Austin, Texas (February 9, 2021) — As the Northeastern U.S. emerges from yet another headline-making snowstorm, Enverus, the leading energy SaaS company, released its latest FundamentalEdge report. Appalachia’s Capacity Conundrum focuses on natural gas production in Appalachia and what seems to be never-ending takeaway capacity challenges and what that could mean for one of America’s most prolific gas basins.
Much of Enverus’ latest report centers on the Keystone State, Pennsylvania. While production has climbed and efficiencies have seen gains in the northeast portion of the state, over the past few years, the region’s growth potential is capped by pipeline takeaway capacity. Efforts to take additional northeastern Pennsylvania gas out of the region have faced significant regulatory and legal challenges.
“For years, natural gas operators in Appalachia have been forced to survive a low-price environment and pipeline bottlenecks, and then the COVID-19 pandemic hit further complicating the energy markets. What’s clear now is that as crude oil prices suffered, natural gas prevailed just in time for winter demand. But if you can’t reliably deliver due to capacity constraints then that changes the road ahead — it’s like driving with one foot on the gas pedal and the other foot on the brake,” said Rob McBride, senior director of Strategic Analytics at Enverus. “And that somewhat clouds the basin’s future.”
Key takeaways from the report:
- Natural gas production in the Appalachia has been volatile over the past year as the COVID-19 pandemic took hold of the world. Shut-ins happened mid-year, similar to other plays, and were brought back online throughout the summer. However, as shoulder season arrived, shut-ins returned to Appalachia operators opted to wait for winter weather and potentially higher prices.
- A large portion of Appalachian gas is produced in three subplays: Core NE PA Dry Gas, Tier 1 NE PA Dry Gas, and Utica South Dry Gas East. These three subplays make up ~44% of Appalachian gas produced from January through September 2020. It’s no surprise that these areas boast some of the best breakevens in the basin.
- Northeast Pennsylvania is one of the premier dry gas plays not only in the Appalachian basin, but the entire country. The area produced more than 10% of total Lower48 dry gas production through the first three quarters of 2020. Increased lateral lengths, proppant, and fluid intensities have all contributed to the efficiency gains of the past five years.
- Despite its attractiveness, Northeast Pennsylvania remains challenged by takeaway capacity. Therefore, Enverus forecasts growth in this basin to be limited to available takeaway capacity at ~12 Bcf/d. Further expansion would be necessary to support additional production.
- Enverus expects additional growth will more likely come from dry gas portions of the Utica as well as wet gas areas of West Virginia.
- The 2 Bcf/d greenfield Mountain Valley Pipeline (MVP) continues to face regulatory hurdles but is still expected online for 2021/2022 heating season. This will provide service to growing Mid-Atlantic markets. Even with MVP, the basin is facing bottlenecks as early as 2023 absent additional expansions.
Enverus is the leading energy SaaS company delivering highly-technical insights and predictive/prescriptive analytics that empower customers to make decisions that increase profit. Enverus’ innovative technologies drive production and investment strategies, enable best practices for energy and commodity trading and risk management, and reduce costs through automated processes across critical business functions. Enverus is a strategic partner to more than 6,000 customers in 50 countries. Enverus is a portfolio company of Genstar Capital. Learn more at Enverus.com.