Prior to COVID, crude oil and natural gas production in the U.S. had been on a tear, surging in tandem in the years following the 2014-15 price meltdown. But then the pandemic decimated domestic demand, crushing prices. Predictably, producers cut back production, particularly in crude-focused basins, and it was widely expected that associated gas from those regions would suffer in proportion. But that didn’t happen. Gas volumes have dropped somewhat, but not nearly to the extent that crude did. Said another way, the ratio of gas production to oil production has risen — and that’s been true at both the total U.S. level and in the primary unconventional basins for oil production. In today’s blog, we will look at the factors driving the trend of higher gas-to-oil ratios.
The 2010s was an exhilarating time to be involved in the oil and gas industry, with both commodities (and NGLs too) experiencing unprecedented production growth. That timeframe can be divided, roughly down the middle, into two distinct periods of development before and after the mid-decade oil and gas price collapse. An awful lot of words were written at the time — by us included (see Summer in the City) — about the cost-cutting measures and productivity improvements producers developed that enabled production to surge once again when prices returned to a range economic for producers. Things really picked up steam in 2017 and, in the two-and-a-half years from June 2017 to the end of the decade, total U.S. crude production increased by 40% to a record 13 MMb/d (green arrow in left graph in Figure 1) and gross gas production increased 30% to 117 Bcf/d (green arrow in right graph). Those gains were driven, of course, by the major unconventional plays shown in Figure 1: the Anadarko (red layer), Bakken (purple layer), Eagle Ford (orange layer), Niobrara (light blue layer), and Permian (green layer) for crude (left graph), along with the Haynesville (yellow) and Marcellus/Utica in Appalachia (dark blue) for gas (right graph). The increases more than offset production declines in legacy basins (gray layers), though it bears mentioning for this conversation that conventional gas had been falling off faster than conventional oil production.
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