Is U.S. natural gas production really going up, or is it flat or down, compared to 2008 and 2009 data? That’s been the key question this year for producers, traders, speculators and end-users. With the lag in drilling last year, the sharp decline curves in the shale plays, and the overhang of uncompleted shale wells in second-half 2009, many people find it difficult to say.
Many analysts thought that production would start to decrease this year, thereby enabling prices to rise later in 2010.
The supply picture is cloudy due to many factors—but that may be about to change for the better.
Pending revisions to supply data, as compiled by the Department of Energy’s monthly EIA-914 production report, “cast uncertainty on a primary source” for gas supply data that affects gas markets, says Barclays analyst James Crandell in a recent report.
The EIA’s data has increasingly come into question, especially now that fast-paced drilling in shale plays is adding significantly to U.S. supply. But on April 29, EIA is expected to announce a revised methodology. The agency also says it will release revised monthly production data for all of 2009.
“We examine other sources of production data for comparison, including government sources and commercial vendors,” Crandell says in his weekly natural gas report. “Typically, they rely either on state-administered surveys in which data are reported with a lag, or on pipeline informational postings. Data tend to converge between methods with enough time lag, but incomplete reporting afflicts recent months and makes comparisons between methods another ‘estimation’ process.”
Crandell says EIA-914 data tend to be best for states where survey coverage is high. “We expect data revisions to be focused in a few states, namely Texas and Louisiana, where the industry composition has changed drastically since the survey was instituted.”
Meanwhile, the horizontal gas rig count is now higher than it was during the last peak in 2008.
--Leslie Haines