Tuesday, July 11, 2017

Texas Railroad Commission Reports Rise in Drilling Permits for June '17

The Texas RRC released its drilling, completion, and permitting statistics for June this week.  Total new permits topped 1,200 for only the second time in years, with combo (oil+gas) and oil wells leading the charge.  Gas well permits were also up, but only represented 70 of the permits issued.

It's notable that new well completions still have not begun to follow the upward trend in permitting.  Whether that is tardy reporting, or maybe DUC count is rising, it suggests that unless many of these permits are being delayed or abandoned, we will eventually witness a surge in completions, and therefore production.

Gas new-drill completions reported in June were just 68, and oil completions were 446:

Sunday, July 9, 2017

Western Hydropower Surplus Fading Quickly

The record snowfalls and subsequent runoff in the Pacific Northwest has led to massive electrical output this year, but the effect is wearing off suddenly and quickly.

In June, the surplus generation over 2016 was equivalent to about 1 BCFD of natural gas.  But June's average hydro output of 12.8 GW has fallen to 8.6 GW as of yesterday, and should generally decline further throughout the month.  

This should reduce exports to California, which would in turn increase thermal generation there.  Thermal output in CAISO has been badly lagging prior years up to now:

Wednesday, June 14, 2017

Nuclear Power Closes Output Gap

Electricity output from nuclear power plants fell below 2016 levels in mid March, and the gap has averaged more than 1 BCF of natural gas equivalent since then.  But the extraordinary maintenance and repair season is finally wrapping up, and as of today output is back above 2016 levels.  This represents an important loss of incremental demand for natural gas at a time when it is struggling in the power sector against low aggregate demand, mild weather, renewables, and cost competition against coal.  

Tuesday, June 13, 2017

Fossil Fueled Electricity Pie is Shrinking

Renewables are driving gas out of the dispatch curve in most major power systems across the US.  Out west, solar is the driver.  Everywhere else, it is primarily wind.  Renewables are benefiting from learning curves, price advantages, legislation, subsidies, growing awareness/favorability, and supporting technologies.  I think the hope for fossil fuels was that the pie itself (load) would also be growing.  The hope for natural gas was also based on some well known advantages over coal.  


The reality is a story of victimization by success combined with economic stagnation.

Wind is the pupil at the head of the class.  It is doing so well, especially in ERCOT and Southern Power Pool.  It has seen rapid installation and a steadily rising capacity factor.  

Here is one small illustration.  With large YOY increases in wind output, Southern Power Pool is generating more non-fossil power (mostly wind).  With wind averaging almost 12GW of output for the last four days (a big new record), the running 30 day average output for non-fossil fuels has held well above the prior year average all through 2017: 

and with gas taking less market share from coal, due primarily to price differential:

It will be hard for natural gas demand to rise to the levels seen in prior years under these circumstances, especially if total electric demand stagnates, which seems to be happening almost everywhere.

It will take special weather or something more dramatic (curtailment of the nuclear fleet?) to light a blue flame under natural gas at this point.  Supply is promising to overwhelm in Q3-4 as well (maybe that won't materialize?), so the $2's may be the new home for Henry Hub.  LNG is ramping up but it's slow and a known quantity.  Supply disappointment is most likely to come in the form of temporary delays, so a price catalyst may be lacking for a while.

Thursday, May 25, 2017

Pacific Northwest Hydro Generation Poised to Overwhelm

Hydro output in Bonneville Power Admin has averaged 12GW this month, against last year's 10GW.

June output last year dropped off quickly, averaging below 9 GW.  This year could dwarf that, with river levels high and forecasts for demand low in the West.  Power will be moving south to California, and the little bit of gas fired burn that is still in the dispatch curve in CAISO will fade further unless heat moves in quickly.