PT: US natural gas production growth to cap at 5% in 2011: Bentek
The recent "torrid pace of growth" of US natural gas production will slow as storage and pipeline capacity limits are tested, leading to a 5% cap on growth in 2011, according to a report released Wednesday by Bentek Energy.
Bentek stated market conditions, upcoming operational issues and low prices will send producers a signal to put on the brakes and adjust drilling plans.
A number of factors could also help slow the pace of growth, including the winding down of drilling to hold production and a decline in drilling cost-carries from joint-venture deals, the report said.
Bentek said the expiring held-by-production obligations would allow operators to shift rigs away from peripheral leases and concentrate activity in the sweet spots, such as rich gas plays, to increase margins in a low-price environment.
While rig counts may fall, production should remain relatively flat or even grow in some key basins as producers focus on these sweet spots and work through an inventory of non-completed wells, Bentek said.
In addition, the report stated the 2,300 uncompleted wells in the Haynesville, Marcellus, Eagle Ford and Barnett shale plays constitute a low-cost inventory already "in the ground" and will cap future price increases.
Meanwhile, the drilling cost-carries from joint ventures would begin expiring between 2011 and 2013, limiting their downward impact on development costs, the analysts said.
Higher-value hedges also would continue to roll off, exposing producers to the lower-price environment, the report said.
It also predicts the 2011 oversupply will continue to bring down futures calendar-year strips, hindering hedging strategies and lowering the economic prospects of some drilling investments.
"Ultimately these factors will lead producers to cut E&P spending and drilling plans, resulting in slower supply growth," the report said.
Following this year, Bentek predicted a "new era of efficient and price-responsive supply growth" that would coincide with further economic recovery and a renewed interest in natural gas from a number of demand sectors.
The report also stated associated gas produced from oil and liquids-rich wells between 2010 and 2015 is expected to grow by 2.5 Bcf/d to a total of 10 Bcf/d.
