Low natural gas prices may lead to lowest U.S. shale gas production in 25 years, EIA says
Energize Weekly, October 30, 2024
U.S. natural gas output from shale formations – the country’s main source of dry gas – is on pace to mark its first annual decrease in production since 2000 when the federal Energy Information Administration (EIA) began collecting data.
Total U.S. shale gas production from January through September 2024 declined by about 1 percent, to 81.2 billion cubic feet per day (Bcf/d), compared with the same period in 2023.
The decline in production for the first nine months of 2024 corresponds to a sharp drop in wholesale natural gas prices, which in the last two years have fallen 79 percent at the Henry Hub to a low of $1.99 per million British thermal units (BTU) in August 2024.
The price in 2024 has averaged $2.10 per million BTUs compared with an inflation-adjusted average of $6.89 per million BTUs in 2022 and $2.62 million BTUs in 2023.
“As natural gas prices declined, the economics of producing natural gas in the dry gas formations worsened, leading producers to shut in production and drop drilling rigs,” the EIA said.
Hardest hit was the Haynesville play, in northeastern Texas and northwestern Louisiana, and the Utica play in Appalachia.
Both the Utica and Haynesville reserves are deeper than those in the Appalachia’s Marcellus and more costly to access. The Utica wells are between 5,000 feet and 11,000 feet deep and the Haynesville wells are 10,500 feet to 13,500 feet deep.
Despite the depth of its wells, the Haynesville is the country’s third-largest shale gas-producing area behind the Marcellus and the Permian plays. In 2023, shale natural gas production in the Haynesville averaged 14.6 Bcf/d, accounting for 14 percent of the total U.S. dry natural gas production.
But from January through September 2024, shale gas production decreased by 12 percent or 1.8 Bcf/d in the Haynesville. It was down 10 percent, or 0.6 Bcf/d in the Utica compared with the same period in 2023.
An average of 33 rigs were in operation in September 2024 in the Haynesville, 53 percent fewer than in January 2023, the lowest it has been since July 2020. In the Utica, an average of seven rigs were operating, fewer than half the number that were operating in January 2023.
Production in the Marcellus play, the largest single producer of natural gas, was flat at about 25 Bcf/d, although the September 2024 rig count of 25 was down 36 percent from January 2023.
Basins where natural gas production is combined with liquid production – oil and condensates – fared better with production up 6 percent to 22.1 Bcf/d
The Permian Basin, in western Texas and southeastern New Mexico, is primarily an oil play and production is dictated by oil prices. “Associate gas” is produced along with the oil. Shale gas production in the Permian play grew by 10 percent or 1.6 Bcf/d.
The EIA is forecasting dry natural gas production to average 103.5 Bcf/d in 2024, down slightly from 103.8 Bcf/d in 2023, and to resume modest growth in 2025 at 104.6 Bcf/d.
