IPAA Access - Summer 2017 - 11

Russia's near-monopoly over European
energy markets.
The American LNG revolution could go
down as the biggest development to take
place in the oil and gas industry since -
well, since the shale revolution itself only
a few years back. Because American
natural gas is predominantly sourced from
shale basins, the U.S. natural gas industry
is perhaps the most economically flexible
and logistically capable in the world. The
cost of producing natural gas in the U.S. is
at or below $1 per million British Thermal
Units (mmBTU), so American producers
will be able to sell gas domestically
and internationally through all kinds
of changing market conditions around
the world.
Nowhere is this reality more obvious
than in the Haynesville, straddling
eastern Texas and Louisiana. Brought
into significant production in 2008 and
encompassing over 9,000 square miles, it
is one of America's largest and youngest
producing basins. Producers have realized
that as LNG terminals come online across
the Gulf Coast, the Haynesville play will be
best positioned to supply cost-effective
gas to global LNG markets. According to
EIA data, the rig count has been surging in
this basin. In May 2017, there were 46 rigs
operating there, compared with just 24 last
November. As a result, the number of wells
being drilled and completed has been
steadily rising since the start of this year.
Many of the wells in the Haynesville
are now being completed and put
into production. Goodrich Petroleum
Corp. reported a 20 percent increase
in production during the first quarter
of 2017, and as new wells are
completed the company expects to see
200 percent annual growth by the end
of this year compared to its Q4 2016
numbers. Range Resources has also
seen recent success in the Haynesville,
bringing 27 new wells into production
during the first quarter of 2017 and
planning to add another 29 in the near
future. Range has seen the cost of
drilling a new well decrease by over
a million dollars since acquiring new
properties there last September.
Since the start of 2017, daily total
output in the Haynesville has risen
by 0.345 billion cubic feet per day
(bcf/d), according to EIA figures.

We could someday look back upon these times as the years
when America became the world's leading energy power, all
thanks to the twin revolutions that first brought U.S. shale, and
then brought us the tools to deliver it around the world.
In total, the Haynesville produced
6.3 bcf/d in May 2017. To put that in
perspective, Poland recently received
a LNG shipment of 5.7 million cubic
feet from the U.S. The Haynesville
basin alone could produce enough
natural gas to fill an LNG tanker every
day and still have plenty left over for
domestic consumption.
Although much of the conversation
about LNG is focused on the export
terminals themselves, the prospect
of their emergence is reason for the
upstream segment to look excitedly
towards the future. Global demand for
LNG means more independents drilling
more wells and being able to market their
products to larger customer bases at
more favorable prices. The International
Energy Agency (IEA) projected a doubling
of trade in LNG by 2040 in its most recent
World Energy Outlook. The growth in LNG
is part of a long-term upwards trend in
the use of natural gas, which is expected
to enjoy a 1.5 percent annual growth rate
through 2040.
Producers in the Haynesville formation
won't be the only ones to enjoy the
benefits of America's LNG export
bonanza. Associated gas coming from the
oil-producing Permian shale, along with
natural gas from the Barnett, San Juan,
Piceance, Niobrara, Fayetteville,
Eagle Ford and Woodford plays could
conceivably end up in LNG terminals on
America's coasts in the coming years.
Recently, there have been signs of a
revival in many U.S. basins - particularly
the Bakken - now that prices have
stabilized (sort of!) and the costs of
drilling have declined.
Making U.S. natural gas available
internationally through LNG exports
will help to ensure that the energy
sector is less prone to the domestic
price volatility endured by shale
drillers in recent years, when natural
gas could only be sold domestically
or in neighboring Canada and Mexico.
Natural gas prices are higher overseas,

