The amazing chart above shows how the number of active natural gas rigs in the US has fallen from an all-time high of 1,606 in September 2008 to only 407 in early March of this year, a drop of 75% according to data from Baker-Hughes. Meanwhile, EIA data though December 2012 show that US natural gas production has risen to record levels and increased by almost 17% during roughly the same period that active gas rigs dropped by 75%. In about the last five years, the amount of natural gas produced (gross withdrawals) per rig has increased by more than four times.
In a Forbes article today by David Blackmon, he explains that amazing phenomenon:
Today, there are fewer than 400 rigs in the US drilling for natural gas. Four years ago, there were over 1,600 rigs engaged in that endeavor. Yet, as the natural gas rig count has dropped by 75%, overall natural gas supplies have continued to rise.
Why? Because operators are getting better over time at maximizing recoveries from each well, and because these oil shales – the Eagle Ford, the Bakken, and those in the Permian Basin – contain a high volume of associated natural gas. So whether companies are drilling for natural gas or not, they continue to find it.
Meanwhile, in dry gas plays like the Haynesville, Barnett and the dry gas portion of the Eagle Ford, companies are basically drilling only the wells they are required to drill under their lease agreements. What this all means is that there is an incredible amount of excess drilling capacity in the system, waiting to come on line should the natural gas price firm up for any prolonged period of time.
Here is the main thing to remember about the US oil and gas shale revolution: We are today at the tip of a very large iceberg.
1. Most of the known shale plays today have been discovered in just the last 6 to 7 years.
2. Prior to 2006, the Barnett Shale in North Texas was the only significant shale play being developed in the US.
3. More new shale plays are being discovered on almost a monthly basis – we are far from having discovered them all.
4. Most resource base projections are based on the oil and gas that is recoverable with current technology. In the oil and gas industry, technology advances every day, so such projections tend to become understated almost as soon as they are released.
5. Consider this: the common belief that an operator is able to recover 10-15% of the available resource with the initial completion of an Eagle Ford Shale well. As technology improves, it is likely that companies will be able to go back into many of these wells, re-stimulate them, and recover much more of that resource decades from now.
David Blackmon concludes:
Last week, New York Times columnist David Brooks wrote this: “Most important of all, the boring old oil and gas engineers have transformed the global balance of power.”
That’s where the US shale oil and natural gas revolution is leading us, and Texas is leading the way. God Bless Texas.
MP: Sorry for being repetitive, but I must ask again: peak what?