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Tsvetana Paraskova

Tsvetana Paraskova

Tsvetana is a writer for the U.S.-based Divergente LLC consulting firm with over a decade of experience writing for news outlets such as iNVEZZ and…

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Haynesville Shale Gas Production Is Bouncing Back

Natural gas production at the Haynesville formation in northwest Louisiana and East Texas has been steadily rising this year to reach its highest level since September 2012.

Recovering natural gas prices, coupled with increased initial productivity rates in the Haynesville wells, have been the main drivers of the revival of the region whose production peaked in January 2012, the Energy Information Administration (EIA) said in a recent analysis.

Productivity gains in the Haynesville region are expected to continue in the near future as producers optimize natural gas recovery, the EIA says, while it expects spot prices of the U.S. natural gas benchmark Henry Hub to tick up into the next year, from currently expected average $2.99/million British thermal units (MMBtu) in 2018 to an average of $3.12/MMBtu in 2019.

Haynesville’s natural gas production averaged 6.4 billion cubic feet per day (Bcf/d) in June 2018, representing 8.5 percent of total U.S. dry natural gas production. The Haynesville production in June was the highest in nearly six years—since September 2012.

The peak of production at Haynesville was at 7.4 Bcf/d in January 2012, after which natural gas output started to slide to touch less than half of that level by early in 2016, when Henry Hub prices dropped to below $2.00/MMBtu.

Unlike other major shale gas formations such as those in the Appalachia region, Haynesville lies much deeper than, say, the Marcellus, so the cost of natural gas extraction is higher than that in Appalachia. The Haynesville lies at depths of 10,500 feet to 13,500 feet, much deeper than the Marcellus depths of between 4,000 to 8,500 feet.

This makes Haynesville’s gas production more susceptible to the price of natural gas. The higher cost to produce natural gas in Haynesville played a large role in the decline in the region’s production between 2013 and 2016, the EIA says.

The higher costs and the low Henry Hub prices combined to result in declining rig count in the Haynesville, touching a low of 20 operational rigs in the middle of 2016. Since then, the Henry Hub prices have increased, and the Haynesville rig count has steadily grown to average at least 50 rigs operating in each month so far in 2018, EIA estimates.

Recovering natural gas prices have been a key—but not the only—factor for rising production at Haynesville. Drillers have dramatically increased the lateral lengths and initial production rates of the wells in the formation.

Average lateral lengths per well jumped from 4,269 feet to 6,421 feet between 2010 and 2017, according to EIA calculations based on DrillingInfo data.

Haynesville’s initial productivity rate, calculated as the initial three-month cumulative production per well, almost doubled from 2010 to 2017—surging from 589 million cubic feet per well to 1.176 billion cubic feet per well.

“Productivity gains are expected to continue as producers optimize natural gas recovery from the Haynesville formation,” EIA says.

Last year, Haynesville was the third-largest producer of shale gas in the U.S. after the Appalachian production region and the Permian.

The Haynesville, together with the Appalachian Basin and the Permian, currently account for almost 50 percent of total U.S. natural gas production, compared to less than 15 percent of all production in 2007, before the first shale boom, EIA data shows.

Gross production of U.S. natural gas has been growing for more than a decade, and in recent months has been more than 10 percent higher compared with the same months in 2017, EIA said last month.

In the September Short-Term Energy Outlook (STEO), the EIA expects U.S. natural gas production to average 81.0 Bcf/d this year, up by 7.4 Bcf/d from 2017 and establishing a new record high. EIA also forecasts that natural gas production will continue to rise in 2019 to average 84.7 Bcf/d.

Haynesville natural gas production may be off its peak, but over the past year, the region has regained its leading role in total U.S. production.

By Tsvetana Paraskova for Oilprice.com

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