AN ARTICLE ON NATURAL GAS. Author: Matthew DiLallo | May 08, 2018 – The Motley Fool
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The United States produced more natural gas last year than any other country in the world at 28.8 trillion cubic feet(Tcf). To put that into perspective, picture a passageway measuring 30 feet high and 30 feet wide that stretches around the world three times. Fill it with natural gas, and that would represent 1 trillion cubic feet. Now multiply that by about 29, and you’d have approximately the amount of cleaner-burning natural gas produced by the country last year, which was enough to meet our entire demand (27 Tcf) with room to spare, enabling the U.S. to export the excess.
What’s remarkable about this vast output is that only 15 states contributed 94% of the total, while the Gulf of Mexico added another 4% or so. Here’s a look at the country’s top gas-producing states.
1. Texas–6.8 trillion cubic feet (23.7%of the total)
They say everything is bigger in Texas, and that’s certainly true of the Lonestar State’s energy production, as it leads the country in the production of both oil and natural gas. The state gets the bulk of those hydrocarbons from three shale plays: The Eagle Ford, Barnett, and Permian Basin. While the Eagle Ford tends to be oilier, while the Barnett is mostly gassy, the Permian Basin produces both in spades. Given Texas’ vast energy riches, hundreds of companies produce oil and gas in the state, though the biggest gas-producer by far is oil giant ExxonMobil(NYSE:XOM), which contributed 10% of Texas’ total in 2017 via its subsidiary XTO Energy.
2. Pennsylvania–5.5 trillion cubic feet(19%of the total)
The state of Pennsylvania produces enough natural gas each year to meet the country’s entire residential demand, which was 4.4 Tcf in 2017. Most of that gas comes from the Marcellus and Utica shale plays, which hold some of the largest gas reserves in the world. According to an estimate, the state has at least 62.7 trillion cubic feet of recoverable gas left in reserve, though drillers continue discovering more of it each year. One of the leaders in producing gas in the state is EQT Corp(NYSE:EQT), which vaulted to the top not only in Pennsylvania but the U.S. after buying fellow Pennsylvania-based producer Rice Energy last year.
3. Oklahoma–2.5 trillion(8.7%of the total)
The Sooner State is home to 14 of the 100 largest natural gas fields in the country, the biggest of which is the Hugoton that covers much of the panhandle region as well as parts of Texas and Kansas. However, an increasingly important source of natural gas, as well as oil, comes from the STACK and SCOOP, which are fast-growing, multi-layered shale plays. Among the companies leading the development of these emerging shale resources is Devon Energy(NYSE:DVN), which controls an industry leading acreage position that provides it with multi-decade growth potential.
4. Louisiana — 2.1 trillion (7.4% of the total)
The state of Louisiana is an important one to the natural gas industry. Not only is it a top-five producer that holds roughly 5% of the country’s remaining natural gas reserves thanks in part to the Hayneville Shale, but it’s a significant consumer of the cleaner-burning fuel. Overall, Louisiana uses 90% of the gas it produces, mainly in the industrial sector. Meanwhile, Cheniere Energy (NYSEMKT: LNG) recently opened the Sabine Pass liquefaction plant in the state to liquefy natural gas and export it to global markets.
5. Ohio — 1.8 trillion cubic feet (6.2% of the total)
Ohio’s natural gas output has skyrocketed over the past several years, going from less than 0.3% of the nation’s total in 2011 to more than 6% in 2017. Fueling that rapid rise has been the development of the Utica Shale, and the Marcellus to a lesser extent. Since 2015, Ohio has produced more gas than it needs to meet its industrial, residential, and utility demand, which now allows it to send the excess to other states.
6. Colorado — 1.7 trillion cubic feet (5.9% of the total)
The Centennial State’s gas output has risen rapidly this decade, more than doubling since 2001. It produces this gas from two main regions, the DJ Basin to the east and the Piceance to the west. It’s also the nation’s biggest producer of coalbed methane, which is gas extracted from — you guessed it — coal beds. One of the leaders in driving the rapid rise in Colorado’s gas production is Anadarko Petroleum (NYSE: APC), which has invested $10 billion in the state over the past five years to increase its output from the DJ Basin, holds the gas-rich Wattenberg Field as well as the oilier Niobrara shale.
7. West Virginia — 1.6 trillion cubic feet (5.6% of the total)
While known more for producing coal, West Virginia has climbed up the leaderboard by tripling its gas output in the past five years. Fueling that rapid growth has been the development of the Utica and Marcellus shale plays. The state has an estimated 28 trillion cubic feet of natural gas still in reserve, which is enough to meet the country’s entire demand for one full year.
