US natural gas output will rise again, IEA says

U.S. natural gas production will accelerate from 2014 through 2018 as higher prices spur drilling and expanded infrastructure allows more shale supplies to reach the market, according to the International Energy Agency.

Gas output will reach 797 billion cubic meters by 2018, 17 percent higher than last year’s total of 681 billion, the IEA said in its Medium-Term Market Report, released today.

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“After stabilizing in 2013, gas output will rise strongly over the rest of the forecast period,” the Paris-based agency said. “As in the five previous years, shale gas continues to be the key driver behind this growth.”

U.S. shale production increased sixfold to 265 billion cubic meters last year from 45 billion in 2007, the IEA said. More than 75 percent of the current shale output is coming from the Marcellus, Barnett, Fayetteville and Haynesville deposits, the agency said.

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Exxon Mobil Corp. (XOM) and Chesapeake Energy Corp. (CHK), the two largest gas producers in the U.S., have both been “radically shifting” their onshore drilling focus from gas deposits toward oil and other liquids, the IEA said. Output of the resulting associated gas has exceeded production from dry gas plays over the last two years, according to the report.

Associated gas will account for 54 percent of U.S. gas production in 2014, up from 51 percent last year and 49 percent in 2011, the agency said.

Gas prices above $4 per million British thermal units in the U.S. “should foster additional gas production growth” until 2018, the IEA said.