A year ago, Lower-48 natural gas production was in steep decline and averaging less than 71 Bcf/d by the fall, down from nearly 74 Bcf/d in February 2016. The oil-price crash of 2014 had taken a toll on gas output, led by a drop in Texas. To add to that, Marcellus/Utica gas supply — which had helped prop up overall domestic gas production volumes — was no longer growing enough to offset those losses. The resulting decline in Lower-48 production helped to correct a huge storage imbalance that had developed in the market following the brutally mild winter of 2015-16. That’s a far different picture than what’s happened in 2017. Gas production began this year below 70 Bcf/d, but has climbed to more than 74 Bcf/d in the past couple of months. And just last Thursday (October 26), production set a new record of 75.7 Bcf/d, exceeding the previous single-day record of 75.1 Bcf/d set in April 2015. Several of the major supply basins are contributing to that uptick, but Marcellus/Utica gas production is again leading the pack. Today, we check in on Northeast gas production using pipeline flow data.
When we last looked into Northeast gas production using pipeline flow data in our April 2017 blog Unchain My Heart, the region was contending with high storage levels, insufficient demand and an overall low price environment — all the bearish effects of two consecutive mild winter seasons. Under those conditions, supply growth in the region had become downright sluggish. But that’s all changed in recent months. Rigs have returned to the region, activity has picked up and so has output. Today, we return to the same daily pipeline flow data from our friends at Genscape to see the latest trends in Northeast production.
We’ve detailed our flow data methodology for looking at Northeast supply and demand previously in blogs like Sooner or Later and One Step Closer. In brief, pipeline flow data is a collection of daily gas volumes nominated by market participants to either be received or delivered at thousands of individual meters along natural gas interstate pipelines across the U.S. Aggregated by type of connecting facility, such as gathering systems and processing plants on the supply side, and power plants, industrial plants and distribution companies on the demand side, these flows provide critical insights into supply and demand trends on a daily basis. Since flow data doesn’t include intrastate data, it doesn’t necessarily include all the supply or demand that’s flowing. But in the Northeast, we can see about 90% of flows, which is enough to register meaningful shifts in the regional fundamentals. So, next, we begin with an update of total Northeast production.
To get the regional total, we filtered flows for receipts from production meters in the 15 states we define as the Northeast. The resulting daily volumes are shown in Figure 1 below (blue area) from 2012 through present. The colored lines mark the annual averages for 2014-16 and the year-to-date average for the current year.