Marcellus to become a net exporter of natural gas this year

Natural gas production is expected to slow this month for the first time across the country as drillers struggle against low commodity prices and oversupply.

Even so, states in the Marcellus and Utica shale plays spanning Pennsylvania, West Virginia and Ohio are expected to still produce more gas than they can use and export the fuel out of the region.

“We are anticipating that the Northeast will be a net exporter for the average of 2015,” said Anne Swedberg, senior energy analyst for Denver-based Bentek Energy. “We are already seeing volumes leave the region this summer.”

The rest of the country is expected to catch up later, becoming a net exporter by 2017.

Now, most Marcellus gas is going to the Midwest, the Southeast and Canada. Eventually it will have access to Mexico through pipelines and globally through liquefied natural gas exports.

Through 2017, there will be about 3.4 Bcf/d of capacity additions on two major interstate pipelines, Kinder Morgan’s Tennessee Gas Pipeline and Spectra Energy’s Texas Eastern Transmission.

In terms of global markets, a bevy of projects are in the works to export liquefied natural gas. The closest such facility, Dominion Resource’s Cove Point project in Maryland, will be able to ship 0.7 Bcf/d of LNG overseas starting in late 2017. Late this year, Cheniere Energy’s Sabine Pass will begin shipping LNG from the Gulf Coast. 

The Marcellus reached a record high of 20.4 Bcf/d on Aug. 24, according to Bentek estimates, “which puts it in line with Texas,” Ms. Swedberg said. In 2010, the region produced about 2 Bcf/d.

That record high may be due to the completion of pipeline maintenance in the area, allowing more gas to be shipped from the wellhead, the U.S. Energy Information Administration noted.

The Marcellus and the deeper Utica formation drive much of U.S. production. The Marcellus alone accounted for 21 percent of the country’s natural gas production in the first five months of 2015, according to the EIA.

Meanwhile, abundant gas without enough pipelines to ship it means prices in the Northeast continue to trade below the national benchmark, Henry Hub, prompting energy firms to slow their drilling plans.

On Friday, Henry Hub traded at $2.70. Meanwhile, the Dominion South spot price in southwestern Pennsylvania clocked in at $1.17 and Leidy Hub in northcentral Pennsylvania didn’t crack a dollar at 92 cents.

For instance, in August, State College-based Rex Energy is planning to sell assets and partner up with other companies to develop its remaining acreage as it hopes to weather the downturn in the oil and gas sector. The company also plans to continue to drill with a single rig through 2016.

The lack of infrastructure has lead to a huge backlog of wells that will drive production growth, even as drillers scale back.

“There are about 2,300 wells in the inventory, representing about 14 Bcf/d of trapped production,” Ms. Swedberg said on a webcast on Aug. 19.  

“When we look at that backlog well inventory, we expect production to grow through 2017 due to people bring those wells into the system,” she said. 

In November, infrastructure projects should bring about 3.9 Bcf/d of new capacity to the Northeast, with production forecasted to grow about 3.4 Bcf/d at that time, according to Bentek.  

In the short-term, gas production from the seven major shale regions is expected to slip for the first time.

Shale production reached a high in May of 45.6 billion cubic feet per day (Bcf/d) and is expected to drop to 44.9 Bcf/d in September, according to the U.S. Energy Information Administration.

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

In the Marcellus, natural gas production is expected to drop by 60 million cubic feet per day between August and September.

Stephanie Ritenbaugh: or 412-263-4910. 

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