US Shale Gas Production Expected To Fall In September

After reaching a high in May, natural gas production across all major U.S. shale regions is projected to shrink for the first time in September, according to a recent Energy Information Administration (EIA) report.

Even as rigs grows more efficient by the month, a lack of rigs and a sharp drop in legacy production is expected to sap even the largest gas shales, such as the Marcellus.

For the first time across all major U.S. shale basins gas production is expected to dip by 7 million cubic feet per day (MMcf/d) to 44.9 Bcf/d in September. The dip comes just months after volumes hit a high of 45.6 Bcf/d in May.

To be sure, major U.S. basins—Bakken, Eagle Ford, Haynesville, Niobrara, Permian Basin, Marcellus and Utica—are still producing massive amounts of natural gas. Year-over-year, gas is easily flowing and nowhere more so than the Utica.

But the drop in rig activity is starting to chip away at production growth.

Seventy-four rigs are drilling in the Marcellus as of July compared to 98 in January, according to the EIA. The Utica operated seven rigs in July compared to 26 the start of 2015.

Even after losing rigs, year-over-year gas production in the first nine months of 2015 is still expected to be up in the Marcellus and Utica.

If EIA’s estimates hold, the Marcellus is expected to boost of production by about 17% in the first nine months of 2015. The Utica will post a 115% increase.

Since 2007, production losses from legacy gas wells have been mounting in the major shale plays, with few exceptions.

The plunge in commodity prices has operators struggling to keep up and even cuts to service costs haven’t cushioned the fall of rigs.

“In each region, production from new wells is not large enough to offset production declines from existing, legacy wells,” the EIA said.

Only the Utica is expected to show consecutive production increases in June, July and August, the EIA said. However, by September new wells will no longer compensate for the ebbing production from legacy wells in the region.

The EIA estimates production declines from legacy wells in the Utica to total 55.6 MMcf/d in September. New wells will only partially counter the decline with production of 52.2 MMcf/d. In total, production in the Utica is expected to fall by 3.4 MMcf/d for the month.

Related: Marcellus, Utica Catapult US Gas Production Upward

In September the Utica’s new-well gas production per rig is estimated to be about 7 MMcf/d, an increase of 47% year-over-year. Still, this value is actually lower than the drop from legacy wells, the EIA said.

A year ago, new-well production in the Utica more than offset the decline from legacy wells of 26.5 MMcf/d. This was due to a higher number of rigs operating in the region, which resulted in a net production increase at the time of 116.5 MMcf/d.

Since then, about 75% of rigs have been taken down and “increasing legacy-well declines mean the increase in Utica new-well productivity is insufficient to overcome legacy-well production declines,” the EIA said.

The EIA said that several external factors could affect their estimates. These include bad weather, shut-ins based on environmental or economic issues, variations in the quality and frequency of state production data and infrastructure constraints.

An example would be the Rockies Express Pipeline, which has started to deliver 1.8 Bcf/d of Appalachian natural gas production west on its existing mainline as of Aug. 1.

“This increase in takeaway capacity may encourage increased production from regions such as the Marcellus and Utica,” the EIA said.

While gas production may stumble in September, so far operators are ahead of the game in 2015—way ahead. Through the first nine months of the year production has increased 15% across the major basins, or by 52.9 Bcf.

Contact the author, Emily Moser, at emoser@hartenergy.com.