However, contributing to this glut was the large amount of solution gas coming from oil wells being drilled. For example the Bakken oil formation in North Dakota alone added 0.6 bcf/d, and in 2014 added another 0.8 bcf/d. And that was from a single oil-dominant formation; many US shale oil fields produced significant additional solution gas. The same held true for natural gas liquids; liquids-rich shale gas production took off because producers could, a few years ago, make good money selling the liquids even if the gas was dumped as a waste product. So natural gas production increases also include gas as a byproduct, which means that pure shale gas production didn’t really add much more than offsetting natural declines.
While that’s an ugly barrage of statistics, it’s useful to look at those numbers to see if there is any reason to believe 90 gas rigs can maintain production, particularly with few oil rigs adding new solution gas.
The answer is: highly unlikely. Oil companies can’t make money drilling for oil or liquids, so that source of gas growth has been cut off. It is true that natural gas production has remained high, however that can be largely attributed to the completion of wells that had been previously drilled. This phenomenon massively distorts production statistics because what is reported is drilling rig activity and production. Even if only one rig was in operation all year, a significant amount of production would be brought on stream by completing this inventory. Energy-illiterate news publications would completely miss the point, marveling at the unbelievable productivity gains that must be occurring from that single rig.
At some point though, the various factors will catch up. The uncompleted inventory is being drawn down, solution gas production is dwindling along with oil well drilling and so few rigs are drilling for gas that we don’t even hear about flaming faucets anymore. It is true that well productivity has increased due to much longer laterals and more frack stages, however, this is a very short term solution that maximizes initial production at the expense of long term recoveries. At some point in the near future natural gas production could very well fall off a cliff.
For natural gas and oil, we have been talking about the big picture. Life after the bust. There is a sense that this time is different than other bust cycles and prices will stay low forever. Of course, if history is any guide the time is now to start positioning for the next boom.