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60% of North American Dry Gas Seen Coming From Shales by 2022

North American shale natural gas production will grow to 64 Bcf/d by 2022, led by the Marcellus Shale, which will be responsible for 17 Bcf/d of that total, and maybe more, according to a new analysis by Ziff Energy.

The consultancy, a division of Solomon Associates, has compiled its latest production outlook for shale gas by basin. By 2022, more than 60% of North American dry gas production will be coming from the shales, Simon Mauger, Ziff director of gas supply and economics and lead author of the report, told NGI's Shale Daily. Currently, shale output accounts for about 30 Bcf/d of an 80 Bcf/d market, Mauger said.

"The gas is there, and we certainly have an excellent opportunity to reach 17 Bcf/d from the Marcellus. And it's not impossible we'll reach that number a lot sooner than 2022," he said.

"Essentially, shale gas production over these nine years is going to double, more than double. The biggest [gainer] is going to be the Marcellus and then followed by the Eagle Ford (including associated gas), and then next is the Haynesville, and the Utica. We have a huge percentage growth from the Utica but a relatively small volume at this point. However, that's one where we could see significantly more gas production down the road.

"Obviously, people are focusing at the moment on the condensate and liquids-rich window, so the amount of gas coming out isn't going to be that high from that particular window. But when they move down into the dry gas, we'll see bigger volumes out of that play as that evolves. We're looking at almost 6 Bcf/d from there."

Legacy dry gas shale plays Barnett and Haynesville will essentially hold their own, according to Ziff. "The Haynesville, from where we're producing today, we're expecting to see a little bit more decline before gas prices rise to the point where that one becomes highly active," Mauger said.

Price assumptions used for the analysis are "not far off" from where prices are today, he said. Prices in the high $4s to low $5s that look as if they're going to stick around for a while will support the production envisioned by Ziff, Mauger said.

This year in the Marcellus the production growth story will be driven by the connection of inventoried wells in the play. "That's cheap gas; it's easy to bring on quickly as soon as the infrastructure is connected. We're seeing big jumps in that taking place this year," Mauger said.

As 2022 draws nearer, the production growth rate is expected by Ziff to slow; however in the middle years between now and then production growth is expected to be "quite strong, not perhaps as much as the 2009-2012 period where we saw just explosive growth, but still just a huge increase to get to that doubling [of shale gas production]," Mauger told NGI's Shale Daily.

On the demand side, liquefied natural gas exports are expected to relieve some of the supply pressures. Ziff thinks North American (United States and Canada) exports will amount to about 8 Bcf/d in 2022. Population growth will drive demand on in the residential/commercial sector, Mauger said.

"As we look at industrial, it's very much price and the biggest growth component in industrial is still going to be the Alberta oilsands," he said. "However, we are seeing a good bit of pickup in the industrial side." Process gas demand growth will continue as projects come online that use gas as a feedstock, he said.

Mauger said there will be periods of imbalance in the market. For instance, when LNG export plants come online, they'll take a slug of gas out of the market almost instantaneously. "...[T]he gas is generally just going to keep on going to the plants, so there's going to be an incremental point demand increase each time one of these plants comes on stream. And that can cause relatively short-term impacts on the market," he said.

But the gas will be there to meet the demand, according to Ziff.

"We've heard a lot of negative comments about shale gas over the last few years: The wells are in steep decline; they’re not going to last, etc., etc." But I think the proof is really there in what we're seeing today, that about close to 40% of the market is being met by shale gas today," Mauger said. "Shale gas is real. It's there. It's here to stay."

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