February 16, 2011 - Louisiana natural gas production

Wednesday, February 16, 2011

Natural gas is a key component of the U.S. energy mix.  Even here in New England, relatively far from gas production zones, gas-fired generation accounts for more than a third of the electricity produced.  Where local distribution companies operate, consumers can also use gas for heating.

Louisiana is a major source of natural gas supply in the U.S.  While the Outer Continental Shelf (OCS) offshore Louisiana provides a large part of the gas flowing out of the state, north Louisiana’s Haynesville Shale is seeing increased production.  Laid down as sediments in a shallow marine environment during the Jurassic (about 150 million years ago), the Haynesville Formation includes shale units that are now about 2 miles deep beneath northwestern Louisiana, southwestern Arkansas, and eastern Texas.

Gas production from the Haynesville Shale is booming, thanks in part to hydraulic fracturing or “fracking”.  That's the same technique of cracking open the gas-containing strata by forcing high-pressure water, chemicals, and mechanical "proppants" underground to hold the layers of rock open and let the gas flow out.  About 61% of Louisiana’s gas production came from the formation, bringing the state's total 2010 production to around 2 trillion cubic feet of natural gas.  That level of production is not only 36% above 2009 levels, but is moreover the highest level of production since 1984.

The environmental impacts of this technique are still under evaluation, but customers are already feelign one impact of fracking: low gas prices, as the nation's supply has risen significantly. According to the federal Energy Information Administration, natural gas prices are predicted to average $4.02 per thousand cubic feet in 2011, about 9% below 2010's average pricing.

Will gas continue to be produced at these levels?  Will these low prices continue?  Are any other regulations needed to protect safety and the environment?  If so, what will that mean for gas pricing?

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