U.S. Natural Gas Production Reached Record High in 2021 Driven by High Prices: EIA

U.S. natural gas production recorded a new annual high in 2021, increasing by 3.5 percent from 2020, according to an Oct. 12 report from the U.S. Energy Information Administration.

U.S. natural gas production declined in 2020, on the back of lower economic activity amid the COVID-19 pandemic. During 2021, natural gas production surpassed the previous record in 2019. The agency’s Short Term Energy Outlook projects U.S. gas production to maintain its growth trajectory throughout 2023. Production growth is expected to rise due to higher natural gas prices and increasing output in the largest resource basins in Texas and Pennsylvania.

Higher natural gas prices, as a result of higher global demand for gas has incentivized U.S. gas production. Moreover, U.S. exports of gas via liquified natural gas (LNG) have increased in recent years and also reached a record high in 2021. The Russian invasion of Ukraine has led to higher U.S. gas demand in Europe. This in turn has led to higher competition for U.S. LNG, with Europe competing fiercely with Asian countries. Accordingly, the price of U.S. gas has increased and led generation assets with a greater incentive to produce, in line with higher profitability margins.

Production in Texas and Pennsylvania grew by approximately 1.5 billion cubic feet per day between 2020 and 2021. Texas covers the Permian Basin and Haynesville Basin, which were both significant sources of production growth in 2021. Pennsylvania covers the Appalachian Basin, which now consists of nearly one-third of all U.S. natural gas production.

At the same time, natural gas production in the Gulf of Mexico has been lower over the last few years due to old wells with lowered productivity, an emphasis on oil development, the high expense and difficulty of undersea production and exposure to hurricanes. During 2021, production from the Gulf of Mexico accounted for merely 2 percent of natural gas production, compared to 9 percent in 2010. The agency expects production decline in the region to persist over the next few years.

Net natural gas imports in the U.S., which represented 11 percent of total supply in 2010, did not contribute to total supply in 2021. The U.S. is a net exporter of natural gas and has been growing since 2016, due to the increase in LNG exports.