US natural gas production on track to top 2011 record in 2012

Source: The State Journal

Despite low prices, U.S. natural gas producers are on track in 2012 to top their record 2011 production.

Gas produced in the first six months of 2012 came to 11.9 trillion cubic feet, or tcf, compared with 11.2 tcf in the first six months of 2011, according to the U.S. Energy Information Administration.

Total production in 2011 of 23 tcf exceeded 2010 production by 7.8 percent and topped the previous record, set in 1973, of 21.7 tcf.

Volume has been higher in every month of 2012 compared with 2011. The monthly average for January through June 2012 was 1.98 tcf, compared with the 2011 average of 1.92 tcf — putting the industry on track to produce 23.8 tcf this year.

Daily production has topped 65 billion cubic feet per day, or bcfd, this year, compared with 63 bcfd in 2011.

Prices dipped to a decade low below $2 per million British thermal units in April and, at under $3, remain low.

But industry executives have explained to The State Journal in the past that leases typically are constructed with five-year expirations, putting time pressure on producers and creating a long lag in price responsiveness. Contracts for the use of drilling rigs, often set up on an annual basis, also make nimble response to low prices difficult.

The industry is working to increase demand by promoting gas-fired power generation, compressed natural gas as a transportation fuel and gas rather than heating oil for home heating, as well as exports of liquefied natural gas.

All of those markets take time to develop and are subject to economic drivers beyond expectations about the price of gas.