Houston Chronicle
What's it going to take for natural gas prices to rebound?

Wednesday, August 19, 2009

The answer: A production cut of about 2 billion cubic feet per day, says Rusty Braziel of Bentek Energy. But don't hold your breath on that happening, or demand ratcheting up from the other direction.

To recap: natural gas prices are near 7-year lows due to a big drop-off in demand thanks to the economic slowdown, and the surge of production that followed success in the many shale plays throughout the country. The completion of a number of natural gas pipeline projects in recent years also helped.

But production is still up over last year, by about 2.7 Bcf, says Braziel.

This is because at the well-head producers are still able to make money on natural gas below $4 per million British thermal units, at least for producers east of the Sabine River (to use a rough geographic rule of thumb).

And there's little mystery as to where these natural gas resources are, Braziel says, since companies have been drilling through them for decades to get at conventional oil and gas formations.

"You may as well drop the 'E' from E&P," Braziel said, because the companies don't need to explore, just produce.

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