News / Business
Natural Gas Production Declines Surface
With the natural gas drilling rig count being sliced in half, natural gas production declines are finally starting to surface, but still at a much slower pace than expected.
According to the Energy Information Administration (EIA), the natural gas drilling rig count has rebounded from a low of 665 drilling rigs in mid-July to around 726 as of October 9, 2009. While it appears that the drilling rig count has bottomed, the current level is less than half of where it was in mid-September 2008 when the natural gas drilling rig count hit a peak of 1,606 rigs.
The dramatic decline in the natural gas drilling rig count was expected as natural gas prices fell to seven-year lows. However, the production decline that was expected to follow hasn’t been nearly as extreme as many anticipated. According to the EIA, U.S. natural gas production in the Lower-48 fell by 1.1% in July from June levels. As production data typically lags the decline in drilling rigs by up to 6 months, it is expected that production declines reported by the EIA will continue into early 2010 at a minimum.
“But, people need to look at more than just the bottom line right now,” says Valerie Wood, President of Energy Solutions, Inc. “While total production declined, production in Louisiana actually increased by 3.5% and production in the Gulf of Mexico Federal Offshore grew by 2.4% in July. Producers have either removed from service their most inefficient drilling rigs or relocated some of their drilling rigs to more productive, lower cost regions.”
“We expect production declines to continue to show up in EIA data, but longer-term, the reality is with shale production and reduced expenses, natural gas prices no longer have to be as high as they once were to offer producers a fair return,” says Wood.
Production declines and the potential price impact they may have on natural gas prices are discussed further in the October edition of The Advisor, a newsletter specifically written for businesses as an educational tool and guide about the natural gas industry. Request a complimentary copy of the October edition of The Advisor by sending your request to request-oct-pr14@energysolutionsinc.com or call (608) 848-9859.
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About Energy Solutions, Inc.
Formed in 1996, Energy Solutions, Inc. is independently owned. With more than 25 years of experience in the natural gas industry, our team focuses on natural gas prices and in helping businesses improve their internal processes for the purchase of natural gas.
