Higher relative cost to produce natural gas from the Haynesville region has led to a gradual decrease in shale gas production over the past five years. The Haynesville formation lies at a greater depth than Marcellus, so drilling costs are significantly more expensive. This caused a sharp drop in monthly dry gas production from a peak at 7.4 billion cubic feet per day (Bcf/d) in January 2012 to less than half that level by early 2016, according to EIA figures. Output rebounded since then to 6.4 Bcf/d in June 2018.
The Haynesville formation in 2017 was the third-largest producer of shale gas after the Appalachian production region – mainly in Pennsylvania, West Virginia, and Ohio – and the Permian production region in Texas and New Mexico.
Geographically speaking, the Haynesville formation lies at depths of 10,500 feet to 13,500 feet, much deeper than the Marcellus, which is 4,000 to 8,500 feet deep. Drilling in the Haynesville shale generally more expensive than in other shale plays which makes production more dependent on the price of natural gas.
Rig count follows Henry Hub price
Higher gas prices at the U.S. benchmark Henry Hub makes it more economical for producers to spend the additional cost associated with drilling deeper to extract gas from the Haynesville formation. In 2010, when the Henry Hub price averaged $4.50 per million British thermal units (MMBtu), 223 rigs were operating in the Haynesville.
As the Henry Hub price dropped, the rig count followed, ultimately reaching a low of 20 rigs in operation in mid-2016. Since then, the Henry Hub price has increased, recently surpassing $2.00/MMBtu, and the Haynesville rig count has steadily increased to average at least 50 rigs operating in each month so far in 2018.
Well productivity keeps rising
A higher well productivity is another factor that contributed to the rise in production as the lateral length and initial production rate of each well have increased. Average lateral lengths per well have increased from 4,269 feet to 6,421 feet in the years between 2010 and 2017, according to EIA calculations, based on DrillingInfo data.
Consequently, the initial productivity rate in the Haynesville region – calculated as the initial three-month cumulative production per well – has nearly doubled from 2010 to 2017, increasing from 589 million cubic feet (MMcf) per well to 1,176 MMcf/well.
Analysts expect productivity gains will gather pace as producers optimize the gas recovery rate from the Haynesville formation.