Emerging gas production areas helping fill in for stalled Marcellus-Utica growth

Constrained pipeline infrastructure is providing a check on Northeast gas production, but is not affecting the overall US gas market, which has seen heady production growth from some private players elsewhere and new activity in non-core areas, an official with Macquarie Energy said June 13.

At the end of 2022, "we think that production was really much stronger than what people probably appreciate," said Kevin Little, managing director, Macquarie Energy, speaking at the 2023 LDC Gas Forum Northeast in Boston.

"If we're correct, this 103-Bcf/d level that we think we reached at the end of 2022 represents about 7 Bcf/d of year-on-year growth," Little said. "That would be the strongest growth rate that the markets achieved since 2018 and 2019."

After the growth trajectory in Marcellus and Utica gas production from 2005 to 2019, Little noted that production there has generally stagnated amid major infrastructure permitting challenges out of the Appalachian Basin. Multiple longhaul projects stalled amid legal battles or state permitting struggles.

But US production still hit highs in late 2022 continuing into the first quarter of 2023, Little said, with the investment and growth transitioning south, to other areas like the Permian, the Haynesville and South Texas.

Market response to higher prices

Amid strong gas prices, there was a market response and "some really spiky runs from some private producers," Little observed.

For instance, he offered the example of three private producers in the Haynesville that combined added 1.1 Bcf/d in late 2022 and into 2023.

Little also called attention to emerging activity in non-core areas "where we haven't traditionally thought about gas production" -- for example, the Dorado, in the southwest Eagle Ford in Webb County, Texas, near the border of Mexico.

After EOG Resources announced a dry gas discovery in that area in November 2020, the rig count in the area rose to 20, as other producers sought to replicate the company's well performance in the area, he added. "At one point, Webb County was the busiest county in the entire Eagle Ford in 2022."

Further, Little pointed to recent strong production results in Robertson and Leon counties in the Western Haynesville play in Texas by Comstock Resources. The resource has been previously known but thought to present equipment and cost challenges because the depth of the gas.

"This will be an emerging resource base over time," he said.

Pipeline surge to Gulf Coast

At the same time, Little cautioned that some of the growth may be misaligned with the timing of adding US LNG export capacity, which could rise to 25 Bcf by 2027 or 2028.

"So, 2023 is a little bit of a gap year , if you will, for the market, but we think that extends into 2024," he said.

Along those lines, he also tallied 12 Bcf of new pipeline capacity that is being added to bring supply from basins -- excluding Marcellus and Utica -- to the Gulf Coast, targeting the LNG market.

"The growth story from an LNG perspective is real," he said. "There's just a little bit of a mismatch in terms of the timing of these midstream expansions coming on," as well as the overall pipeline capacity planned.

But Little asserted it will be necessary unlock Marcellus and Utica production for the US to meet the potential to help shave global CO2 emissions.

Looking beyond 2030 and 2040, "we need to not have the Marcellus and Utica be resource-constrained," he said. "This is the US' most economic gas basin and it could possibly be one of the most economic gas basins in the world."