LOW GAS PRICE TRIMS DEVON'S SAN JUAN FLOW
Devon Energy Corp., Oklahoma City, will cut production from its largest gas property, the Northeast Blanco Unit (NEBU) in San Juan County of the San Juan basin in Northwest New Mexico.
The company cited low wellhead prices as the reason.
Devon expects July mainline prices for San Juan basin gas to be only 95-98/Mcf, or 40-50 less than last year's level.
For July, Devon will cut gross NEBU production to 65 MMcfd from its current capacity of 115 MMcfd.
Some of the 50 wells currently on stream will be shut in. Production from others will only be curtailed. Still others will continue to flow at maximum levels to prevent drainage by nearby wells owned by other companies.
The move will slash Devon's net NEBU production for July to 400 MMcf from 800 MMcf.
Darryl G. Smitte, Devon vice-president of marketing, said, "We have often shut in production for selected areas when the price being offered appears to be unreasonably low. Our decision to curtail NEBU production is consistent with this policy.
"In the case of the San Juan basin, we believe gas purchasers have overestimated producers' need to sell gas and have been predatory in their pricing practices. We have neither a financial nor operational need to sell our gas at just any price.
"Decisions regarding future curtailments for NEBU will be made on a month-by-month basis."
Devon sells NEBU gas under a contract that gives the company control of volumes.
Prices vary month to month and are related to spot markets. Spot natural gas prices across the U.S. dropped dramatically last January and have been weak since then.
Figures compiled by Natural Gas Clearinghouse (NGC), Houston, show a nationwide average spot price of $1.07/MMBTU for this month, off from averages of $1.35 in July 1990 and $1.21 last month.
Lowest average is 95 in Beaver County, Okla., and at Opal, Wyo.
NGC blames low prices on large volumes of gas in storage, relatively mild weather on the Texas-Louisiana Gulf Coast, and high operating levels of nuclear power plants.
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