High Permian well productivity, crude oil prices drive U.S. natural gas production growth

The Energy Information Administration estimate that U.S. marketed natural gas production in the Lower 48 states (L48) will grow by 5% (5 billion ft3/d) in 2023 and 2% (1.8 ft3/d) in 2024 in their latest Short-Term Energy Outlook. Most of the forecast growth comes from the Permian region, where it is expected that improved well-level productivity and higher crude oil prices will spur drilling activity that will increase natural gas production.

The Permian region, which spans western Texas and eastern New Mexico, currently accounts for a quarter of all marketed natural gas production in the L48. The eia forecast Permian region natural gas production will increase by 11% in 2023 and 6% in 2024.

Most of the natural gas production in the Permian region is associated natural gas production from oil wells. As a result, producers in the Permian region typically respond to changes in the crude oil price when planning their exploration and production activities, including when deciding whether to deploy drilling rigs or take rigs out of operation.

Advances in hydraulic fracturing and horizontal drilling techniques have improved U.S. oil and natural gas well productivity. The length of a well’s horizontal section, or lateral, which is a key factor in well-level productivity, has increased substantially for wells operating in the Permian region, from an average of less than 4000 ft in 2010 to over 10 000 ft in 2022.

Natural gas well productivity is measured by a well’s monthly average natural gas output. In its first full month of operation, a well typically produces the most natural gas, followed by declining output in subsequent months. Permian region wells that have started operations so far in 2023 have produced on average 1849 million ft3 of natural gas during their first full month of operations. Average first month production for Permian region wells has risen in recent years, averaging 1829 ft3 in 2022 compared with 1301ft3 in 2017.

So far in 2023, natural gas production has increased in the Permian region even as the rig count has decreased. According to Baker Hughes, 322 active rigs were operating in the Permian region as of September 15, 31 fewer than at the start of the year.

The eia forecast the price of West Texas Intermediate crude oil will increase in 2024, averaging US$83.22 per barrel compared with US$79.65 per barrel in 2023, partly because of Saudi Arabia’s extended crude oil production cuts. The eia expect that the higher crude oil prices will incentivise operators to produce more oil and, as a result, more natural gas in the Permian region.

Read the article online at: https://www.oilfieldtechnology.com/drilling-and-production/19102023/high-permian-well-productivity-crude-oil-prices-drive-us-natural-gas-production-growth/