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Crude Oil Supply/Demand Fundamentals Marcellus and Utica General Information Page
US Drilling Activity: Play Level Maps and Trends China Shale Gas
Permian Basin:  The King of the Oil Shales Deep Utica Dry Gas- Emergence of a "super" shale play.
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US Natural Gas Supply/Demand Fundamentals
(Demand, Production, Import, Exports, and Price)
Table of Contents


US Natural Gas Supply Summary
US Natural Gas Demand Summary
US Natural Gas Drilling Activity Summary
Natural Gas and Coal Substituion in Power Generation
Regional Pipeline Flows and Price Variation Across the US Natural Gas Market
Shale Gas Technology and Productivity Trends


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The Recovering Natural Gas Market

The  natural gas market recovery from its 2016 lows stalled in early 2017 due to higher than average temperatures in January and February in important space heating markets in the US. However, over the most recent 8 week span,  the recovery restarted as evidenced by weekly storage additions, which since late April have been less than the prior five year average in 7 of the last 8 weeks (see below).  In fact, for the week of June 23rd the net storage injection volume was the second lowest of the last 14 years.  We believe the reason the recovery has been reactivated is due to accelerating exports, led by LNG, and increasing fuel burn in the power sector as natural gas approached and then breached to the downside the imporant $3.00/mmbtu level.   As illustrated in the analysis below, at $3.00/mmbtu and below, our analysis indicates that natural gas becomes increasingly competitive with coal in base load service.  As a result of these improving fundamentals, the US natural gas rig count has been increasing, albeit slowly, over the last 3 months.  Click here to go to the section on this page titled, "US Natural Gas Drilling Activity".

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US Natural Gas Storage Levels Updated thru June 29, 2017
2017 US Natural Gas Storage Levels
2017 US Natural Gas Storage Levels, June 29, 2017
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2017 US Natural Gas Storage Rate of Change Comparison
2017 US Natural Gas Storage Rate of Change Comparison, June 22, 2017
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2016 US Natural Gas Storage Rate of Change Comparison (end of year)
2016 US Natural Gas Storage Rate of Change Comparison
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 USA Heating Day Through mid-February 2017
USA Heating Day Through mid-February 2017
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US Natural Gas Supply Summary
In this section we provide a brief overview of the US natural gas supply situation.  As illustrated on the following two charts, US nat gas supply which had pulled back in response to the pricing nadir reached in the spring of 2016, has begun to rebound as nat gas prices improved over the summer and fall of 2016.  The relationship between drilling activity and price is clearly shown on this chart.  The first chart in this section illustrates that according to numbers provided by the EIA, production from the main non-conventional gas regions, which had been flat to lower through much of 2016, has now pushed higher.  The main reason for the increase are higher associated gas production in the Permian/STACK/SCOOP regions, and higher volumes from the  Marcellus/Utica plays.  The second chart in the section provides a estimate of how the conventional regions are faring, and it shows that while these regions had experienced a signifcant production falloff through much of 2016, they too are stablizing. 

Reported Production for Main US Non-Conventional Regions
Reported Production for Main US Non-Conventional Regions
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US Natural Gas Production with Marcellus, Utica, and Eagle Ford Breakout
US Natural Gas Production with Marcellus, Utica, and Eagle Ford Breakout
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USA Natural Gas Demand, Production (Supply), Imports, Exports, and Price
As reported by the EIA thru June 2016

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The chart to the left provides a single page reference for USA natural gas supply/demand fundamentals.  The obvious trends since the advent of large scale shale gas drilling and development are:
1)  Declining natural gas prices
2)  Increasing demand in response to the lower prices
3)  Falling imports and growing exports.


Go to this page for a discussion of the emergent Utica dry gas play, which might be the next "super" shale play.  Operators  have reported 24 hr IP's in excess of 70 MMCFD with flowing casing pressures (FCP) of 8000-10000 psi.


