Drilling and lower costs

[TheShiznit]

Everyone look at the price of Natural Gas. Take a look at the price jump over the course of the last 5 year-7 years. In that time, the drilling for Natural Gas has been going GANGBUSTERS and the price has still risen and quite markedly. So, my question is, armed with this knowledge, do you still feel drilling will lower prices? Or just make those who drill for it more profits?

[Kid Cid]

Are they making more profits or are they covering the cost of exploration and extraction with the rising prices?

 

Edited for crap spelling.

Edited July 3, 2008 by Kid Cid

[H8tank]

I think gas never went down after 1979.

[Tford]

Lifting Costs are much higher than they were back when gas was cheap. Not to mention demand has not fallen off at all. The majority of gas reserves in North America now come from shallow formations and tight rock, where production is difficult and costly. To put it into context, my company (yes, I work for an oil&gas company) needs to drill approximately 40 wells in other shallow formations to come up with an equivalent amount of gas to one well in deeper formations that has been long since depleted.

 

Also, many wells in tight formations (non-permeable) require additional work to fracture the rock and artificially create permeability to allow the petroleum product to flow to the wellbore. This is not cheap and not always guaranteed to increase inflow.

 

 

It's not as simple as drilling more to increase production and lower cost. Current reserves in North America are getting more and more difficult to produce. If the price of gas were to drop, many of these costly ventures in getting tight gas or shallow gas would simply be too uneconomical to continue, leading to a drop in production and a drop in recoverable reserves.

 

Gas is also a different beast in that other than LNG (liquid natural gas). There is no way to transpot it effectively, outside of pipeline. Therefore, with regards to gas production, North America is on an island effectively, whereas oil can be tanked.

[TheShiznit]

Lifting Costs are much higher than they were back when gas was cheap. Not to mention demand has not fallen off at all. The majority of gas reserves in North America now come from shallow formations and tight rock, where production is difficult and costly. To put it into context, my company (yes, I work for an oil&gas company) needs to drill approximately 40 wells in other shallow formations to come up with an equivalent amount of gas to one well in deeper formations that has been long since depleted.

 

Also, many wells in tight formations (non-permeable) require additional work to fracture the rock and artificially create permeability to allow the petroleum product to flow to the wellbore. This is not cheap and not always guaranteed to increase inflow.

 

 

It's not as simple as drilling more to increase production and lower cost. Current reserves in North America are getting more and more difficult to produce. If the price of gas were to drop, many of these costly ventures in getting tight gas or shallow gas would simply be too uneconomical to continue, leading to a drop in production and a drop in recoverable reserves.

 

Gas is also a different beast in that other than LNG (liquid natural gas). There is no way to transpot it effectively, outside of pipeline. Therefore, with regards to gas production, North America is on an island effectively, whereas oil can be tanked.

 

Ok. but then the analogy is still the same. I am sure you can come up with all sorts of excuses after we drill in anwar and on the ocs for why it was "more expensive" than we thought...or other such excuses for why the price still goes up even though production is greater.....You see, the commodities market could care less about what it costs for you to pull it out of the ground....that is the judgement of the company...which is why right now these oil companies want to drill in easier places to get oil...they can make a killing....I get it....I just wanted to highlight the reasons more.