Is the shortage in the wells or is it in the pipe network?
All of the wells in Permian and Eagle ford are fracked so early oil first 2years then rest of life they become more gassy.
Because of gas price so low no worth keeping wells open and they abandon them also new flaring laws make harder to just flare the stuff
Gas pipes are so full in the Permian price go negative they can’t even put the gas anywhere and the pipes are used as storage
Unless these data companies install there data centre right next to the wells and pipe the gas straight to site. Probably see energy price go up but if it’s a direct play on the gas thing about these fracking company the moment doing something is profitable they flood the market only for there own action to bring that price right back down to unprofitable zones.
You should look into the way these wells are made. Have heard stories about Permian basin not producing oil not because there’s no oil but because most of the basin has become so gassy because gas expands more easily and flows up the well head instead of the oil.making the wells unproductive and shutting it off
Now a high gas price would solve this but then your back at there not being enough pipe network to send the gas to where it needs to go
I think one thing to factor in is that most European countries are planning to increase their LNG terminals or introduce brand new ones. These developments have a serious lag time leading to more demand in the medium term though. Defo the case in Ireland.
NG up 40% TTM period. Shortage plus higher demand and what is it in 1 year? 2 years?
Most likely the biggest growth correlation sits within the Russia/Ukraine conflict. I’m gonna dig (pardon the pun) more on Nigeria now. Lot of money flowing into Africa these days.
According to Reuters today, Canada will produce its first LNG for export via the Pacific this weekend. Over time, this would reduce LNG supplies to the USA, which helps your thesis, Russell.
I need to think this over. Gas is a byproduct of Oil and with the oil price low at this time , that would affect future Gas production and therefore the price of gas would rise. To me being Old I always go back to the Discounted Cash flow model of asset prices. Falling interest rates pushed up asset price and as rates went to 0 there was an exponential rise in all asset prices. This price rise is so ingrained into people that to even mention that it might reverse produces a very angry response and so prices will keep rising, but for how long. For me it is about the future path of interest rates, and up to now I have been with you. However Natural Gas as an argument has been a bit of a stretch and sounds like you want it to be true. If this article is still online in 7-10 days I will update my thinking but today this is all I have.
I have followed the shale industry for a long time - and there has been massive consolidation - which normally leads to higher prices. However - Permian oil production led to natural gas production as a by product. But now, oil and gas drilling seems to be slowing, just as demand is ramping... looks interesting to me. But lets see how it plays out
I have looked into the Nat Gas market and you could be on to something. However the first shortage appears to be in the middle east, and they could be in real trouble. I also think the UK could start issuing exploration liscences as they are also going to need a lot of power and the Nuclear power stations are decades away.
However the data centres are being produced at quite a lick in the USA because the over valuation of stock prices for the MAG 7 has reaulted in huge over investment and i think poor investment.
Nat Gas is a much larger portion of todays energy mix and this coupled with higher demand will keep infl;ation higher and therefore put more pressure on interest rates.
So I ask when will the market realise that interest rates are not coming down. When that happens the stock market and then the housing market will fall. Therefore this is a long way of saying I think you could be on to somethibing here. However this could play out tomorrow or in 4 years time.
You are right about the huge gas usage in the next few years to power the data centers. This the reason for Trump to sign 5 EO to build and fund nuclear projects all over US and to build strategic minerals mining in the US. But building a new nuclear plant is quite many years away. Those tech AI firms cannot wait that long. US gas play is slowing down due to the over extraction and geological feature. Also, oil companies are not interested in drilling for new wells. In the US, good reserve locations have all been drilled out. New wells will cost a lot more to construct from here. Oil firms business model is to keep the gas price constant with the same supply of gas then buy back own shares while paying dividends ( return of capital). This builds more value than drilling expensive wells and selling cheap gas/oil products. Gas price in Asia and Europe is higher than the US. If I own a gas company I like to sell more outside of the US for that reason. Adding all this together, US will have less gas to burn soon.
A genuine shortage, I believe, would only be possible if domestic demand would exceed supply. If price starts to get too high (e.g. even approaching TTF) exports get restricted in a heartbeat. This surely is a lot more political than fiscal, monetary policy etc so thinking the market would be allowed to determine price freely is just fantasy IMO
Is the shortage in the wells or is it in the pipe network?
All of the wells in Permian and Eagle ford are fracked so early oil first 2years then rest of life they become more gassy.
