U.S. Oil and Gas Industry is Investing and Increasing Production
Contrary to media reports and the Administration's war on fossil fuels
Much has been written lately about the U.S. energy industry’s refusal to comply with the Biden Administration’s admonitions to increase oil and gas production, for example, here, here, and here. The facts don’t support that narrative.
U.S. natural gas production is expected to reach its highest level ever by the year's end. Energy consulting firm Rystad Energy projects natural gas production exceeding 100 Bcfd (billion cubic feet per day) by year-end with continued growth in 2023.
Rystad expects production in the Haynesville and Appalachia shales and associated gas from the Permian Basin to be the drivers. This growth will maintain the U.S. as the world’s largest natural gas producer, a position it has held since 2011.
A lack of pipeline capacity has constrained natural gas production in many parts of the country, especially in the Appalachian area. Environmental groups have successfully blocked new pipelines, specifically the Mountain Valley Pipeline (MVP), which is key to increasing Appalachia's natural gas production. But with recent developments at the national policy level, this pipeline may finally be on track to completion.
The Washington D.C. drama over the last few weeks focused on Senator Joe Manchin as the lone Democrat vote holding up passage of the so-called “Inflation Reduction Act” until he got what he wanted for his state of West Virginia, which gained his support for the legislation. The bill passed and was signed by President Biden on August 16, 2022.
According to reports, Senator Joe Manchin was holding out for approval of the Mountain Valley Pipeline (MVP) running from northwestern West Virginia to southern Virginia, which he apparently secured before agreeing to vote for the bill. While there is still uncertainty about the timeline, it appears there is a path for the pipeline to move forward. Hopefully, the MVP will get built soon, and the development of the massive natural gas resources in the Appalachian area can continue.
Background
The history of U.S. shale development which propelled the U.S. to be the world leader in oil and natural gas production, is an astounding story. As late as 2008, it was still believed that the U.S. was running out of oil and gas. The first LNG (liquified natural gas) facilities were built to import natural gas because the U.S. was thought to have limited domestic supplies. By the time some of these import facilities were constructed, the “shale revolution” had revealed that the U.S. had vast natural gas reserves, and the existing LNG import facilities were converted to export facilities. Since then, many more LNG export facilities have been built and expanded.
The “shale revolution” was off and running around 2000 in North Texas, in the 5,000 square mile Barnett Shale formation around Fort Worth, Texas. The process of producing natural gas locked in shale rock, referred to as “fracking,” which is short for hydraulic fracturing, was perfected, allowing enormous quantities of natural gas to be produced from shale rock.
The technology quickly spread to other areas of the U.S., including the Haynesville Shale in east Texas and Western Louisiana, the Marcellus Shale in New York (which to this day does not allow gas drilling), Pennsylvania, West Virginia, and Ohio, plus dozens of other U.S. shales.
The Marcellus is the largest shale gas reserve in the U.S and the world. Initially, some thought that the estimates of its productive potential were overblown, but the Marcellus has far exceeded early expectations for its sheer size.
Current Situation
The graphic below shows the enormity of the most extensive U.S. shales relative to other countries' total natural gas production. Since 2011 since the U.S. overtook Russia as the largest natural gas producer in the world, U.S. production (yellow line) has increased while Russia’s (grey line) production has remained relatively flat.
Rystad noted: “When you compare these major basins to other players on the global stage, the scale of their contributions comes into focus. If it were a standalone country, the Appalachian basin would be the third largest gas producer globally, with 34 Bcfd, behind only the US – including Appalachia – and Russia. The Haynesville is expected to produce about 18 Bcfd, surpassing the total from major gas player Qatar and closing in on China and Canada.”
The statistics are clear. The U.S. has the natural resources to continue being the world’s largest natural gas and crude oil producing country, despite the continued efforts by the climate and renewable energy lobbies and the current administration to stop fossil fuel development and pipeline construction.
The most dangerous impediment facing the U.S. natural gas industries’ efforts to expand natural gas and crude oil production is the assault on the U.S. fossil fuel industry by the current administration in the name of a forced “energy transition” away from fossil fuels. The most critical challenges are the actual energy crises in the world, which include energy shortages caused by epic failures of wind and solar power in Europe and the need to replace Russian oil and gas to keep Europe from freezing to death this winter.
The U.S. is blessed with vast natural resources which can be used to help provide for the world's energy needs, but the current administration must cease its policy of destroying the oil and gas industry in the name of an “energy transition.” This includes abandoning the policies being implemented by the SEC to require public companies to adopt anti-fossil fuels ESG investing requirements.
The United States energy industry is the world's largest oil and gas producer, with sufficient resources to export to countries that need energy, but the current administration’s war on the American fossil fuel industry must stop.