Growth in natural gas production in the biggest producing regions in the United States is on the decline due to the lack of sufficient pipeline network, as prices soar at home alongside a major uptick in LNG exports destined for gas-thirsty Europe.
Since Russia’s invasion of Ukraine in late February, U.S. natural gas prices have increased approximately 50%, Reuters reports, and producers in Appalachia and West Texas are now struggling with a shortage of pipelines to move product to market
Appalachia accounted for 37% of total U.S. gas production, while West Texas accounted for another 19%, Reuters said, citing a warning by Bank of America analysts that Appalachia was nearing the limits of its takeaway capacity, heralding a potential halt to production growth.
In West Texas, home of the Permian shale play, pipelines are also filling up quickly, according to Reuters.
The pipeline shortage could lead to even higher prices for natural gas, which topped $7 per million British thermal units on the spot market at the end of last month. May futures also expired at a price above $7 per mmBtu, the Energy Information Administration (EIA) reported last week. Natural gas prices stood at $7.250 at the time of writing (8:18am EST).
The timing of this pipeline shortage comes as Europe is seeking alternatives to Russian gas, with U.S. LNG the preferred replacement. Currently, the U.S. has the capacity to export 9.8 billion cu ft daily, according to Reuters, while Europe’s largest economies import Russian gas at a rate of 18.3 billion cu ft daily. Pandemic demand recovery for natural gas, inflation and energy shortages at home will affect American consumers.
By Irina Slav for Oilprice.com
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