Last time the National Petroleum Council published a study saying we had more than enough natural gas for all was back in 1999. In December 1999 Henry Hub was $2.36/MMbtu (in 1999 dollars). By December 2000 it was $8.90/Mmbtu. I wrote a piece in 2001 saying that the gas fired power business, fueled (pun intended) by Enron's investment in gas-fired peakers to play the California power market would raise gas prices and crowd out industrial users like ethylene plants. Gas prices marched upward until mid 2008 and all kinds of LNG IMPORT projects were permitted. Some were built, like Freeport, and then sat idle during the big ramp in shale drilling for 15 years. A study published Tuesday finds that America enjoys a profound abundance of natural gas so large that even the most conservative estimates indicate a supply for at least the next 100 years. The study, conducted by The National Petroleum Council – a federal advisory committee that serves under the umbrella of the Department of Energy – also finds that federal energy and climate policies already in place would create a 59% reduction in methane emissions by 2050.   I have no argument with the emissions comments other than the wording reads that we have enough "policies" as opposed to "we're no longer routinely flaring" or something more solid, but the supply part triggered me into writing this post. Putting out regulations and not enforcing them is for sure a waste of time and money. The supply forecast may be what the DOE was waiting for to go ahead and start issuing export permits for the next round of LNG terminals. So this time around, 25 years later, we also have plenty of gas, not only for the US, but for the global market. To me, this new NPC report is a sign that my scenario of a tightening natural gas market in the next few years is on track. I saw this movie already when the conventional gas supply bubble popped shortly after the report was distributed and GE went on backorder for gas turbines. This is a whopper of a file - 70 slides. Enjoy. The good news is that gas prices are going up. https://chartingthecourse.npc.org/files/GHG-Report_Summary-Charting_Course-2024-04-23.pdf

And so it begins - if you were wondering what the government could do to push down oil prices without the SPR or a way to get OPEC+ to say they'll boost production.......the EIA has no way of knowing what production in either one of those basins will really be, but they'll be watching how the market reacts to this to see if it works.

We heard from the Dallas Fed that breakevens have marched up to over $60 now, just not whether that's on a "netback" basis or a WTI basis. If it's netback, producers probably need at least $85 market price now. Here's the news from North Dakota: https://boereport.com/2024/04/12/north-dakotas-rig-count-drops-as-consolidation-sweeps-oil-patch/ And from the Mid-Continent, the Kansas City Fed: https://boereport.com/2024/04/12/oil-and-gas-activity-in-us-midwest-rockies-fell-in-q1-kansas-fed-says/ They're saying $90 breakeven is needed to drill. Meantime I read that Biden will release more oil from the SPR - what SPR? And why? We have plenty of light tight oil that could be diverted from exports. Or is it that the grade of oil in the SPR is what the refiners actually need to make diesel. With the Canadian heavy oil line to the West Coast starting up very soon, we're increasingly in a bind to make up the grade we need. It'll be harder to boost imports of refined products with the shipping issues in the MidEast and Russia out of the market. When you hear someone say "that will never happen" in this business, start running numbers around what you would do if it did.

https://blog.gorozen.com/blog/is-us-oil-production-surging Great post by Goehring and Rozencwajg again - reinforcing the idea that all US oil basins have basically rolled over = production > 50% of estimated available reserves. This article goes into their version of the EIA "adjustment" math and predicts we could be down 1 million b/d by on crude production by year end 2024. I'm not on board with this whole "under reporting" of production issue they're writing about here. Producers in Texas at least divide what comes out of the ground into 3 buckets - crude oil, condensate, and gas. I have no idea what they tell the EIA every month and since the EIA apparently doesn't audit it and royalty, working interest owners and the Texas University Fund don't collect their checks based on it I don't really care. It's fairly well known that condensate will find its way into a crude tank somewhere if it can meet the vapor pressure specs. Due to how the gas gathering systems are set up and the need for producers to quit allowing light ends to "weather off" in trucks and tanks, a bit more liquid is collected at compressor stations and gas plants. This "bit" is mostly butanes and pentanes. These will also get blended into crude, again if they meet the vapor pressure ceiling limit. Keep in mind that condensate blending is nothing new at all and should be in the numbers marked "crude and condensate" in the EIA reports. The NGLs left in the gas after all this wringing out in the field go into a separate system designed to handle high pressure liquids and mostly heads to Central Kansas, East Houston, or Corpus Christi. Contrary to some reports, the pieces that come out of them generally do NOT find their way back into the so-called crude oil stream. I've pulled the numbers for liquids production reported by compressor stations and gas plants in Texas, and although quite a few of them don't bother to report, the volumes from the ones who do don't add up to anywhere near the 700k barrels of "adjustment" we hear about in the EIA numbers as what they need to close their bookkeeping gap. Bottom line of all this - it appears to me that at least some of the barrels that we think are crude are really condensate and NGLs, which aren't worth nearly as much as actual oil. So that "BOE" people keep talking about is increasingly made up of lower value hydrocarbons. Gas in the Permian today has risen in value to almost breaken - ($.015)/Mmbtu before gathering, treating, and processing fees. Yee-haw! You're much better off selling it as ethane if you can get it in the line. So it can go over the dock to India and China.

Looks like the Big Surprise scenario is still a good bet - the EIA numbers won't tell us anything for months if even then, but producers in this quarter's Dallas Fed Survey say things are slowing down, even if they also think oil will be $82 this year. Good read - they surveyed actual producers this month instead of reading Alex Epstein. https://www.dallasfed.org/research/surveys/des/2024/2401