Data Watch: US Natural Gas Monthly Production September 2013

The U.S. government agency The Energy Information Administration (EIA) issues data on U.S. natural gas production, including shale gas, on a monthly basis with a lag of roughly two months. The latest data release was made on December 12 and covers the period up until end-September 2013.

Data is reported in billion cubic feet (bcf). Key points:

  • September 2013 natural gas dry production: 1,989 bcf, minus 0.2% year-on-year
  • Average monthly production for the 12 months to September 2013: 2,014 bcf, +0.8% over the same period the previous year

Since the end of 2011, the rate of production increase has rapidly decreased (click chart below for larger image).

US Dry Gas Production Sep 13 jpeg

The uptick in natural gas prices associated with the rapid deceleration in natural gas production growth has, rather surprisingly, rolled over, probably due to the increased competitiveness of coal. Prices paid by electricity utilities are back near $4 (I prefer this indicator since ‘well head’ prices are reported with a large lag). This price level is unlikely to sustain a new round of rig investment.

NatGas

Much recent media attention has centred on a so-called shale-gas revolution in the United States and, in particular, the ability of shale gas to boost overall volume of natural gas production. Many claims are made with respect to the prospective expansion in shale gas production in the coming years including the following:

  • Shale gas will provide a low-cost source of natural gas, and thus cheap energy, for decades to come. This, in turn, will boost the competitiveness of the U.S. economy.
  • The U.S. will move toward an era of energy self-sufficiency, which will help buttress the country’s geopolitical security.
  • The scale of shale gas production will be sufficient to allow the U.S. to commence natural gas exports, thus transforming energy markets outside of the U.S. such as those in Europe.
  • Increased natural gas production in the U.S. will mitigate carbon emissions through displacing coal and so reduce the risk of dangerous climate change.

I have blogged extensively on these claims (some repeated by President Obama) hereherehere and here.

For these claims to be substantiated, significant year-on-year rises in U.S. natural  gas production will be required over an extended period. Through tracking monthly production of natural gas, a non-specialist can confirm or refute whether large rises in natural gas production are being achieved and, therefore, whether the claims associated with a shale-gas revolution are credible. In short, the monthly numbers allow you to evaluate the hype. Monthly data are currently not showing any material increase in production.

3 responses to “Data Watch: US Natural Gas Monthly Production September 2013

  1. Thanks for the interesting post! Do you have also a graph in which the number of wells use to produce this 2,000 bcf is given. I find a lot of numbers about this but i am not sure if this is for this full area of wells (and of course that is an important factor to have an idea how fast the productivity of all the wells taken together is changing)?
    Thanks and keep up the good work

    • Hi Stefaan. There is a fascinating EIA report that shows rig count and productivity of new and legacy wells at the major shale gas formations: http://www.eia.gov/petroleum/drilling/pdf/dpr-full.pdf

      I blogged about it previously here: https://therationalpessimist.com/2013/11/21/the-red-queen-rigs-and-shale-gas/

      There should be an aggregate number knocking around somewhere, probably in the latest EIA annual forecast. I aim to blog on this but it is rather in the queue in terms of posts I want to do.

      The EIA argues quite convincingly that the relationship between rig count and production has broken down due to new technology. Nonetheless, at current natural gas prices, the production data is telling us that investment isn’t sufficient to push volume higher. This doesn’t mean that I think natural gas production in the US has permanently peaked. But I do think that we will need to see much higher prices to restart investment and production growth. The key question is how much higher will prices have to go? A bunch of US LNG export terminals have been approved on the premise that their owners can arbitrage between cheap US natural gas prices and expensive world LNG prices. If US natural gas prices need to rise a lot to call forth investment, the arbitrage will look less attractive and we won’t see shale gas having much of an impact on, say, the LNG import price for Europe. The shale gas revolution story is that you get more gas at a cheap price; in reality, I think we will get the same amount of gas at a cheap price or more gas at a much higher price. The latter is what has happened with tight oil production in the US. In other words, there is no such thing as a free lunch 🙂

  2. Hadn’t seen that recent report. Thanks. I’ll dive in to it and look if I find a total number of rigs producing in the last years and if the argument of the EIA is so good as it sounds concerning the ‘new technologies’.

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