Despite the 70% drop in the spot price of natural gas over the past year, industry leaders remain optimistic about the future. In recent discussions with investors, natural gas producers, and service firms have expressed confidence in the industry’s long-term growth prospects, as the fuel gains global acceptance as a “destination fuel,” according to Lorenzo Simonelli, Chairman and CEO of Baker Hughes.
Several factors have contributed to this optimism among Appalachian gas producers:
- The reopening of the Freeport LNG facility in Texas after a June 2022 fire will allow US producers to export more gas.
- Appalachian wells produce gas with a lower carbon footprint compared to other regions, attracting investments to verify and improve this metric.
- The ongoing decline of coal-fired electricity generation in the US is boosting demand for natural gas.
- The industry has weathered fluctuations in natural gas prices before and is prepared to adapt to future changes.
Toby Rice, CEO of EQT Corp., has initiated the “Unleash LNG” campaign, promoting policies to increase production and export of US natural gas as a means of replacing dirtier fuels overseas. Rice believes that there has been a shift back to a “more realistic, more practical all-of-the-above approach” to energy.
As Europe replaces Russian gas following the attack on Ukraine, nearly 75% of all US gas exports are now destined for the continent, up from less than 30% in 2021. Rice argues that producing more natural gas will result in less price volatility at home.
Nick DeIuliis, CEO of CNX Corp., envisions greater gas demand from the manufacturing and transportation sectors in the short term, keeping the resource closer to home. CNX is partnering with Adams Fork Energy on a proposed project in West Virginia to build an ammonia plant using hydrogen produced from natural gas with carbon capture and sequestration.
Although drilling costs have not decreased with the natural gas price drop, various operators are employing strategies to cope with high costs and potential price slides, such as owning drilling rigs, controlling gathering and water pipelines, relying on natural gas liquids, and adjusting production levels as needed.