American Oil and Gas Reporter - December 2022 - 45

in the power generation mix, with 55 gigawatts
of new natural gas and renewable
resource capacity expected to enter service.
These changes make additional natural
gas pipeline takeaway capacity even more
imperative so that quick-ramping natural
gas can be available to provide balance
and reliability to the power grid.
Supply Growth Expected
Although higher overall market prices
for both oil and natural should incentivize
more domestic drilling, limited takeaway
capacity, increased price volatility, the
ongoing conflict in Europe, and uncertainty
around permitting processes and how environmental,
social and governance concerns
will be factored into future investments
are clouding the long-term supply
potential. Therefore, moderate near-term
production growth is expected as North
American producers stick to financial
discipline to avoid overinvestment.
While stronger prices are likely to
incentivize new well drilling in the short
term, the ability to bring production on
quickly is somewhat limited by the
steady decline of the number of drilled,
but uncompleted wells in inventory. The
number of DUCs has been falling at a
4% monthly rate since April 2021, incentivizing
the new drilling necessary
to maintain or expand current output.
The decline in the DUC inventory is yet
another indicator of increased natural
gas activity (Figure 3).
U.S. gas-weighted producers are forecast
to increase capital expenditures by
30% in 2022 while oil-focused producers
are expected to raise spending by 17%.
However, with inflation and the ongoing
decline in DUCs, capital spending may
support only moderate production
growth-albeit at levels sufficient to support
record production volumes.
The development of takeaway capacity
also plays a role in investment levels.
The certification of new gas projects, including
pipelines and LNG terminals,
will be subject to greater scrutiny if the
Federal Energy Regulatory Commission
finalizes its certificate and greenhouse
gas emissions policy statements in its
current problematic forms that require
the consideration of difficult-to-quantify
indirect and cumulative GHG emissions.
The 2 Bcf/d Mountain Valley Pipeline,
already 94% complete, faced increased
regulatory challenges after the federal
court revoked a key permit in early 2022.
Because of the delay, Northeast customers
will not benefit from the cost reductions
associated with MVP this winter. The
mid-term Northeast gas production outlook
will largely hinge on the completion of
this project.
Robust production growth in the Permian
will also test the takeaway capacity
limit in the next two years. Major pipelines
Agua Blanca (1.8 Bcf/d), Gulf Coast
FIGURE 2
Gas Production Change by Basin (Summer 2022 versus 2021)
Bcf/d
4.00
3.50
3.00
2.50
2.00
1.50
1.00
0.50
0.00
(0.50)
(1.00)
Nonassociated
Gas Production
Growth:
1.31 Bcf/d
Associated
Gas Production
Growth:
3.39 Bcf/d
Source: EIA, Energy Ventures Analysis
FIGURE 3
DUC inventory versus Rig Count
DUC Inventory
.0000
9,000
8,000
7,000
6,000
5,000
4,000
3,000
2,000
1,000
Rig Count
900
800
700
600
500
400
300
200
100
Anadarko
Bakken
Haynesville
Permian
Appalachia
Eagle Ford
Niobrara
Total Rig Count
DECEMBER 2022 45
Jan-20
Apr-20
Jul-20
Oct-20
Marcellus
Utica
Haynesville
Permian
Jan-21
Eagle Ford
Apr-21
Jul-21
Oct-21
Jan-22
Apr-22
Bakken
Anadarko
Niobrara
Others
Lower 48
American Oil and Gas Reporter - December 2022

Table of Contents for the Digital Edition of American Oil and Gas Reporter - December 2022
