American Oil and Gas Reporter - January 2022 - 43

assesses. " The delayed Nord Stream 2
pipeline is essential to boosting Russian
gas supply into Europe as Russia is
shifting away from Ukraine transit and
electronic sales platform sales.
" Despite the fact that Europe is desperate
for gas supply, regulators appear
to be in no rush to sign off on Nord
Stream 2, " the firm continues. " While
S&P Global Platts Analytics expects the
pipeline will begin operations in June,
further delays would cause European
buyers to scramble for alternative gas
supply, boosting not only European gas
prices, but global LNG prices. Even
U.S. prices would get an uplift from
this, as U.S. LNG exports will ramp up
further in 2022. "
EIA also acknowledges LNG exports'
importance, noting that just as November's
unseasonably warm temperatures stole
some of U.S. natural gas prices' October
momentum, U.S. liquified natural gas
exports mitigated the downward pressure.
But much as it did with oil, EIA offers a
restrained forecast for natural gas prices.
" The Henry Hub spot price averages
$4.58 an MMBtu from December 2021
through February 2022 in our forecast
and then generally declines through 2022,
averaging $3.98/MMBtu in 2022 amid
rising U.S. natural gas production and
slowing growth in LNG exports, " EIA
says. " We forecast the U.S. inventory
draws will be similar to the five-year average
this winter, and we expect that
factor, along with rising U.S. natural gas
exports and relatively flat production
through March, will keep U.S. natural
gas prices near recent levels before downward
price pressures emerge. "
Noting that winter temperatures and
seasonal demand can be unpredictable,
EIA says it expects prices will remain
volatile over the coming months.
EBW Analytics Group's Rubin agrees
that the market will likely continue to
experience some degree of volatility, but
says the unusually warm start to winter
and increased dry gas output in the United
States has overridden the strong upward
price pressure points in place at the start
of winter and effectively redirected U.S.
market dynamics to the downside despite
historic global natural gas prices and
record LNG export volumes (Figure 2).
" As weather-driven demand approaches
its climatological peak in late January,
winter weather remains king. Extreme
disruptions are always possible and can
occur with only relatively limited warning, "
he relates, reminding that as of Christmas,
the domestic market had not yet been
tested with significant cold weather. " The
first notable cold outbreak in January
could provide a significant demand boost
and lift NYMEX futures. "
However, Rubin says, " the accumulated
bearish effects from tremendously mild
weather from October through December
buoyed the most-likely storage trajectory
and slashed winter risks. In our view, absent
extreme weather, this weakness is
likely to begin to play out in January as
the March contract assumes the frontmonth
role and carries natural gas pricing
downward toward the low-to mid$3.00/MMBtu
range. "
Meanwhile, Raymond James predicts
a relatively strong year for U.S. prices.
" For U.S. natural gas, muted supply
growth translates into continuation of
lofty prices by the standards of the past
decade, with 2022 averaging $4.00/Mcf
(5% above the strip), " the firm says.
Activity And Investment
On the question of whether U.S. upstream
oil and gas spending will generally
climb, fall or plateau in 2022, many
voices seem more confident that the pace
will pick up compared with last year.
Analysts such as Rystad Energy, Evercore
ISI and Fitch Ratings all sing in harmony
about a busier year for U.S. producers.
U.S. shale expenditure is projected to
surge 19.4% in 2022, leaping from an
expected $69.8 billion in 2021 to $83.4
billion, the highest level since the onset
of the Covid-19 pandemic and signaling
the industry's emergence from a prolonged
period of uncertainty and volatility, maintains
a December report from Rystad.
The analysis acknowledges that most
U.S. companies may hesitate to increase
their investments amid pandemic-related
concerns, but predicts U.S. land players
still will loosen their purse strings. " Of
the expected year-on-year increase, service
price inflation alone is set to add $9.2
billion, with increased activity chipping
in $8.6 billion, " Rystad calculates. " These
increases will be partially offset by $4.2
billion in savings from efficiency gains.
Efficiency gains are expected to be driven
predominantly by further adoption of
simulfracs. "
Artem Abramov, head of shale research
at Rystad Energy, says even publicly-traded
companies should ramp up
activity this year. " Oil and gas activity
and upstream spending in U.S. land has
been exposed to significant volatility in
the last two years, " he acknowledges.
" Aggressive strategies from private operators
in the U.S. shale patch have
FIGURE 2
U.S. Dry Gas Production versus LNG Feed Gas Demand (Bcf/d)
Bcf/d
4.0
1.0
2.0
3.0
0.0
-1.0
-2.0
-3.0
1-Apr
4-May
Source: EBW Analytics, Bloomberg
JANUARY 2022 43
LNG feed gas gain coincides
with sliding production
Natural Gas
Production
LNG
6-Jun 9-Jul 11-Aug 13-Sep 16-Oct 18-Nov 21-Dec
American Oil and Gas Reporter - January 2022

Table of Contents for the Digital Edition of American Oil and Gas Reporter - January 2022
