Additional gas supply from U.S. shale plays made up most of America’s 5.5% increase in dry natural gas production, particularly in the Permian Basin with a 15% year-on-year increase, according to the International Energy Agency’s (IEA) Global Gas Security Review.

The review’s most salient point was a warning of possible gas price volatility if Russia squeezes off supply to Europe in the winter, but the review also detailed the American shale plays’ prominent roles in gas production.

The July 17 IEA review says the Permian Basin increases accounted for more than 35% of incremental gas output in the U.S., but in total, the Appalachian Basin is responsible for 30% of all U.S. gas production and the largest source of gas in the U.S. That hefty Appalachian share contracted just a bit—0.5% year-on-year in the first half of 2023.

The review put the Haynesville shale gas play as the second largest source of incremental gas in the U.S. in the first six months of 2023. The shale gas play located in northeastern Texas and western Louisiana boosted dry gas output by nearly 20% compared to the previous year. The May 2023 completion of the Acadian Haynesville Extension pipeline added 4 Bcm/year of exit capacity from the Haynesville play to the Gulf Coast.

U.S. Natural gas production
(Source: IEA)

Steady drilling activity supported the production increases with an average of 471 new wells drilled each month in the first quarter of 2023. Well completions increased more than 15% year-on-year, the review said.

The review revised down the IEA’s medium-to-long-term natural gas demand, but it also illustrated a precarious situation in Europe, stating that the EU’s likelihood of reaching 95% of working gas storage capacity is no guarantee of protection against volatility in the winter. A cold winter and a halt of Russian piped gas “could easily renew price volatility and market tensions.”

The review correctly states that the EU is exposed to spot market increases, but the situation is even worse than the review depicts if more long-term contracts are not signed, Steven R. Miles said, the Fellow of Global Natural Gas at the Baker Institute of Energy Studies at Rice University.

“Europe is by our calculation relying on uncontracted LNG for almost 150 billion cubic meters annually. As the IEA notes, an additional 150 Bcm/annually of firm gas contracts will be expiring in the next few years, leaving the EU heavily exposed to the LNG spot market if those contracts are not renewed and other long-term contracts for new volumes signed,” Miles said.

“Even assuming supplies will always be available," Miles added, "an EU energy policy based on a spot market premise of ‘we will outbid everyone for whatever we need’ can lead to exorbitant prices, social disruption when governments sacrifice social programs for energy and energy poverty for all but the richest energy blocks in Europe and North Asia. The IEA leaves these uncomfortable truths out of its report.”

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