EIA: annual US shale gas production may decline for the first time since 2000

US natural gas production from shale and tight formations, which makes up 79% of dry natural gas production in the US, saw a slight decline in the first 9 months of 2024 compared with the same period in 2023. If this trend continues for the remainder of 2024, it would mark the first annual decrease since the US Energy Information Administration (EIA) started collecting these data in 2000.

From January to September 2024, total US shale gas production fell by about 1% to 81.2 bcfd, while other US dry natural gas production rose by about 6% to 22.1 bcfd. Overall, US dry natural gas production averaged 103.3 bcfd during this period, essentially flat from the same period in the previous year.

The decline in shale gas production so far this year has been driven primarily by declines in production in the Haynesville and Utica plays. According to EIA, from January through September 2024, shale gas production decreased by 12% (1.8 bcfd) in the Haynesville and by 10% (0.6 bcfd) in the Utica compared with the same period in 2023. At the same time, shale gas production in the Permian play grew by 10% (1.6 bcfd). Production in the Marcellus play, which leads US shale gas production, remained flat.

The Haynesville play in northeastern Texas and northwestern Louisiana is a dry natural gas formation. The Utica and Marcellus plays in the Appalachian Basin produce lease condensate in addition to dry natural gas. In all three plays, natural gas prices are the primary driver of drilling and developing wells. The US benchmark Henry Hub daily natural gas price has generally declined since August 2022 and reached record lows in first-half 2024, making drilling natural gas wells less profitable, particularly in Haynesville. Several operators in Haynesville and the Appalachian basin shut in natural gas production in reaction to historically low prices and intend to continue curtailments second-half 2024.

By contrast, natural gas produced in the Permian play in western Texas and southeastern New Mexico is primarily associated gas from oil wells where drilling and development is driven by the oil price. Natural gas production in the Permian has increased this year along with increasing oil production.

Shale natural gas production in the Utica was 5.6 bcfd in September, 33% less than the monthly high of 8.3 bcfd in December 2019 and 10% less than the 2023 average of 6.2 bcfd. At depths of 5,000-11,000 ft, wells in Utica, which lies beneath Marcellus, are slightly more expensive to drill than Marcellus wells because of their depth, EIA said.

Drilling costs of Haynesville wells, at depths of 10,500-13,500 ft, are even higher. Shale natural gas production in the Haynesville was 13.0 bcfd in September 2024, 14% less than the peak in May 2023. Haynesville is the third-largest shale gas-producing play in the US, behind Marcellus and Permian. In 2023, Haynesville shale natural gas production averaged 14.6 bcfd, accounting for 14% of total US dry natural gas production.

The US benchmark Henry Hub natural gas price fell 79% from the August 2022 inflation-adjusted high of $9.39/MMbtu to an average of $1.99/MMbtu in August 2024. So far this year, the price has averaged $2.10/MMbtu compared with an inflation-adjusted average of $6.89/MMbtu in 2022 and $2.62/MMbtu in 2023. As natural gas prices declined, the economics of producing natural gas in the dry gas formations worsened, leading producers to shut in production and drop drilling rigs.

“Producers tend to increase or decrease the number of drilling rigs in operation as natural gas prices fluctuate. The number of natural gas-directed drilling rigs in the Haynesville, Utica, and Marcellus plays has decreased steadily since the end of 2022, according to data from Baker Hughes. In the Haynesville, an average of 33 rigs were in operation in September 2024, 53% fewer than in January 2023. The number of rigs operating in the Haynesville in September was the lowest it has been since July 2020,” EIA said.

“In the Utica, an average of 7 rigs were operating in September 2024, fewer than half the number that were operating in January 2023, and in the Marcellus, an average of 25 rigs were in operation, about 36% fewer than in January 2023. Although the productivity of newer wells has improved in recent years, the decline in rig counts has contributed to an overall decrease in production.”

In its latest Short-Term Energy Outlook, EIA forecasts total US dry natural gas production to average 103.5 bcfd in 2024, down slightly from 103.8 bcfd in 2023, and to resume modest growth in 2025 to 104.6 bcfd.