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Appalachia Driving Growth in US Natural Gas Production

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Natural gas production growth in Appalachia

According to a report released by the EIA (U.S. Energy Information Administration) in December, natural gas production in the Appalachian region, or the Marcellus and Utica shale plays, has increased rapidly since 2012. The Appalachian region has driven the overall increase in natural gas production in the United States.

Key players in the Appalachian region include Cabot Oil & Gas (COG), Antero Resources (AR), CONSOL Energy (CNX), Eclipse Resources (ECR), EQT (EQT), Chesapeake Energy (CHK), Gulfport Energy (GPOR), Range Resources (RRC), and Southwestern Energy (SWN).

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EIA’s November Drilling Productivity Report

According to the EIA’s November DPR (Drilling Productivity Report), Appalachian natural gas production increased from 7.8 billion cubic feet per day (Bcf/d) in 2012 to 22.1 Bcf/d in 2016. According to EIA data through October 2017, natural gas production in the Appalachian region was 23.8 Bcf/d in 2017.

In November, the Appalachian region produced 25.6 billion cubic feet of natural gas per day, and it’s expected to produce ~26.1 billion cubic feet per day in December—an increase of 394 million cubic feet per day (MMcf/d). For context, total natural gas production in the United States in December is expected to rise 779 MMcf/d over November, and almost 51% of that growth will be coming from the Appalachian region.

Key constraints

The onslaught in natural gas production in the Appalachian region wasn’t met with sufficient infrastructure and takeaway capacity to transport natural gas to demand centers and export locations. This imbalance led to prices at local hubs such as Dominion South trading at discounts to Henry Hub prices.

According to an EIA report released in August this year, 25 pipeline projects are under development and are scheduled to be completed in 2017. These will result in 7.2 Bcf/d of additional takeaway capacity in the Northeast Appalachian region.

These upcoming projects likely explain the decrease in DUCs (drilled but uncompleted well) in the Appalachian region. The number of DUCs has fallen 10% since October 2016 and 26% since October 2015.

In the following article, we’ll take a look at productivity in the Appalachian region.

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