8. Wyoming — 1.6 trillion cubic feet (5.4% of the total)
While Wyoming was only the eighth largest natural gas producer in 2017, it ranked among the top five holders of reserves. Another interesting quirk is that the state produces two-thirds of its natural gas on federal leases. The bulk of the gas comes from the Green River Basin in the southwest that holds the Pinedale and Jonah fields, which are two of the 10 largest gas fields in the country. The state’s largest gas producer is Ultra Petroleum (NASDAQ: UPL), which recently started drilling horizontal wells in the Pinedale, which are more common in shale fields, to see if that would enable it to produce more gas.
9. New Mexico — 1.3 trillion cubic feet (4.4% of the total)
New Mexico is a top 10 natural gas producer and reserve holder thanks to the San Juan Basin, which stretches across the state and into Colorado. Further, it’s second to the Centennial State in the production of coalbed methane. In addition to that, a portion of the Permian Basin runs through the southeast part of the state, making it an increasingly important area for drillers. The state’s largest natural gas producer is privately-held Hilcorp Energy Company, which assumed that mantle when it acquired ConocoPhillips’ San Juan Basin assets in 2017.
10. Arkansas — 701 billion cubic feet (2.4% of the total)
Arkansas produces its gas from the Arkoma Basin in the west-central part of the state, which features the Fayetteville Shale. Southwestern Energy (NYSE: SWN) was the first company to drill into that shale and has since completed more than 4,700 wells that produced 316 Bcf of gas last year. However, due to lower drilling returns compared to Pennsylvania’s Marcellus, Southwestern Energy isn’t drilling very many wells in the Arkansas these days and currently plans to sell its assets in the region and focus on its more lucrative ones in the Keystone State.
11. North Dakota — 573 billion cubic feet (2.0% of the total)
North Dakota produces almost all of its natural gas in association with oil production from the Bakken Shale. For many years the industry burned off (flared) a significant portion of the associated gas production because there wasn’t enough pipelines to get it out of the region. However, thanks to tightening regulations and the construction of new pipelines, North Dakota’s gas production has skyrocketed in recent years and could continue climbing as drillers begin ramping their activities in the state back up after a long downturn in oil prices.
12. Alaska — 344 billion cubic feet (1.2% of the total)
Alaska is actually the country’s third largest natural gas producer. However, because the state lacks a pipeline to transport it to market centers in the south, most of the gas associated with the oil produced from the North Slope field gets reinjected back into the field to help extract more oil. While the state has long urged for the construction of a gas pipeline to the south, it’s not an economically viable option. However, the state is working to build an 800-mile pipeline to the coast where it would also build an LNG export facility for between $45 billion to $65 billion. Though it is on its own after its original partners, which included oil giants ConocoPhillips, ExxonMobil, and BP (NYSE: BP), all pulled out of the project due to the price tag and risk.
13. Utah — 313 billion cubic feet (1.1% of the total)
Utah holds three of the country’s 100 largest gas fields, with most of its output coming from the Uinta Basin. While production has been on the decline in recent years due to lower prices and better drilling returns elsewhere, that could be about to change. Leading shale driller EOG Resources (NYSE: EOG) is seeking to drill more than 2,800 natural gas wells in the state as part of its plan for developing its acreage in the Uinta Basin.
14. Kansas — 220 billion cubic feet (0.8% of the total)
Kansas gets most of its natural gas from the Hugoton field, which also stretches into Oklahoma. However, production from the field and others in the state have been on a steady decline for decades due to low natural gas prices, and more recently to the higher returns drillers can earn in places like the Marcellus.
15. California — 202 billion cubic feet (0.7% of the total)
The Golden State produces natural gas as well as oil from several areas, including off its southern coast. Output, however, has been in a steady state of decline for years because drillers can earn higher returns in other regions of the country while facing fewer environmental regulations. The largest share of the state’s dwindling gas output comes from California Resources (NYSE: CRC), which uses some of it to make steam to increase its oil production.
Offshore Drilling Platform
Bonus: The federal waters of the Gulf of Mexico — 1.1 trillion cubic feet (3.7% of the total)
States control the waters immediately off their coasts (usually three to nine nautical miles out), entitling them to claim the gas produced close to shore. However, the federal government controls the waters from that point to about 200 nautical miles offshore, giving it the rights to the gas below. In 2017, production platforms sitting in federal waters produced nearly 4% of the country’s total supply, which gets shipped back to land via underwater pipelines.
Concentrated at the top
The U.S. is the top natural gas producing country in the world. While 15 states contributed the bulk of this output, Texas and Pennsylvania did most of the heavy lifting by contributing roughly 43% of the total thanks to the bounty of low-cost gas sitting in shale deposits underneath those two states.
Matthew DiLallo is a Senior Energy and Materials Specialist with The Motley Fool. He graduated from the Liberty University with a degree in Biblical Studies and a Masters of Business Administration.