Longer term, development of the deep Utica, super shale is starting to rev up and could begin pressuring natural gas prices as soon as next spring.  We currently estimate the resource potential of this play to be in excess of 400 TCF  a significant portion of which may be economic at less than $2/mmbtu.  Note: US demand is on the order of about 27 TCF p.a. ,As a reminder, three recent wells in the deep Utica in sw PA tested at 59 MMCFD, 73 MMCFD, and 63 MMCFD.  All three had flowing pressures of 8000 psi or higher.  See the following links for more details:  Scotts Run (73 MMCFD) well; Gaut4IH (63 MMCFD) well; and Claysville Sportsman's Club No. 1(59 MMCFD) well.

US Natural Gas Demand Summary
In this section we provide a brief overview of the US natural gas demand situation. As illustrated in the first slide of this section, domestic demand over the past three years has been well above the levels of prior years.  This is due to a combination of growing use of natural gas in the power sector, as well as users taking advantage of relatively low prices to use more of the commodity for a variety of purposes, including petrochemical feedstock, to space heating, to transportation. Exports are also up substantial;y as both Canadian and Mexican users have imported more of the fuel, and more recently increased volumes have been sent to export markets in the form of LNG.  However, although the demand story is strong and is helping the market heal itself, for the recovery process to end well, we need to have a 2016-2017 winter with seasonal temperatures.  As illustrated in the third slide of this section, the warm temps of last winter submarined US natural gas demand in Jan., Feb., and Mar of 2016, leading to heightened storage levels that depressed price for much of the first half of 2016.  Along those lines, the fourth slide shows that NOAA is projecting temperatures for the upcoming 2016-2017 winter (January, February and March) for much of the northern US to potentially have seasonal to colder than average temperatures.

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US Natural Gas Demand by Major User Segment
US Natural Gas Demand by Major User Segment
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US Natural Gas Demand and Export Levels: 2001-2016
US Natural Gas Demand and Export Levels: 2001-2016
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Year-on-Year Change in Daily Natural Gas Demand
Year-on-Year Change in Daily Natural Gas Demand
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NOAA Temperature Outlook for the 2016-2017 winter (Jan, Feb, March)
Forecast circa December 2016
NOAA Temperature Outlook for the 2016-2017 winter (Jan, Feb, March)
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Short Term Temperature Outlook for the USA for February 2017
Forecast issued by NOAA on January 19, 2017
Short Term Temperature Outlook for the USA for February 2017
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NOAA Temperature Outlook for the Summer 2017 (June, July, and August)
Forecast issued by NOAA on January 19, 2017
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NOAA projections for the summer of 2017 (June, July and August) appear to indicate an elevated chance that temperatures across much of the USA could be above normal.  If this scenario were to happen, it would suggest elevated levels of natural gas demand may occur due to a potential increase in electrical power demand to support air conditioning usage.

US Natural Gas Trade
US Natural Gas Trade
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US Natural Gas Exports to Mexico
US Natural Gas Exports to Mexico
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Sabine Pass LNG Export Report Card
Thru October 2016
Sabine Pass LNG Export Report Card
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Est. Landed LNG Prices At Selected Locales Around the World

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US Natural Gas Drilling Activity

After a long decline, US natural gas drilling activity is starting to pick-up in response to higher natural gas prices.  At present, this increase is concentrated in the Marcellus/Utica regions (see below), but as natural gas prices continue to rise, our upstream activity model indicates that drilling will start to pick up in other regions as well.

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ECG Assessment of Horizontal Drilling Activity in Several Large Shale Gas Plays in the USA (January 2017)
ECG Assessment of Horizontal Drilling Activity in Several Large Shale Gas Plays in the USA
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Map of USA Onshore Gas Drilling Activity
January 2017
Map of USA Onshore Gas Drilling Activity
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Gas Price Versus Gas Rig Count
(Jan 2017)

Gas Price Versus Gas Rig Count
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Map of USA Onshore Drilling Activity
January 2017
Map of County Level USA Onshore Drilling Activity
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Natural Gas and the US Power Sector


Another short to medium term factor in North American natural gas demand is fuel-on-fuel competition in the electric power industry.  The power sector has become increasingly adept at switching between coal and natural gas, depending on relative price levels.  Our research (see below) illustrates that once natural gas prices at Henry Hub move below $3.00/mmbtu, natural gas becomes increasingly competitive with coal for fuel burn.

