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Rate of U.S. Gas Production Decline Appears to Slow

The rate of decline in U.S. natural gas production appears to be slowing and may remain flat over the next one-to-two years, according to a review of state-by-state and offshore statistics.

Energy consultant Stephen A. Smith reviewed Department of Energy (DOE) total monthly dry gas production for the United States, including Alaska, for the latest "Monthly Energy Outlook" report. Using the first quarter statistics in 2001 and 2005 -- to remove seasonal effects that include hurricanes -- the U.S. gas production decline rate appeared to be 1.8% a year.

However, since 2003, Smith noted the rate of the gas production decline appears to be easing.

"This would be reasonable given the sharp increase in domestic gas drilling activity over the last three-to-four years," he said. And while the DOE's June and July daily gas production numbers look "surprisingly weak...we expect these numbers to be revised upward."

The DOE reported gas production in June is slightly above 50 Bcf/d; for July, it is slightly below 50 Bcf/d. A working hypothesis suggests actual daily gas production is likely to be in the 50-51 Bcf/d range, and "this range is likely to persist for the next one-to-two years (excluding hurricane effects)."

Aggregating DOE state-by-state production data into five production regions -- which accounts for about 92% of Lower 48 gas production -- Smith found gas production from the federal offshore "is declining at by far the fastest rate, and the impact of occasional hurricanes may be seen."

Between August 2002 and the end of April (45 months), the fastest growing gas producing region has been in the Rocky Mountains, specifically in Wyoming, Colorado and Utah, which "doubled production over the last eight years," from 6.6 Bcf/d to 8.6 Bcf/d (7.3%). In the Texas/New Mexico region, gas production in that 45-month period has grown from 18.4 Bcf/d to 19.5 Bcf/d, while in Oklahoma/Kansas, gas output rose slightly from 5.5 Bcf/d to 5.8 Bcf/d.

"Within Texas, the Barnett Shale play has been the dominant growth driver, but the Bossier and other plays have shown growth as well," Smith noted.

Meanwhile, Gulf of Mexico gas production has fallen the most, from 13.7 Bcf/d in August 2002 to 10.8 Bcf/d at the end of April (down 6.3%). Onshore along the Gulf Coast production has been "nearly flat," he said.

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