Top Challenges Facing the Natural Gas Industry Today

The recent Platts Appalachian Oil and Gas Conference offered tremendous insight into the key challenges facing the natural gas industry today. The major presentation categories can be summed up in three categories: economic environment, infrastructure challenges, and markets for production.

The U.S. gas market is oversupplied by approximately 1 billion cubic feet per day. Although Appalachian growth has continued, the growth rate is slowing. There has been a significant drop in rig count over the last year, while simultaneously, producers have exploited efficiency gains and increased production. The “over production” has been met with continued price pressure in the Northeast. Ultimately, the Northeast will continue to aggressively compete to displace production from the Midcontinent, the Rockies, and Canada.

Infrastructure challenges continue to resonate as a key issue facing the Northeast. The Conference included panel discussions focused on strategies to help with summer surpluses of Natural Gas Liquids (NGLs) as well as pipeline discussions to help address demand generated in the Northeast during the winter peak season. The idea of long-term contract commitments to support pipeline development seems promising.

As U.S. based Liquefied Natural Gas (LNG) projects move closer to completion, the question of capacity utilization leads the discussion. The current elasticity in U.S. markets means the largest opportunities and impacts will occur abroad. With a global market place in mind, U.S. LNG must push to decrease project costs in an effort to remain competitive.

This conference shined a light on the upcoming challenges facing the natural gas industry domestically and abroad as well as highlighted cautious optimism as we look toward the future.

ScottMadden has deep experience in assisting our clients with managing the gas business through services from strategic analysis and business planning to mergers and acquisitions and rates and finance strategy. For additional insight or to learn more about our consulting support, please contact us.

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Contributing Authors

Jason Payton Manager

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