Oil price drop may hit shale gas
Shale gas rigs, Horn River Basin, Canada. The more than 40% drop in world oil prices between June and December is putting enormous pressure on US shale producers. (Nexen)
For US shale plays that produce both oil and gas, the high price of light tight oil (LTO) used to be a de facto subsidy on gas prices – which have typically been below $4/MMBtu. Similarly, NGLs also improved the economics of shale, causing producers to switch from dry to wet gas production.
However, rising NGL volumes and falling prices have taken a toll on shale producers (see US NGL market faces growing glut, 22 January 2013). And, now oil prices have dropped to below $60 per barrel, that subsidy has been sharply reduced.