Natural gas production in the United States has skyrocketed over the past five years, making the carbon-light fossil fuel cheaper to access and plentiful for export, according to a new report by the Energy Information Administration.
Production in the Appalachia region alone has seen a jump of 14 billion cubic feet per day since 2012, driving the bulk of output growth in recent years and giving the region a 2016 output of 22.1 billion cubic feet per day.
National output soared to 72.3 billion cubic feet per day last year– that’s more than Russia, Africa, Iran and Qatar – the latter being the world’s most prolific liquefied natural gas exporter. The Appalachian basin alone produced more natural gas than any nation except for Russia.
But a decline is on the horizon, according to data emerging from new wells. The average production from freshly drilled sites has fallen in the Appalachia, Haynesville and Eagle Ford basins. The three used to be the nation’s largest natural gas producing basins, until the dip in Eagle Ford output gave Niobrara a chance to nab the third-place spot.
Still, ‘natural gas production growth has outpaced demand,” Robert Rapier, director of engineering for ZHRO power wrote in a recent column for Forbes. “This caused natural gas inventories to swell, which kept downward pressure on natural gas prices. A decade ago, natural gas prices were still regularly spiking above $10/million BTU (MMBtu). Over the past three years, high inventories have mostly kept prices below $3/MMBtu.”
The shale revolution actually started with natural gas production, which turned upward in about 2006. Oil production began to rise in 2009, but along with it came associated natural gas, which is extracted before drillers hit their prized and profitable oil reservoirs. Just as the surge of shale oil production contributed to the collapse of oil prices, the surge of natural gas production – both from dedicated natural gas drilling and from associated gas production – collapsed natural gas prices three years ago.
This price drop is the reason the U.S. electricity industry plans to raise natural gas-fired generating capacity by 8 percent in 2018 compared to existing capacity as of the end of 2016, according to an EIA report from January. The plan will to increase natural gas-fired generating capacity by 11.2 gigawatts (GW) this year and 25.4 GW next year.
The planned increases of natural gas-fired power generating capacity come after five years of net reductions of coal-fired electricity generating capacity. Between the end of 2011 and end-2016, available U.S. coal-fired generating capacity dropped by an estimated 47.2 GW, or by 15 percent.
The end of coal demand—and the doomed future of miners in coal country—propelled U.S. presidential candidate Donald Trump to a victory back in 2016. Now, to reverse the gasification trend at American power plants, Trump plans to subsidize coal plants to lower their costs.
“In light of threats to grid reliability and resiliency it is the Commission’s immediate responsibility to take action…” the Department of Energy directive on coal plants from September states to justify the subsidies. This position actually pits one fossil fuel, natural gas, against another, coal, in exchange for votes in swing states.
Coal mining will not survive past oil’s expected demise. The logistical hurdles of transporting the solid cross country are numerous and wasteful. In contrast, oil and natural gas flow to their final destination, and certain renewables can be installed right onto homes and businesses. Plus, the free market prefers natural gas over coal on price point and general availability. The path forward is clear, despite brazen politicking in Washington.
By Zainab Calcuttawala for Oilprice.com
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