Curtailed

It may take some time before fewer drilling rigs and curtailed output make a dent in domestic onshore natural gas production. Dry gas production skyrocketed 11.6% in January from a year earlier to 2,047 Bcf gross, the Energy Information Administration (EIA) said.

Seneca Resources Corp., the exploration and production (E&P) arm of National Fuel Gas Co., has curtailed some Marcellus Shale production, is delaying some well completion activities there and possibly may not participate in some joint venture wells with partner EOG Resources Inc. because of low natural gas prices, the company said Monday.

Chesapeake Energy Corp. last week curtailed 0.5 Bcf/d, or 8%, of its operated gross natural gas output in the U.S. onshore and said “if conditions warrant” it was prepared to double its curtailment to as much as 1 Bcf/d. The second biggest gas producer in the United States also cut by by half its operated gas drilling activity and slashed dry gas spending by 70% this year.

The “big takeaway” from a recent investigation of power outages and curtailed gas deliveries during extended cold weather in the Southwest earlier this year is the need for more natural gas storage capacity, according to some FERC commissioners.

The “big takeaway” from a recent investigation of power outages and curtailed gas deliveries during extended cold weather in the Southwest earlier this year is the need for more natural gas storage capacity, according to some FERC commissioners.

Natural gas production is being curtailed in pockets across North America and some completed wells are not being hooked up, events that energy analysts say are inevitable, given weak prices and a growing list of storage-related operational flow orders (OFO).

Marathon Oil Corp. has completed drilling all four development wells on the deepwater Gulf of Mexico (GOM) Droshky project, but onshore spending has been curtailed because of lower natural gas prices, the producer said. Well completions at the Droshky project are under way and production is on track to begin in 2010, with peak net output estimated at 43 MMcf/d of natural gas and 45,000 b/d of oil (see NGI, Nov. 3, 2008). Marathon earned $413 million net (58 cents/share) in 2Q2009, compared with $774 million ($1.08) in 2Q2008. The producer’s average realized U.S. gas price was $3.60/Mcf in 2Q2009, compared with $8.66 a year earlier. U.S. E&P operations lost $41 million in the quarter versus earnings of $359 million in 2Q2008, as revenues plunged 60% on lower commodity prices. Marathon’s net U.S. gas sales fell quarter/quarter to 365 MMcf/d from 431 MMcf/d, and U.S. hydrocarbon liquids sales rose slightly to 64,000 boe/d from 63,000 boe/d. The company’s integrated gas segment, which includes liquefied natural gas, reported profits plunging to $13 million in 2Q2009 from $102 million in 2Q2008, mostly on lower price realizations.

Marathon Oil Corp. completed drilling all four development wells on the deepwater Gulf of Mexico (GOM) Droshky project, but onshore spending has been curtailed because of lower natural gas prices, the producer said Monday.

Chesapeake Energy Corp. last week curtailed 7%, or around 240 MMcfe/d, of its gross natural gas and oil production at least through March because of “extraordinarily” low wellhead prices in the Midcontinent region. Another 10% of the producer’s drilling activity through the rest of this year may be slashed “if natural gas and oil prices remain low during the next few months.”