(November 3, 2014 – NGI) Prices Expected to Take Beating in Coming Gas-on-Gas War (By: Joe Fisher)
The natural gas market has seen gas-on-gas competition before, but the mix-up coming between low-cost molecules from Appalachia with gas from liquids plays such as the Bakken Shale as well as the Permian and Anadarko basins will be something on a grand scale, according to a new analysis.
"We've seen this movie before, in the 2008-10 time frame when Rockies gas battled it out with new shale supplies from the Haynesville and Fayetteville. But this time there is a big difference in the economics of production," said Rusty Braziel, president of RBN Energy, which along with BTU Analytics conducted the analysis.
"In that earlier battle for market share, the breakeven prices for Rockies and Southeast producers were in the $4 to $5/MMBtu range. Most of the production was dry, and producers had yet to realize the significant productivity improvements in drilling and completion technologies seen over the past five years. Today market conditions are quite different."
Many producers in Northeast Pennsylvania can profitably produce gas at prices of less than $2.50/MMBtu. Further, wet gas gas producers in Southwest Pennsylvania, West Virginia and Ohio can operate profitably at prices well below $2.00/MMBtu by selling higher-value natural gas liquids (NGL), according to the report. This is true even with today's lower NGL prices.
This economically advantaged Appalachia gas will compete with gas from the Bakken, Permian, Anadarko and the Eagle Ford. Producers in these regions that are making money on oil "are essentially immune to the impact of low natural gas prices -- down to a breakeven price of zero," RBN and BTU said.
Read the full story here: http://www.naturalgasintel.com/articles/100283-prices-expected-to-take-b...
