Appalachia Was a Top Producer of Natural Gas in 2019, But Success Could Spell Trouble in 2020

Natural gas production in Appalachia topped other US shale plays again in 2019. According to the U.S. Energy Information Administration (EIA), the Marcellus region produced more than 380 million MCF of natural gas over the course of the year. The second highest producer was the Permian region in Texas, which produced about 183 million MCF of the resource. 

Appalachia’s natural gas yield in 2019 jumped by about 13 percent from last year when the region produced more than 340 million MCF of natural gas. The EIA expects production to continue to be strong into at least January of 2020. According to the EIA, Appalachia will produce more than 30,000 MCF per day of natural gas this month, a slight increase over the same time in 2019, but a decrease from December.

High production levels have caused a bit of a headache for the industry as an abundance of natural gas has caused prices to plummet. The Henry Hub Natural Gas Spot Price for natural gas averaged about $2.60 per million BTU in 2019. For comparison, the average price for natural gas was about $4.39 per million BTU a decade ago.

Industry officials anticipate that the markets for natural gas will fluctuate through 2020 as producers work off the glut that accumulated in 2019 and years prior. In the meantime, some companies are trying to mitigate their losses. Chevron announced in December that it would sell its holdings in Appalachia. Chevron’s departure from the region stands in stark contrast to its position earlier in the decade. In a report released in 2014, the company boasted its 1 million acres of leased land and 500 employees engaged in drilling in Fayette, Greene, Washington, and Westmoreland Counties.

Public officials will need to monitor production trends in 2020 to see if and how far production falls. Major decreases could spur more companies to downsize in the future. Furthermore, lower production could result in lower impact fees collected in 2020.