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What Is Leading To Lower Natural Gas Production Despite Higher Demand?

Although many countries are looking for new suppliers to help break their dependence on Russian gas after the Ukraine-Russia conflict, U.S. natural gas production growth is decreasing.

Benzinga · 05/02/2022 07:11

Although many countries are looking for new suppliers to help break their dependence on Russian gas after the Ukraine-Russia conflict, U.S. natural gas production growth is decreasing.

The U.S. is already the world's largest producer of natural gas. But the two mainstays of production - the Appalachian region and West Texas - are seeing growth slow. The companies blame the lack of adequate pipeline infrastructure, despite prices near 14-year highs, writes Reuters.

In Appalachia, growth has slowed, which supplied about 37% of U.S. gas in 2021. It has become increasingly difficult for energy firms to build new pipes.

Also Read: US Refiners Expect Robust Q1 Performance On Fuel Price Surge: Reuters.

With pipelines in the Permian Shale filling quickly, analysts said production growth in that Texas-New Mexico basin could slow significantly next year unless firms start building new pipelines soon. 

The largest European economies import about 18.3 billion cubic feet per day (bcfd) from Russia. The U.S. currently can export about 9.8 bcfd as LNG. 

Several companies are looking to boost exports, but substantial new LNG export capacity is not expected for at least two years.

Pipeline construction has slowed, and output growth dropped to an average of 4% in 2020 and 2021.

Appalachia "is nearing takeaway capacity limits," said analysts at Bank of America, who estimated there would be "little to no production growth" until new pipes enter service. 

The Atlantic Coast pipeline was canceled in 2020 after costs rose from $6.0-$6.5 billion to $8 billion.

Equitrans Midstream Corp's (NYSE:ETRN) $6.2 billion Mountain Valley line has not been completed due to ongoing lawsuits. 

Several energy companies are interested in building new pipes in the Permian, including units of Enterprise Products Partners LP (NYSE:EPD), Kinder Morgan Inc (NYSE:KMI), and Energy Transfer (NYSE:ET).

Photo by Anita Starzycka via Pixabay