especially in East Asia - home to many
of the world's largest gas importers
such as Japan, South Korea, China and
India. A lack of pipeline and processing
infrastructure in some producing basins
remains the only serious obstacle to
meeting export demand. Expansion of
that infrastructure could breathe new
life into many American shale basins
that saw production grind to a halt as
oil and gas prices collapsed in late 2015
and early 2016.
The other ace the U.S. has up its
sleeve is reliability: The diversion of
U.S. LNG to Dubai to replace natural gas
normally sourced from Qatar is testament
to how the Middle East's ongoing
political instability has the potential
to disadvantage exporting countries
that are party (or even proximate) to
it. Meanwhile, Australia is actively
considering imposing federal restrictions
on LNG exports, choosing instead to
hold that gas back for sale into domestic
markets. Qatar and Australia are the
world number one and two exporters
of natural gas. Guess who's number
three? We are - but we won't be staying
there for long.
In the long run, the U.S. is poised to
become an LNG exporting superpower.
As of May 1, 11 export projects were
under construction, and another six were
approved and awaiting construction,
according to a report from the Atlantic
Council. Collectively, these projects have
the potential to add 5.4 trillion cubic feet
(tcf) per year of LNG export capacity.
EIA projects that U.S. LNG exports will
surpass 3 tcf per year by the middle of the
next decade, boosting total natural gas
exports past 6 tcf. Undoubtedly, these
projects will transform the American
role in global energy markets. We could
someday look back upon these times as
the years when America became the
world's leading energy power, all thanks
to the twin revolutions that first brought
U.S. shale, and then brought us the tools
to deliver it around the world.
www.ipaa.org IPAA ACCESS MAGAZINE 11


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Table of Contents for the Digital Edition of IPAA Access - Summer 2017

President’s Message
Great Exportations: Lng Revolution About to Take Place Is the Real Deal
Litigation Continues to Halt Hydraulic Fracturing Regulations
Private Capital Conference
Wildcatters’ Ball
Congressional Call-Up
OGIS New York
Index of Advertisers
IPAA Access - Summer 2017 - intro
IPAA Access - Summer 2017 - bellyband1
IPAA Access - Summer 2017 - bellyband2
IPAA Access - Summer 2017 - cover1
IPAA Access - Summer 2017 - cover2
IPAA Access - Summer 2017 - 3
IPAA Access - Summer 2017 - 4
IPAA Access - Summer 2017 - 5
IPAA Access - Summer 2017 - 6
IPAA Access - Summer 2017 - 7
IPAA Access - Summer 2017 - 8
IPAA Access - Summer 2017 - President’s Message
IPAA Access - Summer 2017 - Great Exportations: Lng Revolution About to Take Place Is the Real Deal
IPAA Access - Summer 2017 - 11
IPAA Access - Summer 2017 - 12
IPAA Access - Summer 2017 - 13
IPAA Access - Summer 2017 - Litigation Continues to Halt Hydraulic Fracturing Regulations
IPAA Access - Summer 2017 - 15
IPAA Access - Summer 2017 - Private Capital Conference
IPAA Access - Summer 2017 - 17
IPAA Access - Summer 2017 - Wildcatters’ Ball
IPAA Access - Summer 2017 - Congressional Call-Up
IPAA Access - Summer 2017 - OGIS New York
IPAA Access - Summer 2017 - 21
IPAA Access - Summer 2017 - Index of Advertisers
IPAA Access - Summer 2017 - cover3
IPAA Access - Summer 2017 - cover4
IPAA Access - Summer 2017 - outsert1
IPAA Access - Summer 2017 - outsert2
IPAA Access - Summer 2017 - outsert3
IPAA Access - Summer 2017 - outsert4
https://www.nxtbook.com/naylor/PAAB/PAAT0118
https://www.nxtbook.com/naylor/PAAB/PAAT0317
https://www.nxtbook.com/naylor/PAAB/PAAT0217
https://www.nxtbook.com/naylor/PAAB/PAAT0117
https://www.nxtbook.com/naylor/PAAB/PAAT0316
https://www.nxtbook.com/naylor/PAAB/PAAT0216
https://www.nxtbook.com/naylor/PAAB/PAAT0116
https://www.nxtbook.com/naylor/PAAB/PAAT0315
https://www.nxtbook.com/naylor/PAAB/PAAT0215
https://www.nxtbook.com/naylor/PAAB/PAAT0115
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