Page 9 - NorthAmOil Week 48 2020

NorthAmOil COMMENTARY NorthAmOil

Shale producers pivot towards gas

Certain major US shale producers are sharpening their focus on natural gas production

on a stronger outlook for gas prices while the country’s oil industry remains under

greater pressure

US US shale producers are reported to be turning hold 21 trillion cubic feet (595bn cubic metres)
their attention to natural gas amid projections of gas.
WHAT: that gas prices will rise higher than oil prices. These gas wells, targeting the Eagle Ford and
Several prolific shale This comes as OPEC meets this week, amid jit- Austin Chalk plays, are reported to be as prof-
producers are paying ters over the impact any rise in global production itable as the company’s best oil wells. EOG had
more attention to their could have on crude prices. drilled 17 wells in the Dorado play since the start
gas assets. Both US oil and gas rig counts have been ris- of 2019, and plans to continue its activity in the
ing over recent weeks after bottoming out over region. In its third-quarter earnings release, the
WHY: the summer. Country-wide gas rig counts are up company talked up its Eagle Ford and Austin
The outlook for gas prices 13% since July, and over that period the number Chalk properties, noting that rates of return
over the coming year is of active rigs has increased 25% in the Haynes- there were supported by “low cash operating
stronger than that for oil. ville shale and 8% in the Marcellus – both gas costs and proximity to several natural gas mar-
plays. kets with options for LNG and pipeline export
WHAT NEXT: Associated gas production also continues pricing”.
Even if oil prices rise, to come from regions rich in both oil and gas Also in November, Apache said it intended
shale producers are – notably the Permian Basin in Texas and New to complete three Texas wells after boosting its
expected to keep acting Mexico, as well as North Dakota’s Bakken play. third-quarter US gas production by 15% over
with restraint in terms of In particular, Permian Basin rig counts are up the second quarter and 6% over the same period
their crude production. to 160 from a low of 116 in August. Production of 2019. And Continental Resources recently
in such regions will continue to focus on oil and shifted drilling rigs to gas from oil in Oklahoma.
will be influenced by crude price movements,
but will keep contributing to overall US gas pro- Price boost
duction. However, various producers with both Part of the reason US gas prices are improv-
oil and gas acreage are showing signs of pivoting ing is that associated production of natural gas
to gas production. from oil-rich regions has fallen as shale drillers
scaled back activity earlier this year. Indeed, this
Oil to gas trend persists, with the US Energy Information
In November, EOG Resources, the US’ largest Administration (EIA) projecting in mid-No-
independent shale producer by market value, vember that nationwide gas production would
said that it would start selling gas from a handful fall again in both November and December.
of new wells next year from its newly discovered Across the leading shale regions, the agency
Dorado field in Texas. The find is estimated to anticipates both oil and gas output largely

Week 48 03•December•2020 www. NEWSBASE .com P9