A new estimate from the U.S. Energy Information Administration predicts the nation will see a 5% growth in marketed natural gas production this year.
The 5% gain totals 5 billion cubic feet a day. The EIA further predicted there will be 2% growth in natural gas production in 2024 and most will come from the Permian Basin, due to improved well-level productivity and higher crude oil prices. The price gain and productivity will spur drilling activity which in turn will result in increased natural gas production.
The Permian region, which spans western Texas and eastern New Mexico, currently accounts for a quarter of all marketed natural gas production in the Lower 48. The EIA forecast Permian region natural gas production will increase by 11% (2.2 Bcf/d) in 2023 and 6% (1.4 Bcf/d) in 2024.
Most of the natural gas production in the Permian region is associated natural gas production from oil wells. As a result, producers in the Permian region typically respond to changes in the crude oil price when planning their exploration and production activities, including when deciding whether to deploy drilling rigs or take rigs out of operation.
Advances in hydraulic fracturing and horizontal drilling techniques have improved U.S. oil and natural gas well productivity. The length of a well’s horizontal section, or lateral, which is a key factor in well-level productivity, has increased substantially for wells operating in the Permian region, from an average of less than 4,000 feet in 2010 to over 10,000 feet in 2022.
The EIA measures natural gas well productivity by a well’s monthly average natural gas output. In its first full month of operation, a well typically produces the most natural gas, followed by declining output in subsequent months.
Permian region wells that have started operations so far in 2023 have produced on average 1,849 million cubic feet (MMcf) of natural gas during their first full month of operations. Average first month production for Permian region wells has risen in recent years, averaging 1,829 MMcf in 2022 compared with 1,301 MMcf in 2017.
So far in 2023, natural gas production has increased in the Permian region even as the rig count has decreased. According to Baker Hughes, 322 active rigs were operating in the Permian region as of September 15, 31 fewer than at the start of the year.
The agency also forecast the price of West Texas Intermediate crude oil will increase in 2024, averaging $83.22 per barrel compared with $79.65 per barrel in 2023, partly because of Saudi Arabia’s extended crude oil production cuts. We expect that the higher crude oil prices will incentivize operators to produce more oil and, as a result, more natural gas in the Permian region.
Source: EIA