Last month, Anadarko and Chesapeake said they were continuing to boost their shale gas drilling activities, with Chesapeake saying it was increasing its drilling budget by about 10 per cent this year.
But yesterday Chesapeake’s chief executive Aubrey McClendon voiced concern about current prices, saying that while the industry could “cope” with $4 gas, it couldn’t grow or sustain production at that price.
Natural gas is fairly seasonal so winter will presumably see prices rise somewhat. But the current US natural gas landscape is a bit peculiar. Prices are historically low, especially in comparison to oil, but excitement abounds about the apparent abundance of gas, helped by shale reserves. Although gas rig numbers have virtually halved since a year ago, there are fears that storage capacity may reach its limits after months of low demand, thanks to mild summer weather, lower industrial consumption, and fewer weather incidents.
Interestingly, the big producers are now confident that this problem will soon be behind them. From Reuters:
Chesapeake and other natural gas producers such as XTO Energy Inc (XTO.N) expect the slowdown in drilling will begin to drain near-record supplies of the fuel currently in storage and lead to a price rebound in early 2010.