain low for some time.
The price decline has resulted in a corresponding decline in lease and drilling activity. The chart below shows the number of oil and gas leases filed of record in Tarrant County, the center of Barnett Shale activity:
This shows a decline in leasing from 18,000 leases in May, 2008, the height of the leasing frenzy, to 2,000 in July 2009.
Earthquakes: Scientists from Southern Methodist University have tentatively concluded that recent earthquakes in the vicinity of Dallas-Fort Worth Airport may have been caused by a salt water disposal well located at the southern end of the airport, operated by Chesapeake.
Chesapeake has shut in the well as a precautionary measure. The scientists found no correlation between the quakes and drilling activity, but the depth of the quake — about twice the depth of the Barnett Shale formation — the depth of the SWD well, 13,780 feet, and the proximity of a small fault that underlies the DFW property, have together led the scientists to conclude that the disposal well may be facilitating the seismic activity. The scientists have as yet reached no conclusion about similar quakes recently around the Cleburne area, but Chesapeake has also shut down a SWD well in Cleburne.
Energy Summit: At the recent Clean Energy Summit in Las Vegas hosed by Senate Majority Leader Harry Reid, there was a lot of discussion about use of natural gas to fuel vehicles. Senator Reid said that he had been converted to Boone Pickens’ idea. “I now belong to the Pickens church.” In an op ed piece after the summit, Boone Pickens reported that everyone seems to be coming on board to his energy plan. He said that Al Gore endorsed using natural gas to power 18-wheelers. Excerpts from Pickens’ piece:
“”The U.S. trade deficit took a big jump in June, up 4 percent from May to $27 billion. The main culprit? Ricing oil prices. Thanks to a spike in crude oil in June, energy-related imports rose to $22.4 billion from $17.7 billion.”
“According to the Potential Gas Committee at the Colorado School of Mines, America’s natural gas resources have jumped 39 percent over the last two years. … At current production rates, ‘the current recoverable resource estimate provides enough natural gas to supply the U.S. for the next 90 years.’ … America has more natural gas than Saudi Arabia has oil.”