Appalachian Basin gas production hits four-month high as MVP flows rise

The startup of long-term shipping contracts on Mountain Valley Pipeline July 1 is already boosting gas transmissions on the new line, adding momentum to the ongoing rebound in Appalachian production.

Since the start of July, flows through Mountain Valley's interconnection to Transcontinental Gas Pipe Line have ramped up significantly. Month to date, deliveries to the connecting interstate Cherrystone compressor station in Pittsylvania County, Virginia have averaged 990 MMcf/d – up from about 710 MMcf/d during the final week of June, data from S&P Global Commodity Insights showed.

Higher utilization on Mountain Valley Pipeline is also boosting gas production from the Appalachian Basin. On July 1, output from the Marcellus and Utica shales jumped to an estimated 35 Bcf/d and has so far averaged about 34.8 Bcf/d month to date, trending at its highest level since late February. In June, gas production from Appalachia averaged just 34.4 Bcf/d, according to data from Commodity Insights.

Drilling down deeper, it appears that much of the recent gas production increase is coming from the Marcellus shale of West Virginia, located in the acreage surrounding Mountain Valley's starting point. In July, Marcellus production from West Virginia has averaged nearly 9 Bcf/d, up from about 8.5 Bcf/d during the final week of June.

Producer push

Recent production gains in Appalachia also come after EQT CEO Toby Rice in mid-June acknowledged publicly that the company had started bringing earlier-deferred production back online – a process that he said would be incremental.

Earlier this year, EQT announced one of the single largest gas production cuts by a US operator, saying it would reduce gross output by 1 Bcf/d in response to low prices. At the time, executives said the curtailment, which started in late February, would lower annual production by at least 30-40 Bcf.

EQT's announcement came just two weeks after Chesapeake Energy announced its own cut of a similar magnitude with a commitment to reduce 2024 output by 15% and lower capital spending by 20%.

Earlier commitments to cut gas production by EQT, Chesapeake and others came largely in response to low gas prices, which were hovering in the mid-$1 area at the time. In early May, though, gas prices rallied back above $2 and kept rising, ultimately topping $3 amid bullish momentum fueled by tighter market fundamentals. Now, with prompt futures prices still hovering in the mid-$2s, it seems likely that production in Appalachia, and elsewhere, could continue rising.