US natural gas drillers will increase output in 2025, reversing a year-long cut
The U.S. Natural Gas producers will increase output in 2025 after a series production cuts this past year. Rising demand from LNG export plants should raise prices, which had dropped to multi-decade lows. According to the latest U.S. Energy Information Administration outlook, U.S. natural gas production will decline in 2024, for the first drop since 2020 when the COVID epidemic reduced demand. After the average monthly spot price at the U.S. Henry hub benchmark, drillers started cutting back on gas production.
Analysts estimate that the rising demand for gas exports will increase average annual prices of gas by 40% in 2020 compared to 2024.
The EIA predicts that the average annual dry gas production in 2023 will drop from 103.8 billion cubic foot per day (bcfd), to 103.3 bcfd by 2024. However, it will rise to 104.5 bcfd by 2025.
The company expects that total gas demand including LNG and pipelines will increase from a record high of 109.9 Bcfd by 2023, to 111.2 Bcfd by 2024, and 113.0 Bcfd by 2025.
The majority of the expected increase in 2025 demand is due to an 14% increase in LNG exports. Domestic use, such as gas for power generation, will likely experience a decline.
Between 2019 and 2023, U.S. gas exports have increased by 34% on average per year. Domestic gas consumption has only increased by 2% annually. By the end of the year, two plants that are currently under construction will be in test mode. These include the first phase of Venture Global’s Plaquemines plant in Louisiana as well as the Stage 3 expansion of Cheniere Energy’s Corpus Christi facility.
WAITING FOR PRICES TO GO UP
In their earnings reports for the third quarter, the largest U.S. producers of gas said that they expected to increase output in the fourth and throughout 2025 in order to meet the growing demand from exports.
Bank of America analysts said that the expected start-up of Corpus Christi Stage 3 and Plaquemines Stage 3 will lead to higher flows in 2019. Analysts predict that the average annual Henry Hub Gas prices will jump from $2.29 per million British Thermal Units in 2024 to $3.27 in 2025. This is up from a low of $2.29 four years ago. Thomas Jorden told analysts that the combination of increasing LNG exports, an increase in electrical generation and the possibility of winter weather suggest a tighter natural gas supply-demand scenario for 2025 and beyond.
Jorden said, however, that Coterra will continue to reduce output until they see materially higher spot gas prices.
EQT, America's second largest gas producer, has increased its production guidance for the fourth quarter to 6.03-6.58 billion cubic feet of gas-equivalent per day (bcfed), an increase from previous guidance of 5.60-6.14 bcfed. This compares to actual production of 6.32 billion cubic feet equivalent per day (bcfed) in the third quarter.
"I expect the production to increase a bit by 2025," EQT's Chief Financial Officer Jeremy Knop said in an earnings conference call.
EOG Resources, one of the country's largest gas producers, anticipates that its U.S. output will rise from 1.745 billion cubic feet per day (bcfd) in the third quarter, to an estimated 1,800-1,850 bcfd during the fourth quarter.
This puts EOG on course to increase U.S. Gas output by approximately 11% in 2020, up from a yearly average of 1.551 Bcfd in the year 2023.
Expand Energy, which is the largest U.S. producer of gas following the merger between Chesapeake Energy & Southwestern Energy said that it could increase gas production to around 7 BCFED in 2025. This would be up from 6.75 BCFED in the third quarter 2024.
The market will determine whether Expand is able to produce this extra output by 2025.
Expand stated that it would prudently activate production if the market warranted. By 2024, Expand expects to have another 1.0 billion cubic feet per day of short-cycle capability - if necessary. (Reporting and editing by Scott DiSavino)
(source: Reuters)
