Natural gas doesn’t tend to get as much attention as oil does, probably because we all buy gasoline directly every week, but much of our consumption of natural gas is hidden in other things we buy (electricity, food, and plastics, for instance). So you may not have noticed that U.S. natural gas production has fully recovered from the pandemic and has continued to set new records. The U.S. Energy Information Administration (EIA) highlighted this success in the release of its recently released Natural Gas Annual Report. Here are a few observations.
Record Production Achieved — U.S. dry natural gas production reached 34.5 trillion cubic feet (Tcf) in 2021, which is an average of 96.5 billion cubic feet per day (Bcf/d). The most recent monthly data from the EIA comes from July 2022 and reflects a continued increase to 98.3 Bcf/d. And while setting a new production record is an important milestone, the graph below shows that the U.S. has been breaking previous gas production records for almost 20 years, during which time gas production has almost doubled.
Growth Is Concentrated In A Few Key Basins — The states that accounted for most of the production in 2021 are those that are home to world-class hydrocarbon basins such as the Marcellus (Pennsylvania, Ohio, and West Virginia), Haynesville (Louisiana and Texas), Permian (Texas and New Mexico) and Eagle Ford plays (Texas).
Shale Gas Dominates — This is unsurprising given the list of key plays just mentioned. The graphic below from the report has a lot of interesting information but note that shale gas accounts for about 72% of U.S. dry gas production. There are two important implications of this observation: first, all these volumes require horizontal drilling and hydraulic fracturing to be commercial; and second, because shale wells have inherently high production decline rates, ongoing development is essential to maintain this level of production. Without continued production, rates will drop very quickly.
Some Previously Important Areas Are Diminishing — Gas production from the Gulf of Mexico has declined significantly over the last 20 years as the focus has shifted to large oil accumulations in the deepwater. Other areas that are generally declining include Arkansas, where one of the early shale plays, the Fayetteville, is located, and Wyoming where, despite some exciting recent horizontal development, the major gas fields in the Green River area have reached peak production.
