EIA: near-term shale gas production to drop

Natural gas production across all major shale regions in EIA’s Drilling Productivity Report is projected to decrease for the first time in September.

Production from these seven shale regions reached a high in May at 45.6 billion cubic feet per day and is expected to decline to 44.9 Bcf/d in September. In each region, production from new wells is not large enough to offset production declines from existing, legacy wells, EIA writes in the report.

The Utica region in eastern Ohio is the only DPR region expected to show production increases in June, July, and August. Production declines from legacy wells in the Utica are estimated to total 55.6 million cubic feet per day in September. Partially countering this decline is expected production from new wells of 52.2 MMcf/d in September. New-well natural gas production per rig is estimated to be about 7 MMcf/d, an increase of 47% from September 2014. Seven rigs were drilling in the Utica in July. Multiplying the seven rigs by the estimated new-well gas production per rig yields the total new-well production estimate for September. Because this value is lower than the decline from legacy wells, total production is expected to fall by 3.4 MMcf/d.

A year ago, the higher number of rigs operating in the Utica meant that new-well production more than offset the 26.5 MMcf/d in legacy-well declines, resulting in a net production increase of 116.5 MMcf/d. Since then, falling rig counts and increasing legacy-well declines mean the increase in Utica new-well productivity is insufficient to overcome legacy-well production declines.

Several external factors could affect EIA’s DPR estimates, such as bad weather, shut-ins based on environmental or economic issues, variations in the quality and frequency of state production data, and infrastructure constraints. For example, on August 1, the Rockies Express Pipeline started to deliver 1.8 Bcf/d of Appalachian natural gas production west on its existing mainline as part of the Zone 3 East-to-West project. This increase in takeaway capacity may encourage increased production from regions such as the Marcellus and Utica.

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