It may take two more years but the light can be seen at the end of the tunnel.

Natural Gas Prices to Rise

January 27, 2016

Shale Play

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WHEELING - Despite a slump in natural gas prices, officials with the U.S. Energy Information Administration expect a rebound over the next two years due to higher industrial use and exports.

In the interim, however, many drillers continue reducing operations, including Southwestern Energy Co. The Houston, Texas-based firm that acquired West Virginia and southwestern Pennsylvania assets of Chesapeake Energy for $5 billion in 2014 is cutting 1,100 employees - about 40 percent of its workforce - in an effort to save $175 million per year.

"Natural gas prices have continued to decline over the past year, creating conditions where cash flow to fund projects will be significantly lower that it has been the past few years. This has led to a need to reduce the company's overall workforce. These organizational changes are required to maintain competitiveness in this low gas price environment," Southwestern spokeswoman Christina Fowler said, adding about 100 of the affected employees worked in West Virginia or Pennsylvania.

Nevertheless, officials with Southwestern are extending hundreds of the West Virginia Marcellus Shale leases they acquired from Chesapeake, including many in Ohio, Marshall, Brooke and Wetzel counties.

"In spite of the challenging price environment, we remain encouraged with the amount of infrastructure that is either under construction or in advanced stages of development. This will enable this region to continue to play a leading role in the development of new lower 48 states' resources and production for years to come," Fowler added.

According to the EIA, natural gas prices fell from about $6.17 per 1,000 cubic-foot unit in January 2014 to $1.98 in December. However, the agency predicted Monday the price would average $2.72 this year and $3.31 in 2017.

Fact Box

AVERAGE NATURAL GAS PRICES

Average Natural Gas Prices per 1,000 cubic feet, according to the U.S. Energy Information Administration:

Projections:

Largely due to growth in production from shale formations such as the Marcellus and Utica, U.S. natural gas production hit a record daily high of 80.2 billion cubic feet per day in September. The agency believes there will be a slight slowdown in 2016, however.

But once Dominion Resources' Cove Point liquefied natural gas exporting facility in Maryland opens, which officials expect in 2017, there will be a new market for domestic natural gas. The Dominion project is expected to export up to 5.75 million tons of LNG per year, once operational. This will help domestic production grow by 1.8 percent in 2017, according to EIA.

"Cove Point will supply critical American allies in India and Japan with much-needed natural gas that will help reduce global greenhouse gas emissions," said Dominion Chairman, President and CEO Thomas F. Farrell.

The EIA also expects the U.S. to begin consuming more of its own natural gas. Although coal still generally leads the way as the leading generation fuel for electricity, natural gas surpassed coal during a few months in 2015.

Moreover, some of the natural gas will also go to the fertilizer and chemical industries, officials said.