Despite lower prices at Henry Hub, dry gas output stayed elevated through 2023 amid rising supply from the Permian Basin, where natural gas is produced as a by-product from oil wells. US government analysts anticipate a continuous rise in oil-drilling as the Brent prices are likely to average $93 per barrel during Q423, up from just $86/bbl in August.
Dry gas production averaged more than 102 billion cubic feet per day in the first half of 2023, a 6 Bcf/d increase compared with the same period in 2022 – even though the US benchmark Henry Hub spot gas price averaged just $2.42/MMBtu the first half of 2023, compared with $6.42/MMBtu in the previous year.
Rising volumes of associated gas from the Permian will, however, be eventually offset by some small production declines in other large producing regions, the US Energy Information Administration (EIA) reckons, suggesting dry natural gas production will average about 104 Bcf/d through the end of the forecast period in 2024.
Gas surge in Q4-24
Analysts expect a surge in gas production in the fourth quarter of 2024 as new pipeline capacity comes into operation and demand for LNG feed gas increases as developers prepare for two new export facilities to come online. Looking ahead, the EIA anticipates US LNG exports to rise from 12 Bcm this year to around 13.3 Bcf/d in 2024 as the Golden Pass and Plaquemines liquefaction terminals start operation.
Europe’s assumed ongoing need to replace Russian pipeline gas deliveries with LNG supports a growing number of cargoes shipped across the Atlantic. “Limited growth in global LNG export capacity in the next two years may [well] increase the need for destination-flexible LNG supplies, mainly from the United States,” analysts reckon.
Heatwave limits LNG sendout
Natural gas delivered by pipeline to US LNG export plants, so-called feed-gas, has averaged 12.8 Bcf/d in the first six months of 2023, some 8 percent higher than last year’s average. Freeport LNG terminal’s return to service, and Europe’s demand for US LNG, pushed feed-gas to 14 Bcf/d in April. But a heatwave in southcentral United States during July and August limited the utilisation of LNG export capacity along the US Gulf Coast.
Modelling by the EIA shows that higher temperatures lowered LNG feedgas volumes by 0.3 bcf/d over the past two months.
The hot weather also raised electricity generation by 2 percent during the third quarter. Gas-fuelled power plants are expected to generate a record of more than 1,700 billion kilowatt-hours (kWh) in 2023, an increase of 7 percent from the previous year. The rise stems from a substantial declined in fuel costs, down more than 50 percent from last year’s level to currently just $3.30/MMBtu.
