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Crude prices and well productivity to drive US gas production

Oil Gas

The combination of relatively high prices for crude oil and improved well productivity in the Permian Basin is to drive further growth of the natural gas produced in the US.

According to the US Energy Information Administration’s (EIA) most recent Short-Term Energy Outlook, the natural gas produced and marketed in the Lower 48 states, which excludes Alaska and Hawaii, will increase by 5% this year and a further 2% next year. The EIA says that around one quarter of this natural gas comes from the Permian region alone, and this is expected to grow by 11% and 6% this year and next, respectively.

Horizontal drilling and hydraulic fracturing techniques have also evolved and increased the productivity of Permian, as explained by the EIA:

“The length of a well’s horizontal section, or lateral, which is a key factor in well-level productivity, has increased substantially for wells operating in the Permian region, from an average of less than 4,000 feet in 2010 to over 10,000 feet in 2022.”

Also driving the increase is the fact that the majority of natural gas production in the Permian comes from oil wells. This means that operators like ExxonMobil and Chevron, the makers of the Mobil and Texaco lubricant and coolant brands, base their production plans on oil rather than gas prices.

With the EIA expecting the price of West Texaco Intermediate to average $83.22 per barrel next year, they are highly motivated to deploy more drilling rigs to increase crude oil production and consequently the associated natural gas production.

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