In a recent EIA Short Term Energy Outlook, it was estimated that U.S. natural gas production in the Lower 48 states would grow by 5% in 2023, and by another 2% in 2024.
More natural gas is produced in Texas than any other state, according to the EIA. Most of its natural gas production comes from the Haynesville and Eagle Ford formations and multiple shale formations in the Permian Basin.
The Permian region, which spans western Texas and eastern New Mexico, currently accounts for a quarter of all marketed natural gas production in the Lower 48 states. Permian region gas production is forecast to increase by 11% in 2023 from year-earlier levels, and by another 6% in 2024.
Most natural gas production in the Permian region is associated with oil wells. Producers in the Permian region typically respond to changes in the crude oil price when planning their exploration and production activities, including when deciding whether to deploy drilling rigs or take rigs out of operation.
Advances in hydraulic fracturing and horizontal drilling techniques have improved U.S. O&G well productivity. The length of a well’s horizontal section, or lateral, which is a key factor in well-level productivity, has increased substantially for wells operating in the Permian region, from an average of less than 4,000 feet in 2010 to over 10,000 feet in 2022.
The EIA measures natural gas well productivity by monthly average output. In its first full month of operation, a well typically produces the most gas, followed by declining output in subsequent months.
Permian region wells that started operations to date in 2023 produced on average 1,849 mcf of natural gas during their first full month of operations. Average first month production for Permian region wells has risen in recent years, averaging 1,829 mcf in 2022 compared with 1,301 mcf in 2017.
To date in 2023, natural gas production had increased in the Permian region even as the rig count decreased. According to Baker Hughes, 322 active rigs were operating in the Permian region as of September, 31 fewer than at the start of the year.
As of August 2023, 70.7 gigawatts (GW) of gas-fired capacity were operating in Texas, and another 2.8 GW of capacity additions were planned to come online between 2022 and 2025. Growth in natural gas production in Texas has encouraged gasfired capacity additions and regional pipeline expansions to accommodate growing exports to Mexico, as well as record-high LNG exports from terminals in South Texas and Louisiana.
Year-to-date in October 2023, 10 gasfired power plants had come online in the U.S. with a total of 6.8 GW of electric generating capacity, according to the EIA.
By the end of 2023, it was expected that another six gas-fired power plants totaling 1.8 GW of capacity would come online, bringing total 2023 capacity additions to 8.6 GW. The additions include both combined-cycle gas turbine plants and simple-cycle gas turbine plants concentrated near the Gulf Coast and Appalachia gas producing regions and in Florida.
In 2022, a total of 11 natural gas-fired power plants came online, adding 5.6 GW of capacity. Total natural gas-fired capacity additions increased in both 2022 and 2023 after consecutive declines in the prior three years.