Because of gas price so low no worth keeping wells open and they abandon them also new flaring laws make harder to just flare the stuff
Gas pipes are so full in the Permian price go negative they can’t even put the gas anywhere and the pipes are used as storage
Unless these data companies install there data centre right next to the wells and pipe the gas straight to site. Probably see energy price go up but if it’s a direct play on the gas thing about these fracking company the moment doing something is profitable they flood the market only for there own action to bring that price right back down to unprofitable zones.
You should look into the way these wells are made. Have heard stories about Permian basin not producing oil not because there’s no oil but because most of the basin has become so gassy because gas expands more easily and flows up the well head instead of the oil.making the wells unproductive and shutting it off
Now a high gas price would solve this but then your back at there not being enough pipe network to send the gas to where it needs to go
I think that is why all the LNG capacity is going in near the Permian - to export the gas to Europe and Asia.
I think one thing to factor in is that most European countries are planning to increase their LNG terminals or introduce brand new ones. These developments have a serious lag time leading to more demand in the medium term though. Defo the case in Ireland.
NG up 40% TTM period. Shortage plus higher demand and what is it in 1 year? 2 years?
I guess that is my point - US natural gas has been very cheap, so everyone is building to take advantage of it - but maybe the supply wont be there...
With the LNG terminals in Europe, I guess they don’t need to be served by the US only. I’d suggest Nigeria might take advantage
True - but almost all the LNG capacity increase over the next 5 years is coming from the US
Most likely the biggest growth correlation sits within the Russia/Ukraine conflict. I’m gonna dig (pardon the pun) more on Nigeria now. Lot of money flowing into Africa these days.
According to Reuters today, Canada will produce its first LNG for export via the Pacific this weekend. Over time, this would reduce LNG supplies to the USA, which helps your thesis, Russell.
Interesting. Not sure how much Canadian NG made it to the US. Will take a look
I need to think this over. Gas is a byproduct of Oil and with the oil price low at this time , that would affect future Gas production and therefore the price of gas would rise. To me being Old I always go back to the Discounted Cash flow model of asset prices. Falling interest rates pushed up asset price and as rates went to 0 there was an exponential rise in all asset prices. This price rise is so ingrained into people that to even mention that it might reverse produces a very angry response and so prices will keep rising, but for how long. For me it is about the future path of interest rates, and up to now I have been with you. However Natural Gas as an argument has been a bit of a stretch and sounds like you want it to be true. If this article is still online in 7-10 days I will update my thinking but today this is all I have.
I have followed the shale industry for a long time - and there has been massive consolidation - which normally leads to higher prices. However - Permian oil production led to natural gas production as a by product. But now, oil and gas drilling seems to be slowing, just as demand is ramping... looks interesting to me. But lets see how it plays out
I have looked into the Nat Gas market and you could be on to something. However the first shortage appears to be in the middle east, and they could be in real trouble. I also think the UK could start issuing exploration liscences as they are also going to need a lot of power and the Nuclear power stations are decades away.
However the data centres are being produced at quite a lick in the USA because the over valuation of stock prices for the MAG 7 has reaulted in huge over investment and i think poor investment.
Nat Gas is a much larger portion of todays energy mix and this coupled with higher demand will keep infl;ation higher and therefore put more pressure on interest rates.
So I ask when will the market realise that interest rates are not coming down. When that happens the stock market and then the housing market will fall. Therefore this is a long way of saying I think you could be on to somethibing here. However this could play out tomorrow or in 4 years time.
Forward market and equity market is already moving... so could happen sooner than you think
You are right about the huge gas usage in the next few years to power the data centers. This the reason for Trump to sign 5 EO to build and fund nuclear projects all over US and to build strategic minerals mining in the US. But building a new nuclear plant is quite many years away. Those tech AI firms cannot wait that long. US gas play is slowing down due to the over extraction and geological feature. Also, oil companies are not interested in drilling for new wells. In the US, good reserve locations have all been drilled out. New wells will cost a lot more to construct from here. Oil firms business model is to keep the gas price constant with the same supply of gas then buy back own shares while paying dividends ( return of capital). This builds more value than drilling expensive wells and selling cheap gas/oil products. Gas price in Asia and Europe is higher than the US. If I own a gas company I like to sell more outside of the US for that reason. Adding all this together, US will have less gas to burn soon.
A genuine shortage, I believe, would only be possible if domestic demand would exceed supply. If price starts to get too high (e.g. even approaching TTF) exports get restricted in a heartbeat. This surely is a lot more political than fiscal, monetary policy etc so thinking the market would be allowed to determine price freely is just fantasy IMO
Huge volume NG of exports to EU to replace lost supply from Nord Stream.