US sets world record natural gas production as prices plunge

U.S. natural gas production set an all-time world record last week despite prices hitting a new annual low and down 85 percent over the last 14 years.

After dominating world natural gas production for 50 years, American production peaked in 1972 at about 21.7 trillion cubic feet.  As annual production slumped to about 18 trillion cubic feet for the next 33 years, prices rose from about $0.59 per thousand cubic feet (tcf) to a record high of $18.95 per tcf in September 2005.

But thanks to 80-year-old George Mitchell, who pioneered modern hydraulic fracking techniques in the suburbs of Fort Worth in the late 1990s, U.S. natural gas production hit 100 million cubic feet per day last week, or an annual rate of 37 trillion cubic feet.  Through the magic of capitalism, prices plunged by $0.18 over the next four days to $2.56 per tcf on April 19.

U.S. natural gas proven recoverable reserves were last reported by the U.S. Energy Information Agency at a record 475 trillion cubic feet in 2017.  With U.S. consumption of 28 trillion cubic feet a year, that works out to about a 17-year supply. But the EIA estimated in its "Annual Energy Outlook 2019" that the technically recoverable resources of natural gas were about 2,459 trillion cubic feet, or about an 88-year supply.

America's only serious competitors for natural gas production are Russia at about 25 trillion cubic feet (tcf); Iran at 7.6 tcf; Canada at 6.5 tcf and Qatar at 6.3 tcf.

Although U.S. fracking volumes drove natural gas prices down, it also driven wellhead drilling costs down by about 40 percent and doubled the production per well. It also has kicked off a "digital energy" revolution in down-hole seismic testing that is expected to continue slashing costs and spiking per well production over the next decade.

In recognition of the massive export opportunities for U.S. natural gas, U.S.-based Chevron announced it was acquiring shale oil and gas company Anadarko for $33 billion.  The company is optimistic about its ability to bring massive economies of scale and leverage its expertise in technologies like artificial intelligence and cloud computing to the fracking industry.  Chevron's CEO, Mike Wirth, recently told investors of the shale decision: "There's nothing we can invest in that delivers higher rates of return."

U.S.-based ExxonMobil, the fourth largest energy producer in the world, announced in March plans to focus its international oil and gas exploration efforts on the huge Permian Basin in Texas and New Mexico.  Exxon is reportedly working on a transformational partnership with Microsoft's Azure cloud computing group to change "the way that game is played," according to Exxon CEO Darren Woods.