After three years of exponential growth, the Marcellus Shale is showing signs of plateauing this year.
The Pennsylvania Department of Environmental Protection (DEP) issued 409 permits for Marcellus drilling and operators reported drilling 144 wells into the play in January this year, according to recent DEP data.
Those figures show increased permitting and decreased drilling over last year's peak. The DEP issued 317 permits in January 2011 and operators reported drilling 167 wells into the play. In January 2010, the DEP issued 146 and operators drilled 87 wells. In January 2009, the DEP issued 79 permits and operators drilled 29 wells.
Bradford County in dry northeastern Pennsylvania led development this January with 21 wells and 74 permits, followed by neighboring Lycoming County (19 wells and 77 permits) Tioga County (15 wells and 46 permits), Susquehanna County (18 wells and 44 permits) and Wyoming County (three wells and eight permits). In wet southwestern Pennsylvania, Washington County led development with 21 wells and 32 permits, followed by Westmoreland County (10 wells and 22 permits), Greene County (nine wells and 10 permits), Fayette County (seven wells and four permits) and Butler County (seven wells and 15 permits).
Through the end of February, Chesapeake Energy Corp. drilled 32 wells into the Pennsylvania Marcellus, Anadarko Petroleum Corp. drilled 26 wells, Range Resources Corp. drilled 24 wells, Chevron Corp. drilled 19 wells, Pennsylvania General Energy Co. LLC drilled 17 wells and EQT Corp. drilled 13 wells.
The apparent tapering in development in early 2012 comes after a banner year for the Marcellus in Pennsylvania. The play not only passed the 1 Tcf mark in 2011, but production increased 41% between the 435 Bcf produced in the first half of the year and the 615 Bcf produced in the second half of the year.
Although 20 counties in Pennsylvania produced from the Marcellus in the second half of 2011, almost 60% of the production comes from Bradford (170.3 Bcf), Susquehanna (118.7 Bcf) and Tioga (65.9 Bcf) counties. Another 22% comes from Washington (70.1 Bcf) and Greene (67.9 Bcf) counties. The second half of the top 10 producing counties -- Lycoming, Westmoreland, Fayette, Wyoming and Butler -- account for 13%.
The DEP only reports production figures every six months (see Shale Daily, Feb. 22a).
The plateauing of Marcellus development is being aided by depressed natural gas prices, which are hovering at 10-year lows and forcing producers to update their development strategies to focus on liquids-rich targets.
Drillers in northeastern Pennsylvania -- the dry gas area of the Marcellus Shale -- in the months ahead will stomp on the brakes with both feet and jam the dry gas freight train into reverse, according to a recent analysis by Bentek Energy LLC (see Shale Daily, Feb. 22b). Even if they do, a bulging gas surplus will fester behind pipeline capacity constraints for years to come, the firm said.
"...Northeast supply growth has outpaced capacity additions and local demand growth and led to a huge backlog of non-producing wells, exacerbating the potential for supply congestion and price weakness," Bentek said in a Market Alert. "In response, producers have announced a 14% decline in total northeastern Pennsylvania (dry gas) rig activity."
Cabot Oil & Gas Corp. is among the latest producers to say it is cutting back in the Marcellus (see Shale Daily, Feb. 22c). Meanwhile, Williams Partners has announced plans for additional Marcellus takeaway capacity (see Shale Daily, Feb. 27), and El Paso Corp.'s Tennessee Gas Pipeline is considering adding yet another Marcellus pipeline project to its slate (see Shale Daily, Feb. 24).
In addition, Inergy Midstream LP, UGI Energy Services Inc. and Capitol Energy Ventures Corp., a unit of WGL Holdings Inc., announced Wednesday evening a plan to build a 200-mile, 30-inch diameter system that would carry at least 800,000 Dth/d from the southern terminus of Inergy Midstream's MARC I pipeline in Lycoming County, PA, through central and eastern Pennsylvania to markets across southeastern Pennsylvania, Philadelphia and the Baltimore and Washington, DC, areas (see related story).
Drilling cuts are expected to be limited to northeastern Pennsylvania, which is where the play's dry gas comes from. "The southwestern Marcellus and Utica are expected to see increased drilling," Bentek said.