The lower price of natural gas seems to be finally taking its toll on the production this year. Though the natural gas price has rallied more than 120 percent from the bottom, it declined to $1.6 per MMBtu this year, which is the all-time low. While the production remained resilient through 2015, despite declining prices, the production in 2016 has declined from 75 billion cubic feet in April to 71.4 billion cubic feet in July. The latest slowdown in the production could largely be attributed to the slowdown in the robust production growth that was triggered by fracking, a technology that helps to extract oil and gas using a mix of water and chemicals, which were previously deemed inaccessible. While fracking led production boom slows down, the productions from the more traditional wells have also been declining.
To give example,
- Before fracking technology in 2006, Arkansas used to produce around 21 billion cubic feet of gas per month but that production reached 95 billion cubic feet in 2012, almost a 500 percent rise.
- In 2006, Pennsylvania was producing just 14 billion cubic feet of gas per month but that figure rose to 452 billion cubic feet March this year, but since then to September, production declined to 418 billion cubic feet.
- West Virginia natural gas production 30 billion cubic feet per month in 2011 to 110 billion cubic feet in April last year, but since then the production has become stagnant.
- Production in Louisiana rose from just 88 billion cubic feet in 2008 to 276 billion cubic feet in 2012. But since then, it has declined to just 140 billion cubic feet this year.
While the production may not decline, the robust growth in the production could easily be a thing of the past.
At the same time, the productions from traditional states are declining too.
- The production from the Gulf of Mexico declined from 457 billion cubic feet per month to just 96 billion cubic feet as of this year.
- Texas production has declined by more than 100 billion cubic feet since 2015.
We remain bullish on natural gas over the long-term and we expect demand to grow faster than the declining production.
