U.S. natural gas production growth is expected to cap at 5% as oversupply volumes test the limits of storage and pipeline capacity later this year, according to a new market alert from BENTEK Energy.
The Sky Is the Limit? U.S. Shale Gas Soars!™ says that until mid-2011, improvements in drilling efficiency, vestiges of $5-6/MMBtu hedging programs, held-by-production (HBP) drilling and the attractive economics of rich (high-Btu) gas, among a host of other factors will drive further production increases.
“There will be a difficult period of market adjustment over the next 12 to 18 months,” according to the report.
That growth is expected to begin slowing in the second half of the year as HBP obligations expire and storage/pipeline operational limitations force producers to put on the brakes. As this occurs, gas prices are projected to come under significant downward pressure, signaling producers to tighten capital budgets and scale back drilling.
“There will be a difficult period of market adjustment over the next 12 to 18 months,” said BENTEK Managing Director E. Russell (Rusty) Braziel. “However, corrections on both the supply and demand sides of the equation are expected to bring the market back into balance in 2012. By 2013, we forecast a slower but more sustainable growth trajectory as drilling activities finally become more price-responsive.”
For more information about The Sky Is the Limit? U.S. Shale Gas Soars!™ visit www.bentekenergy.com or call 1-888-251-1264.