Thursday, September 27, 2012

Shale Gas Boom

The EIA was full of good graphics today.  The table below, sourced from Lippman Consulting, shows shale gas production from January 2010 to June 2012.  Pretty amazing that you see production grow from around 12 Bcf/day to 25 Bcf/day in a price environment that can charitably be called "challenging."  Just think if natural gas were trading at $8/MMBtu and we weren't totally oversupplied...


One thing the chart also shows is the leveling off of Haynesville production.  This has been a topic of conversation around here and will have to wait for another day in this forum, but it will be interesting to see what happens Haynesville production over the next six months or so as the impact of the plummeting rig count is felt.

4 comments:

Anonymous said...

Thanks for posting this graph. I had made an assumption that the eagle ford was producing much more that it really is. It also appears that the slight drop in haynesville production is not seen in total production because of an increase from the marcellus. Is this true or am I seeing it incorrectly?

Robert Hutchinson said...

With the Eagle Ford, you've got these "windows" where you know you are going to get dry gas, wet gas (with liquids) or oil. Activity has shifted away from the dry gas window and prices of liquids are down of late, hence the flat production there.

In the Marcellus, the rig count has not declined as it has in the Haynesville. Drilling there picked up steam later than it did down here, so they are still drilling to hold leases in some places. They also cater to a more constrained customer market up there. The Northeast is a pretty big consumer but it is geographically isolated and used to depend more on pipeline imports from Canada to meet demand. The Marcellus is closer to this end user and doesn't have to pay as much for transport to get the gas there. I doubt you will see too much of a drop in production there.

Anonymous said...

That makes sense. I'm looking forward to seeing what the soon to come sharp drop in haynesville production does for prices. In the Marcellus, the assumption would be that it would follow the path of the haynesville regarding massive drilling to hold land by production followed by a sharp drop in drilling.

Robert Hutchinson said...

There are those who believe we won't see a sharp drop in Haynesville production. I think there will be a drop but it will be more gradual. There are a lot of factors that will impact the situation, many of which are price dependent and basically unknowable at this point.