Back On Top - Natural Gas Production from Crude-Focused Basins Growing Again

Lower-48 natural gas production has climbed more than 4.0 Bcf/d in the past 10 months. While Marcellus/Utica activity continues to drive the bulk of the recent increases in total volumes, crude-focused basins, like the Permian and SCOOP/STACK plays, also are picking up steam as a new generation of oil rigs is deployed to the fields and vying for market share. In other words, production growth is no longer a one-man — uh, one-basin — show. Today, we look at what’s happening with gas production outside the Northeast. 

We’ve talked quite a bit lately about the rebound in natural gas production in the RBN blogosphere. Lower-48 gas production volumes have roared back in recent months. After peaking at 75.1 Bcf/d in 2015, gas output had been lingering near 70 Bcf/d earlier this year. But in the past few months, it has not only surged, but also last week set a new record of 75.2 Bcf/d. As has been the case in recent years, the Marcellus/Utica region is driving much of these gains. As we detailed in Part 1 of this blog series, the addition of new takeaway capacity, like Tallgrass Energy’s Rockies Express Pipeline (REX) and more recently Energy Transfer Partners’ Rover Pipeline — or at least a portion of it — has allowed producers to ramp up production in the region (see It’s Been a Long Time Comin’ and Against All Odds). Most of the new volumes are hitting gas pipeline systems in Ohio, where westbound flows on REX and Rover originate.

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All that said, it’s also become abundantly clear in recent months, that the Marcellus/Utica is no longer the only driver. Gas production is now growing from many of the major basins, including associated gas from crude-focused basins like the Permian and SCOOP/STACK. Notably, as we mentioned in a previous blog (Too Much Gas) this latest growth spurt is happening at $50-something/bbl crude, instead of $80-plus crude. Not only that, but as long as the crude price stays above $50/bbl, we expect gas production volumes to grow as much as 20 Bcf/d (28%) over the next several years. That’s because technological advances have improved economics to make production profitable at progressively lower prices. For one thing, most of the rigs that are being deployed today aren’t the same ones that were taken out of service three years ago. Instead, producers are now embracing much more technologically advanced, high-powered rigs than a few years ago.

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