Are the good times over for growth in U.S. shale gas?

Tue Mar 17, 2015 8:45am EDT
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By Scott DiSavino

(Reuters) - U.S. natural gas production could decline in 2016 for the first time in 10 years, driven by low oil prices after a decade of gangbusters growth from shale plays.

While most analysts forecast gas production will continue growing year-over-year, albeit at a slower pace, a couple of outlier analysts believe low oil and gas prices will prompt drillers to cut spending enough to reduce gas production next year.

Any talk of cutbacks is an early sign that low oil prices have slowed the U.S. shale gas boom that has revolutionized global markets and is expected to transform the nation into a net exporter of gas by the end of the decade.

U.S. gas production has increased every year from 51.9 billion cubic feet per day in 2005 to a record 74.4 bcfd in 2014, a 43 percent increase. The U.S. Energy Information Administration expects gas output to reach 78.4 bcfd in 2015 and 80.0 in 2016.

The lack of consensus among analysts shows how much still depends on what oil prices do in the coming months.

U.S. crude oil futures CLc1 fell about 60 percent from a high over $107 a barrel in June to a six-year low under $43 on Tuesday.

"It all depends on market prices. If we get higher gas and oil prices in the next three or four months than gas production won't decline next year," said Randall Collum, Managing Director, Supply Analytics, at energy data provider Genscape, which expects gas production to fall 1.1 bcfd next year.

Any pullback in gas production was considered unthinkable just six months ago.   Continued...

A demonstrator takes a photograph at the entrance to Chevron corporate headquarters in San Ramon, California May 29, 2013. REUTERS/Robert Galbraith