Rig activity in the Lower 48’s two most productive shale gas plays rose steeply in recent months (Figure 1). The Marcellus and the Haynesville in 2H18 respectively averaged 42 and 43 daily active rigs. Since the end of 2018, the Marcellus has ramped up to about 54 active rigs with the Haynesville close behind at about 51.
FIGURE 1 | Marcellus and Haynesville Rig Activity
Source | RSEG, raw data from RigData
At the end of 2018, RSEG assessed the potential for Haynesville gas pipeline restrictions because of the play’s rapid production growth. We concluded at the time that there should be enough pipeline capacity to keep basis narrow until the next wave of new Gulf Coast LNG projects and pipelines targeting the Haynesville begins around 2023.
With eight more active rigs in the Haynesville compared to 2H18, the play’s gas production could rise more quickly than anticipated, and increased activity in the Marcellus will provide additional pressure as US Northeast gas tries to make its way to the Gulf Coast and the impending LNG projects there.
With the Haynesville positioned so close to the coast, producers active in the play have become accustomed to realized gas prices only $0.10 to $0.15 below Henry Hub. If the number of wells that are completed and start flowing follow this high level of rig activity, Haynesville pipeline capacity could quickly fill and basis risk could emerge as early as this summer, much sooner than we predicted even a few months ago.
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