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Page added on February 18, 2015
The hearty, hardy gas production of the US
It seems like only yesterday that big winter storms or other extreme weather events could curtail or shut natural gas production in the US. A winter storm and freezing temperatures in the Northeast or in the Southeast would prompt freeze-offs or shut-ins along pipelines. But perhaps no longer.
When I joined Platts as a gas markets reporter in February 2011 — another abnormally cold winter (at least in Houston) — I would see cash markets bounce around as freeze-offs and other shut-ins shook up prices.
In a testament to fast-growing natural gas production and infrastructure, though, particularly in the Northeast, Hurricane Sandy had a minimal impact to Marcellus gas production in 2012. Gas pipelines also fared well in the aftermath of the hurricane.
A year ago, in a winter that is widely regarded as being insanely cold, things appeared to fall more in line with historical expectations. Freeze-offs in the Northeast cut into production totals and surprised even our analyst colleagues at Bentek Energy.
But this winter appears to be returning to the new trend of prolific production regardless of weather. Today, members of the gas market team from Platts and an analyst from Bentek Energy recorded a podcast about markets, supply and demand, and I was astounded to hear each of them specifically mention production and how unfazed it is recently, even with the ridiculous amounts of snow falling across much of New England and the Northeast.
There’s been a lot of speculation about how announced capex cuts could eventually curtail the US production of oil and gas (the question being whether the falls will come before prices, and hence production, rebound). But if you can weather winter storms and get rocked by hurricanes and still come out unscathed, you have to wonder what it would take for gas production to seriously fall off — and stay off.
5 Comments on "The hearty, hardy gas production of the US"
Plantagenet on Wed, 18th Feb 2015 8:47 pm
Thanks to fracking we’ve had low natural gas prices for the last four years. Now fracking has resulted in an oil glut, and the price of oil is way down too.
rockman on Thu, 19th Feb 2015 7:32 am
“But if you can weather winter storms and get rocked by hurricanes and still come out unscathed, you have to wonder what it would take for gas production to seriously fall off — and stay off.”. No…you don’t have to wonder at all. The Marcellus certainly has been great: from 2007 until today it went from delivering just 2% of US NG production to almost 20%. And that’s a big number given the US is the largest NG producer on the planet. And the Marcellus is still adding to the production rate. But between a decrease in the number of wells drilled, lower productivity and declines of the older wells the Marcellus only added less than 200 million cubic ft/day NET in 2014. Gross gain was ¾ of a bcf/day but decline of the older existing wells offset much of that gain. So the Marcellus productionis still growing but at a much slower rate than it had been a few years ago. In the meantime conventional NG, including the offshore fields, has shown a consistent net loss in production. We could see some improvement from those sources but that will require much higher NG prices.
buddavis on Thu, 19th Feb 2015 9:01 am
Interesting numbers rock. I would be curious if some of our fellow PO’s know the percentage decrease for rigs in the Marcellus over the last 6 months? Or did they pick up any from the Eagleford and Bakken?
Curious about the number of “quality locations” left to drill as well. 200 mmcf net is alot of gas, but if you are losing 1/2 a tcf from old wells declining, the light is at the end of the tunnel.
My guess is once the marcellus peaks, gas prices will start their rise.
rockman on Thu, 19th Feb 2015 11:25 am
Bud – Here’s an excellent site from the EIA to come up to speed on the Marcellus.
http://www.eia.gov/petroleum/drilling/pdf/marcellus.pdf
It clearly shows the great advantage of hz drilling in the trend. OTOH looking at the rapid decline in legacy production it clearly shows the ugly side of high initial hz production rates: high decline rates. While the initial drilling of a lot of new wells with high initial flow rates those wells are now in steep decline. IOW the Red Queen hasn’t caught up yet but she’s getting close. LOL.
Actually 200 mmcf (actually 171 mmcf) isn’t a lot compared to total MS production (just 1%) or total US NG production (0.3%)
buddavis on Thu, 19th Feb 2015 11:28 am
Thanks Rock for the link.