As Rig Counts Fall and Production Rises

The Appalachian region’s natural gas production is rising, even as well counts fall. Production has risen year over year in Appalachia since the 2010-11 start of the Marcellus Shale boom. However, although natural gas production rises and falls periodically, the number of rigs in the region has ultimately fallen over the same time period.

Rig counts for 2020 are up slightly from 2019, with just over 60 in the region. Though there is a slight upward trend this year, the tendency is that rig count numbers have consistently fallen since 2012. The U.S. Energy Information Administration’s 2020 outlook indicates that an increase in the US's production and consumption of natural gas will continue throughout 2020. Although rig counts have fallen over all, the Administration estimates indicate that production will increase in 2020 by 2.9 percent, averaging 94.7 billion cubic feet per day (Bcf/d). This relation clearly shows that low rig counts do not imply low production. Advancements in drilling technology has streamlined the drilling and extraction process, making for a more efficient system.

The gas that the US is producing is being used. The EIA forecasts a 1.7 percent rise in domestic consumption for 2020, with the natural gas power generation sector leading consumption. Natural gas-fired power plants consumed 31.0 Bcf/d in 2019, a 7 percent bump from 2018. This is attributed to the creation of new gas-fired plants, retrofitting of former coal-fired plants to gas, and low gas prices pushing out other fuel sources such as coal. This rise will likely be short lived, as EIA estimates a slowdown of consumption for electrical generation in 2020, only increasing by 1.3 percent, and falling by 3.2 percent in 2021 as gas will have to compete with renewables.

Nationally, use of natural gas is rising. Total consumption of gas climbed from 82.4 bcf/d in 2018 to 85.28 bcf/d in 2019, and is expected to continue to rise in 2020. The year 2021 is being projected as the year of natural gas slowdown. However, demand for electricity continues to grow, as it has been consistently since 1950, the nation will need to supplement the bandwidth of renewable energy with an alternative fuel source, of which natural gas would be a prime choice.

Though gas is slowing down nationally and regionally, Appalachia should not write off the fuel just yet. Even if the US moves to wean itself off of fossil fuels, a position that many legislators and presidential hopefuls have added to their platform, the nation’s petrochemical and energy exporting sectors are growing and could be the gas market’s biggest buyers in coming years.