Washington (Platts)--22Jan2013/155 pm EST/1855 GMT

US natural gas production will continue to grow for as much as another decade, investment bank Raymond James' top oil and gas analyst said Tuesday, driven by huge production gains in the Marcellus Shale and gas associated with oil and natural gas liquids drilling.

"Now that the dry gas rig count has dropped precipitously (down 60% year over year), many energy analysts are eagerly anticipating an imminent roll-over in U.S gas supply," Raymond James Marshall Adkins told his clients in a note.

"We guess gas supply didn't get the memo because it continues to climb steadily higher," Adkins said. "In fact, our updated gas production model now says that U.S. gas supply is not likely to roll over anytime soon and could even continue growing through the rest of this decade (especially if oil prices stay anywhere near current prices)."

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Adkins predicts US gas supplies will grow another 1.3 Bcf/d this year and 600,000 Mcf/d next year as more and more dry gas production comes from the Marcellus Shale and associated gas.

While dry gas production has shrunk in the Haynesville, Fayetteville, and Barnett shales as rigs have left for brighter horizons, the Marcellus has replaced that production and then some, Adkins said.

"Despite losing 53 rigs, gas production is still up an estimated 3.1 Bcf/d this gas year (November to November)," Adkins said.

"Wait a minute! Weren't low prices and high shale gas decline rates supposed to force U.S. gas supply sharply lower? Not for the Marcellus," Adkins said, noting that drillers can make money at $3.00/Mcf in the Marcellus.

Adkins sees another 3.2 Bcf/d worth of gas production out of the Marcellus through 2014 with the Pennsylvania play ending 2014 at 10.4 Bcf/d worth of production, up from the current 7 Bcf/d. The production increases will come from backlogged wells being hooked to new pipelines in what Adkins called "a perfect storm" for gas supplies.

The biggest contributor of gas associated with oil drilling is Texas' Eagle Ford Shale where more than 250 rigs are active, Adkins said. He thinks the Eagle Ford will add another 900,000 Mcf/d of annual growth to gas supplies this year and next.

For the entire US, Adkins expects 2013 production to average 66.8 Bcf/d, up 1.3 Bcf/d, and 2014 production to average 67.4 Bcf/d, up 600,000 Mcf/d. The latest numbers from the US Energy Information Administration showed US natural gas production averaged 66.4 Bcf/d as of October, up 1.6 Bcf/d from a comparable period in 2011.

--Bill Holland, bill_holland@platts.com
--Edited by Katharine Fraser, katharine_fraser@platts.com

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