Marketers were working overtime in the second quarter, according to NGI's 2Q2010 Top North American Gas Marketers Ranking, which found that the 22 reporting marketers that also participated in the 2Q2009 survey transacted 126.55 Bcf/d in 2Q2010, an increase of 6.2% compared with the 119.17 Bcf/d they reported in the year-ago period.
But the additional gas hitting the market wasn't necessarily good news for the industry, according to Ken Medlock, an energy and resource economics fellow at Rice University's Baker Institute.
"There's a whole lot of gas trying to find a home," Medlock told NGI. "I don't want to say it's a nightmare for producers, but it's pretty close. We're in a situation where storage is going to be brimming, and, quite frankly, the weather we had this summer helped us out a little bit...but you look forward and all of the long-range forecasts call for a mild fall and a mild winter."
While still the top marketer in the survey, BP plc reported physical sales of 25.30 Bcf/d in 2Q2010, a 9% decline from 27.70 in the year-ago period. It was the third consecutive quarterly decline for BP, which reported an 8% decline in 1Q2010 compared with 1Q2009 and an 11% decline in the 4Q2009 survey.
Several BP plc marketing veterans recently departed to join a competing shop (see NGI, Sept. 13), and the embattled energy giant continues to recover from the Macondo well tragedy in the deepwater Gulf of Mexico nearly five months ago. The company, which has already spent more than $8 billion related to the well blowout and resulting clean-up, has vowed to sell up to $30 billion in assets over the next 17 months in an effort to slim down to weather the spill's fallout (see NGI, Aug. 2). Included in the planned sales are $7 billion in assets BP agreed to sell to Apache Corp. in late July (see NGI, July 26).
Shell Energy North America (US) LP remained in second place in the survey, reporting a 1.6 Bcf/d (12%) increase to 15.10 Bcf/d in 2Q2010 compared with 13.50 Bcf/d in 2Q2009. It was the fourth consecutive strong performance for Shell, which reported a 17% increase in NGI's 1Q2010 survey compared with 1Q2009, a 12% increase in the 4Q2009 survey and a 9% increase in the 3Q2009 over the respective quarters the previous year. ConocoPhillips reported that it marketed 14.60 Bcf/d in 2Q2010, a 3% increase compared with 14.20 Bcf/d reported in 2Q2009.
|2.||Shell Energy NA||15.10||13.50||12%|
|8.||EDF Trading NA||6.43||n/a||n/a|
|21.||Bank of America Merrill Lynch||1.40||1.65||-15%|
|24.||Southwestern Energy Co||1.08||0.81||33%|
Source: Quarterly financial reports with the Securities and Exchange Commission, or if necessary, statements signed by company officials and provided to NGI. Some previous-year data has been updated by the companies since it was originally reported.
Companies providing data directly to NGI include BP, Chevron, Citigroup, ConocoPhillips, EDF Trading NA, JP Morgan, Louis Dreyfus, Macquarie Energy, Bank of America Merrill Lynch, RBS Sempra, Shell Energy and Tenaska. *Macquarie Energy data reflects Macquarie Energy LLC's transactions in the United States and Macquarie Energy Canada's transactions in Canada. **The gas volume figures for Apache, Chesapeake, Devon, EnCana and ExxonMobil represent the amount of North American gas produced in the quarter. Those companies may be marketing more third-party gas for sale.
North America's natural gas supply gains are undermining some of the major exporting countries, which could disrupt investments in new infrastructure projects, according to International Energy Agency chief economist Fatih Birol (see related story). Natural gas production and rig counts have "diverged materially since 2008," suggesting that "rig productivity" is the force behind the massive supply growth, said Barclays Capital energy analysts (see related story).
"I think what we had going through the second quarter and the beginning of the third quarter has been a lot of leasehold drilling," Medlock said. "When you look at rig counts and you saw some jumps near the end of August, there was a lot of consternation -- 'why are all the rig counts jumping when prices are going down?' -- but it's related to being able to hold on to the assets."
Natural gas values continue to hover around the $4/MMBtu mark.
"I do expect, given the weakness of the price, for producers to start holding back a little bit because you can't just keep drilling and pray. You've got to be able to make money when you do it," Medlock said. "Right now it's probably as close to the gas bubble years as we've been in a decade. Whether or not that's going to last for a decade much like it did in the '90s is hard to say, especially given the wave of different potential regulatory moves we could see in the next few years. It looks like we're going to be -- for a long period, not just this year -- in a situation where we're going to have lots of supply and not have to worry about it too much.
"I fully expect the year to continue to weaken...I think the spread to January is pretty soft, and that's usually an indicator that even the market's not pricing in any cold weather. A lot of weakness is expected, not just what we have today but expected going forward as well."
Highlights of the 2Q2010 NGI survey include the addition of Houston-based producer Southwestern Energy Co., which reported that it marketed 1.08 Bcf/d, up from 0.81 Bcf/d in 2Q2009. The largest percentage increases in the survey were reported by Sequent Energy Management (50%), RBS Sempra Commodities (49%) and Macquarie Energy (46%).
XTO Energy Inc., which was ranked 16th in NGI's 1Q2010 survey with 2.40 Bcf/d, was acquired by ExxonMobil Corp. earlier this year (see NGI, Dec. 21, 2009). The $41 billion deal was closed June 25 and the 2.01 Bcf/d reported by ExxonMobil, which is a 5% increase from 1Q2010, includes XTO volumes from the final six days of the quarter. XTO did not report 2Q2010 volumes.
Changes will be coming to the survey's upper ranks later this year with RBS Sempra Commodities, a joint venture of Sempra Energy and the Royal Bank of Scotland, scheduled to be dissolved by the end of this month (see NGI, Aug. 9; May 10). The once-lucrative business, which was ranked fifth in the 2Q2010 survey and eighth in the 1Q2010 survey, lost $5 million in the first quarter, compared with $114 million in net profits in the first quarter of 2009, and was only break-even in the second quarter, according to Sempra.
And Nexen Inc., which reported 4.80 Bcf/d in 1Q2010, a 6% decline compared with 3.10 Bcf/d in 1Q2009, has agreed to sell its North American downstream natural gas marketing business to Goldman Sachs' commodity trading subsidiary J. Aron & Co. (see NGI, May 17).
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