Save for later Print Download Share LinkedIn Twitter Gas production is rising in a re-energized Haynesville Shale, which is expected next month to set a new production record above 12.2 billion cubic feet per day. And it's no secret what's sustaining output growth in the northwest Louisiana/east Texas play: location, location, location. Proximity to a vast LNG export and gas-dependent industrial and petrochemicals market 150-200 miles south on the Louisiana/Texas Gulf Coast means transportation costs are low to a region with year-round demand strength that can easily absorb Haynesville output. "Haynesville production is growing a bit due to increased rig count -- 46 currently -- and superior economics in the play," Robert Turnham, president of Haynesville pure play Goodrich Petroleum, told Energy Intelligence. "LNG demand is helping on current prices and expectations for higher prices in the back half of the year driven by tight fundamentals." Faith in the growing value of Haynesville gas is obvious from rig activity. While it's a fraction of the size of the sprawling three-state Marcellus/Utica Shale in Appalachia, since August 2020 it's been running more rigs than the bigger play -- seven to eight more at last count. What happened in August? US LNG exports and feedstock demand, which had hit lows between 2 Bcf-4 Bcf/d over the summer, began to recover, recently hitting record highs close to 12 Bcf/d. There is a strong correlation between Haynesville gas output and LNG demand because the vast shale basin is in an enviable position to tap it (see graph). The Gulf Coast LNG export terminals closest to the Haynesville -- Sabine Pass and Cameron LNG -- together have seen feedstock needs approach 6 Bcf/d as their trains are nearly fully utilized and debottlenecking ekes out ever more LNG from existing infrastructure. Capacity is also set to rise by 685 million cubic feet per day next year, when Sabine Pass launches its sixth train. Cameron has plans for a Phase 2 development that would add another 1.2 Bcf/d in capacity, but the market will determine if that project is sanctioned. There are additional active terminals to the west in Texas that could pull gas supply closer to home, especially with the influx of Permian Basin gas into south and southeast Texas. About 4 Bcf/d of new egress capacity has come on stream out of Permian in the past two years and 2 Bcf/d is set to come this summer. However, there is more sanctioned LNG capacity being developed in Louisiana, Golden Pass (2024) and Calcasieu LNG (2022), which together would have an export capacity of more than 3.8 Bcf/d. Needless to say, unless global LNG markets dry up all of these projects point to long-term Haynesville growth. Growing output is also coming while Henry Hub prices have remained below $3 per million Btu except during the extraordinary price spike during the February freeze, which drove daily prices at the Pine Prairie gas hub in North Louisiana to a $16.54/MMBtu average on Feb. 16, Energy Intelligence data show. However, most producers reported getting little benefit from spike as they tend to hedge most of their output (NGW Feb.22'21). And while they welcome the possibility of a $3-plus Henry Hub gas price emerging later this year, current prices exceed break-even costs in the play's core. Cleaner Supply a Must? However, there is an obstacle in the road ahead. An urgency has been growing that if the LNG sector doesn't radically alter its carbon footprint, it will become marginalized in the run-up to a net-zero carbon future. LNG export operations have increasingly embraced this goal (NGW Mar.8'21). Now, Haynesville producers are beginning to do the same with an eye toward producing more sustainably sourced gas supply. Last week, Chesapeake Energy said it is launching a pilot project that uses a new technology to monitor methane emissions. The system designed by Project Canary, a Denver firm that sells emissions monitoring hardware and software, detects emissions using devices installed at the well site rather than relying on more expensive overhead drones or aircraft flyovers. The initial effort will focus on 10 wells at two drilling pads in Louisiana and involve Goodrich, which often partners with Chesapeake. "I believe they are going to test it on new joint wells we drill," Turnham said. "We, too, are looking into it, as it seems like a cheap alternative." Chesapeake said the program may be expanded "based on initial findings and market conditions." Tom Haywood, Houston
