• 1 day PDVSA Booted From Caribbean Terminal Over Unpaid Bills
  • 1 day Russia Warns Ukraine Against Recovering Oil Off The Coast Of Crimea
  • 1 day Syrian Rebels Relinquish Control Of Major Gas Field
  • 1 day Schlumberger Warns Of Moderating Investment In North America
  • 1 day Oil Prices Set For Weekly Loss As Profit Taking Trumps Mideast Tensions
  • 1 day Energy Regulators Look To Guard Grid From Cyberattacks
  • 1 day Mexico Says OPEC Has Not Approached It For Deal Extension
  • 1 day New Video Game Targets Oil Infrastructure
  • 2 days Shell Restarts Bonny Light Exports
  • 2 days Russia’s Rosneft To Take Majority In Kurdish Oil Pipeline
  • 2 days Iraq Struggles To Replace Damaged Kirkuk Equipment As Output Falls
  • 2 days British Utility Companies Brace For Major Reforms
  • 2 days Montenegro A ‘Sweet Spot’ Of Untapped Oil, Gas In The Adriatic
  • 2 days Rosneft CEO: Rising U.S. Shale A Downside Risk To Oil Prices
  • 2 days Brazil Could Invite More Bids For Unsold Pre-Salt Oil Blocks
  • 2 days OPEC/Non-OPEC Seek Consensus On Deal Before Nov Summit
  • 2 days London Stock Exchange Boss Defends Push To Win Aramco IPO
  • 2 days Rosneft Signs $400M Deal With Kurdistan
  • 3 days Kinder Morgan Warns About Trans Mountain Delays
  • 3 days India, China, U.S., Complain Of Venezuelan Crude Oil Quality Issues
  • 3 days Kurdish Kirkuk-Ceyhan Crude Oil Flows Plunge To 225,000 Bpd
  • 3 days Russia, Saudis Team Up To Boost Fracking Tech
  • 3 days Conflicting News Spurs Doubt On Aramco IPO
  • 4 days Exxon Starts Production At New Refinery In Texas
  • 4 days Iraq Asks BP To Redevelop Kirkuk Oil Fields
  • 4 days Oil Prices Rise After U.S. API Reports Strong Crude Inventory Draw
  • 4 days Oil Gains Spur Growth In Canada’s Oil Cities
  • 4 days China To Take 5% Of Rosneft’s Output In New Deal
  • 4 days UAE Oil Giant Seeks Partnership For Possible IPO
  • 4 days Planting Trees Could Cut Emissions As Much As Quitting Oil
  • 4 days VW Fails To Secure Critical Commodity For EVs
  • 4 days Enbridge Pipeline Expansion Finally Approved
  • 5 days Iraqi Forces Seize Control Of North Oil Co Fields In Kirkuk
  • 5 days OPEC Oil Deal Compliance Falls To 86%
  • 5 days U.S. Oil Production To Increase in November As Rig Count Falls
  • 5 days Gazprom Neft Unhappy With OPEC-Russia Production Cut Deal
  • 5 days Disputed Venezuelan Vote Could Lead To More Sanctions, Clashes
  • 5 days EU Urges U.S. Congress To Protect Iran Nuclear Deal
  • 6 days Oil Rig Explosion In Louisiana Leaves 7 Injured, 1 Still Missing
  • 6 days Aramco Says No Plans To Shelve IPO
Alt Text

The Natural Gas Market Is Set To Boom

With the new lower-for-longer oil…

Alt Text

2 Red Flags For The World’s Top Shale Play

Changing legislation and taxation for…

Alt Text

The U.S. LNG Boom Could Be About To Stall

United States LNG has seen…

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…

More Info

Is Haynesville About To Make A Comeback?

Shale

Back in early 2011, the Haynesville shale play in east Texas, northwest Louisiana, and southwest Arkansas surpassed the Barnett Shale in Texas as the highest-producing shale gas play in the U.S., according to reported pipeline flows. Since 2013, however, Haynesville production has been falling amid low gas prices, and the shale play has been outrun by the lower-cost Marcellus and Utica basins in the Northeast.

