In case you haven't already noticed, the cost of natural gas has dipped significantly throughout the course of 2015. While this might lead you to think that companies would be eager to slow down on drilling so as to save money and increase demand, the opposite is actually true. Natural gas production has been going strong this year, and the Energy Information Administration (EIA) has predicted that there will be a 5.4 percent increase in input during 2015 compared to 2014. Is this really the case, though? Will natural gas production continue down this course, or will it drop off -- and, more importantly, what does this mean for you? Read on to learn more.
Possible Decline in Production in Shale Regions?
Despite its previous energy forecast, the EIA's latest reports are suggesting something quite different. Its August "Drilling Productivity Report" revealed the likelihood that gas production will decline in each of the seven major shale regions in the US throughout the autumn months. This marks the very first blanket slum in shale gas production that has ever been recorded by the agency. These shale regions include Marcellus in PA, Bakken in ND, Eagle Ford in TX, Haynesville in LA/TX, Niobara in CO, Permian in TX, and Utica in OH. The drop in production may be quite significant, too. While it hit peak numbers when it reached an all-time high of 45.6 billion cubic feet per day, the daily output will dip down to 44.9 cubic feet this fall.
This information is derived from EIA's calculations, which compare the estimates of production from legacy wells against that which is expected from newly drilled wells. The latest report has concluded that new well output in shale regions will tend to lag any falloffs in production from older wells.
Peak Production Numbers Still Reign
Fortunately, this news doesn't mean that EIA's gas production projections will be entirely upset. In fact, the agency still predicts in its August "Drilling Productivity Report" that the gas production of the US as a whole (including the gas produced from onshore wells in the Gulf of Mexico) will climb by around 4 billion cubic feet per day this year, reaching 78.7 billion cubic feet per day. This will happen as the result of improvements in drilling efficiency, which can offset the low prices of fuel. This growth won't begin to taper off until 2016.
According to experts, natural gas production throughout the first half of the year was so much higher than during the first half of 2014 that, even with declining production at the moment, we will still come out on top. Simply averaging the production over the year will still result in an increase in 2015 over 2014, and it won't be until next year that we begin to see the price impact.
Of course, it's important to bear in mind that the Drilling Productivity Report doesn't take all of the economic factors like changes in gas prices or new infrastructure to carry gas from shale regions into consideration. As an example, the Rockies Express Pipeline, which was originally constructed to carry gas eastward from CO and WY, just recently started to ship gas west from Marcellus and Utica.
This, in turn, is opening new markets and creating the potential for higher prices for producers in those areas. Ultimately, the primary intention of the report is to inform people of inflection points that make us aware that things are about to change direction. Beyond a couple of months, though, it's anyone's guess. That's why it's so critical that enterprises stay in the loop and well-connected with energy experts.
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