Amid Year of Uncertainty, U.S. Oil and Natural Gas Industry Steps Up in 2021

Taryn Brown - December 29, 2021
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Amid Year of Uncertainty, U.S. Oil and Natural Gas Industry Steps Up in 2021

In another year of mass uncertainty surrounding the energy sector and the broader economy, the U.S. oil and natural gas industry continued to step up big in 2021 with record exports, increased technological innovations, and continued progress on reducing emissions.

These were no easy feats. The Biden administration’s illegal ban on federal oil and natural gas leasing led to a year of lost revenue. That combined with the continued economic shock of the COVID-19 pandemic, and now an historic energy supply crisis has made the past year especially challenging.

But the United States, a well-established energy superpower, continued to get the job done.

Here are some key highlights from 2021:

LNG Exports Reach New Heights

With the global economy slowly recovering from the pandemic, production has ramped up to meet higher global demand, leading to U.S. LNG exports reaching new heights.

As the chart below demonstrates, LNG exports have steadily risen for years and are expected to continue to increase next year.

It means that the United States will become the world’s top LNG exporter in 2022, taking the country from energy scarcity to energy dominance.

LNG exports should remain a position of strength as the Energy Information Administration projects increased export capacity buildout.

Production Bounced Back to Pre-Pandemic Levels

U.S. production dropped in 2020 as a result of the pandemic and low market prices for crude oil, but it turned around in 2021. As Bloomberg recently reported:

“U.S. shale-oil production is expected to reach 8.68 million barrels a day in December, which would be the highest since March 2020, analyst at the Oslo-based research house said. Meanwhile, nationwide gas output is on its way to a 6-year high.”

Increased U.S. oil production is being spurred by growth in the Permian Basin. AOGR reported in October:

“According to the U.S. Energy Information Administration, Permian oil production has returned to pre-pandemic levels and in October is expected to surpass the previous record of just under 4.8 million barrels a day set in early 2020. Permian oil output in September was 4.78 MMbbl/d, and EIA projects that it is set to surge to 4.83 MMbbl/d this month.”

Meanwhile, natural gas production growth is being led by the Appalachian Basin, Haynesville Shale and Permian Basin. As S&P Global recently reported:

“U.S. natural gas production surged to more than 95 Bcf/d Nov. 24, hitting a nearly two-year high that comes as domestic operators stage a prewinter push that has recently begun to cool the bullish sentiment in the forward gas market.”

The article goes on to explain that Appalachian Basin production “climbed to a record-high 34.7 Bcf/d” in November, while the Haynesville saw “successive record highs at more than 14.1 Bcf/d” last month.

Flaring in the United States Drastically Reduced

More companies committed to reducing and eliminating routine flaring in 2021 and the United States is already seeing a drastic reduction in the use of this process. Rystad Energy reported in December that onshore flaring in the United States fell “to its lowest level since at least 2012” in the third quarter.

As Rystad’s head of shale research Artem Abramov explained:

“While the reduction in the Bakken was largely in line with expectations, based on our analysis of satellite data, the rate of change in the Permian is surprising. The decline in flaring activity across the board is a concrete sign that best practices are spreading beyond just large producers to small, privately-owned operators too, and this trend looks likely to continue in the foreseeable future.”

The Railroad Commission of Texas released data in December showing that the state is seeing a “record-low flare rate”:

“The percentage of natural gas flared in Texas dropped from a previous record low of 0.61 percent in July 2021 to a new record low of 0.21 percent in September. Texas has one of the lowest flaring rates of large oil and gas producing states in the country with an average rate of flaring that has remained significantly less than 2 percent for more than two years.”

And in North Dakota’s Bakken Shale, increased infrastructure and improved technology led to producers achieving ambitious flaring reduction targets ahead of schedule. The state captured roughly 94 percent of natural gas produced this year, bringing it’s total flaring rate to about 7.5 percent of natural gas produced.

Continued Focus on Addressing Climate Change

In 2021, oil and natural gas companies continued to invest billions of dollars to tackle climate change. This has included boosting efficiency in existing operations, developing carbon capture technologies, and spending on research and development. The result is that the United States is the global leader in reducing carbon emissions.

Additionally, the Oil and Gas Climate Initiative has utilized new technology and practices to achieve an absolute decrease in methane emissions by 22 percent the last two years. The Environmental Partnership, another collaborative effort geared towards addressing climate change, is sharing innovative ideas and best practices, providing members with tools that are “designed to further reduce emissions using proven, cost-effective technologies.”

2021 was a whirlwind year filled with unique challenges but also substantial opportunities for the United States to continue to produce the energy that will help with reliability and emissions reductions both domestically and globally.