Fuel-on-fuel competition between coal and natural gas for power generation fuel burn
Fuel-on-fuel competition between coal and natural gas for power generation fuel burn
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As this chart illustrates, once natural gas prices move below $3.00/mmbtu at Henry Hub, the cash cost of power generation, mainly consisting of fuel and variable opex, starts to work in favor of natural gas.  As a result when prices fall to such levels, we see operators increasing the use of natural gas fired power plants to take advantage of the lower costs.  Obviously, the more natural gas prices move below the $3.00 threshold, the greater the incentive to switch over to natural gas fired power generation.

The two charts below of changes in coal or natural gas power generation amounts are presented on the same time scale as the chart to the left.  They clearlyshow the relationship described above.
Year-On-Year Change in USA Terawatt-Hours
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USA Coal and Natural gas Fired Terawatt-Hours
USA Coal and Natural gas Fired Terawatt-Hours
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Cost of Power Comparison By Technology for New Build Power Installations
Levelized CAPEX, OPEX ex Fuel, Sept, 2015, Est. Nat Gas Fuel Cost, Fall 2015

For more discussion of how natural gas is changing the North American power market, go to Power Generation Summay


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Pipeline Flow Information and USA Regional Price Variation Across the US Natural Gas Market

The spot price, trading hub maps presented below illustrate the price impact of the largest, highest quality of these plays: the Marcellus and Utica in the northeast USA.  As shown by the spot price map of the northeast USA, prompt prices in the Marcellus/Utica area were about half or less that of Henry Hub/NYMEX pricing in January and February 2015.












Select USA Natural Gas Hubs
(These map locations should roughly correspond with the hubs listed to the right)

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The daily estimates of pipeline flows to the right was sourced from the useful
Natural Gas Intelligence (NGI) and Genscape website.
 Click here to go to the full page for all the information.










Reported January 2015 Natural Gas Spot Prices at Selected Trading Hubs in the United States:  This demonstrates pricing relative to Henry Hub
Map: Reported January 2015 Natural Gas Spot Prices at Selected Trading Hubs in the United States
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Reported January 2015 Natural Gas Spot Prices At Selected Trading Hubs in the Northeast United States
Map: Reported January 2015 Natural Gas Spot Prices At Selected Trading Hubs in the Northeast United States
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Reported Natural Gas Spot Prices At Selected Trading Hubs Across the United States as of March 2016
Reported Natural Gas Spot Prices At Selected Trading Hubs Across the United States as of March 2016
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Reported Natural Gas Spot Prices At Selected Trading Hubs in the Northeast United States as of March 2016
Reported Natural Gas Spot Prices At Selected Trading Hubs in the Northeast United States as of March 2016
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Shale Gas Technology and Productivity Trends
The rapid pace and magnitude with which shale play technology is improving is illustrated by the two plots below.  The one on the left is an example of an early shale gas well with an initial rate of about 3 MMCFD, and an EUR of about 4.5 BCF.  As the technology evolved since those early days, it is now leading to the emergence of super wells, which are capable of flowing as much as 40 MMCFD, and producing nearly 30 BCF from a single well. This ten fold increase in rate, and 4-6 times increase in EUR, is accomplished with about a 2x increase in well cost.  Currently, only a few such "super" wells exist, but the industry is rushing to determine if such wells are only a local phenomena or whether they might be relatively common. 
Example of Early Shale Gas Well Production Profile

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Example of Emerging Super Shale Gas Well Production Profile

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Rig Productivity Growth Within One Major Shale Gas Play 
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As a result of this technological revolution, the North American natural gas supply curve (below), as we calculate it, has been dramatically pushed down, and flattened.  The implications are that large volumes of gas can be developed at lower breakeven costs, meaning the shale revolution is not likely to be a flash in the pan, but rather a long, lived force for good, that has the potential to lower the cost of living for everyone.  There is no better example of this than what is happening in the deep, dry Utica in southwest Pennsylvania.

A North American Natural Gas Cost of Supply Curve
October 2015

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Top 40 Natural Gas Companies in the USA by Daily Output (NGSA)


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