While events in energy markets in 2009 did not resemble the roller-coaster ride of 2008, technological innovations that opened the floodgates for gas production out of shale plays changed the paradigm for the gas market, according to a state of the markets report issued Thursday by FERC’s Division of Energy Market Oversight.

“Even as prices and drilling were dropping from record highs, domestic gas production remained strong” in 2009, thanks to the innovations in shale production, according to the Federal Energy Regulatory Commission (FERC) report.

“Production from these new sources is also creating a subtle shift in the market as supply activity increases onshore in northern Texas and Louisiana at places such as near Perryville…and decreases in and around the Gulf at places such as Henry Hub.”

Innovations have also shortened the average time to drill from “several months” in the recent past to about 20 days in 2009, and have made production “almost certain before drilling begins,” according to the report.

Well efficiency increases as producers learn the particular nuances of individual shale plays, and the very nature of the plays provides stability to the market, FERC said in the report.

“Because shale production has many of the characteristics of gas in storage, companies have greater flexibility to produce gas when the market calls for it. Production can be deferred without risking the integrity of the well. Ending long production lead times and the risk of failure or loss may dramatically temper the gas market’s systemic boom-and-bust cycle.”

The large increase in supply last year “is almost entirely due to improvements in our ability to produce gas from shale with certainty and control,” advances that may be reducing the cyclical nature of the natural gas market, the report said. At the same time, new market area liquefied natural gas (LNG) import capacity appears to have reduced winter price volatility in New England.

On days nearing all-time natural gas demand peaks in the Northeast this winter, the Northeast Gateway LNG terminal in Massachusetts Bay, the Canaport LNG terminal in New Brunswick, the Neptune LNG terminal off the northern coast of Massachusetts and the Everett LNG terminal near Boston accounted for half of New England’s gas supplies, FERC said.

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