Pennsylvania produced a record volume of 5.1 tcf (144.4 bcm) of gas in 2016, according to state’s Department of Environmental Protection (DEP).
The growth, driven by operations in the Marcellus shale, comes despite the fact that the number of new wells drilled in Pennsylvania fell to their lowest figure since 2008.
The production numbers marked an 11% rise on 2015 levels, and showed that Pennsylvania continues to be the second largest US gas producer behind Texas thanks to shale drilling.
This came as the number of new well drilling permits for Pennsylvania in 2016 stood at just 1,321 – down from 2,081 recorded in 2015. In 2011, the figure stood at 3,560, while the state produced around 1.1 tcf (31.2 tcm) of gas that year. Last year, Pennsylvania saw a total of 503 new wells drilled.
These trends can partly be attributed to producers working through their backlog of drilled but uncompleted (DUC) wells. At the start of 2016, many firms cut back operations as gas prices remained depressed, leaving large numbers of wells uncompleted.
At the same time, continuing improvements in technology and efficiency have had a major impact, with new wells generally producing more gas than old ones. The length of the laterals of new wells has consistently increased, for example, allowing for higher production. And some older wells are being refractured, saving around 75% of the costs of drilling a new well.
There is little sign that production may be slowing in line with the reduction in drilling. The US Energy Information Administration’s (EIA) most recent Drilling Productivity Report forecasts that output from the Marcellus will rise by 22 mmcf (623,040 cubic metres) per day in June compared with May.
The EIA’s data also show that gas production from the Marcellus accounts for roughly 38% of output from the country’s seven leading shale regions. Meanwhile, rig counts have also risen in the Marcellus, and currently stand at 45, compared with 26 at the same time last year.
And while natural gas prices remain relatively low, they have also improved, helping to boost gas drilling activity. Henry Hub prices stood at US$3.26 per million British thermal units (US$90.17 per 1,000 cubic metres) at the start of last week compared with US$1.91 per mmBtu (US$52.83 per 1,000 cubic metres) at the same time last year.
There is also a significant amount of pipeline capacity due to come online in the region, further boosting production. For some time, a lack of pipeline infrastructure has played a part in constraining output from the Marcellus, but with 19 expansions totalling 15.5 bcf (439 mcm) per day due for completion by late 2019, this will soon no longer be an issue.
This, combined with the increasing use of shale gas as feedstock for new LNG facilities in the US, means that output from the Marcellus will be available to more markets that ever before.
There is therefore confidence that the number of permits awarded will soon rise. Speaking to NGI’s Shale Daily, the director of Pennsylvania State University’s Marcellus Center for Outreach and Research, Thomas Murphy, said: “there does seem to be a spirit of renewed interest and excitement by many industry players”. He added that the industry was “starting to see that in some of their permitting activities, and certainly in their drilling schedules”.
Given these trends, the Marcellus region seems set for another strong performance this year.