Saturday, January 09, 2010 10:43:38 AM
"The fix is underway" says Chesapeake Energy in their April Investor Presentation. What they mean is that natural gas prices are going back up this winter. The number of rigs drilling for natural gas is going down. Fewer rigs means fewer new wells and eventually less natural gas and higher prices for consumers.
This is the third article investigating the possibility of a spike in natural gas prices during early 2010. In this article we look at the scenarios Chesapeake has created based on the how low the drilling rig count goes (shown in Figure 1). And we dig a bit into the other factors that could increase or decrease demand for natural gas.
Conclusion
The drilling rig count has fallen to the point where the market should balance in early 2010, if Chesapeake's assumptions are correct.
If a further drop in the rig count happens or if the decline rate is faster than assumed, then production will fall well below demand.
Shortfalls in supply will be moderated because of a continuing decline in the industrial sector that will be slow to recover and because storage is currently high (and possible shut in production coming back into production as prices rise).
http://www.theoildrum.com/node/5323
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