The Haynesville may have been down, but it is not yet out. Recent production forecasts and Haynesville’s geographical proximity to the Sabine Pass LNG terminal and other planned LNG export facilities, as well as its proximity to planned additional pipeline capacity to Mexico, may help Haynesville come back to life again. The uncertainty and downside, as always, are the price of natural gas and concerns that a glut would keep prices low, at least in the short to medium term. But many producers have been hedging gas production to try to offset the negative impacts of price volatility.

At the CERAWeek event in Houston earlier this month, Chesapeake chief executive Doug Lawler said, referring to Haynesville, “It was largely written off by industry two to three years ago, but it has reemerged stronger than ever.”

According to EIA’s latest Drilling Productivity Report, Haynesville natural gas production is expected to increase by 108 million cubic feet/day from March to stand at 6.247 billion cubic feet/day in April.

This year, total U.S. dry natural gas production is expected to average 73.7 billion cubic feet per day (Bcf/d), up by 1.4 Bcf/d from the 2016 level, and reversing the 2016 production decline, which was the first annual decline since 2005, EIA’s Short-Term Energy Outlook shows. According to the EIA, new natural gas export capabilities and growing domestic natural gas consumption will contribute to the Henry Hub natural gas spot price rising from an average of $3.03/MMBtu this year to $3.45/MMBtu next year.

The EIA also expects that the U.S. will become a net exporter of natural gas on an average annual basis by 2018. The transition to net exporter would be driven by declining pipeline imports, rising pipeline exports, and higher LNG exports. Expectations of rising natural gas exports, especially from new LNG terminals, sustain projections of continued growth in U.S. natural gas production. Related: Climate Change Policies Working: CO2 Emissions Flat For 2 Years In A Row

As of January 2017, the Federal Energy Regulatory Commission (FERC) had seven LNG export terminals approved and already under construction, and another four approved but not yet under construction. Most of those approved LNG export terminals are in Louisiana and Texas, with one in Georgia and one in Maryland.

So Haynesville could be a beneficiary of that additional export capacity of LNG along the Gulf coast. In addition, it is also poised to benefit from the rising U.S. natural gas exports to Mexico via pipelines, with pipeline capacity also set to grow, as Mexico is largely meeting its growing electricity demand with new gas-fired plant generation.

So export capacity is set to grow, and the companies that have emerged from the oil price downturn and from the low gas prices are now increasingly hedging production to spare themselves the negative impact of low prices. Related: The 5 Biggest Strategic Petroleum Reserves In The World

Mining and energy commodities giant BHP Billiton has operations in the Haynesville shale, but in 2015 it decided to suspend development there amid the low natural gas prices, its asset president of shale, Alex Archila, said at the CERAWeek event earlier this month. BHP Billiton has recently launched a gas price hedging strategy in North America. That strategy was an “essential aspect of the return to Haynesville,” Archila noted.

According to Wood Mackenzie, oil hedging in the U.S. is surging, while gas hedging activity in Q4 2016 was more subdued, “mainly because producers already held healthy positions for 2017”. WoodMac’s analysis shows that 2.2 billion cubic feet/day of new gas hedges were added in Q4 2016, down by 57 percent from Q3 2016, with most of the new gas derivatives added at strike prices between $3.00/mcf and $3.60/mcf Henry Hub. Analyzing a peer group of producers, WoodMac found that the group’s hedged gas production accounted for 42 percent of its output for 2017, up from 32 percent in 2016.

With export capacity close to Haynesville growing, the shale play has the chance to play a bigger role in rising U.S. natural gas exports. The question is: will producers find the sweet spot between Haynesville’s well economics and natural gas prices?

By Tsvetana Paraskova for Oilprice.com

More Top Reads From Oilprice.com:




Back to homepage


Leave a comment
  • Dan on March 30 2017 said:
    It's bloody cold here, heats still on. Lakes still frozen and hopefully Vermont is cold too.
  • Skip Peel, Independent Landman on March 30 2017 said:
    You lost me at the first sentence. Not only is there no Haynesville Shale exploration or production in Southwest Arkansas, there is no Haynesville Shale well within 25 miles of the AR/LA border. An oil and gas publication should know that. It is disappointing that after eight years of development this erroneous statement of Haynesville Shale anywhere in AR persists.

Leave a comment




Oilprice - The No. 1 Source for Oil & Energy News