The article below by Bloomberg focuses on an issue most people in the oil and gas industry are oblivious to. With all the oil being produced in the Permian, one has to wonder how long the gas can be flared.
This development reinforces my thinking that the U.S. will become the major liquid natural gas (LNG) producer to the world which means that the U.S. will set the price for LNG.
The two biggest shale gas deposits in the US are producing a record amount of the power-plant fuel, signalling that a fight for market share will intensify as supply outstrips demand.
As natural gas prices rebound from last year’s historic lows, output from the Marcellus shale basin in the US East and the Permian reservoir in Texas is driving a rebound in America’s production of the fuel.
Low-cost supply from the Marcellus is surging as new pipelines are built to shuttle gas to markets across the US and Canada. Meanwhile, Permian output is rising as a recovery in oil prices boosts the production of gas that’s extracted alongside crude.
A deluge of new gas production from Texas and Pennsylvania threatens keep the US awash in excess supply and lower prices nationwide, even as rising exports trim a glut of the fuel in storage.
Though the reservoirs are thousands of miles apart, gas competition between the Marcellus and Permian is set to heat up as producers there go after the same customers in major markets like the Midwest.
“Everyone can’t grow and everyone can’t win,” Justin Carlson, managing director of research at East Daley Capital Advisors Inc, an energy consulting company he co-founded in Centennial, Colorado. “Marcellus producers did not count on the Permian.”
Marcellus gas output will rise 0.5 per cent to 19.4 billion cubic feet a day in July from June, while Permian production will climb 1.9 percent to 8.5 billion, the US Energy Information Administration’s monthly Drilling Productivity Report showed yesterday. That’s an all-time high for both shale deposits.
The Marcellus may end up ceding some ground to the Permian, Carlson said. Output from the Marcellus will probably climb by 11 billion cubic feet by the end of 2019 from last year, well below the guidance given by producers in the region showing a gain of 14.5 billion during the same period, he said.
That means the new pipelines crisscrossing the region could take longer to fill. — Bloomberg